Avocado Shopper Segmentation 2016 Avocado Shopper Segmentation Avocado Shopper Segmentation Shopper Groups, Purchase Trends, Demographics and Growth Opportunities Using Shopper Insights to Drive Retail Sales of Hass Avocados

Table of Contents Objective and Methodology 3 Executive Summary 4 Segmentation 6 Key Purchase Trends - Annual 9 Key Purchase Trends - Quarterly 16 Demographics 24 Appendix 33

Objective and Methodology Understanding fresh avocado shoppers and their purchase behaviors can help marketers and retailers create strategies that build loyalty, drive traffic and grow sales of Hass avocados. The objective of this study is to better understand avocado shoppers by developing a shopper segmentation based on their actual avocado purchase levels (Super Heavy, Heavy, Medium and Light), and to identify the underlying purchase behaviors and demographics. Additionally, this study aims to understand how avocado purchase behaviors vary quarterly throughout the year to identify opportunities for further category growth. Methodology Time Periods: Current Year: 52 weeks ending 6/12/2016 Q3, 2015: 13 weeks ending 9/13/2015 Q4, 2015: 13 weeks ending 12/13/2015 Q1, 2016: 13 weeks ending 3/13/2016 Q2, 2016: 13 weeks ending 6/12/2016 Prior Year: 52 weeks ending 6/16/2015 Data source: IRI Consumer NetworkTM - Consumer Purchase Trends Household panel data from the National Consumer Panel (NCP), an operational joint venture between IRI and Nielsen. The panel consists of a representative sample of approximately 120,000 U.S. households, balanced to the general U.S. population, who electronically record all purchases In this study, “General Population” refers to the total panel The NCP captures the dollar value of fresh avocado purchases, not the volume (eaches). Throughout this report, “purchases” refers to purchase dollars

Executive Summary Fresh avocados is one of the most successful categories in fresh produce, with double-digit growth rates fueled by annual household purchases in excess of $1.6 billion. Driving this growth are the nearly 60% of U.S. households that purchase fresh avocados throughout the year. While most households are repeat buyers, a very large proportion of avocado purchase activity is concentrated in a relatively small slice of households. This top-spending quartile (25%), designated as Super Heavy households, accounts for nearly three out of every four avocado purchase dollars. With an average annual avocado spend of nearly $70, Super Heavy households are extremely influential and important to the future of the category. The other three quartiles each account for a smaller share of avocado dollars than their respective share of households would suggest. As the second-highest spending quartile (25%), Heavy households account for 18% of avocado purchases. On a combined basis, Super Heavy and Heavy households account for 91% of all avocado purchases at retail. These two shopper groups are the key to the growth that the avocado category has been experiencing. In stark contrast, on a combined basis, Medium and Light households comprise 50% of all avocado purchasing households, yet only 9% of the spend. Light households in particular represent a set of shoppers that are only minimally engaged in the category. Light households buy infrequently and their average annual household spend is less than $2. Moving this segment up the ladder may prove challenging.

Executive Summary Because of their greater involvement in the category, Super Heavy and Heavy households may be more apt to respond positively to marketing efforts to increase their purchases. Some clues to stimulating purchases by Super Heavy and Heavy households are revealed in their quarterly purchase patterns. Household avocado purchases are highest in Q3* and dip to a quarterly low in Q4. Three percent of Super Heavy households and seven percent of Heavy households drop out of the avocado category altogether in Q4. Finding ways to keep these influential shoppers interested in avocados at this time of year could add as much as $16 million to the category. Improving purchase frequency and spend per trip could yield even greater gains. This study also provides demographic detail for each of the segments and for avocado households in total. In many respects, the four segments reflect the general U.S. population. In other respects, the figures reveal distinct skews that may signal marketing opportunities and provide insights on the future make up of avocado purchasing households. Building sales and marketing strategies that leverage the segmentation, seasonality and demographic insights in this study can help strengthen and expand sales of Hass avocados in the retail marketplace. * See Methodology for dates

SEGMENTATION

Segmentation Segment Share of Avocado Purchasing Households Segment Annual Household Avocado Spend Range Super Heavy = $26. 95 or more Heavy = $10.45 to $26.94 Medium = $3.90 to $10.44 Light = $3.89 or less This segmentation ranked avocado purchasing households according to each household’s total annual avocado spend (high to low). This ranked list was then divided into four equal segments (buyer groups) Households in the top-spending quartile (Super Heavy), spend $26.95 or more annually on avocados Households in the second highest-spending quartile (Heavy), spend between $10.45 and $26.94 annually Households in the third highest-spending quartile (Medium), spend between $3.90 and $10.44 annually Households in the lowest-spending quartile (Light), spend $3.89 or less annually

