Pet Specialty Market Overview

Pet Specialty Market Overview Trends and Insights Presented by Maria Lange PIJAC 2016 1

Working with Retailers to build a Pet Specialty Panel Retailers Send GfK their data Receive market & benchmark reports Manufacturers Subscribe to market reports Make informed business decisions using data GfK Receive data from retailers Produce market reports, analyze, & consult on market insights 2

GfK Retail Panel for Pet Care North America Canada (2017) Western Europe UK & IRL Vet (2001); UK (2015) Germany Vet (1982) France (2005) Greece (2015) Spain (2013) North America USA (1994) APAC China (2013) Existing retail panels In progress CEE / META S Africa (2014) Czech Rep. (2015) Slovakia (2015) 3

Canada Pet Retail Universe 2015 Province 2014 2015 % AB 249 231 7% BC 343 307 10% YT:2 MB 58 57 2% NB 38 38 NL 17 17 BC:307 AB:231 NS 55 44 20% SK:35 MB:57 NL:17 ON 835 815 2% ON:815 QC:393 PE 7 7 QC 425 393 8% NB:38 NS:44 SK 35 35 YT 1 2 +100% Grand Total 2,034 1,946 4% 4

Canadian Pet Specialty Retail Universe 2016 YT:2 1,946 Stores BC:307 AB:231 SK:35 MB:57 NL:17 ON:815 QC:393 NB:38 NS:44 5

Timeline for Canadian Pet Retail Panel Launch Last Call for Retailers to join the panel Retailer scan data is being coded based on GfK code plan Data projected up to full Canadian Pet Retail Universe SKU level data reporting Finalizing Recruitment And Coding Phase September/October 2016 Pre-Launch Leader Panel Mid-November 2016 Aggregating raw data from 200+ shops Understanding segment, feature and brand shares Launch Full extrapolated Panel February 2017 6

What s happening in the US? 7

Pet Specialty Retail in Numbers 2011/2016 Dollar Sales grew from $6.2Bn in 2011 to $8Bn in 2016 +29% Poundage Sales declined from 3.5Bn -4% in 2011 to 3.3Bn in 2016 Changing 2011/2016 Price for a pound of pet food +34% At Pet Specialty is $2.40 There are total of 559 pet +52% food brands in the market. 2,880 new items were launched in the past year. +12% 8

Market Size Trend Dollar & Poundage Sales DOLLAR Sales in Millions Growth accelerated again +4.2% (2016) vs 2.8% (2014) POUNDAGE Sales in Millions Growth bounced back from -2.4% (2014) to -1.7% (2016) $6,207 $6,852 $7,282 $7,484 $7,832 $7,976 3,463 3,533 3,479 3,395 3,349 3,320 2011 2012 2013 2014 2015 2016* 2011 2012 2013 2014 2015 2016* YOY Growth% +10.4% +6.3% +2.8% +4.6% +4.2% YOY Growth% +2.0% 1.5% 2.4% 1.4% 1.7% *2016 - represents data for 12 months ending June 2016 (all other periods are based on calendar years) 9

Pet Specialty Retail Trends Channel migration growing importance of ecommerce Toy/small breed dog food sales growth (+73% since 2011) 10

Rapid growth of Small/Toy Dog Breed Segment Rapid increase in number of items result in rapid growth MAT 2016* 2015 Dry $505M 2011 $389M 2012 $460M 2013 $537M 2014 $600M $658M $675M +6.5% Wet $47M +8.1% Treats $123M +4.9% 501 573 587 731 867 939 TOTAL ITEMS 263 322 313 410 480 504 DRY 73 77 85 100 102 129 WET 165 174 189 221 285 306 TREATS RG 4598750 ID 478889391: Dog Small/Toy Only, Total Pet Retail, *MAT 2016 through June 11

Pet Specialty Retail Trends Channel migration growing importance of ecommerce Toy/small breed dog food sales growth (+73.5% since 2011) Higher density products freeze-dried & dehydrated petfoods 12

Pet Specialty growth has slowed in recent quarters PETFOOD US Pet Retail 10 Quarter Trend Growth Rate PY Jan 14-Mar 14 Apr 14-Jun 14 Jul 14-Sep 14 Oct 14-Dec 14 Jan 15-Mar 15 Apr 15-Jun 15 Jul 15-Sep 15 Oct 15-Dec 15 Jan 16-Mar 16 Apr 16-Jun 16 Adj Sales USD Adj Sales Units Adj Sales LBs Adj Sales USD Growth Rate PY/Adj Sales Units Growth Rate PY/Adj Sales LBs Grow th Rate PY 6 5 4 3 2 1 0-1 -2-3 -4 2.8 3.0-3.0 1.8 0.5-3.2 2.7 1.1-1.9 3.6-1.5 1.4 2.0-1.7 3.9 5.4-0.4 0.9-1.4 5.1-1.2 4.2-1.1-2.1 4.6-1.2-3.1 2.8-2.1-2.2 GfK GfK 2016 September - All rights reserved 27, 2016 9/2016 PIJAC Includes Liquids & Pill Pockets RG4609152 Channel Split + Growth MAT Tot PF(4) 13

