June 11, 2017 Millennial Munching A big brand playbook as the small rise up & generations transition Equity Research The Conde Nast-GS Love List: Consumer insights across the food industry The small rise up and the big fall down Legacy packaged food companies are experiencing sales headwinds on both weaker category growth and share losses. While private label is in focus of late, evidence suggests that small brands are the main drivers of share losses as barriers to distribution and brand building fall at the same time big brands curtail investment. Opportunity on the horizon for those ready to seize it Category growth should improve in the years ahead as Millennials form households and ramp food at home consumption. To better understand which brands and companies are best positioned to capture that growth, we executed an attitude and usage study across 35 attributes for 172 brands in conjunction with Conde Nast. Some of the findings are surprising. Many big brands are far from irrelevant – Millennials demonstrate above average affinity for them. Big brand communication and company portfolio strategies, however, appear largely unaligned with the attributes that can fuel growth vs. scale. The growth vs. scale dilemma and call for broader portfolio approach Our combined analysis suggests very few brands that attempt to achieve scale and growth will succeed, which may run counter to the CPG structure and culture of big brand concentration. We look for companies with established Millennial preference, a track record of brand investment and a flexible portfolio approach embracing a small brand mindset to separate the likely leaders from laggards. MDLZ & Nestle lead; CPB & KHC lag Leaders: MDLZ benefits from both broader snack affinity and strength in Oreo, overlaid with consistent investment and a big and small brand (e.g., Vea) mindset. Nestle stands out with top brands in coffee (#1 coffee brand), water (San Pellegrino #1 overall Millennial favorite) and leading brands in frozen. Laggards: Numerous CPB brands appear relatively disadvantaged and continuous advertising cuts disconcerting. At KHC, low brand support raises questions and a culture of cost efficiency appears counter to the portfolio complexity likely needed to thrive. Jason English (212) 902-3293 [email protected]Goldman Sachs & Co. LLC Mitch Collett, CFA +44(20)7774-1060 [email protected]Goldman Sachs International Dylann B. Katz (212) 902-7929 [email protected]Goldman Sachs & Co. LLC Vivek Srivastava (212) 934-8372 [email protected]Goldman Sachs India SPL Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S. The Goldman Sachs Group, Inc. Global Investment Research
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June 11, 2017
Millennial Munching
A big brand playbook as the small rise
up & generations transition Equity Research
The Conde Nast-GS Love List: Consumer insights across the food industry
The small rise up and the big fall down
Legacy packaged food companies are experiencing
sales headwinds on both weaker category growth
and share losses. While private label is in focus of
late, evidence suggests that small brands are the
main drivers of share losses as barriers to
distribution and brand building fall at the same time
big brands curtail investment.
Opportunity on the horizon for those
ready to seize it
Category growth should improve in the years ahead
as Millennials form households and ramp food at
home consumption. To better understand which
brands and companies are best positioned to
capture that growth, we executed an attitude and
usage study across 35 attributes for 172 brands in
conjunction with Conde Nast. Some of the findings
are surprising. Many big brands are far from
irrelevant – Millennials demonstrate above average
affinity for them. Big brand communication and
company portfolio strategies, however, appear
largely unaligned with the attributes that can fuel
growth vs. scale.
The growth vs. scale dilemma and call for
broader portfolio approach
Our combined analysis suggests very few brands
that attempt to achieve scale and growth will
succeed, which may run counter to the CPG
structure and culture of big brand concentration. We
look for companies with established Millennial
preference, a track record of brand investment and a
flexible portfolio approach embracing a small brand
mindset to separate the likely leaders from laggards.
MDLZ & Nestle lead; CPB & KHC lag
Leaders: MDLZ benefits from both broader snack
affinity and strength in Oreo, overlaid with consistent
investment and a big and small brand (e.g., Vea)
mindset. Nestle stands out with top brands in coffee
(#1 coffee brand), water (San Pellegrino #1 overall
Millennial favorite) and leading brands in frozen.
Laggards: Numerous CPB brands appear relatively
disadvantaged and continuous advertising cuts
disconcerting. At KHC, low brand support raises
questions and a culture of cost efficiency appears
counter to the portfolio complexity likely needed to
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research analysts with FINRA in the U.S.
The Goldman Sachs Group, Inc. Global Investment Research
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 2
The problem: Rise of the small but mighty
Organic sales growth for leading packaged food companies has disappointed in recent years with the aggregate of our US packaged
food coverage setting a new all-time low organic sales decline in 1Q17 (-1.6%). The source of weakness has been twofold. First,
overall category growth has slowed which has been most pronounced for center-store categories as consumer shopping behavior
migrates to the perimeter of the store. Equally problematic has been broad based market share erosion. The old adage of number
one or number two brands are most defensible in categories has broadly broken down as top brands are broadly (though not
universally) losing share.
