Agenda

• Grocery and retailing in the UK • Overview of in the UK • UK economic outlook and the impact on • Two big internal drivers of change; Promotions and Private Label • Retailers and owners working in harmony • Conclusion Events and economics Outlook for retailing

Source: Oxford Economics/ONS Internet sales per capita 2010

Source: Passport GMID,2011 Price of overall consumer basket 2010 UK price relative to area 2010 Grocery Retail Market Size

Grocery sector performance has remained solid, although market growth will slow through H2 2009 and into 2010 as grocery inflation falls

160 10% 146.3 139.6 9% 140 133.1 128.2 123.5 119.8 8% 115.0 120 111.3 106.3 7% 99.8 100 93.3 96.6 6.5% 6% 4.9% 80 4.7% 5% 4.2% 4.9% 3.8% 4.8% 3.8% 4% 60 3.5% 3.3% 3.3%

3% (%) Growth YOY 3.1% 40 2% 20

Grocery Retail Market Size(£bn) RetailMarket Grocery 1%

0 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: IGD Research UK Grocery Market Facts

Source: IGD UK Grocery Retailer Sales

45

40

35

30

25

£Bn 20

15

10

5

0 Sainsbury Morrison SPAR M&S Premier Martin Budgen Simply McColl Food

Source: IGD Analysis / Verdict – 2010 & 2011 sales data Format Focus - Convenience

IGD forecasts the convenience sector will be worth £41.4bn by 2014

45 30% 41.4 39.1 40 36.8 34.4 25% 35 32.1 30.3 30 20%

25 15% 20

15 10%

10 6.9% 6.0% 7.0% 6.3% (%) Growth YOY 5.9% Market Size (£bn) Size Market 6.1% 5% 5

0 Convenience Grocery Retail Retail Grocery Convenience 0% 2009 2010 2011 2012 2013 2014

Convenience is benefiting from the recession: consumers seek to shop more frequently, more locally and more last minute

Source: IGD Research UK Convenience Retail Sector Key Facts

Source: IGD Convenience players and “new” entrants

4

3,5

3

2,5

2 £Bn

1,5

1

0,5

0 Tesco Express SPAR Coop M&S Simply Londis Costcutter Nisa Premier Sainsbury's Martin McColl Budgen Local Stores

Source: IGD Analysis / Verdict – 2010 & 2011 sales data Spar in perspective

Founders purpose • SPAR was founded in the in1932 by Adriaan Van Well and was originally know as DESPAR. • The name DESPAR in Dutch stands for ‘Door Eendrachtig Samenwerken Profiteren Allen Regelmatig ‘ this translates into English as ‘All Benefit from Joint Co- operation’. • The word SPAR in Dutch means fir tree and from the start the fir tree symbol was used to identify the organisation SPAR Worldwide

• SPAR operates in 33 countries spread over 4 continents • 2010 SPAR’s retail sales were in excess of €27bn from 12,680 outlets

Beginnings of SPAR UK – Over 50 years ago

The secret of SPAR success

Customer Manifesto We are a group of local independent store owners and managers living, involved and ‘Tuned in’ to our communities. We are passionate about the food we provide and our aim is to offer our customers better stores, better products and the services they want – locally. Our aim is to make the places we live, better places to live.

Retail Mission To provide the most profitable solution for Independent retailers in the convenience market Who are our typical retailers? SPAR organisation in numbers £3bn Retail Sales 15 million customer transactions 2560 stores

1322 retailers

5 RDCs

1 CO SPAR Customers convenience needs ranking

What factors are important in choosing which to use? -Mean rating of importance out of 10

Fair price 8.47 Nearest store 8.35 Fast service 8.35 PRIMARY Stock availability 8.34 NEEDS Staff 8.31 Quality Fresh fruit & veg 8.27 Wide range 8.21 Store environment 8.08 Quality - fresh meat 8.07 SECONDARY Community 7.9 NEEDS Offers & promotions 7.89 Other services 7.59 Selection of healthy food 7.38 Quality - own label 7.21 Parking 7.16 Ethically-minded 7.14 TERTIARY NEEDS Source food locally 6.95 Choice & ideas for quick meals 6.77 Good to buy a 6.43

