Packaged Meat Landscape: Safeway Northern California

Packaged Meat Landscape: Safeway Northern California
Nielsen Perishables Group November 2015

Table of Contents Situation and Approach 3 Executive Summary 4 Total U.S. & West Region 5 Safeway NorCal Packaged Meat Overview 14 Luncheon Meat Deep Dive 19 Bacon Overview 31 Dinner Sausage Overview 34 Appendix 37 Source: Nielsen Perishables Group

Situation and Approach
Columbus Foods has partnered with Safeway NorCal to create a merchandising test that would place Columbus deli meat products in the meat department. With that in mind, Columbus Foods would like to analyze the current state of processed lunchmeats sold in the meat department through both performance and promotional trends to help plan for the test and possible future merchandising set. Using point-of-sale data sources, Nielsen Perishables Group developed an overview of the packaged meat department in Safeway’s Northern California division, in order to: Learn about high-level Total U.S. and West region processed meat trends Identify opportunities as well as emerging trends in the luncheon meat, bacon and sausage categories Understand point-of-sale performance metrics across hierarchy levels – including segment, brand and attribute (particularly health and wellness-focused) levels Nielsen Perishables Group Total Meat Hierarchy, 52 weeks ending 8/29/15 Safeway Custom Hierarchy, 52 weeks ending 7/18/2015 APPROACH DATA SOURCES Source: Nielsen Perishables Group

Executive Summary Build on Safeway NorCal’s strong performance in specialty luncheon meat by increasing trips and stabilizing household penetration Focus on salami since growth was particularly strong in Safeway NorCal compared to its rest of market (ROM) Work with Safeway NorCal to make promotions more efficient to compete with lower prices in ROM Provide recommendations on limiting items in luncheon meat to the most efficient as Safeway NorCal has more items, but fewer sales per store/week than its ROM Focus efforts on natural and antibiotic-free and keep an eye on organic as it is small, but growing – do not focus on fat claims Offer a variety of flavors in turkey, ham and chicken– especially trendy, spicy and barbeque/smoked flavors Dinner sausage is a large and growing category in Safeway NorCal that may represent a good next opportunity Source: Nielsen Perishables Group

TOTAL U.S. & WEST REGION: Packaged Meat Landscape

Total U.S. & West Region Overview
PERFORMANCE Processed meat dollars grew, driven by price increases – particularly in lunch meat In the West, lunch meat had a higher share of processed meat dollars than in the Total U.S. CONSUMERS Processed meat shoppers are families – slightly older families and couples in the Pacific region A larger share of Pacific households purchase lunch meat than Total U.S. households PRICE AND PROMOTION More bacon volume was sold on promotion; bacon had the highest promotional efficiency of the three focus categories Promotions across bacon, dinner sausage and lunch meat were less efficient in the West compared to the Total U.S. average BRANDS AND FLAVORS Oscar Mayer and Private Label had the highest share of lunch meat dollars Gallo brand sales were particularly strong in the West compared to Total U.S. Turkey and ham led lunch meat share, but salami sales grew the fastest in the West and nationally Source: Nielsen Perishables Group

Dollar Share of Processed Meat Total US
In the Total U.S., processed meat dollars and volume grew despite sizeable price increases in key categories Processed lunch meat had the largest share of the category Lunch meat average retail price increased 7.3% which led to dollar growth, but not volume growth Dollar Share of Processed Meat Total US Dollar Growth Volume Growth ARP Growth Total Processed Meat 3.7% 1.6% 2.1% Processed Lunch Meat 4.7% -2.4% 7.3% Bacon -0.6% -7.4% Dinner Sausage 6.8% 2.7% 4.0% Franks -3.9% 5.7% Packaged Meals 5.6% 9.3% -3.4% Hams 7.4% -1.8% 9.4% Processed Turkey -1.1% -4.1% 3.1% ARP Total Processed Meat $3.56 Processed Lunch Meat: $4.56 Bacon $4.58 Dinner Sausage $3.93 Franks $3.08 Packaged Meals $2.14 Hams $2.67 Processed Turkey $3.69 West Region ($9.45B): Dinner Sausage ($1.05B) growing by 7.8% dollar and 4.9% volume Packaged Meals ($608M) growing by 8.7% dollar and 11.7% volume Central Region ($9.18B): Dinner Sausage ($1.03B) growing by 5.2% dollar and 2.8% volume Packaged Meals ($676M) growing by 4.7% dollar and 8.3% volume South Region ($20.23B) Dinner Sausage ($2.06B) growing by 7.6% dollar and 2.3% volume Packaged Meals ($1.66B) growing by 5.7% dollar and 10.0% volume East Region ($6.28B) Bacon ($910M) growing by 1.14% dollar and 7.1% volume Dinner Sausage ($901M) growing by 5.7% dollar and .8% volume Table: Processed Lunch Meat ($29B) Bacon ($22B) Dinner Sausage ($17B) Packaged Meals ($1.6B) Hams ($1.4B) Call Out: - Salami Lunch Meat ($2.6B) - Regular Bacon ($10.4B) - Smoked Sausage ($2.4B) Dinner sausage, packaged meals and ham dollars grew the fastest while processed turkey and bacon declined Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

