1. May 2015 NRA Show Presentation Industry Status and Outlook Update

2. Discussion 1 Macroeconomic Update 2 2015 Technomic Top 500 Review 3
Customer Status 3
Distribution Report 4
2015 & 2016 Growth Outlook 5

3. Next Foodservice Planning Program Meeting
June 22-23,2015
Outlook for Traditional QSR 1
Food with a Story 2
Driving Sales in a Challenging Environment 3
Assessment of Alternative Distribution Channels 4
Guest Speakers: Shake Shack, LYFE Kitchen 5

4. Arjun Chakravarti, Ph.D. IIT Stuart School of Business
Macroeconomic Update
Arjun Chakravarti, Ph.D. IIT Stuart School of Business

5. Mid-2015: Assessing Tradeoffs
Expected some liftoff above 3% growth this year
We expected some reversion in Q1…
…but Q1 growth significantly underperforming:
1% expected versus 0.2% actual
What is going on and what do we expect for the end of the year?

6. U.S. Consumer Situation Hasn’t Changed Since January…

7. Consumer Confidence Accelerates
April ’15
95.9
Index level
Recessionary trend
Expansionary trend
2015
2007
2001 50 70 90
110
Solid increase in consumer spending to end Consumers in expansionary mindset.

8. Unemployment Rate Falling18 16 14 12 10 8 4 6 1
Jan 2009
Jan 2010
Jan 2011
Jan 2012
Jan 2013
Jan 2014
Jan 2015
“Full” Employment?
Unemp
5.5%
Under
10.9%
April employment slows as export markets drags hurt energy and manufacturing jobs. Job quality remains an issue but underemployment trends further down.
Source: Federal Reserve, Labor Department

9. Real DPI Creeping Up but Way Off Trend
2003
2007
2011
2014 39 38 37 36 35 34 33 32 31 30
(000s)
Wages up 2.1% in 2014, but median wage ($24) is still about $3.16 off prior trend. Income growth expectations still haven’t recovered since recession.
Source: Labor Department, UMich Sentiment survey

10. Inflation Rates Declining
Y-Y Percent Change
2009
2011
2014 5 4 3 2 1 -1 -2 -3
CPI Mar
-0.1%
PCE Feb
0.3%
Inflation levels have fallen to dangerously low levels. Low oil prices do not sufficiently account for this drop. Fed likely delays raising interest rates.
Source: Federal Reserve, Labor Department

11. Personal Savings Ticking Up
1980
2005
2015
1987
2000 14 12 10 8 6 4 2
Feb ’15
5.8%
Aggregate savings usually reveals fluctuations in income savings of top 10%. Bottom 90% may be slightly pocketing gas savings.
Source: Federal Reserve

12. Consumer Credit: Is “Deleveraging” Over?
Debt-income ratios falling and almost in line with equilibrium
Equilibrium: sustainable debt for a household based on economic fundamentals and interest rates
Actual and Equilibrium Debt (in % of Personal Income) 60 70 80 90
100
1980q1
2002q1
2006q1
2010q1
2014q1
Equilibrium Debt Total Debt-to-Income Ratio
Signs point to “YES” but lending conditions are still very tight.
Source: Claudia Sahm, Federal Reserve; Albuquerque et al (2014)

13. Is Q1 an Aberration or Should We Worry?

14. Contributors Q1 Growth (0.2%)
Export Losses Outweigh
Consumption Gains
Large business originally recovered faster than small on exports. Trade deficits hurting corporate earnings.
Source: Bureau of Economic Analysis

15. Q1 GDP Has Become Slower in General
2010 to Present
2000s
1990s
1980s 1% 2% 3% 4%
GDP Growth
Q1 Less than Other Quarters
Q1 Exceeds Other Qs Q1
Other
Possibly all measurement error but since 1985 Q1 growth has been underestimated 80 % of the time. No one is quite sure why.
Source: Justin Wolfers, Bureau of Economic Analysis

16. Foodservice Outpacing Other Spend
Percent Change 3 Month Average Change Since 2014
Note: Gas down 24%
Overall retail sales stagnant since Jan. Consumers are pocketing gas savings… but Foodservice is a significant exception.
Source: Commerce Dept., April 2015

17. Looking Ahead to End-2015/Early 2016

18. A 2014-like Late Year Comeback Is Needed
Oil prices
Gas prices should increase but not significantly
Significant supply volatility expected in 2016
Weather probably overstated as an effect.
Weather an Issue but Dollar Strength Is Key
Lower gas bills more likely to be saved than spent if volatility occurs. Real wage increases are needed to accelerate the U.S. economy and are yet to be seen.
Source: Energy Information Administration, Baker-Hughes North America Rig Counts

19. Housing Isn’t Taking Off Yet
Supersized homes: Homes prices aren’t going up as much as home size
Substitution toward larger homes
Household income isn’t keeping pace with home price growth
41% don’t expect to buy a home in foreseeable future (Gallup)
Housing growth not pushing economy forward as in Many rent without expectation to buy, pressuring rental costs.
Source: Gallup, Commerce Dept.

20. Risk: Time to Keep an Eye on the Globe
CHINA
Slowing below 7%
Falling investments
Consumer spend underperforms
Housing sector default risk

21. Risk: Time to Keep an Eye on the Globe
EUROPE / JAPAN
International demand for dollars as a safe-haven and to pay commodity bills suggest that dollar strength is entrenched in the short-run.
Continued weakness
Default risk in Greece
Solid U.S. recovery depends either on export-rebalancing or wage growth in the U.S. The two are increasingly related but dollar strength may temper 2015 growth.

22. Federal Reserve Policy in 2015
Fed Claims Rate Increases Possible this Summer
Unlikely given dollar strength and deflation risk
Futures market suggests Dec 2015 for increase
Export losses are having a bigger impact than we thought. We still expect growth on par or slightly above 2014, but “escape velocity” looks less likely.
Source: Federal Reserve, Labor Department

23. Slow Improvement on 2014 Barring Global Risk
Conclusions
Slow Improvement on 2014 Barring Global Risk
Downward guidance: 3% looks more like the high end in U.S. GDP growth
Foodservice outpacing retail by 2x
U.S. economy is global leader. . .
. . .but not strong enough yet to sustain dollar strength/export losses
Wage and housing growth in the U.S. are still 1-2 years away as the economy is improving but Dollar strength keeps it off trend.

24. 2015 Technomic Top 500 Restaurant Chain Report

25. Headline: Starbucks Heats Up to #2

26. Headline: Subway Sales Not Healthy

27. Headline: Big Burger Brands Cold

28. Headline: Wing Houses Soar

29. U.S. Top 500 Chains: Sales Performance
Annual Growth Rate
2.2%
5.1%
4.1%
3.3%
4.0%
-0.5%
Source: Technomic Top 500 Report(s)

30. FSR: Menu Category Sales Growth
3.6%
Top 500 FSR Sales Growth Rate
Source: Technomic Top 500 Report

31. Fastest Growing FSR Chains
2014
Sales
($MM)
$239
$215
$245
$234
$205
2014
Sales
Growth
45%
21%
20%
19%
17%
2014
Unit Growth
39%
20%
18%
19% 9%
Growth rates nominal. Source: Technomic Top 500 Report; FSR Chains > $200 million U.S. sales

32. LSR: Menu Category Sales Growth
4.2%
Top 500 LSR Sales Growth Rate
Source: Technomic Top 500 Report(s)

33. Fastest Growing LSR Chains
2014
Sales
($MM)
$201
$311
$523
$426
$4,049
2014
Sales
Growth
38%
31%
30%
29%
28%
2014
Unit Growth
30%
32%
20%
28%
12%
Growth rates nominal. Source: Technomic Top 500 Report; LSR Chains > $200 million U.S. sales

34. Fast Casual: Still the Bright Spot in the Restaurant Industry
Top 500 Chains
Source: Technomic Top 500 Report(s)

35. Customer Status

36. Operator Revenue Situation Best in Recent History
Net Increase* (%)
*% indicating revenues increasing minus % indicating revenues decreasing. Base: operators representing all major segments. Representative Sample
Source Technomic Operator Surveys

37. CDR in Recovery Mode LSR Q1 ’15 2.1% CDR Q1 ’15 2.3%
% Change vs. same period previous year
1Q 2015 data is preliminary
Source: Technomic Same-Store Sales Report

38. McDonald’s Drags Down LSR Results
2012
2013
2014
% Change vs. same period previous year
Source: Technomic Same-Store Sales Report