Super Heavy households account for one out of four households, but three out of four avocado purchases Segment Share of Avocado Purchasing Households Super Heavy households account for 73% of annual avocado purchases Heavy households account for 18% of annual avocado purchases Together, Super Heavy and Heavy households account for 91% of avocado purchases. These two segments are essentially driving the growth trends in the avocado category and represent key targets for marketers and retailers seeking to drive continued growth In contrast, Medium and Light households comprise fifty percent of all avocado purchasing households but account for only 9% of annual avocado purchases

KEY PURCHASE trends - Annual

Nearly 6 out of 10 U.S. households purchase avocados, and spend on average $24 per year Annual Purchase Dollars = $1.6 Billion* Household Penetration 57% of U.S. households buy avocados Spend per Household Avocado spend per household averages $23.91 annually Number of Trips per Household Avocado buying households average 6.9 trips annually Spend per Trip Avocado buying households spend $3.49 per trip X Data Source: IRI Consumer NetworkTM 2016 All figures are rounded *Total number of U.S. households = 121MM. Annual avocado penetration = 57% = 69MM households purchasing avocados annually (57% * 121MM = 69MM). Annual purchase dollars = $1.6B (69MM households with an annual spend per household at $23.91)

Most households that purchase avocados are repeat buyers 78.3% of total avocado households purchase avocados more than once per year Nearly all Super Heavy and Heavy households purchase more than once per year

Super Heavy households spend four times more per year than Heavy households 4X Higher! Average annual avocado spend per household (All Buyers) is $23.91 Super Heavy households spend an average of $69.77 per household, more than four times that of Heavy households

Super Heavy households buy more often and spend more per trip than the other groups 2X Higher! 2X Higher! Super Heavy households average 15 purchases annually, more than twice that of Heavy households At $4.64 per trip, Super Heavy households have the highest spend per trip of the four groups, and nearly twice that of the Heavy group

Together, the number of trips and the spend per trip, account for each group’s usage level profile High Dollars Per Occasion All Buyer Average = $3.49 Low Low All Buyer Average = 6.9 High Purchase Occasions Super Heavy and Heavy households purchase avocados more often, and spend more per trip, than Medium and Light households On these two key purchase metrics, Super Heavy households far outpace even the second highest group, Heavy households These two purchase metrics are key to understanding the underlying shopper dynamics driving growth in this category, and also help identify developmental opportunities

The value of a +1% increase in number of purchase trips or spend per trip for Super Heavy households is 4 times higher than for Heavy households Number of Trips Opportunity Spend Per Trip Opportunity A +1% increase in number of purchase trips or spend per trip for Super Heavy households represents a +$12MM opportunity for the category In contrast, a +1% increase in number of purchase trips or spend per trip for Heavy households represents a +$3MM opportunity for the category *See Appendix page 41 for full opportunity calculation

Key purchase Trends - Quarterly

Quarterly purchase dollars dip in Q4 for all buyer groups Total Q3 $450 Total Q4 $345 Total Q1 $420 Total Q2 $433 Avocado purchases reach their lowest point in Q4 at $345 million This drop in purchases occurs across all four buyer groups However, each buyer group’s relative share of purchases remains approximately the same quarter-by-quarter, with Super Heavy households accounting for approximately three-fourths of each quarter’s purchases Subsequent pages examine the purchase trends driving these results

Not all avocado purchasing households purchase avocados every quarter, with penetration at its lowest in Q4 44 MM* 39 MM* 46 MM* 46 MM* While annual household penetration is 57%, quarterly penetration is lower: Not all avocado purchasing households purchase avocados every quarter Household penetration reaches its lowest point in Q4, with only 32% of U.S. households buying *Total # of U.S. households = 121MM. Annual avocado penetration = 57% = 69MM households purchasing avocados annually (57% * 121MM = 69MM). However, not all of these 69MM households buy avocados every quarter.

Average spend per household is lowest in Q4 and does not fully recover in the following two quarters Average spend per household is lowest in Q4 at $8.77 The low Q4 penetration (page 18) and the low spend per household (above) are the key purchase trends underlying the low overall Q4 purchase dollars (page 17)

Both the number of purchase trips, and the household spend per trip, decline in Q4 The number of purchase trips hits a low in Q4 at 2.5 trips Spend per trip shows a sharp decline in Q4 and continues to decline steadily throughout the next two quarters The next page examines these quarterly purchase trends by buyer group

Household penetration and spend per household drop for all four buyer groups in Q4 SH and H $ spend per household drops more than other buyer groups in Q4 Household penetration dips in Q4 across all four groups Q4 household penetration drops for all buyer groups, but less so for Super Heavy households While the penetration decline is less pronounced for Super Heavy households, this group shows the deepest Q4 decline in avocado spend per household

All* buyer groups display a Q4 decline in number of trips and spend per trip SH, H and M households purchase less often in Q4 * L household # trips increased nominally after Q4 The number of trips hits a low in Q4 for Super Heavy, Heavy and Medium households, with Super Heavy households showing the greatest decline Q4 spend per trip declines for all buyer groups from its high in Q3, and does not recover in the subsequent two quarters