In the West, lunch meat had a higher share of processed meat dollars than in the Total U.S.
Dinner sausage dollars velocity grew nearly 6% versus year ago DOLLAR SHARE West Region Total U.S. Total Processed Meat $3.2B $15.1B Processed Lunch Meat 30.9% 27.6% Bacon 21.6% 21.2% Dinner Sausage 16.7% 16.8% Franks 13.5% 14.5% Packaged Meals 9.7% 10.8% Hams 7.5% 9.1% Processed Turkey 0.1% Processed Meat West Region $ per MM ACV $28,518 Vol per MM ACV 7809 Non-Promo Price $3.81 ARP increase was not as substantial as in the total US West Region Processed Meat Market: $9.45B Dinner Sausage ($1.05B) growing by 7.8% dollar and 4.9% volume Packaged Meals ($608M) growing by 8.7% dollar and 11.7% volume Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Total U.S. processed meat shoppers are primarily families with kids
West region households are similar to the average, but are slightly older Total U.S. and Pacific Region Over-Index in Dollars Spent PROCESSED LUNCH MEAT DINNER SAUSAGE BACON Age 35-44 Age 45-54 Kids 13-17 Kids Under 18 Kids 6-12 or 13-17 Younger/ Older Bustling Families Empty Nest Couples Younger/Older Bustling Families Modest Working Towns Comfortable Country Compared to the total US, Pacific region shoppers are very similar – differences are small, but they tend to be higher income, larger households and older (35-44 instead of under 35), more cosmopolitan centers and affluent suburban spreads, less likely to be in plain rural living - more empty nest couples as opposed to small scale families Red = Total U.S. only Blue = Pacific Region Only Source: Nielsen Total Shopper View Specialty Panel 52 Weeks Ending 6/27/2015

More than 67% of Pacific region households purchase processed lunchmeat - more than the Total U.S.
Penetration of dinner sausage and bacon is lower in the Pacific Focus on increasing trips and maintaining penetration to grow lunch meat in the Pacific region PROCESSED LUNCH MEAT DINNER SAUSAGE BACON Pacific Total U.S. Penetration 67.7% 62.8% 69.0% 69.7% 70.6% 76.5% -1.3 -1.4 -0.1 0.7 1.2 2.2 Trips per HH 5.6 5.4 4.7 4.9 4.8 5.7 0.0% -1.8% 2.1% -2.0% 3.6% Dollars per Trip $5.46 $5.04 $5.91 $5.55 $7.14 $6.38 2.6% 5.2% 5.5% 6.7% -2.3% -0.8% Processed Lunch Meat Source: Nielsen Total Shopper View Specialty Panel 52 Weeks Ending 6/27/2015

