Belarus Grocery Retail Market

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Belarusian Grocery Retail Market

July 2018 Belarusian Economy Agenda Grocery retail market Logistics overview Regulation in grocery retail Belarusian consumer Grocery e-commerce Barriers to market entry

2 Copyright by© 2018 Overview Belarus is a mid-size developing country in Eastern Europe with strong links to neighbors and the EU via foreign trade. GDP dynamics affected by exchange rate volatility & commodity price fluctuations

Economy Before 2016 2016-2017 2018-2022 In recent years, the However, the economy Economic forecasts are Belarusian economy has has been picking up cautiously optimistic: been through since 2016 and a basis • 2-3% real GDP and a number of crises for growth established GDP/capita growth • 2009: systemic problems • Tight monetary • 3% real wage growth in the world economy and fiscal policies • YOY CPI stabilization at 107 • 2011: currency crisis in helped to reduce • Refinancing rate continues Belarus - devaluation inflation downward trend: 10,5% in by 64% followed by • Refinancing rate 1Q2018 balance of payments cut from 24% to Cyclical factors to track are Executive crisis 11% within 2 years commodity prices, currency • 2015-2016: oil prices • Subsequent volatility, and performance of summary plummet, crisis leading increase in public trading partners to currency devaluation investment and Results of Q1 2018 exceed and redenomination of GDP growth forecasts: real GDP growth at the Belarusian ruble recovery 5.1%, optimistic scenario likely

Regions Belarus consists of 7 administrative units – Minsk city and 6 regions: Minsk, Grodno, Gomel, Vitebsk, Mogilev and Brest. The regions have different industrial specializations, most often machinery, food processing, and petrochemical. Minsk and Minsk region contribute ~50% of Belarus GDP and have the highest wages; otherwise GDP and wages are evenly distributed among the remaining regions

Retail The outlook is positive for the development of grocery retail. Worldwide GDP – retail The Boston Consulting Group, Inc. All rights reserved. market curve suggests growth from 22B ($11.4B) to 34-36B BYN ($14-14.8B) in 2022 following forecasted GDP growth. Low downside risk in food retail as demand would largely remain unaffected even in the event of an unexpected economic shock

Population 9.5M GDP nominal 105B BYN / $ 55B

Nationalities 84% Belarusian GDP/capita $ 5,737 8% Russian nominal 8% Other GDP real 144B PPP US$ at 2005 prices Petrochemical Religion 48% Orthodox 48.3% Key economic 7% Catholic 7.1% sectors Machinery 4% Other 3.5% Chemicals 41% Non-believers Food processing 41.1% Metals & mining years Life expectancy 73 Agriculture Median age 40 years IT Doing business 38 out of 190 Currency Belarusian Ruble rank1 (BYN) President Alexander Lukashenko

Area 208K km2

Membership in United Nations The Boston Consulting Group, Inc. All rights reserved. international CIS Capital Minsk organizations Eurasian Economic Union2 1. World Bank Doing Business Report 2018; 2. Russia, Kazakhstan, Armenia, Kyrgyzstan, Belarus

Population 2017, M Nominal GDP 2017, $B Nominal GDP per capita 2017, $

Latvia 2.0 Georgia 15 Ukraine 2,540 Georgia 3.9 Latvia 30 Georgia 3,893 Norway 5.3 Serbia 42 Belarus 5,737 Serbia 7.0 Belarus 54 Serbia 5,959 +33% Bulgaria 7.1 Bulgaria 57 Emerging markets1 7,635 Belarus 9.5 Ukraine 108 Bulgaria 8,022 Sweden 9.9 Greece 200 Turkey 10,435 Portugal 10.3 Romania 211 Russia 10,710 Czech Republic 10.6 Czech Republic 216 Romania 10,737 Greece 11.2 Portugal 218 Poland 13,568 Romania 19.7 Norway 397 Latvia 15,332 Poland 38.3 Poland 519 Greece 17,929 Ukraine 42.4 Sweden 539 Czech Republic 20,342 Spain 46.4 Turkey 843 Portugal 21,153 Italy 59.4 Spain 1,314 Spain 28,352 France 65.0 Russia 1,574 Italy 32,699 United Kingdom 65.5 Emerging markets1 1,931 EU 34,033 Turkey 80.8 Italy 1,941 France 39,769 Germany 82.8 France 2,584 United Kingdom 40,096

1. Emerging markets include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan

Source: The Economist Intelligence Unit, Belarus National Statistical Committee and National Bank of the Republic of Belarus for Belarus 5 Copyright by© 2018 Oxford Economics, Raiffeisen Research, RenaissanceResearch, Raiffeisen Economics, Oxford 2018 Belarusforecasts Source Belarusforand conservative2020 forecast Note: Optimistic theeconomicdevelopmentof neighboring countries onpar with economyis Belarusian of the The performance 12% - - 8% 4% 0% 4% 8% : Economist Intelligence Unit for EU and Russia; Belarus National Statistical Committee for actual Belarusactual for Committee StatisticalRussia;and BelarusNational EU for Intelligence Unit Economist : 2005 Real GDP growth, Russia (%) Russia growth, GDP Real 2006 - 2019 from 2019 2007 Focus World economyWorld 2 2008 009: Systemic009: problemsin Economics ( Economics 2009 Panelists Real GDP growth, Belarus (%) Belarus growth, GDP Real 2010 Capital, 2011 – followed of paymentscrisis of devaluation : Currencycrisis : - 2022 based on basic forecast 2020forecastbasedonbasic 2022 : 2011 WIIW Barclays Capital, Barclays by balance by ) plus forecast from Eurasian Development Development WorldEurasianand Bank;Bank ) from plus forecast by by 2012 64% 2013 BMI Research, EIU, Euromonitor, Frontier Strategy Group, Group, JPMorgan, Strategy Frontier Research, Euromonitor,EIU, BMI 2014 problems; BYN depreciationproblems; BYN 2015 in exports caused by inexports - Russia’seconomic 2016: Real GDP growth, EU (%) EU growth, GDP Real - 2015 2022 andcorresponding 20182022 Significant drop Significant 2016 2017 data; Basic forecastBasic data; 2018 Key growth factors: • • - 2019 f 2019 partners e External demand led by public and private investment refinancing rate supporting Limited inflation and low 2019 conomic conomic growth of trade Optimistic orecast from FocusEconomicsfromorecast Forecast BCG Forecast for 2018 analysis 2020 - for Belarusfor 2022, and other and 2022, 2021 KUKE Conservative 2022 S.A., S.A., 2022 2021 2020 2019 2018 2017 5.1% GDP2017 growth Conservative 3 scenarios for 3 scenarios 1.8% 1.7% 1.6% 1.5% 1.4% optimistic Actual GDPActualgrowth inQ1 '18vs 1.6% forecasted Basic 2.4% 2.3% 2.2% 2.1% 1.9% 1.8% scenario - 2022 Optimistic 3.4% 3.3% 3.2% 3.1% 3.0% likely 6 –

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. 100 150 200 Nominal Nominal GDP, BYN B WIIW Research, RenaissanceRaiffeisen Group, JPMorgan, KUKE S.A., Economics, Strategy Oxford Frontier Research, Euromonitor,EIU, (Panelists: EconomicsFocusfrom ForecastEIU; and Committee StatisticalBelarus National from ActualdataSource: positivefor Belarus forecastconsensus moderately basic Realtogrow,set andis GDP2017 in recovery started 50 0 ), ), Development Bank,Eurasian analysisBank;World BCG 10.0 2013 Nominal GDP (B BYN)GDP Nominal 67 +2 % 10.2 2014 81 - 2015 9.8 3% 90 Real GDP (B BYN at 2005 prices) 2005 at (B BYNGDP Real +12% 2016 9.5 95 +2 % 2017 105 9.8 10.0 2018 115 xx% CAGR 10.2 2019 126 +10% +2% Forecast 10.4 2020 138 Real GDP, BYN B at 2005prices Barclays Capital, 10.6 2021 151 Cap ital, BMI 10.9 2022 167 0 10 20 30 partners Russiaand remainsEU arisk trade, dependencebut ontrading onbased healthy consumption and Economyexpected pickto in up encouraging reforms economyprompted by investment StabilizationBelarusianof the 2017 Belarusianthe ruble devaluation and redenomination of O 2015 2011 currency crisis stabilizationeconomyof following 2013 Optimistic Optimistic scenario likely il 11.4B 176B BYN BYN prices plummet, - - - 2018 2016 2014 Nominal 2022GDP Real 2022GDP crisis lead to 2019 - 7

2017 GDP PPP 2017 Nominal GDP Country per capita, $ per capita, $ Ukraine 8,650 2,540 GDP per capita (nominal BYN), K GDP per capita ($ at PPP), K Georgia 10,148 3,893 18.1 Serbia 15,340 5,959 16.3 30 Belarus 19,220 5,737 14.8 2 15 Emerg. markets 19,690 7,635 13.4 19K BYN Latvia 20,120 15,332 12.2 by 2022 likely in 11.1 25 Bulgaria 20,409 8,022 optimistic scenario1 10.0 Romania 25,140 10,737 10 9.5 8.5 Russia 25,490 10,710 21.7 22.2 7.1 20.7 21.2 20 Greece 26,727 17,929 20.0 19.2 19.2 Turkey 27,010 10,435 18.5 18.7 18.5 5 +2% Poland 28,950 13,568 +1% 15 Portugal 32,158 21,153 Czech Republic 36,760 20,342 Spain 38,270 28,352 0 10 Italy 40,660 32,699 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 EU 41,600 34,033 Forecast France 44,130 39,769

GDP per capita (nominal BYN), K UK 44,219 40,096 The Boston Consulting Group, Inc. All rights reserved. xx% CAGR GDP per capita ($ at PPP), K Germany 50,743 44,587 Sweden 50,911 54,360 1. The World Bank Belarus economic update on 19 April 2018. 2. Emerging markets include Armenia, Azerbaijan, Belarus, Norway 60,250 74,984 Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan

Source: Actual data from Belarus National Statistical Committee and EIU; Forecast based on Focus Economics and EIU; BCG analysis 8 Copyright by© 2018 Positive outlook for the future: CPI and currency rate stabilizing, wages growing, population moving to cities, unemployment remains low

CPI (YOY) Currency/Exchange rate (average) Wages (YOY)

BYN:US$ BYN:EUR CPI CPI - food Wages growth (%) Nominal Real -3% 120 4 +5% 40 0% 3 -55% 2,18 107 108 13 110 2 2,43 20 12 1 1,93 106 3 100 0 0 6 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Forecast Forecast -20 Forecast 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 • CPI stabilized at single digits in 2017 due to • BYN exchange rate determined by trade volumes on export recovery and tight wage control the Belarusian Currency and Stock exchange from '15 • Nominal wages grow in line with nominal GDP • Expected to remain at 107-108 for 2018-2022 • 2013-2016 BYN depreciated at 21% vs $US / year • Further nominal wage growth of 10% and real • Slow depreciation expected wage of 3% expected Population, M (end of period) Urbanization rate, % (end of period) Unemployment rate, % (end of period)

11 90 0% -1% 85 +1% 4 10 9.5 0% 9.2 80 9 81% 2 0.9% 75 78% 0.5% 8 70 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Forecast Forecast Forecast

• Population is stable but expected to slightly • Urbanization rate is already at 78%, but expected • Unemployment rate in Belarus is kept low The Boston Consulting Group, Inc. All rights reserved. decline in 2018-2022 to exceed 80% by 2022 (under 1%) by government measures • Decline driven by aging population, which is not • Growth is driven by biggest cities attracting young • Decree #3 from April 2015 requires unemployed compensated by migration inflow people looking for education opportunities individuals of working age pay tax of $200-300 equivalent per year depending on x-rate1 1. Decree suspended in 2018, to be replaced with requirement for unemployed individuals of working age to pay full cost of government subsidized tariffs

Source: Belarus National Statistical Committee, EIU, Focus Economics, Trading Economics, BCG analysis 9 Copyright by© 2018 YOY CPI stabilized at single digits in 2017 due to export recovery and tight wage control and is expected to remain at that level

Country CPI 2017 Greece 101.1 France 101.2 Italy 101.3 YOY CPI Romania 101.3 120 119 119 Portugal 101.6 CPI Germany 101.7 118 CPI - food 118 EU 101.7 115 114 Sweden 101.8 Norway 101.9 112 Poland 102 112 Spain 102 110 110 Bulgaria 102.1 107 108 108 107 107 107 Czech Republic 102.5 United Kingdom 102.6 105 106 Latvia 102.9 Serbia 103.2 Russia 103.7 1 100 Emerging markets 105.8 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Georgia 106.0

Belarus 106.1 The Boston Consulting Group, Inc. All rights reserved. Forecast Turkey 111.1 Ukraine 114.4 1. Emerging markets include Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan and Uzbekistan Note: CPI food forecast based on average CPI : food CPI ratio 2013-2017

Source: Actual data from Belarus National Statistical Committee and EIU; Forecast from Focus Economics; EABR; BCG analysis 10 Copyright by© 2018 Source equivalents; annual allexchange ratesareinredenominationare averagesprices Note: all to raised 0.2and0.5, geometric on Redenomination 1. in 2016 was stabilize rate exchangecurrency average Belarus' : EIU; Belarus National Statistical Committee; Focus Economics forecasts; BCG analysisBCG forecasts; EconomicsFocus Committee; Statistical BelarusNationalEIU; : 0 1 2 3 rate exchange Average the power of 0.5. ofthe power weighted averageweighted of respectively 0.89 1.18 2013 - 17, expected to keep a slow depreciation rate depreciationa slowexpectedtokeep 17, 1 1.36 July 2016 wiped four zeroes off the Belarus the off zeroesfour wiped July 2016 ( 1.02 2014 i.e. multiplication of exchange ofi.e. rates:BYN/USD multiplication bilateral 1.76 - 2015 54% Exchange rates are are rates Exchange for the last 2 2 years last thefor 1.59 relatively stable relatively Redenomination rates of the the of rates of BYN of 2.20 2016 1.99 Belarusian ruble (BYN) against the USD, ruble the EUR USD, Belarusian(BYN) against 1 1.93 2.18 2017 ruble 2.04 2.44 2018 raisedto 2. 2. As of 01.10.2016, the value of the currency basket has currencybasketbeen value the the of As01.10.2016,of 2.13 2.61 2019 the power of 0.3, the power of Forecast 2020 2.21 2.76 and BYN/EUR raisedto BYN/EUR RUB RUB 2021 2.33 2.92 for 1 unit of foreign currency with weights 0.3, 0.3, weights with currencyforeign of unit1 for 2022 2.43 3.08 the power of 0.2and power of the BYN:US$ exchange Average BYN:EUR exchange Average calculated ascalculated rate rate BYN/RUB the the Stock Exchange Belarusian Currency and daily traderesults on the ratehas been set based on Since 2015 and Stock Exchange on the Belarusian Currency currency sale purchase/ accumulated requests for exchange ratebased on determined the BYN Bank of Belarus has Since 2011 of USD, and EUR RUB Belarus based on a basket the National Bank of ratewas determined by Before 2011 , the exchange , the National , , the exchange , 2 11

Nominal wage growth, % Wages growth (%) 37.7% 100 40 12.7% nominal / 4.6% real 2012 average wage growth in 2018-2022 likely based on recent positive 80 30 Wage growth economic developments2 initiated by the government 20.3% 60 and not backed up 20 16.4% by productivity 12.8% 1 10.3% 10.1% 11.1% 11.5% growth 7.6% 10.4% 10.6% 40 2013 10 6.2% 2.8% 3.0% 3.2% 3.3% 3.4% 1.3% 20 2014 0 2017 2015 -2.3% -3.8% 2016 0 -10 0 20 40 60 80 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Nominal GDP growth, % Forecast