Data Source: HPI U&A Convenience Shoppers What we sell in a typical SPAR store

Grocery Food 5% Grocery Non Food 4% 6% 18% Impulse Soft Drinks 2% Impulse Crisps House & Home 2% 6% & Cakes Chilled 4% Frozen 24% Fresh Fresh meat 12% Produce News & Mags 2% 6% 1% 5% 3% BWS Retail development • Optimising the retail opportunity – Every customer has a reason to visit you – Better range fit means higher basket size – Selling goods at the optimum price The key drivers Store type The formats

EUROSPAR EUROSPAR

Community Affluent Neighborhood Value SPAR Neighborhood Affluent Less Affluent Urban Lifestyle EXPRESS In-Transit SPAR- Missions - there for you, and you, and you… “I need to buy some items in-between my + + Top-Up big weekly shop”

“I want a quick & Meal for easy meal + + Tonight solution”

Special “I need a gift” + + Occasion

“I’m hungry now” Food- + + to-Go

“I need my daily Daily Life essentials” + + EUROSPAR – small supermarket c 800sq mt Neighbourhood – all under 300 sq mt Urban Express In Transit So this is where we are today….. PAUL VALERY, 1871 - 1945 However adapting to a changing market is essential – just ask these guys……………….

1980's 1990's 2000 - present

Bejam's Aberness Foods Crazy Prices Alldays Galbraith Bells David Greig Day & Nite International Food Giant Europa Law's Gateway Fresh Express Lennons Grandways GT Smith Normans Presto Jacksons Sperrings 7-Eleven Shop Rite Morning Noon & Wm Low Safeway

Change comes in lots of different ways. Grocery Multiple Retailers Promotional Sales In Grocery Multiples Spend on Offer is more intense with 35% of all Sales now being sold on offer Top 4 Grocery Multiple Retailers Promotional Sales

Without a `loyalty ` scheme in October, Morrison's have now overtaken Tesco for the top promotional slot

Source: Nielsen Homescan Grocery Multiples

What Has Had The Biggest Positive Impact on Your Business This Year (Spontaneous)

Value communication Private label S Budget Recent private label initiatives

Source: company websites Premium OL is again the fastest growing sub brand, as budget OL turns negative. With ‘Dining-in’ the new dining out, Premium OL is an option for retailers to differentiate their offer and provide shoppers quality at a price they can afford. The focus on Premium is expected to continue in 2011. Grocery Multiples 4 weekly data: % Growth

Premium Budget Standard Healthy

50% 2009 2010 2011 40%

30%

20%

10%

0%

-10%

-20%

3-Oct-09 2-Oct-10

8-Aug-09 5-Sep-09 7-Aug-10 4-Sep-10

11-Jul-09 10-Jul-10

31-Oct-09 30-Oct-10

18-Apr-09 17-Apr-10

13-Jun-09 23-Jan-10 12-Jun-10

21-Feb-09 21-Mar-09 28-Nov-09 26-Dec-09 20-Feb-10 20-Mar-10 27-Nov-10 25-Dec-10 19-Feb-11

16-May-09 15-May-10 22-Jan-11 4 weeks ending Categories coded with sub- attribute account for 58% Sales sold through Grocery Multiples Grocery Multiples market for data 4 w/e 19th February 2011

*Standard includes Standard OL, Free From, Kids & Discounter Brands Source: Nielsen Homescan With the exception of Frozen, OL contracted across all categories for the second year running, as branded promotions averaged the year at 46%.