Value Natural & Private Label Growth are a partial driver of recent dollar growth slow-down (driven by large chains) 3.6% 3.4% Private Label and Value Natural brands outpace growth for all other brands. The price difference of 20% is partial driver of the overall declining dollar growth in Pet Superstores. 14

Average Price per Pound Food & Treats 2011 through June 2016 11.50 $11.03 Price per Pound in $ 10.50 9.50 8.50 7.50 $6.59 6.50 5.50 4.50 +67% since 2011 3.50 2.50 $1.57 1.50 Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 FULL MEAL Jul 13 Sep 13 Nov 13 Jan 14 TREAT Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 +40% since 2011 May 15 Jul 15 Sep 15 Nov 15 Jan 16 Mar 16 $2.20 May 16 RG 4607227 ID 479489951 Total Pet Retail (Jan 2011 Jun 2016) 15

Premiumization of Pet Food in Pet Specialty Retail US Key Categories - MAT June 2016 Natural $5.6Bn +7.6% YOY 70% market share $2.77 per pound Grain-Free $3.0Bn +20.2% YOY 37% market share $3.07 per pound *Full meal only natural, grain-free and freeze-dried/raw products driving dollar growth 16

Natural Grain-Free Trend The driver of Natural Growth without grain-free, the natural category is declining 54% 41% 17

Premiumization of Pet Food in Pet Specialty Retail US Key Categories - MAT June 2016 Natural $5.6Bn +7.6% YOY 70% market share $2.77 per pound Grain-Free $3.0Bn +20.2% YOY 37% market share $3.07 per pound Limited Ingredients $683MM +12.5% YOY 8.6% market share $2.58 per pound *Full meal only natural, grain-free and freeze-dried/raw products driving dollar growth 18

Key Performance Metrics Annual Sales & YOY Growth Trend by Segment Segment Share % $682 Million Year-over-Year Growth Trend % (last 3 years) MAT Jun 16 2014 2015 MAT Jun 16 6.6 82.5 4.4 1.9 4.4 Dry Wet Treats Dog Dry makes up lion share of all LID sales (growing consistently in lower teens) Strong growth for Cat Wet, albeit a small segment Total Category Growth 10.8 11.4 13.0 14.1 8.7 4.0 28.3 7.6 13.6 13.8 12.3 10.6 13.3 22.9 25.9 11.9 11.3 12.5 $585.8MM $651.7MM $683.3MM 19

Limited Ingredient Diet (LID) Segment Expansion Original LID concept New LID approach 20

Limited Ingredient Diet (LID) Segment A human trend That s it. Fruit Bars RXBAR All natural fruit bars made from 100% REAL FRUIT and only 2 ingredients: Apples and Pineapples! Seriously, That's it! You love us for what s inside. So we decided to be upfront about it. First things first, our exclusive, powerful core ingredients: egg whites, fruits and nuts. Our 100% natural flavors. And our oneof-a-kind promise: No B.S. Loud and clear. 21

Premiumization of Pet Food in Pet Specialty Retail US Key Categories - MAT June 2016 Natural $5.6Bn +7.6% YOY 70% market share $2.77 per pound Grain-Free $3.0Bn +20.2% YOY 37% market share $3.07 per pound Limited Ingredients $683MM +12.5% YOY 8.6% market share $2.58 per pound *Full meal only natural, grain-free and freeze-dried/raw products driving dollar growth Frozen $97MM +26.9% YOY 1.2% market share $6.51 per pound 22

Key Performance Metrics Annual Sales & YOY Growth Trend Annual $ Sales Trend in Million Monthly Year-over-Year Growth Trend % 2015 MAT Jun 16 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 50 39.6 38.9 39.4 38.0 40 2012 2013 43.1 51.0 2014 65.0 88.9 97.3 32.8 35.3 34.5 Frozen accounts for 1.2% of all sales 33.5 29.6 23.9 26.1 23.9 20.2 14.5 12.9 30 20 10 +/- %PY 0 +/- % PY 19.5 18.3 27.3 36.8 26.9 23

Key Performance Metrics Distribution & Velocity Annual Trend 2011 2012 2013 2014 2015 MAT June16 Sales per Shop/Month (Thousands) 1.2 1.1 1.0 0.9 0.8 0.7 $36.1M $43.1M $51.0M $88.9M $65.0M $97.3 0.6 38 40 42 44 46 48 50 52 54 56 58 60 62 64 % of Stores Selling/Distribution Velocity has doubled since 2011 and 36% since 2014 Stores selling frozen pet food nearly doubled from 38% to 63% of all stores (past 5 years) 24