Of the three categories, bacon sold the most volume on promotion, and its promotions were most efficient Lunch meat and bacon prices were higher in the West than the national average Volume sold on promotion was similar in the West, but lift was lower than the Total U.S. Processed Lunch Meat Bacon Dinner Sausages West Total U.S. Non-Promo ARP $4.74 $4.57 $5.01 $4.86 $3.98 $4.07 Promo ARP $4.37 $4.49 $4.06 $3.92 $3.57 $3.40 % Promo Efficiency 41% 48% 60% 65% 50% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Oscar Mayer led brands with more than one-third of processed lunch meat dollar share
Land O’Frost, Bar-S and Gallo had higher dollar share in the West, but overall the top brands were the same as the Total U.S. Dollar Share of Top Ten Brands in Processed Lunch Meat Lunchmeat = $4.15B Applegate Farms – 0.5% dollar share, 83.6% dollar growth, $38.26 $ per MM ACV, 79.9% growth Hillshire Farms Deli Select = natural, bold flavors, summer sausage, farm classics Top Bacon Brands – Oscar Mayer, Hormel Black Label, Wright Brand, Smithfield and Farmland Foods – most top brands declining except Smithfield, Tyson is also up double digits Top Dinner Sausage Brands – Johnsoville, PL, Hillshire Farms, Eckrich, Unbranded, Premio, Aidells’s - nearly all are growing, Eckrich is growing fastest Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Dollar Share of Processed Lunch Meat
Turkey had the highest share of category dollars, but salami sales grew fastest Salami sales were particularly strong in the West, while Bologna dollars declined in both regions Dollar Share of Processed Lunch Meat Turkey Ham Salami Bologna Beef West 33.9% 27.5% 16.9% 7.5% 5.0% Total U.S. 31.9% 27.6% 15.5% 9.6% 4.6% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

SAFEWAY NORTHERN CALIFORNIA: Packaged Meat Landscape

Safeway Northern California Overview
PACKACKED MEAT OVERVIEW Driven by price increases, packaged meat volume declined and dollars increased in both Safeway NorCal and ROM Safeway NorCal led ROM in bacon and dinner sausage dollars per store/week, but fell behind in luncheon meat PERFORMANCE Deli tubs and specialty led share of Safeway NorCal luncheon meat dollars Safeway NorCal outperformed its ROM in both specialty luncheon meat dollars and volume per store/week PRICE AND PROMOTION Across all sub-categories, Safeway NorCal luncheon meat was priced higher than ROM Safeway NorCal and ROM sold roughly the same specialty luncheon meat volume on promotion, but ROM’s promotions were more efficient BRANDS, SEGMENTS AND CLAIMS Oscar Mayer and Gallo were top brands in luncheon meat Turkey and ham led segments in dollar share, but dry salami grew the most in Safeway NorCal Many top growing flavors involved barbecue and/or spice Natural and antibiotic free had a higher share of dollars in Safeway NorCal compared to ROM – organic grew substantially Source: Nielsen Perishables Group

In both Safeway NorCal and ROM, packaged meat decreased in volume driven by luncheon meat
Bacon volume grew the fastest in ROM, while Safeway NorCal outperformed ROM growth in dinner sausage Packaged Meat Top Sub-Categories, Safeway NorCal vs. ROM Dollar Share Luncheon Meat Bacon Dinner Sausage Safeway NorCal 25.7% 20.3% 17.2% Safeway NorCal ROM 28.9% 16.3% 13.9% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

More luncheon meat dollars were sold per store/week in Safeway NorCal’s ROM
Safeway NorCal sold more dollars per distributed store in bacon and dinner sausage and growth was higher in dinner sausage Growth was higher for ROM in luncheon meat and bacon Dollars per d-Store/Week- Safeway NorCal vs. ROM LUNCHEON MEAT BACON DINNER SAUSAGE % Change vs. YAGO 2.1% 3.6% 0.6% 2.2% 6.9% 5.9% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Safeway NorCal had more unique items in store than its ROM across all three categories
Luncheon meat impressions per store/week declined versus year ago in both Safeway NorCal and its ROM -2.8% -0.1% -3.4% -2.2% -3.2% 1.8% 0.2% 4.8% *Impressions: The average number of unique items (SKUs) carried per store per week during the timeframe Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