Very High OL categories

94% 94% Own Label Value Shares within the category 92% 91%

High 78% 77% OL categories Medium OL categories

56% 54% 52% Very Low 50% 51% 50% OL categories

36% 34% 35% 34% 33% 31% 25% 24% 21% 20%

16% 15%

Deli

Dairy

Liquor

Frozen

Bakery

Beauty

Health&

Poultry

Household

Soft Drinks Soft

Fruit & Veg& Fruit

Dry Grocery Dry

Meat Fish& Meat Confectionery 52 w/e 23-Jan-10 52 w/e 22-Jan-11 Source: Nielsen Homescan – Total FMCG Grocery Multiples 52 w/e 22nd January 2011 vs 52 w/e 23rd January 2010 69% of shoppers agree their main store’s own label is as good as brands with pre and new agreeing the most ... the new generation of shoppers ..?

“My main store’s own label products are generally as good as the well- known brands” % Respondents agreeing 13% 2011 69% 18% 2010 68%

2009 67% 69% 2007 67% Agree Neither Agree nor Disagree Disagree 2006 70% Key Buyer groups opinion to statement: Agree Disagree 2005 70% • Pre (116) • Established Family (114) 2004 67% • New Family (112) • Older Couple (112) • Maturing Family (107) • Older Singles (113) 2003 69%

Source: Nielsen Homescan Survey (GB) January 2011 Supplier & retailers Partners or….?

Customer engagement Engage the customer by: Listening to the customer re: their strategies and goals for the short and long-term Understanding the customers’ shoppers Sharing your company and category strategies on a consistent and constant basis and endeavour to stay on strategy Adapting to change and variances in the market and situation

Follow up with customer by: Maintaining contact with senior management to sustain buy-in Conducting regular business reviews and assessments Leveraging key relationships within the customer Applying performance measures that highlight continuous improvement

Key Enablers Internal strategic alignment Top to tops with retailer senior management Shopper insight & understanding Cross functional alignment & human resource capability Information technology/tools

© Copyright and Proprietary information property of Advantage Group International and associated subsidiary companies

UK Retailers among the most satisfied with supplier performance

30 30 29 26

18 16 16 11

Canada UK USA Spain

2008 Advantage Mirror Report PRIORITIES FOR MANUFACTURER SUPPORT AS IDENTIFIED BY RETAILER (COMMERCIAL) 2008 2009 2010 Priorities Spain Portugal France Italy Belgium Holland Germany UK Rusia Has brands/products that provide adequate margin levels to enable us to 1 1 1 4 1 1 1 1 1 1 1 2 achieve our category/business targets

3 3 2 Works well with us/easy to do business with 3 1 3 10 1 2 5 1 1

Understands and responds to the unique strategies and goals of our 2 2 3 2 5 2 2 1 3 2 6 8 company and its fascias

5 6 4 Works with an appropriate sense of urgency to meet agreed deadlines 4 5 4 10 9 6 3 5

6 4 5 Supports our needs to compete effectively with other distribution channels 1 4 9 3 4 7 9 13

4 5 6 Has/uses authority to make decisions 6 7 5 8 12 2 9 8

Tailors its initiatives to help us differentiate our company with 8 7 7 7 14 8 4 4 11 9 6 shoppers/consumers

7 8 8 Makes productive visits 10 7 4 16 7 7 2 11 8

Works with us to develop category plans that help us build sustainable 9 9 9 8 1 9 7 14 12 20 4 11 growth and profit relative to category expectations

11 10 10 Has a collaborative process for joint business planning 9 1 12 8 10 14 18 4 20

© The Advantage Group International, Inc. PRIORITIES FOR MANUFACTURER SUPPORT AS IDENTIFIED BY RETAILER (LOGISTICS) 2008 2009 2010 Priorities Spain Portugal France Italy Belgium Holland Germany UK Russia