In some instances, the share loss for leading brands has been to private label which has garnered increasing investor focus of late
given announced or suggested initiatives by retailers (e.g., Amazon’s private label assortment expansion, Walmart’s focus on
private label and the US expansion of private label oriented Lidl and Aldi). While we are not dismissive of private label threats, we
see greater cause for concern in the rise of the small brands.
Smaller brands, many of which are being led by entrepreneurs (e.g., Kind, Clif or Quest in bars, Amy’s Kitchen in frozen, Siggi’s in
yogurt), continue to make inroads and are outpacing both industry and private label growth across the food industry. The pattern is
even more evident when we focus on the top 50 packaged food categories which drive 80% of industry sales. Among the top 50
categories, we see established brands and private label losing share in general to smaller brands on both a three and one year
basis; in 2016, small brands gained share in 62% of the top 50 categories vs. only 40% for private label and 32% for the leading
brand.
We believe the rise of the small brands and fall of the big brands is driven by multiple factors:
Barriers to distribution are falling. Traditional retailers continue to broaden their assortment and are increasingly
welcoming of small and differentiated brands as they attempt to differentiate their offerings from peers and cater to
expanding consumer preferences. In Nielsen measured channels, the average number of SKUs per store has expanded at a
2.5% CAGR since 2013 with major food companies seeing a 0.7% increase, private label rising 2.7% and all-other branded
manufacturers leading the growth at 3.8%. On-line, while still in its infancy in Food, will likely perpetuate this given broader
assortment in the channel and easier access/lower cost for smaller companies.
Barriers to building brand awareness and interest have fallen. Enhanced social connectivity through digital platforms
has facilitated both rapid spread of word-of-mouth awareness building and peer endorsement for brands. Both small and
large brands alike can benefit from this, but the point is that it has leveled the playing field. Compounding this has been the
digitization of media; multi-million dollar mass media campaigns are no longer requisite to build awareness – another
leveling effect.
Intense focus on margins has likely increased the vulnerability of big brands. The industry at large has prioritized
margin expansion in recent years, often at the expense of brand investment. Traditional advertising spend by large brands
has materially declined in recent years. This followed an over decade long process of engineering cost out of the food by
major companies. The combination has resulted in food products that are often seen as over-engineered by consumers and
now less supported by brand investment.
An evolving consumer psyche may also play a role. Some see a connection between broader anti-establishment
movements among the Millennial generation and a distrust of big brands. While we intuitively understand the argument,
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 3
we note that anti-establishment movements have been commonplace in history and believe the other three explanations
are the main drivers for big brand weakness.
Exhibit 1: Sales have eroded for major food companies as both industry
growth has slowed and market share was ceded to private label and smaller
companies YoY $ sales growth, 52 wk periods ending March
Exhibit 2: Share losses have come as proliferation of assortment at food
retailers persists with smaller branded companies the primary gainers YoY Average items per store, 52 wk periods ending March
Source: The Nielsen Company, Goldman Sachs Global Investment Research. Note: Food majors include CAG, CPB, GIS, HSY, SJM, K, KHC, MDLZ, Mars, Nestle, PF
Source: The Nielsen Company, Goldman Sachs Global Investment Research. Note: Food majors include CAG, CPB, GIS, HSY, SJM, K, KHC, MDLZ, Mars, Nestle, PF
Exhibit 3: Among the top 50 packaged food categories over the past three
years, big brands have lost share at the expense of “all other’ smaller brands,
not private label 2013-2016 market share change
Exhibit 4: While not ubiquitous, small brands have gained share in 53% of the
categories analyzed vs. only 40% for the incumbent leader 2013-2016 % gaining market share
Source: The Nielsen Company, Goldman Sachs Global Investment Research
Source: The Nielsen Company, Goldman Sachs Global Investment Research
‐0.8%
1.9%2.3%
1.4%
‐3.0%
‐2.0%
‐1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2014 2015 2016 2017 13‐17 CAGR
Food majors Private Label All Other Total Food
0.7%
2.7%
3.8%
2.5%
‐3.0%
‐2.0%
‐1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2014 2015 2016 2017 13‐17 CAGR
Food majors Private label All Other Total Food
‐0.3%
‐0.5%
‐0.1%
0.6%
‐0.6%
‐0.4%
‐0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
#1 brand Top 3 brands Private label All other
40%43%
49%53%
0%
10%
20%
30%
40%
50%
60%
#1 brand Top 3 brands Private label All other
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 4
Exhibit 5: This pattern continued in 2016…
2015-2016 market share change
Exhibit 6: …with small brand share gains now spanning 62% of major food
categories last year 2015-2016 % gaining market share
Source: The Nielsen Company, Goldman Sachs Global Investment Research
Source: The Nielsen Company, Goldman Sachs Global Investment Research
Exhibit 7: Brands outside of the top three are gaining share in key categories ranging from cereal to infant formula with yogurt seeing the most erosion and
more commoditized categories such as frozen seafood, milk, eggs and butter the least All other brands (excluding top three and private label) market share change for 2015-2016 and 2013-2016
Source: The Nielsen Company, Goldman Sachs Global Investment Research
‐0.1%
‐0.3%
‐0.1%
0.4%
‐0.4%
‐0.3%
‐0.2%
‐0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
#1 brand Top 3 brands Private label All other
34% 34%
40%
62%
0%
10%
20%
30%
40%
50%
60%
70%
#1 brand Top 3 brands Private label All other
‐7%
‐5%
‐3%
‐1%
1%
3%
5%
Frzn. seafood
Snack cake
Frzn. Sandwiches
Milk
Nuts
Eggs
Butter
Ice cream
Gum
Frnz. entrees
Novelty
Fresh desserts
Ref. juice drinks
Nutritional
Frnz. pizza
New
age bev.