Nominal wage growth In 2017, the average wage Since January 2018 the minimum wage in

1. Led by a top-down directive from the government to increase average wages to $500 per month. 2. The World Bank Belarus economic update on 19 April 2018 Note: Nominal wage growth 2018-2022 forecasted as nominal GDP growth 2018-2022 adjusted by a wage/GDP coefficient calculated as an average of 2014-2017; real wage growth calculation based on nominal growth forecast and CPI forecast; BYN:USD exchange rate used – yearly average 1.93 for 2017, 2.04 for 2018

Source: Belarus National Statistical Committee; National Bank of the Republic of Belarus; BCG analysis 12 Copyright by© 2018 Source: Belarus National Statistical Committee; Focus Economics forecasts EconomicsFocus Committee; StatisticalBelarusNational Source: low to toosustainrates are as birth Belarus' Share Share of population by age group Population, M 0 20 40 60+ - 20 9.47 2013 - - 40 60 15.2% 13.7% 10.7% 9.48 2014 6.9% 2013 10.1% population stable but expected to steadily decline tosteadily butexpected stable population 12.8% 9.50 0% 2015 15.1% 15.7% 0% 9.50 2016 9.49 2017 14.9% 13.2% 10.9% 7.5% 2017 Male 2018 9.40 10.3% 13.6% 14.4% 15.1% Female 9.40 2019 Forecast - ; CIA ; 9.32 - 2020 1% 1% 13.6% 12.8% 11.6% Factbook 8.4% 2022 9.28 2021 ; 11.0% 13.0% Population Pyramid; Belarus Digest; BelarusDigest; analysisBCG Pyramid; Population 14.6% 15.1% CAGR 9.20 2022 thepopulation affecting population Key factors

↑ ↓ ↓

↓

↑ Downward impact Downward Upward woman vs vs 2.15 target) woman (1.72/ equilibrium below rate Birth balance migration low) (but Positive expectancy life Growing impact level still younger than Europeans At the same time Belarusians are Country Germany Italy Greece Latvia Bulgaria Serbia Spain Portugal Czech Sweden France Romania United Kingdom Ukraine Poland Belarus Norway Russia Georgia Turkey Republic Median 13 2017 age age 46.8 45.1 4 43.3 42.4 42.3 42.3 41.8 4 41.2 41.2 40.7 40.5 40.4 40.3 39.8 39.7 39.3 38 30.5 4.2 1 .7 .0

Country Population density, 2016 United Kingdom 271.1 Germany 236.4 Vitebsk Italy 206.1 29.5 Czech Republic 136.9 Poland 124.0 France 122.2 EU 120.7

1 Portugal 112.7 Minsk Mogilev 85.7 Turkey 103.3 Grodno 36.4 Spain 92.9 41.6 Romania 85.6 Greece 83.6 Serbia 80.7 Gomel Brest 35.0 Ukraine 77.7 42.2 Bulgaria 65.7 Georgia 65.0 Belarus 46.8 Latvia 31.5 Sweden 24.4 The Boston Consulting Group, Inc. All rights reserved. XX - Population density by region, residents per km2 Norway 14.3 Russia 8.8 1. Includes Minsk region and Minsk city

Source: National Statistical Committee of the Republic of Belarus; World Bank; BCG analysis 14 Copyright by© 2018 At the same time, the population is gradually shifting to cities Urban population in Belarus is approaching 80%, close to the highest level in Europe

Urbanization rate (%) Country Urbanization rate 2017 Romania 54.9% 90 Poland 60.5% Portugal 64.6% 85 Italy 69.3% Ukraine 70.1% Czech Republic 72.9% 80 Russia 74.2% 80% 80% 81% 79% 79% Turkey 74.4% 78% 78% 78% 77% 77% 75 Bulgaria 74.6% Germany 75.7% Belarus 78.1% 70 Greece 78.7% Spain 80.0% France 80.0% 65 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Norway 81.0% Forecast United Kingdom 83.1% The Boston Consulting Group, Inc. All rights reserved. Belarus Greece Spain Turkey Sweden 86.1%

Note: Urban population is assumed to remain at 2017 levels while the total population goes down

Source: Belarus National Statistical Committee, EIU; BCG analysis 15 Copyright by© 2018 Cities remain a magnet Population 2017 for young Belarusian citizens Region from rural areas, with Minsk City attracting population from other regional centers Vitebsk 1,180,000 77.4% 369,933

3,409,0001 Key population trends 1,982,000

Shrinking of villages 1 1,059,000 Minsk Mogilev Migration from urban to rural 81.8% 80.4% 380,440 areas in steady decline Grodno 75.4% 1,044,000 368,710 Growth of the biggest cities Outflow from regional Gomel 1,416,000 centers to Minsk Brest 77.3% 535,229 70.5% 1,385,000 Younger population in cities 343,985 An urban resident is on average 5 years younger than a rural one The Boston Consulting Group, Inc. All rights reserved. Total population 9,493,000

1. Including Minsk city and Minsk region X% - Urbanization rate, %

Source: Belarus National Statistical Committee, EIU; BCG analysis 16 Copyright by© 2018 Support for rural development The Belarusian government is taking measures to prevent depopulation of rural areas by providing support for agriculture and rural trade

Regulation 2011-15: Belarus rural development program1 2017: Development of trade, public catering, and consumer services in rural areas and small towns2 Key objectives • Improve economic efficiency of agriculture • Promote development of retail and public catering in • Increase incomes of the rural population rural areas • Improve reputation of rural areas as a place to live • Create new jobs for people living in rural areas

Activities • Build and upgrade agricultural facilities3 • Grant VAT exemption • Provide state-of-the-art agricultural machinery • Set profit tax rate at 6% (vs 18%) • Invest in R&D • 6% income tax rate for individual entrepreneurs • Liberalize prices for agricultural products • Grant property tax exemption for land plots in state • Build 20,000 apartments in rural areas ownership • Overhaul and build heat, water and gas supply systems • Retailers with market share > 20% for food sales in • Build and overhaul retail trade facilities ATU are now allowed purchase or lease additional selling space in villages with <2K inhabitants Impact

~23% Agricultural product ~31% Wage growth, New Agribusiness development program 2016-20 4 is intended

1. Presidential decree "On State Program for Sustainable Rural Development in 2011-2015" dated Aug. 1, 2011 No.342. 2. Presidential decree "On the Development of Trade, Public Catering and Consumer Services" dated September 22nd, 2017 No. 345. 3. Farms, grain elevators, processing facilities. 4. Resolution of The Council of Ministers dated March 11, 2016 № 196.

Source: Belarus National Statistical Committee, official web-portal of the President of the Republic of Belarus, Ministry of Agriculture and Food of the Republic of Belarus, BCG analysis 17 Copyright by© 2018 Source volatilityexposedtoremainsexternal However,countrysmall a comparativelyas Belarus 12% - - 8% 4% 0% 4% 8% : Economist Intelligence Unit for EU and Russia; Belarus National Statistical Committee for Committee StatisticalRussia;and BelarusNational EU for Intelligence Unit Economist : 2000 Real GDP growth, Russia (%) Russia growth, GDP Real 2001 2002 2003 2004 Real GDP growth, Belarus (%) Belarus growth, GDP Real 2005 2006 2007 2008 Worldeconomy 2 009: Systemic 009: problemsin 2009 Real GDP growth, EU (%) EU growth, GDP Real 2010 2011 – followed Belarus; of paymentscrisis of devaluation 2011 : Currency crisisCurrency : BCG analysisBCG by balance by 2012 exports(vs 27% ShareRussia of 44% inBelarusian shareof by 36% by 2013 EU) 2014 problems; BYN depreciationproblems; BYN 2015 in exports caused by inexports - Russia’seconomic 2016: 2015 Significant drop Significant 2016 2017 Volatility drivers depreciation (BYN) currency Local (RussiaEU) & partners trading Performanceof (oil, potash) (oil, prices Commodity • • relations International performance Economy volatility and and volatility 18

Belarusian export Other countries Belarus remains a stable net importer with Russia structure in 18 Share of Russia in Belarusian export / import 59% 57% 57% Other EU 55% 53% 55% 56% breakdown by trade 5 52% 44 Russia 45% 46% 44% partners, 2017 Lithuania 3 39% 42% 39% 35% 35% Poland 4 4 Netherlands 4 Germany 8 12 UK Ukraine 2010 2011 2012 2013 2014 2015 2016 2017

Export Import

Belarusian export and import structures, 2017 Belarusian import Other countries Other EU 7 10% structure in 15% Minerals (3,486) 25% Italy 8 (4,433) 10% 29% breakdown by trade 7% (7,193) Chemical products Turkey (3,421) (9,924) 2 2 (2,057) Food Products partners, 2017 USA 3 Machinery Ukraine 4 18% 23%% 18% (5,299) and transportation (7,903) 15% The Boston Consulting Group, Inc. All rights reserved. Poland 4 57 (5,388) Russia Metals (4,983) 5 17% 13% Germany (4,842) Others (4,519) 8 China Exports XX% (M USD) Imports

BYN:USD x-rate vs. GDP growth Brent oil prices vs GDP growth Nominal GDP growth, % Nominal GDP growth, % Real GDP growth, % Real GDP growth, % YOY Brent oil price growth, % YOY BYN:USD growth, % 12% 12% 200% 200 8% 8% 4% 4% 56% 0% In recent years, 0% 0% devaluation did -4% not lead to growth -8% -200% -4% 2000 2002 2004 2006 2008 2010 2012 2014 2016 2000 2002 2004 2006 2008 2010 2012 2014 2016

Real GDP growth Nominal GDP growth BYN:USD depreciation Real GDP growth Nominal GDP growth Oil prices

Belarus as a comparatively small economy sustains high current Belarusian economic dependence on Russia… Exchange rate Oil prices account deficit levels and is thus exposed to x-rate volatility …as export market: 44% of Belarus exports go to Russia In the past, currency devaluation led to increased …as crude oil supplier: petroleum products produced competitiveness of exports, causing real GDP growth and real from Russian crude oil account for 20% of Belarusian wage growth in following years exports – a key driver for foreign currency inflow to As wages reached $500-600 per month, costs rose making finance budget imbalances exports less competitive and increased income caused growth in In the past, drop in oil prices weakened RUB and made

imports Belarusian exports less competitive on the Russian The Boston Consulting Group, Inc. All rights reserved. All resulted in current account deficit and another cycle of market currency devaluation

Source: Economist Intelligence Unit for EU and Russia; Belarus National Statistical Committee for Belarus; BCG analysis 20 Copyright by© 2018 economysectors Industry and Services 2017 structure, Belarusian are key key are GDP Finance Finance and insurance Public administration Source: Belarus National Statistical Committee StatisticalBelarusNational Source: and communication Other Other services Information Real Real estate Education Services 35 13 6 3 4 4 5 % 35% Net taxes Net 13% Transportation 6% 8% Agriculture 10% Trade 23% 5% Industry Construction 23 6 8 2 2 3 3 % Other Other industry Plastic, rezin, non Chеmicals production w Electricity, gas and Oil products and Food production mineral mineral products coking cole production ater ater supply 21 - metallic

Minsk Vitebsk region Agriculture

Automotive Consumer IT Oil processing Shoes Food processing electronics 9.5% Mogilev region

Grodno region Vitebsk Chemicals Minsk city 31.4% Mogilev Milk Poultry Tires Machinery Milk Fertilizers 9.8% 8.4% Minsk region Grodno 16.7% Brest region Petrochemical Minsk region Gomel Brest Metals & 12.6% mining 11.6% Automotive Fertilizers Gomel

Fish Milk, juice Consumer The Boston Consulting Group, Inc. All rights reserved. electronics IT XX % of Belarus GDP Oil and gas Confectionery Steel Note: Unassigned GDP was allocated proportionally to assigned GDP from the region Textile &

Source: Belarus National Statistical Committee leather 22 Copyright by© 2018 Regions Source: Belarus National Statistical Committee; National Bank of the Republic of Belarus;survey BCGthe Republic of Bankof National Committee; StatisticalBelarusNational Source: from 2017 used averageexchange isof rateBYN to Note: USD by Belarus region BYN 2017,in Average and Minsk region and distributed evenly across other regions As a result, wages and disposable income are also the highest in Minsk Minsk city Minsk Mogilev Vitebsk Grodno Gomel Minsk Brest monthly wage 689 694 705 705 732 815 Belarus 818 $365 $359 $357 $365 $422 $379 $424 1,136 $588 NBRB ; BYN per % households by disposable income

$ Regions Minsk city Minsk person Mogilev Vitebsk Grodno Gomel Minsk Brest Under Under 130 Under 250 5% per month 15% 17% 20% 20% 23% 24% 17% 130 250 - - 181 350 28% 27% 21% 19% 27% 30% 30% 350 181 - - 450 233 20% 28% 26% 22% 29% 21% 21% 11% 233 450 - - 13% 13% 14% 284 550 12% 12% 11% 26% 8% 7% 6% 7% 6% 6% 284 550 10% 10% 10% 10% 9% 8% - - 337 650 337+ 650+ of income difference ofincome driver additional an is residence Urban/rural population) and towns k (> 10 villages k population)10(< difference between averageper capita 7% Minsk/capitals of regions population) and between villages k 10(< averageper capita income 20% difference in difference in income 23

70-74B BYN by 2022 likely based on GDP per capita, K BYN Disposable income per capita (annual), K BYN Consumption, B BYN 70.4 recent positive economic 20 10 +10% developments1 63.1 18 56.7 CAGR CAGR 16 8 51.2 (13-17) (17-22F) 14 +12% 46.3 57% 43.1 57% 12 +10% 39.1 Food consumption 36.7 57% 10 6 33.6 57% 58% 14% 10% 27.7 58% 8 59% +12% 57% 58% 6 54% 4 Non-food 4 43% 43% 43% 43% goods consumption 41% 42% 42% 2 46% 43% 42% 9% 11% 0 2 2013 2014 2015 2016 2017 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22

1. The World Bank Belarus economic update on 19 April 2018 Note: Consumption of services excluded; food consumption includes alcohol and tobacco; forecast for 2018-2022 based on nominal GDP growth, assuming share of food and non-food consumption to develop based on historical trend in share of food and non-food in consumer expenses

Source: Belarus National Statistical Committee; BCG analysis 24 Copyright by© 2018 Source: The Economist Intelligence Unit for Retail, Oxford for GDP, Belarus National Statistical Committee, BCG analysisBCG Committee, StatisticalGDP, BelarusNational for Oxford Retail, for Intelligence Unit The EconomistSource: 1. 34 grocery BYN, 61B reaches market retail level GDP/capita 2022 forecasted, As RetailGDPwith togrowexpected turnover Retail turnover per capita in US$, 2017 in capita per turnover Retail 10 15 2 7302 5 Assuming constant share of grocery market grocery Assumingshareof constant 000 000 000 1 0 Share of non Shareof 000 total retail turnover retailtotal Pakistan - food infood India Nigeria Egypt Vietnam The second quartile (from 41% to 50%) to 41%(from The secondquartile 41%) to 31%(from quartile The first Ukraine Philippines Indonesia Venezuela Azerbaijan in total retail; 2. 2. The retail; intotal $2,730 Retail turnover Retail $2,730 /capita * 2.43 BYN/$ * BYN/$ * 2.43 /capita 61 Retail market 2022 = 2022 market Retail Algeria 9.2M population 9.2M Sri LankaSri Belarus B Iran Ecuador Belarus2022 BYN South Africa Colombia 7 Peru Thailand World Bank Belarus economic update update on BankWorldBelaruseconomic 469 Bulgaria Malaysia China 10 Brazil The fourth quartile (from 56% to 70%) to 56%(from quartileThe fourth 56%) to 50%(from quartileThe third 000 Russia Romania Mexico Turkey Grocery retail market 2022 market retail Grocery Poland 34 economic developments economic based on recent positive positive on recentbased 36 Hungary B BYN - 36 Argentina Portugal Greece Chile by B 2022 likely2022 BYN Czech Republic Saudi Arabia South Korea Taiwan 19 April 19 1 2 Great Britain Spain France Japan Italy 2018 Finland Israel of non of developed countries the share share the countries developed develops with GDP per capita capita perGDP with develops Germany S hare Belgium GDP per capita in US$, 2017 US$, in capita perGDP and income growth; in growth; income and Hong Hong Kong New Zealand Austria - food retail is above 50% 50% is above retail food Canada of non of Netherlands Denmark Australia Sweden Singapore - USA food in retail food Norway Ireland Switzerland - 36B BYN36B 100 000 more expensive items more onfood by buying people tend to spend When income grows, shrink much slower roughly the same or grocery bill will stay devaluation), their (e.g. due to currency their income shrinks always buy food, so if resilient Food spending is and retail higher capita of country,a The higher the GDP per areconsumption – people people will turnover the 25