Premiumization of Pet Food in Pet Specialty Retail US Key Categories - MAT June 2016 Natural $5.6Bn +7.6% YOY 70% market share $2.77 per pound Grain-Free $3.0Bn +20.2% YOY 37% market share $3.07 per pound Dehydrated* $20MM +37.1% YOY New Items: 20 in 15 vs. 26 in 14 $9.54 per pound Limited Ingredients $683MM +12.5% YOY 8.6% market share $2.58 per pound Freeze-Dried* $61MM +45.5% YOY New Items: 75 in 15 vs. 37 in 14 $32.39 per pound *Full meal only natural, grain-free and freeze-dried/raw products driving dollar growth Frozen $97MM +26.9% YOY 1.2% market share $6.51 per pound 25

Key Performance Metrics Raw Alternative Annual Sales & YOY Growth Trend Annual $ Sales Trend in Millions 100% Freeze dried 100% Dehydrated Monthly Year-over-Year Growth Trend % 2012 2013 2014 2015 MAT Jun 16 $86.0 Apr 15 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Jun 16 100 $76.1 69.6 70.0 72.2 80 61.0 $48.2 52.9 $32.1 $27.4 33.0 14.6 19.9 23.2 26.4 12.8 12.2 15.2 +/- % PY 40.0 17.2 50.2 58.0 43.4 68.8 51.0 72.0 60.3 Raw Alternative accounts for 1.1% of all sales 64.7 63.7 61.3 55.6 57.2 60.4 54.2 38.5 51.3 41.6 40.0 39.2 50.4 34.6 37.8 50.1 42.7 27.4 30.3 19.0 28.7 25.6 13.4 60 40 20 0 +/- %PY *100% Dehydrated includes 100% Dehydrated + Freeze-Dried Combination Full Meals. 26

Key Performance Metrics Distribution & Velocity Annual Trend 100% Freeze dried 100% dehydrated Sales per Shop/Month 750 700 650 600 550 500 450 400 2014 $15.2M 2012 $12.8M $10.3M 2011 $12.2M 2013 2011 $9.2M 2012 $14.6M 2015 $23.2M $19.9M 2013 2014 $33.0M $26.4M MAT 2016 2015 $52.9M $61.0M MAT 2016 While dehydrated foods have grown in distribution, freezedried foods grew to more than double the market size (greater dist. & sales/store) 350 10 20 30 40 50 60 70 % of Stores Selling/Distribution 27

Types of Raw Alternative Lots of different ways to explore raw $69 Million Sales 357 items (+32% since 2014) 63% distribution $1,024 per shop/month $19 per pound $17 Million Sales 53 items (+230% since 2014) 54% distribution $242 per shop/month $33 per pound $142 Million Sales 357 items (+62% since 2014) 75% distribution $1,427 per shop/month $3 per pound 28

Premium Dry Trend Dog & Cat Full Meal Annual $ Sales by Preservation Type in Million PETFOOD US Pet Retail MAT 2011-2016 FULL MEAL DRY Premium Dry Petfoods Trend $ in MM 240 220 200 180 236.4 5.4 Rapid 6.2 20.4 Growth +66% $ in MM 160 140 120 100 80 67.9 82.6 8.8 99.1 10.1 142.1 14.8 80.9 143.2 PART DEHYDR. DEHYDR+ FRZDRIED 100% DEHYDR. PART FRZDRIED 100% FRZDRIED 60 40 20 0 9.1 42.9 12.5 54.4 16.3 60.3 25.6 41.9 61.3 GfK 2016 September - All rights reserved 27, 2016 8/2016 PIJAC PRJ 114710 - RG 4543494 - RP 28149934 - ID 473112645 MAT 2012 MAT 2013 MAT 2014 MAT 2015 MAT 2016 29

Types of Mixers & Meal Enhancers 30

Meal Enhancers Yearly Growth Yearly dollar sales have grown rapidly, driven by total items nearly tripling since 2013. 2013 $3.5 MM 2014 $6.4 MM 2015 $21.2 MM MAT 2016 $27.8 MM Preserved $19.2MM Wet $7.2MM Liquid $1.2MM 66 102 130 164 Total Items 56 83 105 121 Dog 10 19 25 43 Cat RG 4510350 ID 471852884: Preserved Freeze-Dried/Dehydrated, Wet wet food topper (chunky/stew-like), Liquid Soups, Purees 31

Dueling Trends Premium Value Price per pound increased by 12% for Treats and 9% for Full Meal since January 2015. Premium natural products vs. with value natural offerings that are usually about 20% cheaper 32

Industry Buzzwords Limited Ingredient claim prominent on packaging Sustainability and Humane is a growing trend for pet food manufacturing Product offering for Small/Toy Breed dogs is growing Premiumization continues strong 33

YOU ARE INVITED! WHAT: Live Webinar -- GfK pet food experts will be sharing trends and insights from our brand new Canadian Pet Specialty Point-of-Sale tracking database WHEN Mid-November 2016 HOW TO JOIN Leave your business card to be invited or email us at petspecialty@gfk.com to get on the invitation list 34

THANK YOU! QUESTIONS? Maria Lange GfK POS Tracking Business Group Director Pet maria.lange@gfk.com @malangpet 35