Fresh sausage
Lunchmeat
Crackers
Isotonic bev.
Cookies
Frzn. veg.
Boxed prep. din.
Salty snacks
Shelf stable veg.
Wholesom
e snacks
Cream
Breakfast meat
Fresh meat
RTE cereal
Cheese
Water
SS liquid soup
SS fruit
Coffee
Baked bread
Spice seasoning
SS juices & drinks
Candy
Soft drinks
Shortening & oil
Infant formula
Ref. meals
Veg. & herbs
Yogurt
1 yr 3 yr
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 5
The opportunity: Rise of Millennials’ food at home consumption
While packaged food industry growth has disappointed in the US of late, there is reason for optimism: the rise of the Millennials.
Millennials remain the largest population by size with the peak age cohort of this generation rapidly approaching household
formation years. As household formation begins, growth in household size should follow. With larger households come larger food
expenditures. The current peak household size is in the 35-44 year band (which the oldest Millennials consumer has recently
entered). Nielsen measured food sales increase 70% on a per capita basis as consumers graduate from the 20-34 year old grouping
to the 35-44 year old grouping. Assuming this relationship holds, the math suggests that Millennial consumers should drive the
entirety of the industry’s growth over the next decade.
This presents both opportunity and risk for the industry at large. Given current trends, it speaks to a rich opportunity for
entrepreneurs to continue to rise in the industry while also offering reason to believe that overall category growth can improve.
Recent results, however, suggest that not all incumbent industry leaders are either prepared or well positioned to benefit.
Exhibit 8: Millennials (roughly 18-34) remain the largest generation in the US
and approach household formation years
Size of cohorts by generation 2015 population (in millions)
Exhibit 9: As Millennials age, their household size should grow Household size by age cohort
Source: Euromonitor, Goldman Sachs Global Investment Research
Source: BLS, Goldman Sachs Global Investment Research
Special K 50% Pillsbury 55%Tates 50% Clif 55%Yoplait 49% Cheez‐It 53%
Haagen‐Dazs 48% Fage 52%
All Millennial Foodie Influencers
Top 20 brands which people consider to be their favorites
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 9
Exhibit 14: Broadly speaking, Millennials demonstrate greater affinity for nearly all top brands % surveyed; “which brands would you consider to be your favorites?”
Source: Conde Nast-Goldman Sachs Love List
The Growth vs. Scale dichotomy
Basic measures such as purchase behavior and affinity demonstrate that large established brands have continued relevance to
Millennial consumers. While encouraging in terms of an outlook on brand durability, it does not shed light on growth prospects, or
lack thereof. In an effort to assess this, we delved deeper and merged Nielsen data to align brand attributes across realized growth,
scale (sales level) and loyalty (repeat) using both retail scanner data and panel data among both Nielsen’s national and Millennial
aged sample sets.
For both the overall pool and the Millennial Foodie Influencer cohort, affordability and consistency were correlated with scale,
suggesting that those attributes are non-negotiable when it comes to establishing a big, scalable brand. It’s also imperative to check
“basic” boxes including “easy to find”, “convenient”, and “good variety”. In order to drive growth, however, a different set of
boxes need to be checked. For the national sample set, Nielsen sales growth was strongly correlated with “unique”, “trendy”,
“innovative” and “a brand not many people know of”. The perception of the ingredient profile (e.g., “made with clean ingredients”
and “less processed”) also correlated strongly with sales growth.
As is evident in Exhibits 15 and 16, almost all of the attributes that correlate with growth are negatively correlated with size. There
are, however, a few exceptions and both the broader pattern of conflict and rare exceptions have implications in terms of both
optimal brand messaging and portfolio strategy, in our opinion.