26 Copyright by© 2018 Overview 2012-2017 2018-2022 • The Belarusian Grocery Retail • The market is expected to Market reached ~22 B BYN (11 B reach 34-36 B BYN (14-15 B USD) in 2017 USD) in 2022 • The market grew by 15% CAGR in • The market is to grow by 9% 2012-2017 in nominal terms and 2% CAGR in nominal terms and 2% CAGR in real terms CAGR in real terms • Modern Trade reached a 46% share • Modern Trade is to reach 60- and grew by 29% CAGR (nominal) 70% by 2022 • In Modern Trade development • Modern Trade is to grow by Belarus is lagging behind Europe and 15% CAGR (nominal) is similar to Poland more than 10 years ago and Romania 5 years ago

Formats and • Supermarkets are the most popular format (39% of Modern Trade Sales), followed by Hypermarkets (34%) and Convenience Stores (25%); format Private Label distribution similar to Serbia and Latvia Executive • Modern format penetration is significantly below European levels • There are no discounters in Belarus • The convenience format is expected to drive market growth in 2018-2022 summary • The Private Label share in grocery is below 5%, significantly lower than European levels

Players • Top 5 players make up 62% of Modern Trade Sales, more consolidated than the Eastern European average • No.1 Modern Player (Eurotorg) has 5 times the market share of No.2 (Korona) • Eurotorg is the leader across all Modern Trade formats • Gippo is becoming the No.2 player in MT with its acquisition of Belmarket, however the 5x share gap between top 2 players persists Geography • Modern Trade penetration is dispersed, ranging by region from below 40% to

above 60% The Boston Consulting Group, Inc. All rights reserved. • 54 out of 129 ATU1 have less than 20% Modern Trade penetration • Eurotorg is the only top player with significant presence in small cities and villages

1. Administrative territory unit (~1600 km2 on average, 129 ATU in Belarus for the purposes of anti-monopoly regulation) Source: Euromonitor, Planet Retail, Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 27 Copyright by© 2018 Figures Grocery Retail Source: processes, documented e.g. highly store and standardshard quality chain,strictsupply andmanagement centralized with All 1. Salesinclude2 figuresTax/VAT; Belarus Grocery Belarus Belarus National Statistical Committee, StatisticalBelarusNational USD 46% 15% 11B 11B 5x Trade Modern of Share TradeModern in #2 times 5 is player #1 (nominal) '12 in CAGR Size Market 2 . Self service stores (vs (vs servicestoresbehind Self . Euromonitor, Belarus Euromonitor, - 1 '17 Retail2017 2 - Ministry of Antimonopoly Regulation and Regulation Antimonopoly of Ministry the - counter attendant model), usually part of large retail chainscounter large model), retail of attendant usuallypart 0.9 M 0.9 USD <5% 62% ~6K ~6K m 2 retail grocery in Label ofPrivate Share TradeModern in players 5 top of Share Space Selling TradeModern Modern Trade m per Sales Trade, BCG market modelmarket Trade, BCG planograms 2 in in 2 2 2 ; 28

Romania Poland Turkey Serbia Spain

Grocery retail market Share of Modern Trade Grocery retail market Share of Modern Trade MT Sales per m2 in 2017 size per capita in 2017 • 47% in Poland in 2006 size per capita in 2017 • 48% in Serbia • 6,100 USD in Spain • 1,156 USD in Romania • 46% in Belarus in 2017 • 1,144 USD in Turkey • 46% in Belarus • 5,637 USD in Belarus • 1,201 USD in Belarus • 1,201 USD in Belarus Share of Modern Trade MT Market Consolidation Share of Modern Trade MT Selling Space per MT Market Consolidation • 47% in Romania in 2012 in 2017 (top 5 players) • 49% in Turkey 1,000 people in 2017 in 2017 (top 5 players) • 46% in Belarus in 2017 • 61% in Poland • 46% in Belarus • 112 m2 in Serbia • 56% in Spain • 62% in Belarus • 99 m2 in Belarus • 62% in Belarus MT Share gap between MT Share gap between Grocery retail market Convenience format MT Share gap between top 2 players top 2 players CAGR '17-'22 Share of Sales in 2017 top 2 players • 17% in Romania • 12% in Poland • 8% in Turkey • 26% in Serbia • 16% in Spain • 32% in Belarus • 32% in Belarus • 9% in Belarus • 25% in Belarus • 32% in Belarus

Road Network Convenience format MT CAGR '17-'22 Share of private label in Road Density Index1 • 85,000 km in Romania Share of Sales in 2017 • 13% in Turkey grocery sales • 30 in Spain • 87,000 km in Belarus • 27% in Poland • 15% in Belarus • 6% in Serbia • 43 in Belarus • 25% in Belarus • <5% in Belarus Road Density Index1 Maximum Shoulder2

Note: Selected benchmarks are countries with grocery retail indicatives most close to Belarus. 1. Road network per 100 km2, km. 2. Hours to reach the most distant point from center of the country.

Source: Belarus National Statistical Committee, Planet Retail, Euromonitor, World Bank, BCG market model 29 Copyright by© 2018 close to close capita per Market Grocery Belarus EE average Retail is Source: Source: Regulation Trade and statistical data ( Note: For countries all except Belarus data is from Euromonitor Liechtenstein, Luxembourg, Malta, Monaco, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom 3 Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Ukraine. 2 Grocery1. Retail does not include Non . . WE EE United United Kingdom – - Grocery Grocery Retail Eastern Eastern Europe: Belarus, Bosnia Albania, Western Western Europe: Austria, Andorra, Belgium, Denmark, Cyprus, Germany, France, Finland, Gibraltar, Greece, Iceland Belarus Belarus National Statistical Committee, Czech Czech Rep. Germany Romania Portugal Bulgaria Belarus Belarus National Statistical committee), Georgia Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia Latvia Russia Spain Italy - WE EE MART), MART), presscompany 2 3 1 (B (B WE EE USD, - 3 4 7 7 11 store Retailing based such Grocery as e 17 18 25 23 29 29 39 2017) 71 92 - releases releases and expert - Euromonitor, CIA Factbook, Company BCG data, market model 127 Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Latvia, Hungary, 169 217 228 company company sales data (Euromonitor), selling space & outlets (Ministry of Antimonopoly 261 275 . For Belarus, For Belarus, analysis is basedon BCG market model built bottom interviews. interviews. 438 1,523 - commerce United United Kingdom Grocery Grocery Retail . . All figures include Sales Czech Czech Rep. Germany Romania Portugal Bulgaria Georgia Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia Latvia Russia Spain Italy WE EE 2 3 per per WE EE capita (USD, capita Tax/VAT 389 , Ireland, Ireland, , 674 1 1 1 1 1 1 - 014 044 1 up using 156 144 201 1 346 Lithuania, Lithuania, 1 483 Italy, Italy, 2 729 2 2017) 836 052 157 2 2 2 national national 603 3 691 720 3 041 +12% 3 239 3 518 4 898 096 5 30 375

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. Belarus' grocery retail market scored double-digit growth over the past 5 years; high growth momentum is expected to be maintained

CAGR CAGR CAGR '12- CAGR '12- CAGR '17- Grocery Retail Market (B BYN) '12-'17 '17-'22 Country '17 real1 '17 nominal '22 nominal

Ukraine -7% 8% 8% 34-36 B BYN Greece -2% -3% 0% by 2022 likely based on recent 34 Russia -1% 7% 6% positive economic developments2 31 Turkey -1% 8% 8% 28 United Kingdom 0% 1% 2% 26 Serbia 0% 3% 5% 24 22 Georgia 0% 3% 2% 21 15% 9% 19 France 0% 1% 2% 17 Italy 0% 1% 2% 14 Norway 1% 3% 3% 13 12 Germany 1% 2% 4% 11 2% 2% Portugal 1% 2% 3% Belarus 2% 15% 9% Spain 2% 2% 3% Czech Republic 2% 3% 3% Sweden 2% 3% 3% 2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f Latvia 2% 3% 4% Bulgaria 3% 3% 3% The Boston Consulting Group, Inc. All rights reserved. Size real (B BYN)1 Size nominal (B BYN) Poland 4% 4% 4% 1. Base is year 2012. 2. The World Bank Belarus economic update on 19 April 2018. Romania 4% 5% 4% Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

Source: Belarus National Statistical Committee, Euromonitor, CIA Factbook, World Bank, Company data, BCG market model 31 Copyright by© 2018 in Belarus in market addressable increase further will Non - food share growth share food Source: Source: statistical data Note: For Belarus Belarus National Statistical Committee, all countries countries all except Belarus data is from Euromonitor. For Belarus, analysis is basedon BCG market model built bottom , company company sales data (Euromonitor), selling space & outlets United United Kingdom Share Share non of Czech Czech Republic Germany Romania Portugal Bulgaria Georgia Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia Latvia Russia Spain Italy - W EE food food in grocery retail market (% E WE Planet Planet Retail, Company BCGdata, market model EE (MART ), ), company press , 2017) 11% - releases releases and expert interviews 13% 15% 15% 15% 16% 16% 16% 16% 16% 17% 17% 17% 18% +5 18% 18% 19% pp 19% 20% - . up using 22% 22% 23% national national 32

nominal CAGR CAGR Share CAGR CAGR Belarus Grocery Retail (B BYN) '12-'17 '17-'22 Country of MT '12-'17 MT '17-'22 MT Georgia 28% 12% 6% 20-25 B BYN nominal nominal Belarus 46% 29% 15% by 2022 likely based on recent positive economic 34 developments1 and growth of MT share up to 70% Serbia 48% 4% 7% driven by market players activities 31 29% 15% Turkey 49% 16% 13% 28 Bulgaria 54% 4% 4% 26 real real Romania 54% 8% 6% 24 60% 22 14% 7% Ukraine 60% 11% 12% 21 57% (20) 19 54% Greece 61% -1% 0% 51% 17 49% 46% Russia 66% 10% 6% 14 41% 44% nominal nominal 36% Italy 73% 1% 2% 11 32% 8% 3% 1.5х Spain 78% 3% 4% 26% France 80% 1% 2% 40% real real 51% 49% 46% 43% Poland 81% 7% 5% 68% 64% 59% 56% 54% (14) 74% -4% -4% Sweden 82% 3% 3% Czech Republic 83% 4% 3% Portugal 84% 2% 4% 2012 2013 2014 2015 2016 2017 2018f 2019f 2020f 2021f 2022f Germany 86% 2% 4%

Modern Trade (MT) Traditional Trade (TT) United Kingdom 89% 1% 2% The Boston Consulting Group, Inc. All rights reserved. Norway 89% 3% 3% 1. The World Bank Belarus economic update on 19 April 2018 Latvia 90% 4% 4% For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up EE using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and EE 70% expert interviews. WE WE 80%

Source: Belarus National Statistical Committee, Euromonitor, Company data, BCG market model 33 Copyright by© 2018 Belarus today is similar to Poland over 10 years ago and Romania 5 years ago, 60-70% share of Modern Trade is feasible by 2022

MT share (%, Grocery Retail) 90

Poland 80 Spain

70 Russia Belarus in 2017 is similar to Poland Ukraine 60 in 2006 or Romania in 2012 Romania Turkey 60-70% MT share by 2022 is feasible 50 Serbia driven by key players' activity Belarus 40

MT Grocery Selling Space per '000 Grocery Selling Space (M m2 , 2017) MT Grocery Selling Space (M m2 , 2017) people (m2, 2017)

Georgia 0.8 Georgia 0.2 Georgia 46 Latvia 1.0 Serbia 0.8 Ukraine 74 Serbia 1.8 Latvia 0.8 Belarus 99 Bulgaria 2.5 Bulgaria 0.9 Serbia 112 Belarus 3.0 Belarus 0.9 Romania 125 2.1х Norway 3.5 Romania 2.7 Bulgaria 132 Czech Rep. 4.0 Czech Rep. 3.1 Turkey 179 Sweden 4.1 Norway 3.3 EE EЕ 209 Ukraine 4.7 Ukraine 3.3 Russia 211 Romania 5.1 Portugal 3.4 United Kingdom 289 Portugal 5.4 Sweden 3.6 Czech Rep. 293 Greece 6.4 Greece 4.0 Italy 298 Poland 15.1 Poland 12.4 Portugal 317 United Kingdom 22.4 Turkey 14.5 Poland 323 Spain 24.1 Spain 16.3 Spain 334 Turkey 24.4 Italy 18.5 WE WЕ 339 Italy 26.3 United Kingdom 18.7 Sweden 358 France 32.3 France 25.8 Greece 370 Germany 43.1 Russia 30.8 France 384 Russia 48.9 Germany 36.8 Latvia 414 EE EE EE EE Germany 102.6 68.0 456 The Boston Consulting Group, Inc. All rights reserved. WE WE 223.4 WE WE 169.6 Norway 614

Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews.