39. Major CDRs All in Positive Territory
2012
2013
2014
% Change vs. same period previous year
Source: Technomic Same-Store Sales Report

40. Labor Issues More Pressing for Operators
Top 2 Box Concern
Top 2 Box Score. 1 to 5 scale 1 = not concerned at all; 5 = extremely concerned
Source: Technomic Operator Surveys

41. Some Food Cost Relief for Operators
CPI FAFH Mar '15 2.9%
CPI FAH Mar '15 1.9%
0.4%
But menu price inflation creeping up

42. More Operators Taking Price
Have Taken Price Increase in First 3 Months of Year
Will Take Price Increase in Next 6 Months
Source: Technomic Operator Surveys Commercial operators only

43. More Optimism About Profit Growth This Year
Net Profit Growth*
* % expecting profits to increase minus % expecting profits to decrease in year.
Source: Technomic Operator Surveys

44. Operators Experiencing Changing Business Dynamics
Strong/Moderate Consumer Demand or Trend
Natural/Wholesome Foods
Consumer Food Interest/Sophistication
Transparency
Less Processed Foods
Customized Menu Items
Living Wages
Local Sourcing
Food Authenticity
Sustainability Practices
Hormone and Antibiotic-free Meats
Local Brand Preferences
Front-of-house Preparation
Humane Animal Treatment
1 to 4 scale: 1 = not a trend/consumer demand, 4 = strong trend/ consumer demand. Top 2 box shown Source: 2015 Technomic Operator Survey

45. Operator Takeaways Brighter 2015 Expected
Lower food costs, but higher labor costs
Consumer Taste, Demand Evolution in Full Bloom

46. Distribution Report

47. Distribution Market is $240B
Other broadliners
+4%
Custom
+3%
Club/CNC
+8%
All other +3%
Power distributors +5%

48. Market is Highly Fragmented
Share
# Companies
Power distributors
40% 21
Custom
17%
~30
Club/CNC
10%
~15
All Other/Other Broadliners
33%
>15,000

49. Distributors Are Generally Upbeat
Better end-market
Some perceive “windfall”
Generally favorable costs
Business mix improvement
Volume and profit growth

50. Concerns Driver shortage Margin pressures Trade dollar “repatriation”
Mega deal fallout?
Alternative channels/local market competition
“Disruptors”

51. CatMan Has Some Traction
Sysco is pacesetter
Formal processes
Dedicated resources
New business disciplines
Some successes
Informal scorecarding

52. Data sharing, JBP are enablers
Key CatMan Elements
Customer penetration
Price, promotion, trade efficiencies
Effective field execution
Profitable assortment and distribution
Data sharing, JBP are enablers

53. The $64,000 Question?
Expect resolution in next 45 days

54. Industry Growth Outlook: 2015 & 2016

55. Industry Growth Forecast
Total Industry
Restaurants
Beyond Restaurants
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
Source: Technomic

56. Limited Service & Bars/Taverns
Total LSR
QSR
Fast Casual
Bars/Taverns
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
2015 CPI = 3.0% 2016 CPI = 2.5% Source: Technomic

57. Full Service Restaurants
Total FSR
Midscale
Casual
Fine Dining
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
2015 CPI = 3.0% 2016 CPI = 2.5% Source: Technomic

58. Retail Hosts Growth Forecast
Supermarket FS
C-Store FS
Other Retailers
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
2015 CPI = 3.0% 2016 CPI = 2.5% Source: Technomic

59. Travel & Leisure Growth Forecast
Lodging
Recreation
Transportation
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
Lodging, Recreation CPI 2015=3.0% 2016 = 2.5%
Transportation CPI 2015 = 1.6% 2016 = 1.3%

60. Healthcare Growth Forecast
Senior Living
Hospitals
Long-term Care
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
2015 CPI = 1.6% 2016 CPI = 1.3% Source: Technomic

61. Other Segment Growth Forecasts
College/University
K-12 Schools
B&I
Refreshment Services*
n 2015 Real n 2015 Nominal n 2016 Real n 2016 Nominal
* Includes Vending, OCS, micromarkets
2015 CPI = 1.6% 2016 CPI = 1.3% Source: Technomic

62. Conclusions 2015 foodservice business brighter
Core segments regaining strength
Potential paradigm shift in distribution on the horizon
Consumers changing the face of the business