0%10%20%30%40%50%60%70%80%90%
Angie's
Ben & Jerry's
Bertolli Frozen
Boar's Head
Cheez‐It
Clif
Coca‐Cola
Cracker Barrel Cheese
Dove Chocolate
Duncan Hines
Fage
Ferrero Rocher
Folgers
Ghirardelli
Haagen‐Dazs
Haribo
Hershey Chocolate
International Delight
Justin's Nut Butters
Kashi
Nespresso
Noosa
Peet's Coffee
Pillsbury
Poland Spring
San Pellegrino
Simply O
range
Special K
Starbucks
Stouffer's
Tate's
Yoplait
Which brand
s wou
ld you
con
sider to
be your
favorites?
All Millennial Foodie Influencers
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 10
There are no attributes at the intersection of positive growth and scale when looking at the national sample set. Amongst the
Millennial Foodie Influencer cohort, there are three attributes that lie at the intersection of both positive growth and scale: “good
variety”, “convenient” and “consistent”. These seem like basic and obvious attributes, but they are nonetheless strengths of legacy
brands that are largely being neglected in modern consumer communication. The industry instead has focused on messages
around transparency, authenticity and natural/clean ingredients. While the evolution of product formulation toward these attributes
is likely warranted (effectively unwinding the over-engineering trend from the 1990’s into the early 2000’s), the data suggest that
brand messaging and communication may be more effective when focused on inherent taste, variety and convenience attributes –
all attributes where incumbent brands arguably have a right to win.
Exhibit 15: National sample set: which attributes correlate with scale and growth National sample set population growth and scale correlation scatter plot
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 11
Exhibit 16: Millennial Foodie Influencer population: which attributes correlate with scale and growth
Millennial Foodie Influencer population growth and scale correlation scatter plot
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 12
Exhibit 17: Among the national sample set, a lack of overlap between growth and scale attributes suggests brands can’t “have it
all”
Brand attributes split into 3 GS-defined buckets based on strong positive correlation for national sample set
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company, Goldman Sachs Global Investment Research
‐Affordable‐Consistent‐Convenient‐Easy to find‐Good value‐Good variety‐Made by a manufacturer I trust‐One that reminds me of my childhood‐Trusted
‐A brand not many people know of‐Expensive‐Innovative‐Less processed‐Made with clean ingredients‐Natural‐One I recommend to friends/family‐Organic‐Transparent about how it is produced‐Trendy‐Unique GROWTH
LOYALTY
SCALE‐One of my favorites
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 13
Exhibit 18: When we zoom into the Millennial cohort, overlap between growth and scale attributes emerge in “convenient” and
“good variety”
Brand attributes split into 3 GS-defined buckets based on strong positive correlation for Millennial Foodie Influencers
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company, Goldman Sachs Global Investment Research
A Portfolio Approach: Challenging the big brand first paradigm
The findings of the analysis have aforementioned implications on brand communication – a ‘fix your food/ingredient issues’ but
‘trumpet your inherent virtues (taste, variety, convenience)’ conclusion. They also have potential implications on portfolio
management strategy that may run counter to the big-brand silo cultures that are inherent in many established CPG companies.
‐Affordable‐Consistent‐Easy to find‐One that reminds me of my childhood
‐A brand not many people know of‐Expensive‐For me/my lifestyle‐Fresh‐Good tasting‐Less processed‐Made by a manufacturer I trust‐Natural‐One I recommend to friends/family‐One of my favorites‐Organic‐Safe for me/my family‐Trendy‐Unique
GROWTHLOYALTY
SCALE
‐Convenient‐Good variety
‐Good value
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 14
The modern day brand management structure of the CPG industry emerged as early as 1931 with implementation at P&G. It took
nearly three decades to spread throughout the industry but is now commonplace. Most established CPG companies have now
organized their marketing functions around and allocated resources against their stable of priority brands. The best talent and most
resources generally gravitate to or are assigned to the priority brands, which most often correlate with the largest brands. The focus
of both the people and resources is generally to drive growth. The aforementioned analysis, however, suggests that these brands
may inherently lack the attributes requisite to achieve the growth and that these resources may be more effective if directed toward
small or newer brands that can carve out a growth “niche”. The implicit portfolio strategy of managing large incumbent brands for
stability and cash and nurturing small or new brands for growth may seem obvious, but it is both uncommon and conflicting with
common food company culture. The evidence of this can be found at retail. Major food companies arguably have an advantage in
developing and commercializing the next rising brand in Food, but too few have found success on this front and instead have turned
to M&A to fill their portfolio holes (often with mixed results). It is time for big brands to embrace a small brand mindset, in our view.
The leaders and the laggards: MDLZ & Nestle set examples; KHC & CPB lag
Based on the realities of recent trends and analysis of underlying drivers, we believe that category fragmentation, the shrinking of
big brands and the growth of small brands is likely to continue. The evidence, however, suggests that this does not need to be a
universal trend or translate into big companies lagging even if their big brands are no longer driving the growth. In short, we see
some better positioned than others based on both their existing stable of brands and actions on both brand investment and
portfolio management. We screen our coverage universe for the following in effort to gauge the likelihood of future success as the
Millennial generation graduates to its core food at home consumption life-stage:
Brands with an already demonstrable affinity among Millennials.
A consistent track record and pattern of brand investment.
A flexible portfolio approach that demonstrates willingness and ability to invest and execute behind large and small brands
alike, often with an effort of driving premiumization within their categories.
Based on these attributes, we highlight the following leaders and laggards we believe are better or worse positioned to capture the
Millennial growth opportunity.
The leaders who appear better positioned:
MDLZ:
Broadly aligned with snack food preferences. Broadly speaking, snack food category growth has consistently outpaced
traditional packaged food growth over the past decade. With eight of the top 20 favorite Millennial Foodie Influencer brands
being snack brands, we generally expect this trend to continue.
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 15
MDLZ’s big brands resonate with Millennials. This is evidenced by the measured consumer affinity for its brands. Oreo,
for example, was the top ranking cookie brand among Millennial Foodie Influencer favorites in our survey (ranking 83 spots
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 18
brands across the globe (both private equity and venture rounds and including e-commerce). Funding since 2014 makes up 83% of
all funding rounds since 2009 (which total close to $15.5 bn). 29% of the funding since 2014 supported companies based in the
United States (with the vast majority of those based in California, followed by New York and Texas).
Funding levels during 2014-2016 increased 455% compared to 2011-2013 levels. Given the lack of organic growth in the space and
the success of new, smaller brands, we are not surprised to see a recent uptick in funding. The spike in 2014 and 2015, however,
came from large private equity inflows for a few deals (ex. Weetabix receiving funding of $764 mn in 2015 and Agropur receiving
funding of $470 mn in 2014). In 2016 funding levels fell back closer to pre-2014 levels. On the forward, we expect funding to
accelerate, as 2017 funding year-to-date is outpacing prior years (funding YTD of $1.4 bn vs. the same period for 2016 of $1.1 bn).
Newer start-ups (those founded in 2010 or later) received 52% of new funds from 2014-2017. E-commerce companies obtained 50%
of new funding since 2014 (48% of new funding since 2009) while mobile commerce received 14% of new funding since 2014 (12%
of new funding since 2009). A lot of the new funding over the past few years has been flowing into a few key “buckets”, including
non-alcoholic beverages, e-commerce, mobile commerce, protein-based food and free-from products. We have highlighted a
number of deals in these categories in Exhibit 26.
Exhibit 20: The Global Venture Landscape: Food and Non-alcoholic Beverage, including e-commerce $ mn (lt. axis), # of deals (rt. axis)
Source: CB Insights, Goldman Sachs Global Investment Research
0
20
40
60
80
100
120
140
0
1000
2000
3000
4000
5000
6000
2009 2010 2011 2012 2013 2014 2015 2016 YTD2017
Funding amount $ (LHS) Number of deals (RHS)
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 19
Exhibit 21: More than 57% of venture funding is coming from early stage
(Angel, Seed, Series A, Series B and Series C funding) Food & bev (including e-comm) venture funding amount in $ mn by stage
Exhibit 22: Average deal size has been on the rise in recent years
Average and median deal size in $ mn for food and beverage companies
Source: CB Insights, Goldman Sachs Global Investment Research
Source: CB Insights, Goldman Sachs Global Investment Research
Exhibit 23: US and China lead new funding since 2009
% of new funding since 2009 by country for food and non-alcoholic beverage
Exhibit 24: By subsector, e-commerce has received the majority of share of
funding % of funding by subsector
Source: CB Insights, Goldman Sachs Global Investment Research
Source: CB Insights, Goldman Sachs Global Investment Research
‐
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2009 2010 2011 2012 2013 2014 2015 2016 YTD2017
Angel Seed Series A Series B Series C Series D+ Growth equity
0
2
4
6
8
10
12
14
16
18
05
101520253035404550
2009 2010 2011 2012 2013 2014 2015 2016 YTD2017
Average deal size (LHS) Median deal size (RHS)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2009 2010 2011 2012 2013 2014 2015 2016 YTD2017
% of total fu
nding
E‐commerce Mobile commerce
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 20
Exhibit 25: Highlighting emerging companies; start-up funding for companies founded after 2010 with more than $75 mn Year founded (LHS) and total funding amount $ mn (RHS); total funding above $75 mn
Source: CB Insights, Goldman Sachs Global Investment Research
2009
2010
2011
2012
2013
2014
2015
2016
‐ 100 200 300 400 500 600 700
Flagstone FoodsMasan Nutri‐SciencePicnic
MissFreshSwiggyThrive Market
DeliverooDoorDashJuicero
Benlai Life
Blue Apron foodpanda InstacartPlated
Suja Life
BigBasket
Hampton Creek
HelloFresh
iFood Munchery