Source: Belarus National Statistical Committee, Euromonitor, CIA Factbook, BCG market model 35 Copyright by© 2018 Modern Trade Sales productivity in Belarus above EE levels, peer market examples show productivity does not decline at least until share of MT reaches 80% Belarus Modern Trade: Sales productivity in peer markets can be growing or stable up Sales productivity is above EE levels to 80% share of MT

Share of MT, % MT Sales per m2, K LCU1 MT Sales per m2, K LCU1 Share of MT, % 2 MT Sales per m (K USD, 2017) 60 100 11 Poland Belarus 11 20 18 10 10 17 17 12 10 9 17 16 17 46% 40 80 44% 81% United Kingdom 7 41% 15 78% 80% 36% 73% 76% 32% 70% 60 26% 20 Sweden 2012 2014 2016 2012 2014 2016 France 8 Portugal Turkey Romania WE Norway 11 60 22 60 10 21 21 21 Belarus Italy 9 20 Spain Germany 10 8 9 20 20 20 Romania 8 49% 54% Czech R. 45% 47% 40 52% 53% 53% 50 Poland 42% 50% Georgia EE Latvia 38% 18 Russia 5 34% 47% 4 Bulgaria Greece 20 40 Serbia Turkey 2012 2014 2016 2012 2014 2016 Ukraine Spain 100 600 Serbia 60 6 508 5 5 5 5 5 486 490 489 483 492 5 500 50 0 5 80 78% 50% 49% 100 200 300 400 500 600 700 75% 76% 76% 77% 78% 49% 48% 400 46% 47% The Boston Consulting Group, Inc. All rights reserved. 4 60 40 MT Selling Space per K people (m2, 2017) 2012 2014 2016 2012 2014 2016

1. In thousand of local currency unit Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling

space and outlets (MART), company press-releases and expert interviews 36 Copyright by© 2018 Source: Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, expert interviews BCG market model Modern Trade Belarusian Modern Trade: rapid growth in selling space, along with sales productivity gains

MT Sales per m2 (BYN)

14,000 CAGR '12-'17

12,000 MT Sales per m2 9% 2016 2017 10,000 2013 2014 2015 MT Selling Space 18% 8,000 2012

Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

Selling # of outlets Format Space Definition in Belarus (2017) Forecourts <400 m2 Convenience outlets located at petrol stations; consumer proposition is typically focused on impulse products for immediate consumption 544

Hypermarkets >2,500 m2 Self-service stores, offering both a comprehensive food range and a wide choice of non-food items (>15% of total sales); 81 number of SKUs - above 20K

Supermarkets 400-2,500 m2 Self-service stores; largely grocery offer with limited non-food (<10% of

total sales); number of SKUs ~8-20K 468 ModernTrade

Convenience <400 m2 Small grocery self-service outlets typically located in convenient high-traffic sites; selling a wide selection of food, drinks, tobacco, grocery and 884 stores household essentials; number of SKUs ~2-8K

Outlets, kiosks, markets and autoshops with over-the-counter service; Traditional mainly independent small grocers or Soviet-era heritage outlets in smaller cities and villages. ~14K TT Trade

Belkoopsoyoz union of regional cooperatives accounts for a 10% market The Boston Consulting Group, Inc. All rights reserved. share in grocery retail; de facto it does not have centralized governance: procurement, sales and supply chain are managed at the regional level

Note: There are no discounters in Belarus (defined as limited assortment self-service stores (up to 3,000 SKUs, for hard discounters up to 1,500 SKUs) with a high share of private label products (above 50% share of assortment), selling area up to 1,500 m2 (average 600-800 m2); low level of service & low price positioning)

Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Planet Retail, BCG market model 38 Copyright by© 2018 Modern Trade Outlet size in Belarus is larger for convenience and smaller for hypermarkets, versus European averages

Convenience, average outlet size (m2, 2017) Supermarket, average outlet size (m2, 2017) Hypermarket, average outlet size (m2, 2017)

Turkey 83 Turkey 488 Bulgaria 3,222 Bulgaria 110 Georgia 601 Belarus 3,813 0.8x Czech Republic 125 Romania 635 Latvia 4,337 Poland 132 Serbia 677 Italy 4,487 Germany 138 Greece 691 Czech Republic 4,545 Latvia 146 Poland 691 Germany 4,608 Portugal 150 Spain 692 Ukraine 4,829 Georgia 170 Russia 708 Serbia 4,853 EE EE 171 Ukraine 721 EE EE 4,999 Greece 172 Czech Republic 727 Greece 5,142 Norway 177 ЕЕ EE 728 Russia 5,206 0.7x Romania 179 Bulgaria 774 1.2x WE WE 5,292 Ukraine 179 1.3x Belarus 858 United Kingdom 5,387 0.99x France 185 WE WE 877 Norway 5,493 Sweden 188 United Kingdom 971 Turkey 5,648 United Kingdom 194 Italy 998 Poland 5,746 WE WE 197 Latvia 1,019 Sweden 5,802 Italy 215 1.1x Norway 1,029 Romania 6,031 Belarus 218 Germany 1,056 France 6,213

Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor),

selling space & outlets (MART), company press-releases and expert interviews. Source: Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 39 Copyright by© 2018 Modern Trade Format distribution in Belarus is similar to Serbia and Latvia The discounter1 format is not present in Belarus

Russia 50 29 18 3 United Kingdom 20 22 44 10 4

Latvia 31 43 17 6 3 Italy 16 45 22 17 Sweden 4 Georgia 27 47 18 8 12 49 29 6 Norway 10 35 5 47 3 Poland 27 17 17 36 3 WE Western Europe 8 41 28 20 3 Serbia 26 44 23 3 4 Portugal 4 63 19 12 2 Belarus 25 39 34 3 France 4 34 52 9 1 EE Eastern Europe 19 44 23 12 2 Greece 4 72 2 21 1 Bulgaria 15 39 27 14 5 Turkey 4 59 4 32 2 Czech Republic 2 13 16 45 24 Spain 1 69 17 12 1

Romania 10 24 45 18 3 Germany 33 20 40 7

Ukraine 7 78 12 3 Belarus 25 39 34 3

Share of MT Grocery Sales (%, 2017) Share of MT Grocery Sales (%, 2017) The Boston Consulting Group, Inc. All rights reserved. Convenience2 Supermarkets Hypermarkets Discounters Forecourts 1. There are no discounters in Belarus (defined as limited assortment self-service stores (up to 3,000K SKUs, for hard discounters up to 1,500 SKUs) with a high share of private label products (above a 50% share of assortment), selling area up to 1,500 m2 (average 600-800 m2 ); low level of service and low price positioning). 2.Convenience does not include forecourts Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, Euromonitor, Company data, BCG market mode; BCG analysis 40 Copyright by© 2018 Source: (MART Note The 1. WorldBelarusBankupdate on economic togrowthexpectedis fuel in'17 convenience market, Belarusian the dominate hypermarkets & Supermarkets MTSales (B BYN) and positive economic developments economic positive 2012 23% 36% 38% 4% by 2022 likely based on recenton based bylikely 2022 3 : Analysis is based on BCG market model built bottom modelbuilt market BCGon based is: Analysis growth of MT share up MTshare of growth ), ), press company Belarus National Statistical Committee, StatisticalBelarusNational 2013 23% 34% 39% 20 3% 5 - 25 25 BYN B 2014 25% 36% 36% 3% 6 +29% - releases interviews. expert and 2015 25% 36% 36% 3% 8 to 70 to 2016 25% 39% 34% 3% % 9 1 2017 25% 39% 34% 10 3% 19 April19 Belarus Ministry of Antimonopoly Regulation and Trade, Trade, andRegulation Antimonopolyof BelarusMinistry 2018f 27% 37% 33% 12 2% 2018 - up using up 2019f 29% 36% 32% 13 2% +15% national statistical data statisticalnational 2020f 31% 35% 31% 15 2% 2021f 34% 34% 30% 18 2% 2% 2022f 37% 33% 28% 20 , company sales data (Euromonitor), sellingoutletsspace & data(Euromonitor), sales company Convenience Supermarkets Hypermarkets Forecourts Euromonitor , Company data, BCG market modelmarket BCG data, Company , Sales CAGR '12 32% 31% 26% 20% - '17 '17 Sales CAGR - '22 - '22 24% 11% 10% 11% convenience expected to be Modern Trade growth Modern Trade Modern - driven 41

Supermarkets dominate in Selling Space in 2017 Penetration level below Europe in all formats (m2 per K people, 2017)

Hypermarkets 135 146 2 103 120 121 (>2,500 m ) 78 85 2 45 55 58 59 60 62

MT Grocery Selling space (M m ) 5 8 15 16 29 31 33 36 36

EE UK

+12% 1.7 WE

Italy

Spain

Latvia Russia

3% Serbia

Poland France

2 Turkey

Greece

Belarus

Norway

Sweden

Ukraine Georgia

1.7-1.8 M m Bulgaria

Portugal

Romania Czech R.Czech by 2022 likely based on 1.5 Germany 4% recent positive economic 28% Supermarkets 312 1 1.3 2 177 210 228 developments and growth (400-2,500 m ) 96 102 135 138 144 158 163 167 172 of MT share up to 70% 4% 26 32 39 42 46 47 52 60 69 1.2 30% 4%

1.0 EE UK

+18% 31% WE Italy

0.9 4% Spain

size formats size

Latvia

Russia

Serbia

Poland France

Turkey

Greece Belarus

0.9 Norway

Sweden

Ukraine Georgia

32% Bulgaria Portugal

4% Romania Czech R.Czech

0.8 Germany 4% 4% 32% 37% 33% 0.7 38% Discounters 274

34% Middle 5% 34% 2 153 39% (400-1,500 m ) 66 77 0.4 0.5 12 16 16 19 19 25 27 43 47 48 48 49 60 35% 40% 0 0 0 0 1

5% 6% 42% EE

43% UK 33% 42% WE

41% Italy

35% Spain

Latvia

Russia

Serbia France 40% Poland

31% Turkey

Greece

Belarus

Norway

Sweden

Ukraine

Georgia

Bulgaria Portugal

38% 29% Romania Czech R.Czech 38% 24% 26% Germany 21% 20% 21% 22% 22% 23% 21% Convenience 155 113 2 71 Stores (<400 m ) 27 34 36 38 47 49 52 59 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2 3 5 7 8 12 14 20 24 26 28 Forecourts Hypermarkets Supermarkets Convenience Stores The Boston Consulting Group, Inc. All rights reserved. 2 (400-2,500 m2) 2

(>2,500 m ) (<400 m ) EE

Italy

Spain

Latvia

Russia

Serbia

France Poland

1. The World Bank Belarus economic update on 19 April 2018. Note: For all countries except Belarus data is from Turkey

Greece

Belarus

Norway

Sweden

Ukraine

Georgia

Bulgaria

Portugal

Romania Czech R.Czech Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company Germany sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

Source: Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 42 Copyright by© 2018 Modern Trade Belarusian Modern Trade penetration is expected to catch up with current EE levels by 2022

Modern Trade penetration per capita is expected Convenience and hypermarket penetration per capita to be above to reach EE levels by 2022 current EE levels by 2022 MT Grocery Selling space per capita (m2 per K people) MT Grocery Selling space per capita by format (m2 per K people)

Europe Belarus Europe Belarus 78 339 39 43 47 51 45 Hypermarkets 29 31 33 36 15 17 24 (>2,500 m2) 183-198 m2 per K people by 2022 likely based on recent 12 13 14 15 16 17 18 19 20 21 22 EE WE positive economic developments1 17 17 and growth of MT share up to 70% 158 209 +13% 96 183 55 61 68 36 39 42 46 50 159 Supermarkets 16 20 27 140 (400-2,500 m2) 124 +18% 111 12 13 14 15 16 17 18 19 20 21 22 EE WE 92 99 17 17 87 69 43 52 46 57 47 Convenience 25 30 37 27 9 12 15 18 19 20

Stores (<400 m2) The Boston Consulting Group, Inc. All rights reserved. 12 13 14 15 16 17 18 19 20 21 22 EE WE 12 13 14 15 16 17 18 19 20 21 22 WE EE 17 17 17 17 1. The World Bank Belarus economic update on 19 April 2018. Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews. Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, Euromonitor, Company data, BCG market model 43 Copyright by© 2018 Modern Trade

Top 10 Modern Grocery Retailers in Belarus in 2017 Estimation

Grocery Retail Revenue1 No. of outlets (31.12.2017) Selling Space2 (M BYN, 2017) Share of MT Convenience Supermarkets Hypermarkets (31.12.2017) CAGR '12-'17 Eurotorg ~4,100 ~40% 385 77 38 278 ~34%

Korona 750-800 ~8% 6 19 11 71 ~27%

Almi 500-550 ~5% 16 32 5 64 ~21%

Vitalur 500-550 ~5% 20 25 1 30 ~34%

Rublevsky 450-500 ~5% 17 56 1 52 ~22%

Sosedi3 450-500 ~5% 38 36 2 41 ~25%

Gippo 450-500 ~5% 0 4 7 38 ~17%

Belmarket 400-450 ~4% 26 44 0 39 ~31%

1. Including Sales Tax/VAT. 2. '000 m2. 2. Here and thereafter Sosedi's revenue does not include Zorina chain revenue which is a traditional trade chain Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press- 2 2 2 releases and expert interviews. Formats distribution: convenience stores - <400 m , supermarkets – 400-2,500 m , hypermarkets- >2,500 m ; Eurotorg stores are categorized based on retailers' own 44 Copyright by© 2018 classification from May 2018; Source: Company data, Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, Euromonitor, expert interviews, BCG market model Modern Trade Belarus: top 5 players account for 62% market share, above the EE average

% of top 5 in MT Grocery, 2017 Share of MT Norway Norgesgruppen 35 Coop Norge 28 97 89% Sweden ICA Gruppen 47 Axel Johnson 17 89 82% Czech Republic Schwarz Group 30 Ahold Delhaize 17 85 83% Serbia Ahold Delhaize 31 Agrokor 29 83 48% Germany Edeka 28 Schwarz Group 29 82 86% Latvia ICA Gruppen 29 Vilniaus 27 80 90% Greece Sklavenitis 24 Ahold Delhaize 19 78 61% Romania Schwarz Group 32 Carrefour 15 78 54% France Carrefour 22 E Leclerc 16 74 80% Bulgaria Schwarz Group 40 Rewe Group 12 72 54% Georgia Carrefour 23 Nikora 18 72 28% WE 71 80% UK Tesco 25 Sainsbury 14 67 89% Portugal Jerónimo Martins 21 Sonae 20 64 84% Belarus Eurotorg 40 Korona 8 62 46% Poland Jerónimo Martins 26 Schwarz Group 14 61 81% EE 59 70% Spain Mercadona 26 Carrefour 10 56 78% Ukraine ATB 24 Fozzy Group 20 55 60% Italy CONAD 13 Coop Italia 13 48 73%

Russia X5 Retail 18 Magnit 15 48 66% The Boston Consulting Group, Inc. All rights reserved. Turkey BIM 15 Migros 10 45 49% Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews. Source: Belarus National Statistical Committee, Euromonitor, Belarus Belarus

Ministry of Antimonopoly Regulation and Trade; Company data, BCG market model 45 Copyright by© 2018 The market leader has 5 times the share of no.2 in modern grocery trade While the biggest traditional player has 10% of the total grocery market Estimation

No.1 Player in MT has 5 times Market leader is in MT the share of No.2 while No.2 is in TT

% of MT Grocery Retail % of Total Grocery Retail

Other MT 28% 38% Other MT 46% MT

Rublevsky 5% Eurotorg 19% 5% Vitalur 5% Almi Belkoopsoyuz 10% 8% Korona 5x 54% TT

2017 2017

Source: Belarus National Statistical Committee; Euromonitor; Company data; Belarus Ministry of Antimonopoly Regulation and Trade; BCG market model 46 Copyright by© 2018 Traditional Trade Belkoopsoyuz: a union of 100+ regional organizations, 10% mkt share and >80% of the network in rural areas

Largest TT player, with productivity ~5x >80% of network in villages and small times below market leader towns with 0-10K inhabitants

Sales per m2 (BYN) No. of outlets by locality 16,000 7,108

14,000 >10 K inhab. 18%

12,000 2-10 K inhab. 13%

10,000

8,000 <2 K inhab. 68% 6,000 5x

4,000

2,000 0 100 200 300 400 500 600 700

Selling Space ('000 m2)

Belkooopsoyuz: key facts: The Boston Consulting Group, Inc. All rights reserved. No centralized governance: union No centralized supply chain Worn out outlets: of 100 + regional organizations & procurement Soviet-era heritage Note: Belkoopsoyuz (established in 1917) is a government established cooperative that caters to small towns and rural regions; has limited selection of goods, depending on cooperative participants. Source: Belarus National Statistical

Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 47 Copyright by© 2018 Modern Trade The large gap between the top 2 players in Modern Trade is often sustainable

MT share difference between % of MT Grocery Retail, 2017 first and second player1

Diff btw 1st Share of 1st Share of 2nd (%) Country1 & 2nd players player in MT player in MT 30 30 29 29 Sweden Belarus 32 40 8 28 28 28

Sweden 30 47 17 25 Bulgaria 28 40 12

Romania 17 32 15 20 21 20 Spain 16 26 10 19 17 17 Romania 16 16 Czech Republic 13 30 17 16 16 16 16 Spain 15 15 Poland 12 26 14 Czech Republic 13 12 13 13 12 12 Poland United Kingdom 11 25 14 11 12 11 11 11 11 10 10 United Kingdom 9 10 Germany 10 28 18 9 9 8 9 9 Germany