SAFEWAY NORTHERN CALIFORNIA: LUNCHEON MEAT

Total Luncheon Meats Sales in Safeway NorCal: $58M
Within luncheon meat, deli tubs and specialty had highest dollar share in Safeway NorCal Specialty and 4x6/wallet packs grew the fastest in dollars and volume Average price increased across all sub-categories Luncheon Meat Dollars Volume ARP Deli Tubs -2.5% -13.4% +12.7% Specialty +7.3% +5.7% +1.5% 4x6 / Wallet Pack +9.6% +0.9% +8.6% Well +1.4% +4.0% Peg -6.6% -14.1% +9.1% Total Luncheon Meats Sales in Safeway NorCal: $58M Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Safeway NorCal outperformed ROM in deli tubs and specialty for both dollars and volume per store/week Deli tubs led dollars per d-store/week ROM was particularly strong in volume for 4x6/wallet packs - nearly doubling Safeway NorCal’s volume per d-store/week Luncheon Meat Segments Dollars per d-Store/Week Luncheon Meat Segments Volume per d-Store/Week 4x6/wallet packs in ROM: A few items that are sold by ROM and not in Safeway NorCal- Champ sliced ham Gallo Ltla D/s Salami – dry salami Bar-S Foods Ham (cooked) Foster Farms oven roasted white turkey Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Specialty meat is a key opportunity in Safeway NorCal
Dollars per $MM ACV Sales Volume per $MM ACV Sales The average number of unique items (SKUs) per d-store/week grew 6.4% to 27 items* in Safeway NorCal Average Retail Price $7.67 +1.5% vs. YAGO 7.3% VS YAGO 5.7% Specialty Promo Efficiency: 34.7% Promotional efficiency for ROM was 44.4% Specialty Meat Segment Dollar Share and Growth Top Specialty Meat Brands, Safeway NorCal $9.3M ROM Growth – 5.4% $ per $MM ACV and 0.4% Volume per $MM ACV Promo efficiency declined vs. YAGO ROM promo efficiency: 44.4% +6.8% +15.6% +7.7% $1.6M $.3M $.3M +2.7% $.3M $.3M -3.1% *Items =Impressions: The average number of unique items (SKUs) carried per store per week during the timeframe Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Safeway NorCal luncheon meat was priced higher than ROM across all sub-categories
The largest price difference between Safeway and ROM was within 4x6/Wallet packs Prices increased across all sub-categories in both Safeway and ROM Luncheon Meat Sub-Category Average Retail Price, Safeway NorCal vs. ROM ARP % Change vs. YAGO Total Luncheon Meat Deli Tubs Specialty 4x6/ Wallet Pack Well Peg Safeway NorCal +8.0% +12.7% +1.5% +8.6% +4.0% +9.1% Safeway NorCal ROM +4.6% +7.7% +5.0% +2.0% +0.8% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Deli tubs sold the most volume on promo in Safeway NorCal, but 4x6 promos were the most efficient
While specialty meat sold the same amount of volume on promo in Safeway NorCal and ROM, ROM’s promotions were more efficient Luncheon Meat Deli Tubs 4x6/ Wallet Packs Specialty Well Peg SFY NorCal ROM Non-Promo ARP $6.36 $5.12 $7.24 $6.45 $5.34 $4.08 $7.77 $6.79 $3.80 $3.15 $7.03 $6.51 Promo ARP $5.40 $4.63 $5.95 $6.33 $4.42 $3.65 $6.83 $6.40 $2.82 $2.45 $7.26 $4.96 Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Oscar Mayer had the highest dollar sales in both Safeway NorCal and its ROM
Private Label dollars per $MM ACV declined in Safeway NorCal, but increased significantly in its ROM Top Ten Luncheon Meat Brands Dollars per $MM ACV Sales by Brand and Change +10.0% +5.3% True Story Foods has 0.2% dollar share of luncheon meat in Safeway NorCal and is not available in its ROM +3.3% +4.0% True story is new this year, so growth numbers are not available – it is all turkey products – split pretty evenly across its 3 items – mostly oven roasted turkey Applegate share is not available in luncheon meat at Safeway norcal -2.9% +16.8.% -4.2% +2.1% +6.5% +0.3% +23.2% +17.1% -6.3% -26.3% -23.5% -1.9% -8.0% -19.5% +7.9% -44.9% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Oscar Mayer had over 44 unique items per store/week
Oscar Mayer, Private Label and Hormel had more unique items per store/week at Safeway NorCal while Gallo and Land O’Frost had more items in its ROM Luncheon Meat Top Brand Impressions per Store/Week- Safeway NorCal vs. ROM Safeway NorCal had many more Private Label luncheon meat items in its stores compared to its rest of market *Impressions: The average number of unique items (SKUs) carried per store per week during the timeframe Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Top Growing Flavors by Segment
Top segments increased in dollars, but not volume due to price increases Dry salami grew the most in dollars and volume Fire/smoked and spicy flavors had top growth across segments Dollar Share 35.9% 18.5% 16.6% 5.8% 5.1% Top Growing Flavors by Segment Herb Honey Cured Dry Italian Jalapeno Chipotle Herb Italian Honey, Flame Seared Beef Bacon Smoked Fire Roasted Fire Braised Oven Roasted Cajun Honey Maple Black Pepper Bourbon Smoke Ranked by Dollars per $MM ACV Growth Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Top Growing Flavors by Segment
Within ROM, smaller price increases led to better volume growth in turkey and ham Ham outpaced dry salami dollar and volume growth in ROM Top growing flavors were similar to Safeway NorCal Dollar Share 29.1% 19.6% 14.3% 5.7% 4.1% Top Growing Flavors by Segment Pepper Honey, Flame Seared Dry Italian Jalapeno Hickory Smoked Herb Italian Virginia Genoa Mixed Meat Hard Fire Roasted Honey Cured Finocchiona Uncured Black Forest Baked Italian & Provolone Turkey Cotto Rosemary Salami Italian Dry Ranked by Dollars per $MM ACV Growth Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