Retaining Q3 penetration and per household spend levels in Q4 would result in large sales gains for the category Household Penetration Opportunity* Spend per Household Opportunity* For example, lifting Q4 penetration to match Q3 for Super Heavy and Heavy households represents a +$16MM sales opportunity for the category For example, lifting Q4 dollar spend per household to match Q3 for Super Heavy and Heavy households represents a +$72MM sales opportunity for the category *See Appendix page 42 for full opportunity calculation

Demographics

Notes on Demographic Groups Each of the demographic categories presented in this report reflects the standard sub-breaks available from the IRI National Consumer Panel (NCP) Age 18-34 35-44 45-54 55-64 65+ Income Under $20,000 $20,000 - $24,999 $25,000 - $34,999 $35,000 - $44,999 $45,000 - $49,999 $50,000 - $59,999 $60,000 - $69,999 $70,000 - $99,999 $100,000+ Marital Status Married Single Other (Divorced, Separated, Widowed) Race White Asian Black Other Hispanic/Non-Hispanic Hispanic (Acculturated + Unacculturated) Non-Hispanic/Unknown Household Size 1 2 3 4 5+ Children/No Children Households with Children Households without Children

The two youngest age groups account for 47% of avocado purchases % pop 49.2% 46.9% 37.0% 41.9% The two youngest age groups comprise 46.9% of avocado purchases but only 37.0% of the general population In the Super Heavy group, the two youngest age groups account for an even larger share of avocado purchases (49.2%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

The top two income groups account for nearly half of avocado purchases % pop 39.5% 47.3% 48.4% 46.4% Across many of the income groups, avocado purchase distribution is similar to the distribution of households in the general population The top two income groups comprise 47.3% of avocado purchases but only 39.5% of the general population In the Super Heavy group, the top two income groups account for an even larger share of avocado purchases (48.4%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

$ Purchases $ Purchases $ Purchases Married households make up 63% of the general population but 72% of avocado purchases $ Purchases $ Purchases $ Purchases % pop Married households account for 62.9% of households in the general population, but account for a greater percentage of avocado purchases (71.7%) In the Super Heavy group, Married households account for an even larger share of avocado purchases (73.6%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

$ Purchases $ Purchases $ Purchases White households account for 72% of avocado purchases, slightly less than their share of the general population $ Purchases $ Purchases $ Purchases % pop White households account for 76.4% of the general population, but they account for 71.7% of avocado purchases Asian and Other households account for a larger share of avocado purchases (19.8%) than their representation in the general population (11.2%) In the Super Heavy group, Asian and Other households account for an even larger share of avocado purchases (21.9%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

$ Purchases $ Purchases $ Purchases Non-Hispanic households make up 88% of the general population but account for only 76% of avocado purchases $ Purchases $ Purchases $ Purchases % pop Non-Hispanic households account for 87.7% of households in the general population, but a lesser percentage of avocado purchases (76.0%) Hispanic households account for a larger share of avocado purchases (24.0%) than their representation in the general population (12.3%) In the Super Heavy group, Hispanic households account for an even larger share of avocado purchases (26.7%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

$ Purchases $ Purchases $ Purchases Households with 2 people account for the largest share of avocado purchases $ Purchases $ Purchases $ Purchases % pop Households with 2 people account for 32.1% of avocado purchases Combined, households with 3, 4 and 5+ people account for a larger share of avocado purchases (49.1%) than their representation in the general population (40.7%) In the Super Heavy group, households with 3, 4 and 5+ people account for an even larger share of avocado purchases (50.8%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

$ Purchases $ Purchases $ Purchases Households without children account for a larger share of avocado purchases than households with children $ Purchases $ Purchases $ Purchases % pop $ Households without children make up two-thirds of the general population, but a lesser share of avocado purchases (59.1%) Households with children account for a larger share of avocado purchases (40.9%) than their representation in the general population (33.2%) In the Super Heavy group, households with children account for an even larger share of avocado purchases (42.4%) Super Heavy and Heavy households account for 91% of total avocado purchases. Please see appendix for Medium and Light households demographic information

Appendix ADDITIONAL DEMOGRAPHIC DETAIL

Demographics – Age $ Purchases $ Purchases $ Purchases $ Purchases % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Households Income % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Marital Status % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Race $ Purchases $ Purchases $ Purchases $ Purchases % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Hispanic vs. Non-Hispanic % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Household Size % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Demographics – Households with Children % pop $ Purchases $ Purchases $ Purchases $ Purchases $ Purchases

Annual purchase trips and spend per trip opportunity: +1% increase valuation Number of Trips Opportunity Spend Per Trip Opportunity

Q4 vs. Q3 opportunity gap calculation Household Penetration Opportunity Spend per Household Opportunity

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