Woowa Brothers
Valeo Foods
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 21
Exhibit 26: Key PE/VC investments in food and beverage categories Total funding/amount by round in $ mn; includes deals with total known funding of over $10 mn
Source: CB Insights, Goldman Sachs Global Investment Research
Company Company description RoundDate of funding
Year founded
AmountTotal Funding
Country City
Soylent Maker of nutritional meal‐replacement drinks and reduces environmental impact. Series B 5/4/2017 2013 $50 $72 United States Los Angeles
Juicero The first home cold‐pressed juicing system. Series B 3/31/2016 2013 $70 $100 United States Lafayette
Blue Bottle Coffee Small network of cafes, wholesale partners, an espresso cart, a coffee kiosk, and vintage German coffee roasters. Series C 6/5/2015 2002 $70 $116 United States Oakland
Suja Life Handcrafted lines of cold‐pressured juices Series C 12/1/2014 2012 $20 $196 United States San Diego
All Market All Market is the manufacturter of Vita Coco Coconut Water. Series D 5/24/2012 2012 $11 $208 United States New York
Joint Juice Ready‐to‐drink glucosamine supplement that builds stronger bone cartilage and lubricates joints. Series E 10/25/2011 1999 $73 $124 United States San Francisco
HelloFresh Global provider of fresh food at home via its soft subscription model business. Series G 12/20/2016 2011 $89 $367 Germany Berlin
Yiguo Ego is a Chinese online fresh‐food eCommerce platform. Series C ‐ II 11/9/2016 2005 $200 $200 China Shanghai
Deliveroo End‐to‐end food delivery service that brings high‐quality local restaurant food to homes and offices. Series E 8/5/2016 2013 $275 $475 United Kingdom London
BigBasket Online grocery store. Series D 3/22/2016 2011 $150 $253 India Bengaluru
DoorDash On‐demand delivery service that connects customers with local businesses. Series C 3/22/2016 2013 $127 $187 United States San Francisco
Womai Sells imported products from overseas markets directly to Chinese consumers. Series C 10/12/2015 2008 $220 $320 China Beijing
Ele.me China‐based online food ordering site. Website and apps enable users to search for restaurants nearby. Series F 8/27/2015 2008 $630 $2,335 China Shanghai
Blue Apron Once‐a‐week subscription service, delivering all the fresh ingredients needed to make 3 meals. Series D 6/9/2015 2012 $135 $193 United States Brooklyn
NatureBox Allows consumers to discover new & healthy foods through a monthly subscription service. Series C 5/5/2015 2012 $30 $59 United States San Carlos
Delivery Hero Online food ordering and delivery sites. More than 150,000 restaurants are connected to its service. Series H 6/8/2015 2011 $110 $1,753 Germany Berlin
Picnic App to place orders, and suppliers then deliver the goods to a central distribution center run by Picnic. Series B 3/28/2017 2015 $109 $109 Netherlands
Instacart Mobile app that allows users to shop for groceries directly from a phone. Series D 3/8/2017 2012 $400 $675 United States San Francisco
MissFresh Fresh produce e‐commerce mobile application which enables users to order fresh produce and get it delivered. Series C 1/23/2017 2014 $100 $177 China Beijing
Meicai Mobile e‐vendor of agricultural products, which serves tens of thousands of restaurants in China. Series D 6/22/2016 2014 $200 $200 China Beijing
Masan Nutri‐Science Fully‐integrated branded meat platform, focused on driving productivity in Vietnam's animal protein industry. Private Equity 4/3/2017 2015 $150 $150 Vietnam Ho Chi Minh City
Icelandic Provisions Brand of Traditional Icelandic Skyr which is packed with more protein than yogurt. Series B 1/24/2017 2015 $9 $20 United States New York
Beyond Meat Offers a plant protein that looks, feels, tastes, and acts like meat. Series F 10/10/2016 2009 $23 $40 United States El Segundo
Hampton Creek 100% vegan, cholesterol and gluten free, egg substitute. Series D 7/29/2015 2011 $120 $240 United States San Francisco
The Chia Company Producer of Chia, a plant based source of omega 3, fiber and protein with a fully traceable global supply chain. Series B 5/27/2015 2003 $6 $28 Australia Port Melbourne
COFCO Meat Engaged in feedstuff processing, livestock and poultry breeding, slaughtering, processing, and more. Private Equity 6/6/2014 2002 $270 $270 China Beijing
Justin's Manufacturer of almond butter snacks including nut butters and candy bars. Private Equity 10/17/2013 2004 $47 $48 United States Boulder
Rhythm Superfoods Develops nutrient‐rich, delicious, raw, vegan, gluten‐free, no cholesterol and non‐GMO foods. Series D 1/18/2017 2009 $6 $17 United States Austin
Kite Hill Maker of non‐dairy cheese. Series A 5/20/2016 2013 $18 $25 United States Hayward
Non‐alcoholic beverages
Mobile commerce
Protein‐based
Free‐from
E‐commerce
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 22
Appendix
Love List Rankings
Exhibit 27: Beverage occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey
Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research
Category OccasionRank within sub‐
category for national sample set
Rank within sub‐category for Millennial Foodie
Influencers
Overall favorite rank for national sample
set
Overall favorite rank for Millennial Foodie
InfluencersBeverage OccasionInternational Delight Beverage enhancer Beverage 1 1 32 14Coffee‐Mate Beverage enhancer Beverage 2 2 42 21Crystal Light Beverage enhancer Beverage 3 133Minute Maid Beverage enhancer Beverage 4 3 141 107Country Time Beverage enhancer Beverage 5 4 153 113Nespresso Coffee/hot chocolate Beverage 1 1 1 5Starbucks Coffee/hot chocolate Beverage 2 1 3 5Folgers Coffee/hot chocolate Beverage 3 3 8 83Peet's Coffee Coffee/hot chocolate Beverage 4 10Maxwell House Coffee/hot chocolate Beverage 5 89Swiss Miss Coffee/hot chocolate Beverage 6 4 159 123Simply Orange Juice Beverage 1 1 13 23Tropicana Juice Beverage 2 7 37 63V8 Juice Beverage 3 3 39 37Bolthouse Farms Juice Beverage 4 5 67 51Odwalla Juice Beverage 5 91Bai Juice Beverage 6 6 96 58Naked Juice Beverage 7 4 123 40Gatorade Juice Beverage 8 2 148 28Powerade Juice Beverage 9 8 154 105Horizon Organic Milk Beverage 1 2 24 48So Delicious Milk Beverage 2 38Silk Milk Beverage 3 1 53 43Coca‐Cola Soda Beverage 1 1 5 13Pepsi Soda Beverage 2 2 43 57Lipton Tea Beverage 1 1 52 55Honest Tea Tea Beverage 2 2 136 69Nestea Tea Beverage 3 3 164 129San Pellegrino Water/enhanced water Beverage 1 1 2 1Perrier Water/enhanced water Beverage 2 6 31 119Poland Spring Water/enhanced water Beverage 3 2 34 5Smart Water Water/enhanced water Beverage 4 3 63 29Vitamin Water Water/enhanced water Beverage 5 5 71 63Dasani Water/enhanced water Beverage 6 4 151 48Aquafina Water/enhanced water Beverage 7 7 155 125
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 23
Exhibit 28: Breakfast occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey
Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research
Exhibit 29: Condiment/dressing occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey
Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 24
Exhibit 30: Lunch/dinner occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey
Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 25
Exhibit 31: Snack occasion relative ranking of brands within categories **brands with no data or ranking are brands where less than 10 people answered survey
Source: Conde Nast-Goldman Sachs Love List, Goldman Sachs Global Investment Research
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 30
Exhibit 40: What it takes to succeed in condiments/dressings/sauces Brand attributes with positive correlation to GS-defined buckets of scale, growth
and loyalty for condiments/dressings/sauces
Exhibit 41: Which brands straddle these buckets Top 5 ranked brands for aggregate of attributes by % for each GS-defined bucket
(ex. Sabra appeared the most in the top 5 for the various growth attributes; it
“checks the most boxes” for the growth attributes); more than 5 listed for ties
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company, Goldman Sachs Global Investment Research
Source: Conde Nast-Goldman Sachs Love List, The Nielsen Company, Goldman Sachs Global Investment Research
GROWTH
LOYALTY
SCALE
‐Convenient‐Easy to find‐Good variety‐Organic
‐Transparent about how it is produced‐Trendy
‐A brand not many people know of‐Less processed
‐Affordable‐Good value
‐Consistent‐Good tasting‐MAde by a manufacturer I trust‐One of my
favorites‐One that reminds me of my childhood‐Trusted
‐Expensive‐Fresh‐Made with clean ingredients‐Natural
‐Breakstone's‐Heinz Ketchup‐Pace
‐Prego‐Reddi Wip‐Sabra
GROWTH
LOYALTY
SCALE
‐Knorr
‐Land O'Lakes‐Philadelphia
‐Old El Paso
‐Hellmann's/Best Foods
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 31
Disclosure Appendix
Reg AC
We, Jason English, Mitch Collett, CFA, Dylann B. Katz and Vivek Srivastava, hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company
or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this
report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a security by comparing key attributes of that security to its conviction sector and the market. The four key attributes depicted are:
growth, returns, multiple and an integrated IP score. Growth returns and multiple are indexed based on composites of several methodologies to determine the stocks percentile ranking within the
region's coverage universe. The precise calculation of each metric may vary depending on the fiscal year, industry and region but the standard approach is as follows:
Growth is a composite of next year's estimate over current year's estimate, e.g. EPS, EBITDA, Revenue. Return is a year one prospective aggregate of various return on capital measures, e.g. CROCI,
ROACE, and ROE. Multiple Multiple is a composite of one-year forward valuation ratios, e.g. P/E, dividend yield, EV/FCF, EV/EBITDA, EV/DACF, Price/Book. Integrated IP score is a composite of
Growth, Return and Multiple scores.
Quantum
Quantum is Goldman Sachs' proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for in-depth analysis of a single company, or to make
comparisons between companies in different sectors and markets.
GS SUSTAIN
GS SUSTAIN is a global investment strategy aimed at long-term, long-only performance with a low turnover of ideas. The GS SUSTAIN focus list includes leaders our analysis shows to be well
positioned to deliver long term outperformance through sustained competitive advantage and superior returns on capital relative to their global industry peers. Leaders are identified based on
quantifiable analysis of three aspects of corporate performance: cash return on cash invested, industry positioning and management quality (the effectiveness of companies' management of the
environmental, social and governance issues facing their industry).
The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, "Goldman Sachs") and companies covered by the Global Investment Research Division of
Goldman Sachs and referred to in this research.
Goldman Sachs has received compensation for investment banking services in the past 12 months: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83), Mondelez International Inc. ($45.62) and Nestle
(SFr80.95)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83),
Mondelez International Inc. ($45.62) and Nestle (SFr80.95)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83), Mondelez International Inc. ($45.62) and
Nestle (SFr80.95)
Goldman Sachs had a non-investment banking securities-related services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Kraft Heinz Co. ($90.83) and Nestle (SFr80.95)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83), Mondelez International Inc.
($45.62) and Nestle (SFr80.95)
Goldman Sachs makes a market in the securities or derivatives thereof: Campbell Soup Co. ($56.54), Hershey Co. ($114.02), Kraft Heinz Co. ($90.83) and Mondelez International Inc. ($45.62)
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 32
Distribution of ratings/investment banking relationships
Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships
Buy Hold Sell Buy Hold Sell
Global 33% 53% 14% 63% 57% 50%
As of April 1, 2017, Goldman Sachs Global Investment Research had investment ratings on 2,857 equity securities. Goldman Sachs assigns stocks as Buys and Sells on various regional Investment
Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for the purposes of the above disclosure required by the FINRA Rules. See 'Ratings, Coverage groups
and views and related definitions' below. The Investment Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.
Price target and rating history chart(s)
70 7170
6564
5960
59
61.5
6763
6160
66
6465
90 82 81
350370390410430450470490510530550
505560657075808590
Nestle (NESN.S)
Goldman Sachs rating and stock price target history
Stock Price Currency : Sw iss Franc
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Mitch Collett, CFA
Not covered by current analyst
FTSE World Europe (GBP)
Inde
xPr
ice
Stoc
kPric
e Dec 2 Sep 13N S
MB
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017
41 3937
36
35 41 38 40 4547
50 62
6162
68
66
59
61
6063
1,800
1,900
2,000
2,100
2,200
2,300
2,400
303540455055606570
Campbell Soup Co. (CPB)
Goldman Sachs rating and stock price target history
Stock Price Currency : U.S. Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Jason English
Not covered by current analyst
S&P 500
Inde
xPr
ice
Stoc
kPric
e Jul 14 Feb 28N S
MN
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017
909189
107
106
101
92 9392
9394
89
99
110
106
101 105107
1,800
1,900
2,000
2,100
2,200
2,300
2,400
80859095
100105110115120
Hershey Co. (HSY)
Goldman Sachs rating and stock price target history
Stock Price Currency : U.S. Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Jason English
Not covered by current analyst
S&P 500
Index
Price
Stoc
kPric
e
Apr 1, 2014 N
Apr 8 Jan 15S
MN
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017
605955
5473
72
7393
91
8382 83 84
89
9398
100
9894
95
1,800
1,900
2,000
2,100
2,200
2,300
2,400
40
50
60
70
80
90
100
Kraft Heinz Co. (KHC)
Goldman Sachs rating and stock price target history
Stock Price Currency : U.S. Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Jason English
Not covered by current analyst
S&P 500
Index
Price
Stoc
kPric
e Jan 15N
MB
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 33
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Goldman Sachs rating and stock price target history
Stock Price Currency : U.S. Dollar
Source: Goldman Sachs Investment Research for ratings and price targets; FactSet closing prices as of 3/31/2017.
The price targets show n should be considered in the context of all prior published Goldman Sachs research, which may or may not have included price targets, as w ell as developments relating to the company, its industry and financial markets.
Rating
Price target
Price target at removal
Covered by Jason English
Not covered by current analyst
S&P 500
Index
Price
Stoc
kPric
e Jul 30B
MN
J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M2014 2015 2016 2017
June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 34
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June 11, 2017 Americas: Food: Packaged & Manufacturing
Goldman Sachs Global Investment Research 35
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