SHARE OF PACKAGED MEAT SALES % DOLLAR SALES GROWTH FROM YAGO
Health benefits accounted for a large share of luncheon meat dollar sales, but share decreased Fat free health claims had the highest dollar share, but nearly all of them declined in dollar sales from year ago Health Declaration SHARE OF PACKAGED MEAT SALES % DOLLAR SALES GROWTH FROM YAGO No Claim 41.0% 9.0% 98% Fat Free 28.5% 10.0% 97% Fat Free 13.4% -3.7% 96% Fat Free 3.6% -2.3% 99% Fat Free 3.2% -10.1% Reduced Fat 3.0% -3.0% Low Salt 1.2% -24.2% No Trans Fat 1.1% -3.2% Lite 0.9% -31.7% 97% Fat Free, Low Sodium -33.2% 99% Fat Free, Low Sodium -35.1% Of all luncheon meat sales, nearly 59% come from items with a declared health benefit ROM: 53.4% have no claim , so roughly 47% with a claim No claim is up 5.9% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Hormel and Applegate have the largest share of AB free
Natural and antibiotic-free had higher dollar share in Safeway NorCal compared to ROM Organic share was particularly low in Safeway NorCal compared to ROM, but grew substantially Luncheon Meat Top Health Claims Dollar per $MM ACV and Volume per $MM ACV % Change vs. YAGO, Safeway NorCal and ROM Hormel and Applegate have the largest share of AB free Most Antibiotic Free is from Ham, Turkey and Beef Most Conventional (no claim) items are Turkey Oscar Mayer, PL and Gallo have highest share of natural Hormel is vast majority in Safeway NorCal while it’s more split in ROM between Hormel and Applegate Dollar Share Natural Organic Antibiotic Free Safeway NorCal 3.6% 0.4% 1.7% Safeway NorCal ROM 1.4% 1.0% 1.2% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