8 The Boston Consulting Group, Inc. All rights reserved. 1. Selected examples: out of peer countries, countries with significant market share difference between 0 1st and 2nd player are displayed. Note: For all countries except Belarus data is from Euromonitor. For Belarus, analysis is based on BCG market model built bottom-up using national statistical data, company 2012 2013 2014 2015 2016 2017 sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews. Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, Euromonitor, Company data, expert interviews, BCG market model

Eurotorg as the only multiformat player Estimation

Company Sales (%, 2017) Convenience Stores Supermarkets Hypermarkets Banners

Eurotorg 41% 23% 36%

Korona 2% 22% 76%

Almi 4% 53% 43%

Vitalur 12% 76% 12%

Rublevsky 10% 85% 5%

Sosedi 20% 64% 16%

Gippo 9% 91%

Belmarket 17% 83%

Santa 29% 71%

Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews. Formats distribution: convenience stores - <400 m2 , supermarkets – 400-2,500 m2, hypermarkets- >2,500 m2; Eurotorg stores are categorized based on retailers' own classification from May 2018; for companies with no explicit data on format sales it is assumed that Sales per m2 are the same for each format 49 Copyright by© 2018 Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model Modern Trade Eurotorg is the clear leader in all formats Smaller players outside of the top 10 are in the top 3 in the convenience format Estimation

Convenience Sales (M BYN, 2017) Supermarkets Sales (M BYN, 2017) Hypermarkets Sales (M BYN, 2017)

~1700 385 ~900 77 ~1,500 38 10x 2.3x 2.5x 170-180 142 400-410 56 570-600 11

110-120 57 390-400 25 420-430 7

90-100 38 360-370 44 270-280 5

70-90 26 290-300 36 220-230 5

70-80 48 280-290 32 200-210 5

60-70 20 190-200 35 70-80 2

50-60 44 180-190 25 60-70 1

50-60 45 160-170 19 60-70 2

Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets 2 2 2 No. of outlets (MART), company press-releases and expert interviews. Formats distribution: convenience stores - <400 m , supermarkets – 400-2,500 m , hypermarkets- >2,500 m ; Eurotorg XX stores are categorized based on retailers' own classification from May 2018; for companies with no explicit data on format sales it is assumed that Sales per m2 are the same for (end of period)

each format; Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 50 Copyright by© 2018 Modern Trade Dispersed penetration of Modern Trade at ATU1 level: 54 out of 129 mini-regions with penetration below 20%

High MT concentration in On ATU level MT penetration Minsk and Mogilev (%, 2017) is dispersed (%, 2017) 42% Vitebsk Region Belarus Average 41% Minsk Region 50% ~46% 39% Mogilev51% Region Grodno Region 62% Могилевская обл. Minsk City 39% 38% Brest Region Gomel Region

1.Administrative territory unit (~1600 km2 on average, 129 ATU in Belarus for the purposes of anti-monopoly regulation) Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 51 Copyright by© 2018 Modern Trade Belarus in 5 years' time: 4 out of 7 regions with >50% of Modern Trade, hitting 80% in Minsk City 2017: 2 out of 7 regions with MT share >50%, 2022: 4 out of 7 regions with MT share >50%, share of MT in Belarus ~46% share of MT in Belarus ~60-70%

42% 54-63% Vitebsk Region Vitebsk Region

41% 53-62% Minsk Region 50% Minsk Region 65-75% 39% Mogilev 50-58% Mogilev Grodno Region Grodno Region 62% 80-90% Region Minsk City Region Minsk City 39% 50-59% 38% 48-56% Brest Region Brest Region

Share of MT <40% 40-50% >50% Share of MT <40% 40-50% >50%

Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 52 Copyright by© 2018 Modern Trade Format distribution varies by region, driven by players' activity

Share of MT by Region (%, 2017) Format Share of Sales by Region (%,2017) Explanation

Belarus 25% 39% 34% 3%

42% Minsk City 42% 2% More hypermarkets due to Eurotorg, 17% 40% Korona, Gippo, Prostore and Biggz presence Vitebsk Region

Brest Region 24% 47% 25% 3% More supermarkets due to Santa presence 41% Not significantly different from Minsk Region Grodno Region 23% 36% 39% 3% 39% 50% country average Mogilev Region Grodno Not significantly different from 62% Minsk Region 27% 41% 30% 3% Region Minsk City country average Not significantly different from 39% Vitebsk Region 30% 37% 30% 3% Brest Region 38% country average Gomel Region Not significantly different from Gomel Region 29% 33% 34% 4% country average

Share of MT <40% 40-50% >50% Convenience Supermarkets Hypermarkets Forecourts

Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 53 Copyright by© 2018 Modern Trade All top players present in Minsk City Only Eurotorg has sizeable national presence - in regional centers and regions

Company Minsk Mogilev Vitebsk Grodno Gomel Brest (No. of outlets, 2017) Total Minsk Region Mogilev Region. Vitebsk Region Grodno Region Gomel Region Brest Region

Eurotorg 500 82 85 31 41 16 39 23 37 26 54 20 46

Korona 36 16 6 2 5 1 1 3 2

Almi 53 8 9 2 2 8 11 2 2 5 4

Vitalur 46 40 4 1 1

Rublevsky 74 54 2 4 1 1 1 5 1 2 2 1

Sosedi 76 51 5 2 3 3 3 4 5

Gippo 11 8 1 1 1

Belmarket 70 22 17 18 1 5 1 2 4

NO stores

Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, BCG market model 54 Copyright by© 2018 Modern Trade 6 of the top 10 players have >40% of sales concentrated in Minsk city Eurotorg is evenly distributed across the country Estimation

% of Company Sales sales by region concentration Minsk City Minsk Region Mogilev Region Vitebsk Region Grodno Region Gomel Region Brest Region

Eurotorg Evenly distributed 21 17 12 13 11 16 10 Minsk City and Minsk Korona 42 16 8 12 8 14 Region Almi Grodno Region 19 8 1 2 31 13 26

Vitalur Minsk City 78 18 2 3

Rublevsky Minsk City 69 2 9 9

Sosedi Minsk City 67 6 7 4 0 16

Gippo Minsk City 72 3 11 14 Minsk City Belmarket 33 27 16 1 9 3 10 and Minsk Region

Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

releases and expert interviews. Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 55 Copyright by© 2018 Modern Trade Modern Trade penetration per capita: 10x gap between villages and larger cities Eurotorg is the only top 10 player with a sizeable presence in rural areas

MT Selling Space Inhabitants MT Selling Space per Players' presence by locality (% of MT Selling Space, 2017) ('000 m2) (M people) '000 people (m2)

0-10K inhab.1 72% 5% 13% 28 2.7 10

10-50K inhab. 52% 3% 6% 10% 24% 76 1.1 66 11x

>50 K inhab.2 34% 9% 9% 5% 3% 33% 200 1.7 115

Regional Centers 25% 9% 7% 4% 8% 5% 6% 4% 2% 25% 600 3.9 155 and Minsk1

Total 31% 8% 7% 3% 6% 5% 4% 4% 3% 27% 903 9.5 95 Belarus

1. Minsk suburbs Borovaya and Schomyslitsa are included in Regional Centers and Minsk 2. Excluding Regional Centers and Minsk Note: Forecourts are excluded. Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

releases and expert interviews. Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, BCG market model 56 Copyright by© 2018 Modern Trade 2018: Gippo has become the No.2 player in MT, with its acquisition of

Belmarket, driving the level of industry consolidation up to 66% Estimation

Gippo is becoming the No.2 player, however Gippo acquired Belmarket in April 20181 the 5x-gap between the top 2 players persists

66% 62% 5% Vitalur Rublevsky 5% 5% Almi Vitalur 5% 8% Korona Almi 5% 1 Korona 8% 8% Gippo + Belmarket

No rebranding planned

1 Previously Belmarket was a Sosedi M&A target Eurotorg 40% 41% Eurotorg

Top 5, Dec 2017 Top 5, Apr 2018

1. It is estimated that after acquisition, Belmarket revenue is split 80%/20% between Gippo and Eurotorg, as owners of 8 former Belmarket shops changed leaseholder to Eurotorg Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

releases and expert interviews. Source: Belarus National Statistical Committee, Euromonitor, Belarus Ministry of Antimonopoly Regulation and Trade, Company data, expert interviews, BCG market model 57 Copyright by© 2018 Private Label Share in Belarus is far below European countries, although the majority of top players have launched PL

Share of Private Label in grocery sales ( %, 2017) 7 out of 10 top grocery retailers with PL

Belarus <5% Eurotorg Serbia 6% Ukraine 6% Korona Georgia 8% Russia 8% Almi Bulgaria 12% Romania 16% ~6x Vitalur Greece 20% Latvia 20% Rublevsky Italy 22% Turkey 23% Sosedi Norway 30% Poland 30% Gippo Czech R. 31% Sweden 31% Belmarket France 33% Portugal 40% Prostore

Private label No private label

59 Copyright by© 2018 • Belarus is a compact European country, with a maximum 640 km distance between its two most distant cities • Any location in Belarus can be reached within a travelling time of 5.4 hours from the country's center (Minsk) • With a road network of 87,000 km, Belarus' road density is at the Roads and average European level • 87% of Belarus' roads are paved – more than its neighbors (Russia and Transportation Poland)

• Belarus has a scarce warehouse capacity of ~0.8 million m2 and 86 m2 per 1000 people, which is 3.5x times below Poland • As a result, annual A-class warehouse lease rates are ~88 USD per m2 - more expensive than in most European countries and Executive twice as expensive as in Poland Warehouse • ~44% of Belarus' warehouse capacity is concentrated summary Capacity in 9 logistics centers, mostly in the Minsk Region • Retailers comprise ~32% of warehouse capacity demand

• Eurotorg is the only player with a sufficient store network in all regions that can afford an efficient supply chain, other players seem to overpay for their supply chain • 4 out of 5 top Belarus grocery retailers operate their own distribution Grocery centers and rely mostly on their own transport; other retailers prefer to

Source: Colliers, Savills, Knight Frank, Belretail, Company data, BCG analysis 60 Copyright by© 2018 Logistics Belarus Source Center Distribution 1. Key2017 Facts hours M m ~44% ~87K ~87K ~0.8 km 5.4 5.4 : Colliers, Savills,Frank: Knight 2 2 centers logistics 9 top the in consolidated Capacity Classes A B and WarehouseCapacity: center from point Time any reach to Roadnetwork , CBRE, CIA Factbook, World Bank,World Statistics, Country CIA , CBRE, Factbook, top 10 USD 87% 5 ~86 ~88 m of 2 Company data, BCG analysisBCG data, Company operate their own DC own their operate MT warehouse m per rate lease Annual '000 people per Warehouse capacity roads paved S hare of hare g rocery retailers retailers rocery 2 in c lass A 61 1

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. Maximum road distance Belarus is between two cities (km) Maximum Shoulder (hours1) a compact country Latvia 420 Latvia 4.3 Any point within max 5.4 hours' Czech Republic 500 Czech Republic 4.4 Georgia 540 Georgia 4.6 reach of Minsk Portugal 600 Portugal 4.6 Belarus 640 Belarus 5.4 Bulgaria 650 Serbia 5.4 Serbia 719 Bulgaria 5.7 Romania 820 Germany 7.0 Poland 900 Greece 7.1 Germany 950 Romania 8.4 Spain 1,000 Poland 8.6 France 1,050 United Kingdom 9.0 5.4 Greece 1,100 France 9.3 hours United Kingdom 1,200 Spain 9.5 Ukraine 1,300 Italy 10.8 Italy 1,500 Ukraine 12.4 Sweden 2,000 Sweden 14.7

1. Hours to reach the most distant point from center of the country

Source: Colliers, Savills, Knight Frank, Country Statistics, BCG analysis 62 Copyright by© 2018 Road density in Belarus is at the average European level, the share of paved roads is above neighboring countries

Road network ('000 km) Road density Index1

Portugal 11 Turkey 9 Bulgaria 20 Russia 9 Georgia 22 Portugal 12 Share of paved roads, Serbia 45 Bulgaria 18 Latvia 58 Ukraine 28 % Turkey 67 Spain 30 Romania 85 Norway 30 Romania 59 Belarus 87 Georgia 32 Norway 92 Romania 37 Czech Republic 129 Belarus 43 Poland 70 Greece 150 Sweden 53 Spain 150 Serbia 58 Ukraine 163 Germany 66 Russia 70 Sweden 216 Italy 86 Germany 230 Latvia 94 United Kingdom 247 United Kingdom 102 Belarus 87 Italy 252 Greece 115

1. Road network per 100 km2, km

Warehouse capacity per '000 Annual lease rate per m2 Warehouse capacity1 (M m2) people (m2) in Class A2 warehouse (USD)

Latvia 0.6 Ukraine 55 Poland 37

Serbia 0.8 Belarus 86 Ukraine 42

Belarus 0.8 Serbia 105 Serbia 44

Ukraine 2.4 Russia 158 Italy 55

Romania 3.5 14x Romania 163 3.5x Russia 56 2.4x

Sweden 4.5 France 194 Latvia 59

Poland 11.6 Italy 217 Romania 59

France 13.0 Poland 302 France 61

1. Class A and Class B. 2. Class A: site coverage 40-45%; ceiling height – 10+ m; min distance between aisles – 24m; concrete floor with more than 5 tons per m2 load ; marshalling area for trucks; ventilation system; typically not older than 15 years

Source: Colliers, Savills, Knight Frank, Cushman Wakefield, CBRE, BCG analysis 64 Copyright by© 2018 Supply: Nearly half of Belarus' warehouse capacity consolidated in top 9 logistics centers, mostly in Minsk region; Eurotorg operates 3 of them

Top Distribution Centers Warehouse Capacity2 ('000 m2 ) Region

Prilesye Prilesye3 80 Minsk Region

China Merchants China Merchants4 50 Minsk Region

Belrusinvest Belrusinvest 41 Minsk Region

Pradius Nova Pradius Nova 40 Minsk Region

Point Logistics Point Logistics 40 Minsk Region

Eurasia Eurasia 32 Minsk Region

Eurotorg (Minsk) Eurotorg Minsk 28 Minsk Region

BLT Logistics (leased by Eurotorg)1 BLT Logistics 27 Minsk Region

Eurotorg (Baranovichi) Eurotorg Baranovichi 22 Brest Region

Top 9 361 (~44%)

1. Including cold storage. 2. Class A and Class B. 3. ~30, 000 m2 of Prilesye capacity is leased by Tut I Tam Logistics. 4. ~15,000 m2 of China Merchants capacity is leased by Eurotorg Source: Colliers, Savills, Knight Frank, Company data, MITSO, BCG analysis

65 Copyright by© 2018 capacity demand capacity warehouse form Demand: one - Retailers third of Source 1. L ogistics operators'ogistics Food ProducersFood Distributors and : Belretail , BCG , Industry share does not include any capacity retailers may be getting through the logistics operators logistics through the be getting may retailers capacityanyinclude sharedoesnot analysis 15% Other 21% 14% 18% Logistics operators Logistics 32% Retailers 1 66

Company Total Minsk Mogilev Vitebsk Grodno Gomel Brest (No. of outlets, 2017) country Region Region Region Region Region Region

Eurotorg 500 167 72 55 60 80 66

Korona 36 22 2 6 1 5

Almi 53 17 2 2 19 4 9

Vitalur 46 44 1 1

Rublevsky 74 56 5 2 6 4 1

Sosedi 76 56 5 6 9

Gippo 11 9 1 1

Belmarket 70 39 18 1 6 2 4

Prostore 5 5

Santa 73 6 1 2 3 6 55 The Boston Consulting Group, Inc. All rights reserved. XX – No. of outlets below 10 NO stores XX – No. of outlets 10 and above Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews

Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, BCG market model 67 Copyright by© 2018 4 out of 5 top grocery retailers operate their own distribution centers and rely mostly on their own transport

Company No. of Capacity used Ownership Transport ownership Outlets (2017) as DC1 (m2) Eurotorg 500 90,500 Mix of own/leased Mix of own/leased

Korona 36 - Own Mix, mostly own Almi 53 15,000 Own Mix, mostly own Vitalur 46 1,500 Own Mix, mostly own

Rublevsky 74 9,000 Leased Mix of own/leased

Sosedi 76 5,000 Leased Мostly leased

Gippo 11 4,000 Leased Mostly leased

Belmarket 70 3,000 Leased Mostly leased

Prostore 5 No DC Mostly leased The Boston Consulting Group, Inc. All rights reserved. Santa 73 - Own Mix, mostly own 1. Capacity includes only Distribution Centers Capacity and does not include any other warehouse capacity Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews

69 Copyright by© 2018 • Anti-monopoly regulation may impose restrictions on retailer in case certain market share limit is achieved within ATU or in sales overall or in particular Anti- category monopoly • Geo footprint: once retailer exceeds 20% market share in food sales (not grocery) within any ATU1, no lease/purchase of additional selling space is allowed; yet effectively, growth beyond 20% is achievable despite restrictions • Sales in villages <2K inhabitants (as of Sep 2017) and on-line sales are not counted in 20% market share limit • Dominance criteria: in case retailer's market share exceeds 35% of sales overall or in a certain category at regional or country level, its profitability margins might be capped at 10-40%2 depending on the category Assortment • Grocery retailers are obliged to sell domestic assortment: minimum number of sourcing SKUs are set per category for each outlet size • Overall, 600-3,350 SKUs per outlet to be of Belarusian origin

• Belarus protects local food producers from imports through: Pricing i) temporary pricing regulation for socially important goods coming from EAEU3 Executive and ii) import duties of 5-30% for goods coming from outside EAEU summary Commercial • Commercial terms regulation allows for higher flexibility versus CIS countries (especially Russia); back-margin size is not regulated, allowing retailers to balance terms front and back margin for maximum profitability

E-commerce • High import duties on parcels from abroad nearly hinder cross-border e-commerce development in Belarus: parcels valued >22 EUR and/or weighted >10 kg are subject to import duties of 30% of the excess amount4

• Belarus belongs to a group of countries with high government oversight in retail Other • Doing Business ranked Belarus 38 out of 190 countries with top indicators on registering property, dealing with construction permits and enforcing contracts

1. Administrative territory unit (~1600 km2 on average, 129 ATU in Belarus for the purposes of anti-monopoly regulation). 2. Profitability margin cap is calculated as % of COGS (cost of goods sold). 3. Eurasian Economic Union members: Belarus, Russia, Kazakhstan, Armenia, th

Kyrgyzstan 4. Presidential Decree No.40 dated February 11 , 2016. Source: Belarus regulatory documents, BCG analysis 70 Copyright by© 2018 Belarus belongs to a group of countries with high government oversight in retail

Government oversight in retail Comments High Trade law regulates anti- Common for welfare states with a strong emphasis on social protection competitive conduct and retailer- Clear criteria to assess market dominance: maximum market share limits supplier relationships (by geographical regions or some category sales), or overall sales threshold Regulation on payment terms, pricing for socially important products; restrictions on fees services regarding product sales Examples: Russia, Kazakhstan, Belarus, Kyrgyzstan, Czech Republic, Hungary, Serbia, China

Medium Policies to ensure fair competition Establishing fair conduct practices is at core of governmental policies exist; retailer-supplier Mix of statutory and self-regulatory approaches: government heavily relationships are mostly self- relies on the market and provides additional support by arbitrating regulatory Some fees are prohibited, but wording in laws is vague making them harder to enforce Examples: India, Malaysia, Japan, Germany, Greece, Poland, Turkey, UK

Low Low to none regulation of retailer- Some general guidelines (codes of conduct) for fair competition driven

supplier relationships; general by industry may exist, self-regulation of retailer-supplier relationships The Boston Consulting Group, Inc. All rights reserved. guidelines for fair trading exist Examples: Finland, Denmark, Spain, Armenia, Italy, Netherlands, Singapore, USA, Argentina, Brazil, Australia

The 38th rank of Belarus is based on an average of 10 indicators Country Rank 2018 Rank 2008 Rank change United Kingdom 7 6 Norway 8 11 Starting a business (30) Sweden 10 14 1 Dealing with Resolving insolvency construction permits Latvia 19 22 (68) 51 (22) Germany 20 20 Poland 27 74 101 Enforcing contracts Getting electricity (25) Spain 28 38 (24) 151 Portugal 29 37 Czech Republic 30 56 France 31 31 Trading across borders Registering property Russia 35 106 (30) (5) Belarus 38 110 Serbia 43 86 Paying taxes (96) Getting credit (90) Romania 45 48 Italy 46 53 Protecting minority investors (40) Turkey 60 57

Greece 67 100 The Boston Consulting Group, Inc. All rights reserved. Scale: Rank 190 center, Rank 1 outer edge Ukraine 76 139 Out of 190 Out of 178 Sources: Doing Business report 2018 and 2008, Worldbank; BCG analysis

2 Presidential Decree "On the Development of Trade, Public Catering and Consumer Services" dated September 22nd, 2017 No. 3452

3 Presidential Decree "On the Development of entrepreneurial activities" dated November 23rd ,2017 No. 73

4 Law "On Advertising" dated May 10th, 2007 No. 225-Z4

5 Law "On Counteracting to Monopolistic activity and competition development" dated December 12th, 2013 No. 94-Z5

6 Presidential Decree "On Licensing of separate types of activity" dated September 1st, 2010 No. 4506

Major regulations 7 Resolution of the Council of Ministers "On approval of the rules of sale for separate types of goods and implementation of public catering, and regulations on the procedure for developing and approving of the assortment inventory and influencing the assortment list of products for public catering" dated July 22nd, 2014 No. 7037 8 Resolution of the MART (Ministry of Antimonopoly Regulation and Trade) "On regulation of the minimum prices for Grocery Retail alcoholic beverages of more than 28° " dated October 2nd, 2017 No. 528

9 Resolution of the Council of Ministers "List of socially important goods subject to price controls by the MART on not more Industry than 90 days in a year" dated January 17th, 2014 No. 359 in Belarus 10 Resolution of the Ministry of Economy "On approving the directions on the price (tariff) regulation procedure for goods (work, services) supplied by legal entities and sole proprietors included in the State register of economic entities dominating commodity markets or the State register of natural monopoly actors" dated June 28th, 2007 No. 12110

1. Закон РБ "О государственном регулировании торговли и общественного питания в Республике Беларусь" 2. Указ ПРБ "О развитии торговли, общественного питания и бытового обслуживания" 3. Декрет ПРБ "О развитии предпринимательства" 4. Закон РБ "О рекламе" 5. Закон РБ "О противодействии монополистической деятельности и развитии конкуренции" 6. Указ ПРБ "О лицензировании отдельных видов деятельности" 7. Постановление Совета Министров РБ "Об утверждении Правил продажи отдельных видов товаров и осуществления общественного питания и Положения о порядке разработки и утверждения ассортиментного перечня товаров, ассортиментного перечня продукции общественного питания" 8. Постановление МАРТ РБ "Об установлении предельных The Boston Consulting Group, Inc. All rights reserved. минимальных цен на алкогольную продукцию крепостью свыше 28 процентов" 9. Постановление Совета Министров РБ "Об утверждении перечней социально значимых товаров (услуг), цены (тарифы) на которые регулируются государственными органами, и признании утратившими силу некоторых постановлений Совета Министров Республики Беларусь" 10. Постановление Минэкономики РБ "Об утверждении Инструкции о порядке регулирования цен (тарифов) на товары (работы, услуги) юридических лиц и индивидуальных предпринимателей, включенных в Государственный реестр хозяйствующих субъектов, занимающих

Regulation Key restrictions Implications for grocery retailers Geographical footprint1 With a market share above 20% in ATU: further growth in market share for • 20% market share in food (not grocery) sales grocery retailers is possible through set for a mini-region called ATU2 • Non-food sales growth leveraging existing supply chain • Once 20% is reached, a retailer is not allowed • Geo expansion in villages <2K inhab. (not counted in 20% share limits) to purchase or lease additional selling space • Online sales (not subject to 20% share limits) within ATU • Improving efficiency of sales for existing selling space • Effectively, growth beyond 20% is achievable Anti-monopoly despite restrictions With a market share below 20% in ATU: rapid new stores opening within ATU regulation between annual publications of statistical data on overall food turnover as a legitimate way to grow market share beyond 20% Dominance criteria in sales • 35% market share, overall or by category3, set • No impact on market share growth at regional/country levels • Profitability margin (calculated as % of COGS)4 might be capped at 10- • In case retailer's market share exceeds 35% of 40%, depending on the category at regional or country level (not ATU) sales, its profitability margins might be capped4 Grocery retailers are obliged to list domestic • No significant impact for local retailers as customer preference for grocery assortments products remains with Belarusian products (effectively ~45-60% share of Assortment sourcing assortment and 70-90% share of sales) regulation • Min. quantities set per category depending on outlet-size => 600-3,350 SKUs per outlet to be • Strong barrier to entry for international players, especially for hard of Belarusian origin discounters, with total no. of SKUs ~1-2K with majority of international assortment that should be imported to Belarus • No significant impact on retailers' top lines, with min. pricing regulation Protection of local producers from imports on certain products (sugar, alcohol) Pricing intervention • Min. pricing limits for certain goods from EAEU6 • Grocery retailers shift towards cheaper Belarusian products; the business and import duties • Import duties 5-30% for goods from outside case for imports is severely challenged EAEU

Commercial terms regulation allows for higher • High flexibility for retailers to balance front and back margin for Commercial terms flexibility versus CIS countries (especially Russia) maximum profitability The Boston Consulting Group, Inc. All rights reserved. regulations • Back-margin size is not regulated

1. Law No. 128-Z (1) 2. Administrative territory unit (~1600 km2 on average, 129 ATU in Belarus for the purposes of anti-monopoly regulation) 3. Law No. 94-Z (5) 4. Profitability margin cap is calculated as

% of COGS (cost of goods sold) 5. Resolution No. 121 (10) 6. Eurasian Economic Union - members: Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan; Source: Belarus regulatory documents, BCG analysis 74 Copyright by© 2018 Anti-monopoly regulation may impose restrictions on retailers in case a certain market share limit is achieved within ATU or in sales

20% 35%

Once 20% of the total food (not Dominance criteria: in case retailer's market grocery) sales is exceeded, a retailer is share exceeds 35% of sales (overall or in a not allowed to purchase or lease … with notable exceptions for the certain category, at regional or national level), additional selling space within ATU… countryside and on-line sales its profitability margins might be capped

• Set for each of 129 mini-regions called ATU1 Country side • If retailer's sales exceed 35%4 market share, overall or in any product category, its position is recognized as • Belarus National Statistical committee once a • Market share is not limited and may reach up to dominant year publishes statistical data on overall food 100% in villages with <2K inhabitants turnover per ATU • Eligible villages are subject to approval from • Profitability margins (calculated as % of COGS5) of the 3 players with a dominant market position might be • Once 20% is exceeded, a retailer is not allowed to local authorities capped at 10-40% depending on the category purchase or lease additional selling space within • Once 20% market share limit is reached, market ATU until the next publication of statistical data share in villages <2K shall not be counted in • Category and profitability margin caps are defined as: on overall food turnover2 market share limits=> effectively selling space 10% cap for fresh meat and meat products; 15% - for bread, milk, baby food, flour; 40% - for salt; 25% - for • Effectively, growth beyond 20% is possible growth is possible beyond 20% share limits in ATU others (e.g. fruits and vegetables) through rapid ATU expansion, with new stores Online opening (between annual publications of • Online sales are not included in the 20% market • Sales are monitored by MART at the regional and statistical data on overall food turnover), non- share limits; limits are applied to stationary national level, frequency of monitoring varies at the food sales growth, and improved efficiency of grocery stores discretion6 of MART The Boston Consulting Group, Inc. All rights reserved. sales for existing selling space Administrative territory unit (~1600 km2 on average, 129 ATU in Belarus for the purposes of anti-monopoly regulation) 2. Law No. 128-Z (1) 3. Decree no.345 (2) 4. Law No. 94-Z (5) 5. Profitability margin cap is calculated as % of COGS (cost of goods sold) as per Resolution No. 121 (10) 6. Resolution of the Ministry of Economics "On approval of the Instruction about the procedure for determination of the dominant position of business entities" dated March 20th,2015 No. 24. Source: Belarus regulatory documents, BCG analysis

Belarus protects local producers and obliges grocery retailers to list domestic Belarusian assortment according to min. quantities set by Convenience Supermarket Hypermarket each category, depending on the outlet size

Selling area (m2) 200-399 400-6492 650-799 800-999 1000-2499 2500-39992 4000-5999 6000-7999 >8000 Requirements on Belarusian assortment are regulated by the Ministry of Antimonopoly Regulation and Trade (MART) within "Assortment List of Goods" Min # of SKUs of local 610 840 1100 1420 1850 2310 2790 3110 3350 • List specifies minimum required number of domestic Belarusian origin SKUs within each category, for each outlet size • Latest Assortment list was published in June 20171 and includes dairy and bakery products, meat, Estimated # 3000 – 8000 15000 – 25000 >30000 of total SKUs candies, etc. Effective share of Requirements on Belarusian assortment (together with SKUs of local Belarusian 55-65% ~50-60% 45-55% import duties) place almost insuperable barriers to entry origin (# of SKUs, %) of international players who seek to maintain majority Effective share of of international assortment 80-90% 75-85% revenue for SKUs of local 70-80% The Boston Consulting Group, Inc. All rights reserved. • Especially for hard discounters that carry in total Belarusian origin (sales, %) 1000-2000 SKUs (Lidl, Aldi, etc.) 1. Resolution of MART dated 27 June 2017 No. 28. 2. Outlets with a size of 400-649 m2 are convenience format and outlets with a size of 2500-3999 m2 are supermarkets, according to Belarusian regulation (MART Resolution No.27 dated June 27th, 2017) Source: Belarus regulatory documents, Belarus National Statistical Committee, BCG analysis

Trade regulation Regulation affects: Key characteristics

The Ministry of Antimonopoly Regulation and Trade (MART) may intervene in Price regulation for Mostly imports from pricing, to protect local producers against imports from the EAEU socially important goods, countries that are • Recent example: min prices for sugar are capped alcohol and tobacco members of Eurasian 1 Intervention in pricing is NOT extensive Economic Union • Price regulation possible by MART and by local authorities, for max. 90 days per year2 • MART may intervene in pricing for "socially important goods"3 (fish, meat and poultry, bread, dairy products, baby food, sugar, pasta, rice, etc.), alcohol and tobacco4 • Local authorities may regulate prices for vegetables (potatoes, carrots, cabbage, and onions)

Customs duties for Imports coming from Import duties follow the Eurasian Economic Union rules5 imported products outside the EAEU • 5-30% import duties, depending on product category • Import business case for certain categories is severely challenged by import

1.Members: Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan 2. Resolution of The Council of Ministers No. 35 (9) 3. Resolution of The Council of Ministers “List of socially important goods subject to price controls by ATE for not more than 90 days in a year” dated January 27th 2017 No. 81 4. Decree of the President “On Certain Aspects of State Regulation of Production, Turnover and Advertisement of Beer, Alcoholic Products and Tobacco Goods” dated 29 February 2008 No. 3 5. The Common Customs Tariff of the Eurasian Economic Union, approved by Decision No.54 of the EEC Council dated July 16, 2012 Source: Belarus regulatory documents, BCG analysis

Belarus CIS examples

Margins Front margin is not regulated2 Front margin is not regulated with some exceptions for basic goods No restrictions on the size of back-margin Back-margin in Russia is capped at 5% of cost of goods and it accounts for volume-based bonus, marketing and merchandizing services, delivery service (in case of ex-works pick-up by retailer), etc.

Volume-based Volume-based bonuses are allowed according to a Volume-based bonus in Russia is a part of other services (marketing, bonus retailer-supplier agreement in the contract merchandizing, delivery, etc.) that are capped at 5% of the cost of goods • Alcohol bonuses are subject to special regulation

Marketing, Listing fee is prohibited Listing fee is prohibited in Russia merchandizing, Marketing and merchandizing are not limited and are All services in Russia are capped at 5% of the cost of goods and include subject to a separate contract between supplier and volume-based bonus, marketing and merchandizing services, delivery listing fees retailer service (in case of ex-works pick-up by retailer), etc. Penalties Government regulates penalties for late deliveries3 and Government regulates penalties for late deliveries, poor quality, and deliveries in insufficient volumes (10% cost of any goods deliveries in insufficient volumes; usually subject to supplier-retailer not delivered on time) and poor quality (25% cost of any negotiations goods delivered that are poor quality); usually subject to

1. Law No. 128-Z (1); 2. Prices/margins for "socially important goods" might be regulated, or the profitability margin might be capped for retailers exceeding 35% of the market share for sales within certain categories; 3. Resolution of the Cabinet of Ministers of the Republic of Belarus "On approving the regulations for goods deliveries in the Republic of Belarus" July 8th 1996 No. 444

Source: Regulatory documents from Belarus and CIS, BCG analysis 78 Copyright by© 2018 E-commerce: high import duties on parcels from abroad nearly hinder cross- border e-commerce development in Belarus

E-commerce regulation Key characteristics

Import duties on parcels High import duties on parcels from abroad create entry barriers for the development of from abroad international online e-commerce players in Belarus • As of 14.04.2016 the allowance for duty-free import of goods for personal use sent via international parcels or express consignments is at 22 EUR and 10 kg for 1 recipient within 1 calendar month1 • Parcels valued above 22 EUR and/or weighing more than 10 kg are considered for commercial use and are subject to import duties of 30% of the excess amount but not less than 4 EUR per 1 kg • In addition, each parcel is a subject to a customs fee to be paid for processing- generally ~5 EUR per parcel • The allowances for duty-free import of goods from abroad are expected to be harmonized among EAEU2 countries by 2021-22 and set at 200 EUR per recipient per month. However, member states of EAEU are entitled to increase allowances within its countries if necessary.

Expected liberalization of Two topics were on the recent agenda in Belarusian legislation regulation in e-commerce • Law on payment services for deliveries to allow third-party delivery services to accept cash payments on behalf of online retailers (under discussion) • Online sales and delivery for alcohol and tobacco goods - currently is prohibited , however the

1. Presidential Decree No.40 dated February 11th, 2016 2. Eurasian Economic Union members: Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan

Source: Belarus regulatory documents, BCG analysis 79 Copyright by© 2018 Support for entrepreneurship, the digital economy and a national food strategy were all on recent agendas in Belarusian legislation

Recent agenda Comments

Decree No. 7 “On the Development of Entrepreneurship” is aimed at liberalizing of entrepreneurship (Nov 2017): • No new taxes introduced until 2020; no increase for effective tax rates; a simplified system of taxation Efforts to • Notification, instead of permission, for a new business start-up support • Simplified requirements for fire safety, sanitary and epidemiological and environmental protection on the entrepreneurs premises • Simplified requirements for catering businesses (restaurants, cafés) in terms of assortment, pricing, working hours, and management

Decree No. 8 “On digital economic development” aims to support of innovative entrepreneurs in the high-tech sector (Dec 2017): • Aimed at a further development of the Belarusian IT cluster - Hi-Tech Park Belarus – given special legal status Digital until 2049 economy • Introduces usage of new legal instruments, such as convertible loan agreements, options, indemnity development agreements, etc. • Creates legal framework for ICO, use of crypto currency, and introduction of smart contracts • Expands types of business activity (i.e. biotechnology, medical, aviation and space technologies, eSports, etc.) and simplified procedures for the recruitment of foreign specialists for cluster residents

National food security strategy 2030 (Dec 2017) as a reference for future policy development: National food • Emphasis on domestic food production and access towards high quality products and stores security • Identification of internal and external threats to food security

In power

Source: Belarus regulatory documents, BCG analysis

81 Copyright by© 2018 • There are estimated 3.9M households in Belarus today, with the majority consisting of 1-3 people and with disposable income up to 550 BYN per person per month Household • Around one-quarter of the population can be considered middle class, incomes with 3% upper class and 73% working class • Further growth of the middle class expected on the back of GDP growth and subsequent increase in consumption

• Further growth of the middle class is expected to strengthen four key trends: growth of Modern Trade, online grocery shopping, fresh and healthy foods, and ready foods in grocery stores • Belarus residents visit grocery stores on average five times a week; half Executive Consumer of the visits are for top-up missions; nearly half of the spend is on stock behavior up missions summary • Most important factors in store selection are location, product range, price, and quality; customers in smaller towns tend to prefer Modern Trade along these parameters and want modern retail chains such as Euroopt to come to their towns

• Euroopt is the leading chain in the market in terms of awareness, customer traffic and image along all major dimensions; besides, promo Perception of games are almost exclusively associated in the market with Euroopt. retail chains Other market leaders in terms of awareness and traffic are Korona,

Source: BCG survey on retail market and brand perception in Belarus. Survey was carried out in April 2018 and covered 758 respondents covering all regions and city sizes across Belarus: Minsk, Brest, Vitebsk, Gomel, Lida, Bobruisk, Gorodok, Novolukoml, Shklov, Bykhov, Mosty, Skidel, Bereza, Luninets, Miory, Chashniki, Orekhovsk, Pleshchanitsy, Oktyabrsky, Gorodishche, Radoshkovichi, Klichev, Bogushevsk, Chernikov, Kirovsk, Uvarovichi,

Zarechye, Glusk, Starobin, Loev, Gorodeya, Ivie, Radon, Dyatlovo, Ostrino, Kossovo, Vysokoe and David-Gorodok 82 Copyright by© 2018 Almost a quarter of the 3.9M households in Belarus can be considered middle class 96% of population can easily afford to buy food

Middle class estimated at 24% as residents The estimates are confirmed by % of Belarus population by number of who can afford new appliances disposable income statistics people in household, 2009 Households by disposable income per Our family income status is… person/month, %, BYN 3% 1 30% upper class 2.4% 0.3% 100% 21% 9% 10% 13% 650+ 6% 6% 24% 24.3% middle+ class 8% 550-650 middle class 80% 11% 12% 14% 450-550 2 28% 80% 19% 60% 21% 23% 350-450 49.3% 40% 29% 73% 29% 3 22% working class 26% 250-350

2015 2016 2017 Consulting

We don’t have any financial difficulties We can easily afford new clothes,

but not new appliances The Boston We can easily afford to purchase anything We can easily afford to buy food, 2.4 3.9M except for a new apartment or house but not new clothes Average Total no. of We can easily afford new appliances, We don’t always have enough money even for food size of the households but not a new car household

Source: BCG survey on retail market and brand perception in Belarus, April 2018, 758 respondents 83 Copyright by© 2018 Further growth of the middle class is expected on the back of GDP growth and subsequent increase in consumption Living in an urban or rural area is a further driver GDP per capita, K BYN Disposable income per Consumption, B BYN behind differences in capita (annual), K BYN income levels 70-74B BYN by 2022 likely based on +10% 70 20 10 recent positive economic developments1 63 gap in average 18 20% 57 per capita incomes 16 8 51 between areas with 14 +12% 46 population <10K and Minsk/ +10% 43 12 39 regional centers 37 10 6 34 28 8 +12% 7% gap in average per

0 2 Consulting 2013 2014 2015 2016 2017 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22

Disposable income per capita (annual), K BYN Forecast The Boston Nominal GDP per capita, K BYN

1. The World Bank Belarus economic update on 19 April 2018 Note: Consumption of services not included in estimates; forecast for 2018-2022 is based on nominal GDP growth

Online shopping Four key trends are driving behavior of Belarusian customers Fresh and healthy foods

Modern Trade Online shopping Fresh and healthy foods Ready foods

Trend • Search for better deals, • Growing Internet • Growing popularity of • Dynamic lifestyle in big prerequisites wider assortment and penetration healthy lifestyle cities and lack of time better service • Purchase convenience, • Mass media attention • Good prices compared to • Shopping process importance of saving to potential risks of restaurants / cafes convenience time mass market products

times a week urban respondents have try to save time and 4/5 21% 66% care about buying 24% Importance of residents do grocery already tried healthy and purchase ready foods shopping in Modern Trade purchasing from grocery stores trend ecological food stores / all grocery stores groceries online when purchasing (ready salads, pancakes, groceries other precooked foods) have not visited are considering reported growing 18% 18% 54% markets or kiosks at trying grocery consumption of fresh all over the past three shopping online categories compared months to the year before

Euroopt rapidly expanding into Euroopt Focus to enhance Fresh Own culinary shop, sushi and Retailer The Boston Consulting Group, Inc. All rights reserved. response rural areas with no Modern launched categories claimed by most salad desks in all large Modern Trade outlets e-commerce of top 10 retailers Trade outlets

Source: BCG survey on retail market and brand perception in Belarus. Survey was carried out in April 2017 and covered 758 respondents covering all regions and city sizes across Belarus: Minsk, Brest, Vitebsk, Gomel, Lida, Bobruisk, Gorodok, Novolukoml, Shklov, Bykhov, Mosty, Skidel, Bereza, Luninets, Miory, Chashniki, Orekhovsk, Pleshchanitsy, Oktyabrsky, Gorodishche, Radoshkovichi, Klichev,

Bogushevsk, Chernikov, Kirovsk, Uvarovichi, Zarechye, Glusk, Starobin, Loev, Gorodeya, Ivie, Radon, Dyatlovo, Ostrino, Kossovo, Vysokoe and David-Gorodok 86 Copyright by© 2018 Stock-up missions account for nearly half of Belarusian How Belarusians shop grocery spend

Stock-up missions account for 17% of People in Belarus visit shops 5 times per week on for a mix of different missions visits and 43% of total grocery spend average visiting a grocery store

1 Main shop Stock up Purchase groceries for a 2 specific occasion / missions to cook a specific meal 1 7% 17% 2 10% 21% Top up shop to replace 43% 40% try to save consumed 3 3 29% 22% money when buying food or perishable goods Top up 51%

missions Inc. All rights reserved. 4 Emergency shop 4 22% 25% 37% Group, Spontaneous store visit 12% 5 5 21% when passing by Consulting 10% 6 12% 9% Visit store to capture a specific find it important to The Boston 6 promo / discount deal Share of total store Share of grocery 45% visits per month spending per month purchase Belarusian groceries

Source: BCG survey on retail market and brand perception in Belarus, April 2018 87 Copyright by© 2018 Belarusian residents select stores based on four key criteria: location, assortment, price, and quality

I will show you a number of store selection criteria. Please specify up to 3 criteria which matter the most to you

Share of respondents considering the driver when making store selection

Convenient location 23% Most important

Wide assortment 15% Satisfactory prices, quality, and freshness, offered range and store location are particularly Low prices 11% important for store selection

Fresh and quality goods 11% Important Many discounts 8% Medium significance: discounts and bonus card

Bonus store card 6%

Promos and lotteries 3% Less important Less important aspects for store selection are Polite services 3% promo games, service, shopping experience

Clean, light, spacious 2%

Source: BCG survey on retail market and brand perception in Belarus, April 2018 88 Copyright by© 2018 Euroopt is a standout leader in awareness: 100% of Belarusians know it, and for >50% of respondents it is the top-of-mind retailer

Share of respondents, % 54 92 Euroopt 3 29 Brusnichka 77 3 38 Korona 71 Retailer brand awareness 2 32 Almi 70 1 18 Rublevsky 63 3 20 Gippo 59 3 19 Sosedi 56 1 18 Vitalur 54 1 8 Top-of-mind unaided brand awareness - 1st Belmarket 52 2 14 mention Mart Inn 45 1 5 Question: Which grocery stores do you know? Please ProStore 39 1 10 name one Dobronom 35 1 9 Green 35 Unaided brand awareness - all mentions 3 15 Santa 35 Question: Which other grocery stores do you know? 1 10 Kopeechka 32 Please name all stores 3 10 Vesta 26 0 3 Aided brand awareness Domashny 21 0 1 Question: Which of these stores do you know, BIGZZ 13 0 whether or not you ever shopped there? Please name Radzivillovsky 0 10 all the stores you know 1 Zakrama 3 10 0 Spar 6 1 11 Other stores 53 Top-of-mind awareness - 1st mention The Boston Consulting Group, Inc. All rights reserved. 4 21 Belkoopsoyuz 38 Spontaneous awareness - all mentions 0 3 DorORS 17 Aided awareness

Source: BCG survey on retail market and brand perception in Belarus, April 2018 89 Copyright by© 2018 38% of Belarusians 38% of choice"for "store andthe retailer visited Euroopt is the most the is Source: BCG survey on retail market and brand perception in perception brand and market on retail survey BCG Source: Belkoopsoyuz (RAIPO) Belkoopsoyuz Other supermarkets Other Radzivillovsky Kopeechka Brusnichka Belmarket Dobronom Domashny Rublevsky Zakrama ProStore Mart Inn Mart Euroopt DorORS Kvartal Korona Vitalur Sosedi Green Retailers visited, share share Retailers visited, BIGZZ Gippo Santa Vesta visited visited over the past Which of Almi Spar 1.2% 1.3% 2.1% 2.1% 3.7% 4.4% 4.2% 5.5% 7.0% 7.5% 7.7% 7.8% 8.2% these these grocery stores have 12.5% 14.8% 15.3% 15.4% 15.6% 19.4% 21.5% 22.7% 23.7% 32.3% 40.4% 3 months months (%)? of 88.0% respondents you you Belarus, Belkoopsoyuz (RAIPO) Belkoopsoyuz Other supermarkets Other April Radzivillovsky Kopeechka Brusnichka 2018 Belmarket Dobronom Domashny Rublevsky Zakrama ProStore Mart Inn Mart Euroopt DorORS Kvartal Korona Vitalur Sosedi Green BIGZZ Gippo the the most What do store buy you Santa Vesta Almi Spar 0.1% 0.1% 0.3% 0.3% 0.4% 0.5% 0.5% 0.5% 0.8% 0.9% 1.5% 1.7% 1.7% 1.7% 2.1% 2.5% 3.0% 3.0% 3.3% 4.1% 4.2% often often (%)? 5.0% 7.7% 15.4% XX – groceries groceries top 10 10 player top at at 38.1% 90

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. Euroopt leads by all metrics and has a balanced profile Image of retailers (I/II): Top 5 players and Belkoopsoyuz Prices are low 80% Good value for money Frequently offers discounts on products of interest to me 60%

40% Wide selection of products Staff is polite and helpful Offers product or brands that are not available The store is constantly evolving, getting better 20% in other stores

The store is different from others, for the better Cares about product quality Offers interesting promo games and lotteries Always has fresh products available Offers advantageous store card with bonuses

The store is spacious and well lit

Euroopt Korona Almi Vitalur Rublevsky Belkoopsoyuz There are no queues in the store

Question: Please specify which stores each of the statements suits best (multiple answers possible)

Source: BCG survey on retail market and brand perception in Belarus, April 2018 91 Copyright by© 2018 Gippo and Santa are the strongest among players 6-10 but still behind the leader Image of retailers (II/II): players 6-10 Prices are low 80% Good value for money Frequently offers discounts on products of interest to me 60%

40% Wide selection of products Staff is polite and helpful Offers product or brands that are not available The store is constantly evolving, getting better 20% in other stores

The store is spacious and well lit

Sosedi Gippo Belmarket ProStore Santa There are no queues in the store

Question: Please specify which stores each of the statements suits best (multiple answers possible)

Bananas, 1kg 100 150 140 150 130 150

Euroopt price Apples, 1kg 100 129 104 96 n/a 104 leadership confirmed Tomatoes, 1kg 100 n/a 110 n/a n/a 115 Potatoes, 1kg 100 188 182 214 182 182

during store visits Chicken filet 100 126 120 108 101 n/a

Pork mince 100 106 123 n/a 92 115

Pollock fillet, 1kg 100 171 114 115 100 100 100 Euroopt Sunflower oil, 0.81l 100 87 104 n/a 106 104 Mayonnaise, 400g 100 n/a 121 121 141 118 121 Korona Cheese, 250g 100 89 100 89 118 87 Milk 2.5%, 1l 100 106 121 109 112 103 117 Almi Toast bread 100 120 109 n/a 130 130 Oat flakes, 500g 100 132 127 134 154 134

Sugar, 1kg 100 103 103 n/a 100 103 121 Vitalur Price index Instant coffee, 190g 100 120 105 n/a n/a 141

Water, 0.75l 100 83 120 100 104 109 119 Rublevsky Vodka, 0.5l 100 127 124 114 n/a 114

Beer, 2l 100 158 111 106 107 104 117

Note: All numbers are price indices; Euroopt prices taken as 100% XX – 100 and below Analysis based on 20 randomly selected basic products covering different XX – above 100

categories; in case of packaged goods, a certain brand was selected, in case of n/a – SKU not available in store 93 Copyright by© 2018 fruits / vegetables – a certain variety Source: Store visits in Apr 2018 The very idea of promo games is associated with Euroopt

What promo games organized by grocery stores do you know? What stores run them?

Number of people recalling Top 3 most known promo games are run a particular retailer Promo games mentioned by Euroopt Udacha v pridachu (Good luck in the Participate in a weekly prize Euroopt 583 (76.9%) bargain), Bonsticks, Kraina Vitamina draw (prizes include cars Dinosaurs, Ochen, 2 for 1, discount Gippo 12 (1.6%) and apartment in Minsk) for coupons for utensils every 10 BYN spent in store, 70% of Sosedi 11 (1.5%) Vygoda, Kupilka in case of the purchase of pre-defined ‘goods of Fortuna, Korona Superprize, Korona fortune’ and presenting the Belarusians Korona 10 (1.3%) Techno store card upon checkout participate Brusnichka 8 (1.1%) Tovar Udachi, Udacha v Pridachu Collectible figurines issued Belmarket 7 (0.9%) Belmarket X, Bolshoy Kush when one makes a 15 BYN in promo games purchase and produces a Vitalur 3 (0.4%) 1+1 store card. One gets additional figurines Almi 3 (0.4%) Vygoda when buying particular goods (promo game was ProStore 2 (0.3%) Soberi Druzei (Gather your friends) active throughout 2017)

Santa 2 (0.3%) 2 for the price of 1 Seed pots handed out when one makes a 20 BYN Zakrama 2 (0.3%) Vygoda purchase and produces a store card (promo game 2 for the price of 1 The Boston Consulting Group, Inc. All rights reserved. Green 1 (0.1%) active from February 26 to April 25, 2018) Dobronom 1 (0.1%) Aktivnoe Leto (Active Summer)

95 Copyright by© 2018 • 67% of the population of Belarus has access to the Internet, on a par with European averages; 2 out of 3 Internet users in Belarus shop online, which is a higher conversion rate than most European countries E-commerce overview • Belarus' grocery e-commerce market totals ~90 M USD (~173 M BYN) and ~9 USD per capita which is 2x greater than the EE spend per capita • Grocery e-commerce grew at 189% CAGR in 2014-17 • Grocery e-commerce is expected to grow at 35% CAGR in 2018-22, the fastest rate in Europe, and to reach ~320 M USD (~777 M BYN ) by 2022 • Growth will be driven by growing penetration of enablers (internet, smartphones, bank cards), expected liberalization of regulation to allow Executive Grocery online sale and delivery of tobacco and alcohol products, high import duties e-commerce on parcels from abroad, with 90% satisfaction with online purchases among summary those who tried • Key barriers to address for grocery e-commerce: consumer trust in product quality when purchasing online and trust in online as a channel for groceries

• The online grocery market leader is Eurotorg with a 98% market share in Belarusian e-commerce • Its two grocery e-commerce services e-dostavka.by and GIPERMALL.BY cover all the regions of Belarus Players • None of the other top 10 Grocery players are active in e-commerce • The only discovered competitors are Restoracia.by (premium grocery) and

1. Belarusian retailer, with no affiliation with Russian retail chain Perekrestok of X5 Retail Group Source: E-commerce Europe, eShopWorld, Euromonitor, Company data, BCG market model, BCG survey

96 Copyright by© 2018 Europe in rates penetration e highest has oneof the Belarus - commerce Source United United Kingdom Czech Czech Republic (% ofpopulation with : e - Germany commerce Europecommerce Romania Portugal Bulgaria Georgia Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia Latvia Russia Spain Italy Internet penetrationInternet , eShopWorld i nternet access, 2016) , e 45% - data.by, data.by, survey BCG 54% 58% 60% 62% 65% 67% 68% 68% 70% 70% 75% 77% 80% 83% 85% 89% 92% 92% +3 97% p.p. United United Kingdom Czech Czech Republic (% of online (% ofonline users buying online, 2016) Germany Romania Portugal Bulgaria Georgia Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia Latvia Russia Spain E Italy - commerce commerce penetration < 10% 14% 14% 21% 23% 26% 27% 41% 41% 42% 42% 45% 62% 63% 63% 63% 67% 71% 72% 73% 97 1.5x

Total e-commerce (M USD, 2017) Grocery e-commerce1 (M USD, 2017) Grocery e-commerce per capita (USD, 2017) Georgia 66 Georgia 5 Georgia 1 Latvia 332 Bulgaria 19 Ukraine 2 Serbia 336 Latvia 30 Romania 2 Bulgaria 387 Romania 52 Bulgaria 3 Belarus 738 Serbia 57 Turkey 3 Romania 1,659 Greece 81 Russia 3 Ukraine 1,661 Belarus 90 EE EE 5 Portugal 1,996 Ukraine 98 2x Poland 5 Greece 2,816 Poland 201 Greece 8 10x 2x Norway 4,909 Czech Republic 235 Serbia 8 Czech Republic 4,929 Turkey 269 Belarus 9 Turkey 7,020 Portugal 312 Italy 14 Sweden 7,124 Norway 314 Latvia 15 Poland 7,797 Russia 500 Germany 20 Spain 10,804 Italy 859 Czech Republic 22 Italy 13,785 Sweden 869 Portugal 29 Russia 19,811 Germany 1,610 Spain 37 EE EE 43,342 EE EE 1,675 WE WE 54 France 45,475 Spain 1,819 Norway 59 Germany 55,890 France 8,099 Sweden 87

1. Grocery e-commerce (as non-store based grocery retail) is not included in total grocery retail market reviewed in Grocery Retail Market Overview (part 2 of this presentation) Note: data for all countries except Belarus and Russia is from Euromonitor; for Belarus and Russia grocery e-commerce data is from company data and expert interviews

Source: Euromonitor, Company data, expert interviews, BCG market model 98 Copyright by© 2018 E Source expert and data company e grocery RussiaforBelarusand Euromonitor;from isBelarusand except Russia allcountries for Note: data 3 e grocery Belarus' - commerce Grocery Market (M g years; rowth potential by 2022 is likely2022 by potential rowth 14 : 7 Euromonitor, Company Euromonitor, 15 93 +189% 0.8 139 16 - 1 . 3 B 173 high 17 interviews. interviews. BYN 234 18f data 316 19f +35% growth momentumgrowth expectedtobemaintained , expert interviews, expert , 426 20f 576 21f - BYN) commerce grew 25 grew commerce 777 22f BCG market model market BCG 189% '14 CAGR - '17 '1 CAGR 35% 7 - ' 22 Country Country - fold over the past over the fold Belarus Greece Norway Czech Republic Serbia Sweden Ukraine Romania Turkey Russia Latvia Germany Italy Poland France Bulgaria Georgia United Kingdom Spain Portugal - commerce data is fr is data commerce CAGR CAGR 1 179 70 59 49 3 2 2 2 2 21 20 1 19 12 1 10 - 8 8 7 '14 4 2 5 4 4 1 9 1 9 % % om % % % % % % % % % % % % % % % % % % - '17 CAGR CAGR 35% 11% 17% 32% 14% 21% 17% 17% 26% 11% 17% 19% 17% 15% 17% 14% 8 7 6 9 % % % % '17 - '22 2017 E banking cards of Internet, smartphones and Furthergrowth in penetration border e from High import duties on parcels tobacco products and delivery of regulation Expected and stick to it will try online grocery shopping penetration: Growing e - commerce commerce drivers abroadprevent cross - 2022 - commerce liberalization of - to allow online sale commerce more consumers alcohol alcohol and 99 -

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. Growing e-commerce penetration Almost half of the population is ready to buy groceries online – to involve the rest, product quality and consumer trust of the online channel need to be addressed Attitude towards More customers will try online Grocery e-commerce barriers: consumer trust grocery shopping and stick to it grocery e-commerce, % in product quality and on-line as a channel Reason for refusal, % 21% 27 Unsure about quality

• Growing Internet penetration 21 Don’t trust websites 18% • Online purchase convenience 14 Don’t know how to order online • Importance of saving time 2% 10 Don’t use internet 8 Don’t want to pay for delivery

• 1/5 of population is already 7 Don’t trust couriers purchasing groceries online 59% 4 I don’t know online groceries • 90% of those who tried have 3 Inconvenient delivery positive attitude to online 3 My store doesn’t have e-commerce grocery shopping More expensive than 2 • Further 1/5 of population is "normal" stores ready to try purchasing online

Source: BCG survey on retail market and brand perception in Belarus, April 2018 100 Copyright by© 2018 Source countriesother Belarus; forthe Republic of Bankof National Belarustaken from bank for number cardson of Data 1. e Internet and further enable andtogrowset is penetrationcard bank andSmartphone United United Kingdom Czech Czech Republic No. No. of s : Euromonitor, Belarus National Statistical Committee, National Bank of the Republic of Belarus, Republic of the of Bank National Committee, StatisticalBelarus National Euromonitor, Germany Romania Portugal Bulgaria Ukraine Sweden Norway Belarus Greece France Poland Turkey Serbia martphones Latvia Russia Spain Italy WE EE WE EE per capita(2017) 0.41 0.55 0.55 0.59 0.60 0.60 0.61 0.63 0.65 0.66 0.67 0.70 0.71 0.75 0.76 0.77 0.77 0.77 0.87 0.88 0.88 1.4x United United Kingdom No. No. Czech Czech Republic - commerce penetrationcommerce o f bank cards per capita(2017 Germany Belarus Romania Portugal Bulgaria Georgia Ukraine Sweden Norway Greece France Poland Turkey Serbia Latvia Russia Spain Italy WE EE 1 WE EE Google, Google, 0.5 0.6 0.7 0.8 0.8 1.0 1.2 1.2 1.5 1.5 1.7 1.8 1.9 Hootsuit 2.1 2.8 3.0 - Euromonit 3.3 3.3 3.4 , BCG analysisBCG , 3.6 4.2 2.2x ) or 6.3 penetrationgrowing ofBelarus: share Belarus Penetration, % 17 32

2008 Further growth ininternet penetration 20 40 Internet access Internet computers Personal 2010 25 44 31 51 + 5p.p. 59 40 2012 52 70 57 78

2014 I nternet 59 88 101 2016 63 96 67 96

Eurotorg - the only top 10 grocery Eurotorg grocery e-commerce retailer with e-commerce sales Market Share (%, 2017) Eurotorg 98% Korona Almi

Vitalur

Eurotorg covers the Rublevsky whole country with two Sosedi e-commerce grocery Other players (some examples) services Gippo Mogilev Region Belmarket

Focus on Minsk Prostore

e-commerce No e-commerce Note: Perekrestok is owned by Mogilev businessman Vyacheslav Pivovarov who also owns a number of premises and other businesses in Mogilev, (no affiliation with Russian retail chain Perekrestok of the X5 Retail Group); Restoraciya is part of the Avalon Group, which unites a number of

Average monthly visits (M) Monthly visits per 1,000 E-commerce Sales Average for November 2017-April 2018 people in population (M USD, 2017)

Edeka2 0.4 5 137

Ahold Delhaize 1.0 59 2,853

Eurotorg exceeds Eurotorg 1.6 168 90

European retailers in Mercadona 2.0 43 220 monthly website visits per capita Tesco 7.3 111 4,875

1. Given for Edeka24.de; Note: not enough data to assess traffic of Restoracia and Perekrestok web sites Source: Similar web, Alexa, Planet Retail, CapIQ, Company data, BCG market model, BCG analysis

104 Copyright by© 2018 • Four core barriers to entry to Belarusian retail market: regulation on assortment sourcing, infrastructure limitation, acquisition challenges Overview and high import duties for parcels from abroad • All barriers together, or each separately, create substantial challenges for a new entrant to rapidly build store network and efficient supply chain

Assortment • Grocery retailers are obliged to list domestic assortment: min. sourcing quantities are set, per category, for each outlet-size; overall, 600-3,350 SKUs per outlet to be of local Belarusian origin • Strong barrier to entry for international players, especially for hard discounters, with 1,000-2,000 SKUs in total, who would have to Executive source majority of their assortment from Belarus Infrastructure • Shortage of: supply of real estate for lease to open a mid-size or summary large grocery store, warehouse capacity with 1.5- 2x rates of Europe, and 3 PL transport companies with competitive rates • Immediate access to an efficient supply chain is not possible, entrants would need to start from scratch

Acquisition • Lack of acquisition targets with country-wide presence, except for #1 targets player, Eurotorg

• High import duties on parcels from abroad nearly hinder cross-border e- E-commerce commerce development in Belarus: parcels valued >22 EUR and/or The Boston Consulting Group, Inc. All rights reserved. weighted >10 kg are subject to import duties of 30% of the excess amount4

4 Infrastructure Limitation Barriers to entry to the Acquisition Challenges Belarusian retail market

Regulation of assortment: international discounters would have to source the majority of their assortment from Belarus Grocery retailers are obliged to list domestic Belarusian assortment: Min # of local SKUs 600-3,350 SKUs to be of local Belarusian for 650-1,000 m2 Share of SKUs to be 1,100 1,420 Ave.selling space, of local Belarusian origin, depending on outlet size "Discount per outlet, m2 origin (# of SKUs, %) Supermarket"

~3,500 720 30-40% New entrant would have to take time and money to develop a relationship with 1,600 840 70-90% local producers and ensure competitive pricing 1,500 650 75-95%

Import duties 5-30%, per category, 1,000 780 100% further challenge the business case of importing private label for any 800 710 100% international player

Source: Belarus regulatory documents, Planet Retail, BCG analysis 107 Copyright by© 2018 Infrastructure limitations: immediate access to an efficient supply chain not possible – entrants would need to start from scratch

Shortage of warehouse Shortage of 3PL transport Shortage of real estate available for lease capacity drives up lease rates companies with competitive rates to open a mid-size/large grocery store

Annual lease rate1 is 1.5-2x 5 out of 5 top grocery retailers Best store locations for mid-size and higher than in European operate their own transport or use large grocery stores are already countries a mixture of own/leased, for occupied by market players economic reasons New entrants would have build their 2 Warehouse capacity per capita own stores => time and money,

1. For class A warehouse, per m2: Belarus 88 USD vs. Poland 37USD vs. France 61USD vs. Russia 56USD; 2. Warehouse capacity per 1,000 people: Belarus 71m2 vs. Poland 302 m2 vs. France 194m2 vs. Russia 158 m2

Source: Colliers, Savills, