1. Today’s Consumer Tomorrow’s Catalysts for Industry Change

2. The Changing Consumer Excerpt from 1950’s Home Economics Handbook : Excerpt from 1950’s Home Economics Handbook : “Have dinner ready: Plan ahead even the night before to have a delicious meal on time. This is a way of letting him know that you have been thinking about him and are concerned about his needs…” “Have dinner ready: Plan ahead even the night before to have a delicious meal on time. This is a way of letting him know that you have been thinking about him and are concerned about his needs…” --Leslie Blankenship, Columbus, OH --Leslie Blankenship, Columbus, OH

3. The Changing Consumer Working women Working women Wealthier HH’s Wealthier HH’s Family redefined Family redefined Growth of ethnic Growth of ethnic Aging population Aging population

4. Who is the consumer? Depends on market strategy Depends on market strategy Retailers Retailers Wholesalers Wholesalers Foodservice Foodservice Primary Shopper Primary Shopper

5. Today’s Issues Dynamic Consumers Dynamic Consumers Global Marketplace Global Marketplace Convenience Convenience Consolidation Consolidation Food Safety Concerns Food Safety Concerns Health & Wellness Attitude Health & Wellness Attitude Technology & Science Technology & Science

6. The Dynamic Consumer Age of Household Unit Population of Age Group (thousands) Forecasted % Change in Population of Age Group 2000-2005 Under 25 96,9693% 25-2917,8614.1% 30-3941,856-7.1% 40-4942,5194.8% 50-5930,58915.1% 60-6410,75719.8% 65+34,9874.1%

7. Dynamic Consumer Implications Generation X – wants more specialty produce w/ bold and varied flavors in their foodservice meals. Generation X – wants more specialty produce w/ bold and varied flavors in their foodservice meals. Baby Boomers - are aging and their food choices will be influenced by health, travel and new experiences. Baby Boomers - are aging and their food choices will be influenced by health, travel and new experiences.

8. Dynamic Consumer Implications Population Segmentation Population Segmentation Hispanics are the major produce consumer by race and this population segment is growing nine times faster than other races. Hispanics are the major produce consumer by race and this population segment is growing nine times faster than other races. Ethnic Foods – will account for about 15% of growth in food sales in the next 10 years Ethnic Foods – will account for about 15% of growth in food sales in the next 10 years 75% of ethnic food sales are to mainstream consumers. 75% of ethnic food sales are to mainstream consumers. The largest ethnic categories are Mexican, Chinese and Italian. The largest ethnic categories are Mexican, Chinese and Italian.

9. The Global Marketplace New varieties New varieties Year-round availability Year-round availability Fewer limitations on shipments Fewer limitations on shipments NAFTA/WTO/GATT NAFTA/WTO/GATT Increased travel Increased travel Higher disposable incomes Higher disposable incomes

10. Fruit Per Capita Consumption (lbs) Fruit199019951999 Apples19.619.018.8 Avocadoes1.11.41.7 Bananas24.427.431.4 Cantaloupe9.29.211.9 Grapefruit5.95.95.9 Honeydew2.11.92.8 Oranges8.512.88.6 Pineapples2.11.93.1 Watermelon13.315.715.9

11. Vegetable Per Capita Consumption (lbs) Vegetable199019952000 Bell Peppers 4.56.36.9 Broccoli3.44.45.7 Carrots8.311.313.5 Corn6.77.89.5 Garlic1.31.92.5 Head Lettuce 27.822.524.4 Mushrooms2.02.14.3 Onions15.118.019.4 Potatoes46.849.247.4 Tomatoes15.517.117.5

12. Top Growth Categories (Fresh Trends-% growth store sales-99-2000)

13. Top Sales Contribution to Chain (Fresh Trends 99-2000)

14. Convenience Trends Aging, dual-income, busy families want and will pay for convenience Aging, dual-income, busy families want and will pay for convenience NOTE: The fresh-cut industry has grown by 20+% and the Home Meal Replacement (HMR) industry has grown by 10%. NOTE: The fresh-cut industry has grown by 20+% and the Home Meal Replacement (HMR) industry has grown by 10%. Common Convenience Items Common Convenience Items Bagged Salads, Peeled Carrots, Cut Melons Bagged Salads, Peeled Carrots, Cut Melons Growing Convenience Categories Growing Convenience Categories Apples, Potatoes, Vegetable Medleys Apples, Potatoes, Vegetable Medleys

15. Consolidation Trends The Retail Industry experienced nearly 40 mergers in 1999 The Retail Industry experienced nearly 40 mergers in 1999 The Foodservice Industry experienced over 100 The Foodservice Industry experienced over 100 Top eight chains are responsible for over 50% of produce sales Top eight chains are responsible for over 50% of produce sales

16. Top Five Players ($ Billion Grocery Sales)

17. Why Consolidation? Take advantage of economies of scale Take advantage of economies of scale Survive global competition Survive global competition Take advantage of all available food dollars Take advantage of all available food dollars Establish private label programs Establish private label programs

18. Food Safety Concerns Consumers fear unknowns such as… Consumers fear unknowns such as… cross contamination, pesticide residues, biotechnology and terrorism cross contamination, pesticide residues, biotechnology and terrorism 76% of all consumers believe their produce is safe, yet 65% still have concerns about harmful chemical residues 76% of all consumers believe their produce is safe, yet 65% still have concerns about harmful chemical residues Apples, grapes, strawberries, lettuce and tomatoes rank highest among consumers of at risk produce Apples, grapes, strawberries, lettuce and tomatoes rank highest among consumers of at risk produce

19. Food Safety Trends Move towards increased demand for Organic Foods Move towards increased demand for Organic Foods Produce represents over 50% of organic food sales Produce represents over 50% of organic food sales Organic produce sales account for 3% of total produce sales Organic produce sales account for 3% of total produce sales Tomatoes and apples are the most often purchased organic produce Tomatoes and apples are the most often purchased organic produce Ages 45-54 and 18-34 are the prime consumer Ages 45-54 and 18-34 are the prime consumer The West Coast is the strongest organic market The West Coast is the strongest organic market

20. Improving Food Safety Research to improve breeding and reduce pesticide use Research to improve breeding and reduce pesticide use Increased tracking of product from field to fork Increased tracking of product from field to fork Third party safety and sanitation audits Third party safety and sanitation audits Increased education for handlers and consumers Increased education for handlers and consumers

21. Health & Wellness Attitudes Today’s consumer is better educated and more aware Today’s consumer is better educated and more aware Media influences perception of self Media influences perception of self Consumers want miracle cures for anti-aging, cancer prevention, etc. Consumers want miracle cures for anti-aging, cancer prevention, etc. Lycopene: watermelon, tomatoes, grapefruit Lycopene: watermelon, tomatoes, grapefruit Anti-Oxidants - blueberries Anti-Oxidants - blueberries Diets are still popular and 68% of consumers choose fruit and vegetables as the key component Diets are still popular and 68% of consumers choose fruit and vegetables as the key component

22. Total US Fresh Produce Consumption (lbs)

23. Technology & Science Biotechnology Biotechnology Category Management Category Management Returnable Plastic Containers (RPC’s) Returnable Plastic Containers (RPC’s) Online Shopping Online Shopping Electronic Data Interchange (EDI) Electronic Data Interchange (EDI) PLU codes replaced by scan data PLU codes replaced by scan data

24. Additional Consumer Trends & Comments Apples, bananas, oranges and watermelons account for over 60% of fresh fruit consumed Apples, bananas, oranges and watermelons account for over 60% of fresh fruit consumed Consumers buy more fruit than vegetables Consumers buy more fruit than vegetables Average produce purchase is about $3.76 Average produce purchase is about $3.76 Produce snacking is up Produce snacking is up In 1999, 14% of consumers used produce as a snack compared to 31% in 2000 In 1999, 14% of consumers used produce as a snack compared to 31% in 2000 Vegetables account for over 64% of produce sales Vegetables account for over 64% of produce sales

25. Reasons for Produce Growth Increasing ethnic populations Increasing ethnic populations Health Conscious Consumers Health Conscious Consumers Rising interest in ethnic specialties Rising interest in ethnic specialties Exposure to new varieties and exotic produce Exposure to new varieties and exotic produce Growing proliferation of fresh cut and convenience products Growing proliferation of fresh cut and convenience products Use of produce in foodservice Use of produce in foodservice

26. Additional Retail Trends & Comments Bulk produce accounts for about 74% of sales Bulk produce accounts for about 74% of sales Produce contribution to store profits exceeds 20% Produce contribution to store profits exceeds 20% Gross margin has remained flat at about 35% (difference between cost of produce and selling price) Gross margin has remained flat at about 35% (difference between cost of produce and selling price) Size of produce department increased from 2600 sq ft to 3600 sq ft Size of produce department increased from 2600 sq ft to 3600 sq ft Number or stock keeping units (SKU’s) increased from 200 to 600 Number or stock keeping units (SKU’s) increased from 200 to 600 Today more consumers pick their supermarket based on produce selections Today more consumers pick their supermarket based on produce selections

27. Retail Share of Produce Sales

28. What Can We Expect An Always Changing Consumer An Always Changing Consumer A Smaller Global Marketplace A Smaller Global Marketplace More Convenience Items More Convenience Items Increased Consolidation Increased Consolidation Heightened Food Safety Concerns Heightened Food Safety Concerns Growing Health & Wellness Attitudes Growing Health & Wellness Attitudes Better Technology & Sound Science Better Technology & Sound Science

29. Opportunity Factor Ability to Adapt to Change + Vision for the Future + Sound Planning – Fear = Opportunity