SAFEWAY NORTHERN CALIFORNIA: BACON

Dollars per $MM ACV Sales Volume per $MM ACV Sales
Bacon sales grew in Safeway NorCal led by regular bacon and Private Label Dollars per $MM ACV Sales Volume per $MM ACV Sales Bacon Promo Efficiency: 68.6% The average number of unique items (SKUs) per d-store/week increased 0.2% to 39 items* in Safeway NorCal Average Retail Price $5.83 -3.1% vs. YAGO 0.6% VS YAGO 3.8% Promotional efficiency for ROM was 56.0% from last year Top Bacon Segment Dollar Share and Growth Bacon promo efficiency up 7.9% vs. yago Hillshire Farms $6,974,456 Johnsonville Sausage $5,799,154 Aidells Sausage Company $5,423,559 New York Style Sausage Company $5,161,139 PRIVATE LABEL $3,681,754 Evergood Sausage $3,177,626 Total Donuts price increases Total Donuts promo eff Impression growth year over year Distribution points Central most developed, West growing fastest (Share) +5.6% -8.5% +4.0% -53.2% -10.3% % *Items =Impressions: The average number of unique items (SKUs) carried per store per week during the timeframe Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Regular bacons had the largest dollar share and grew in both Safeway NorCal and ROM
Poultry bacon was down in both Safeway NorCal and ROM Dollars per $MM ACV % Change vs YAGO Safeway NorCal Safeway NorCal ROM Total Bacon +0.6% +2.2% Regular Bacons +5.6% +3.6% Poultry -8.5% -4.6% Cooked/Microwavable +4.0% -3.0% Canadian -10.3% -1.9% Ends & Pieces -12.1% -11.5% Beef NA -30.3% Other Bacons -53.2% +199.6% Top Bacon Segment Dollar Share, Safeway NorCal Top Bacon Segment Dollar Share, Safeway NorCal ROM Top flavors in Regular Bacons: Hickory Smoked Smoked Applewood Smoked Top flavors in Regular Bacons: Cured Hickory Smoked Smoked Naturally Hickory Smoked 85% Regular 15% Specialty 86% Regular 14% Specialty Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

SAFEWAY NORTHERN CALIFORNIA: DINNER SAUSAGE

Dinner Sausage sales grew in Safeway NorCal while the number of unique items decreased
Dollars per $MM ACV Sales Volume per $MM ACV Sales Dinner Sausage Promo Efficiency: 42.4% The average number of unique items (SKUs) per d-store/week declined 3.2% to 63 items* in Safeway NorCal Average Retail Price $4.96 +6.1% vs. YAGO 6.9% VS YAGO 5.9% Promotional efficiency for ROM was 40.3% from last year Dinner Sausage Sub-Category Dollar Share and Dollars per $MM ACV Growth Top Dinner Sausage Brands, Safeway NorCal Top Dinner Sausage Brands +13.0% promo efficiency – down 3.6% vs. last year True Story at NorCal for 52 Weeks ending 7/18/15: $39,834 +4.2% -3.1% *Items =Impressions: The average number of unique items (SKUs) carried per store per week during the timeframe Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Italian sausage had a higher share in Safeway NorCal while smoke sausage dominated its ROM
Most top dinner sausage segments grew in both Safeway NorCal and ROM – Italian and Polish sausage grew the most in Safeway Top Dinner Sausage Segment Dollar Share, Safeway NorCal Top Dinner Sausage Segment Dollar Share, Safeway NorCal ROM Dollars per $MM ACV % Change vs YAGO Safeway NorCal Safeway NorCal ROM Total Dinner Sausage +6.9% +5.9% Italian Sausage +11.1% +5.7% Smoked Chicken Sausage +5.0% +8.2% Smoked Sausage +7.1% Smoked Beef Sausage +0.9% +1.2% Polish Sausage/Kielbasa +13.9% +8.5% Bratwurst 0.0% +0.4% Other Dinner Sausages +2.6% +24.4% Other Dinner Sausage: In Safeway NorCal: Mostly Cajun/Andouille , Brockwurst Swiss, Banger, Louisiana Hot/Sweet ROM: Andouille also top, Louisiana Hot, Brockwurst Swiss, Jalapeno Cheddar 74% Cooked/ Smoked 26% Uncooked 67% Cooked/ Smoked 33% Uncooked Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

APPENDIX

Safeway packaged meat hierarchy: Sausage and bacon
Source: Nielsen Perishables Group

Safeway packaged meat hierarchy: Luncheon meat
Source: Nielsen Perishables Group

Pacific region processed meat shoppers have children
Sausage-buying households are the only ones that over-index for empty-nest couples PACIFIC REGION Dollar Index PROCESSED LUNCH MEAT SAUSAGE BACON Age 35-44 Age 45-54 Kids Under 18 Kids 13-17 Kids 6-12 or 13-17 Younger/ Older Bustling Families Empty Nest Couples Younger/Older Bustling Families Modest Working Towns Comfortable Country Compared to the total US they very similar – differences are small, but they tend to be higher income, larger households and older (35-44 instead of under 35), more cosmopolitan centers and affluent suburban spreads, less likely to be in plain rural living - more empty nest couples as opposed to small scale families Source: Nielsen Total Shopper View Specialty Panel 52 Weeks Ending 6/27/2015

Nearly 70% of households purchase processed lunch meat in the Pacific region
Bacon decreased in trips and dollars per trip, but increased in penetration PACIFIC REGION Processed Lunch Meat Dinner Sausage Bacon Penetration 67.7% 69.0% 70.6% -1.3 -0.1 1.2 Trips per HH 5.6 4.7 4.8 0.0% -2.0% Dollars per Trip $5.46 $5.91 $7.14 2.6% 5.5% -2.3% Source: Nielsen Total Shopper View Specialty Panel 52 Weeks Ending 6/27/2015

Specialty performance was stronger in Safeway NorCal than its ROM
Volume declines were slower in ROM due to less substantial price increases Luncheon Meat Performance, Safeway NorCal Dollar Share Deli Tubs Specialty 4x6 Wallet Pack Well Peg Safeway NorCal 43.9% 24.0% 19.1% 9.1% 3.9% Safeway NorCal ROM 34.8% 27.0% 19.4% 10.7% 8.1% Luncheon Meat Performance, Safeway NorCal ROM Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Bacon sales grow while luncheon meat sales plunge during holiday season
Dollars per $MM ACV by Week, Safeway NorCal Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 7/18/15

Dollar Share of Luncheon Meat
Price increases at Safeway NorCal led to dollar, but not volume growth in top luncheon meat segments Salami and pepperoni grew in both dollars and volume Most of turkey is from deli tubs (71%), then wallet packs, then well and peg – growing in dollars per $MM ACV in all except Well – declining in volume for all except deli tubs – price is up across all – especially deli tubs Dollar Share of Luncheon Meat Turkey Ham Dry Salami Bologna Pepperoni/ Other Chicken Breast/ Roll Beef 35.9% 18.5% 16.6% 5.8% 5.1% 4.3% 3.9% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Dollar Share of Luncheon Meat Salami (non-specialty)
Most top categories increased in dollars and volume within Safeway NorCal’s rest of market Non-specialty salami had a higher share within ROM Turkey and Ham grew in both dollars and volume in addition to salami and pepperoni Dollar Share of Luncheon Meat Turkey Ham Dry Salami Bologna Salami (non-specialty) Pepperoni/ Other Chicken Breast/ Roll 29.1% 19.6% 14.3% 5.7% 4.1% 3.3% Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Private Label and Johnsonville were top brands in bacon an dinner sausage in both regions
Farmer John’s and Farmland Foods bacon had significantly higher share in West Most top dinner sausage brands had higher shares in the West BACON DINNER SAUSAGE Top Brands West Dollar Share Total US Dollar Share Private Label 27.0% 23.4% Oscar Mayer 15.1% 21.6% Farmer John’s 7.6% 1.6% Hormel Black Label 9.7% Farmland Foods 7.3% 3.8% Wright Brand 4.5% 8.0% Top Brands West Dollar Share Total US Dollar Share Johnsonville Sausages 23.8% 21.7% Hillshire Farms 17.4% 14.6% Private Label 12.2% 15.5% Aidell’s Sausage Co 6.1% 2.6% Bar-S Foods 4.4% 1.6% Unbranded 3.4% 2.9% Applegate Farms Bacon has a 1.3% share in Safeway NorCal and 1.7% share in its ROM – both are growing in dollars per $MM ACV True Story Foods has a 0.1% share in dinner sausage – selling 2 skus of uncooked pork Italian sausage – spicy and mild – it is not available in its ROM Bacon Sales Total US: $3.12B West Region: $680M Dinner Sausage Sales Total US: $2.52B West: $528M Source: Nielsen Perishables Group Fresh Facts® 52 Weeks Ending 8/29/15

Packaged Meat Landscape: Safeway Northern California

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