1 1 1 Delivers orders at the time requested 1 2 1 2 1 1 1 1 3

5 11 2 Delivers accurate orders 2 2 2 1 2 1 2 5

2 2 3 Delivers complete orders/high % fill rate 3 1 2 11 3 3 2 3 2

3 3 4 Has order cycle times that consistently meet our needs 4 7 7 3 7 5 5 10 4

6 5 5 Works with an appropriate sense of urgency to meet agreed deadlines 6 4 4 6 9

** 9 6 Understands and aligns with our key supply chain performance metrics 4 6 11 5 4 4 10 6

9 8 7 Works well with us/easy to do business with 10 10 5 4 3 7 6

7 6 8 Provides easy to reach, responsive customer support service 15 7 6 4 11 10 5 11

Provides timely, proactive communication about order 4 7 9 9 10 6 6 8 10 4 19 status/adjustments/changes

12 12 10 Has/uses authority to make decisions 7 14 6 18 1

© The Advantage Group International, Inc. DISTRIBUTION PRIORITIES IDENTIFIED BY MANUFACTURERS 2008 2009 2010 Priorities Spain Portugal France Italy Benelux Germany UK Russia Stores sustain an acceptable level of in-store/on-shelf availability of our 4 1 1 10 6 1 1 1 1 1 1 products.

1 3 2 Works productively with us to bild profitable business for both parties. 2 2 3 7 3 2 2 6

Implements agreed upon business plans with high discipline at store level 5 4 3 1 3 2 5 5 4 4 execution Is a good company to do business with (e.g., professional, responsive, 2 5 4 3 5 4 2 5 3 makes effective use of our resources, reasonable cost to serve)

Stores execute promotional and retail marketing plans in accordance with 3 2 5 3 3 6 2 4 2 6 5 commitments

8 8 6 Having a quick and efficient process to introduce new products 7 7 4 7 6 5 7

7 7 7 Stores maintain a high standard of on-shelf display 5 1 7 9 9

Retailer works with us to forecast and order sufficient stock to maintain 12 11 8 10 9 2 4 displays for the duration of the promotion

6 6 9 Builds category assortment based on consumer needs 7 6 3 7 9 10

13 9 9 Having an efficient and effective supply chain 9 10 7 2

© The Advantage Group International, Inc. The optimal supplier – retailer relationship

A “best practice” manufacturer: A “best practice” retailer: • Understands what is unique about each • Does what they say they are going to do, retailer and will tailor their offerings to help including executing at store level differentiate that retailer • Considers the profitability of the • Works collaboratively in developing their manufacturer category plans and is objective in their • Is professional, responsive and strategic recommendations • Clearly communicates their strategy and • Has personnel that are well-trained, objectives knowledgeable and empowered to make timely decisions • Shares information to facilitate effective planning • Invests funds appropriate to their size • Is quick to market with new products and • Manages promotions effectively and programs efficiently • Have skilled, experienced personnel that • Delivers product on time, accurately and are available and can make a decision complete and proactively informs retailers of • Bases assortment decisions on consumer order irregularities needs

© Copyright and Proprietary information property of Advantage Group International and associated subsidiary companies

Perceived barriers to successful relationships

. Initiatives driven by brand agenda with little reference to category or channel needs. Lack of external focus – driven by internal needs.

. Difficulties in delivering the ‘business basics’ – consistent supply chain, accurate submissions, timely paperwork.

. Lack of communication on plans and timing, layers of management, lack of access to senior people

. Not bringing research and insights

. Something different for me/collaboration around opportunities rather than the same approach for all

Source: Interviews conducted by The Advantage Group

© Copyright and Proprietary information property of Advantage Group International and associated subsidiary companies

Take outs

Pack Sizes

SPAR- Shopping Missions - there for you, and you, and you… “I need to buy some items in-between my + + Top-Up big weekly shop”

“I want a quick & Meal for easy meal + + Tonight solution”

Special “I need a gift” + + Occasion

“I’m hungry now” Food- + + to-Go

“I need my daily Daily Life essentials” + + Conclusion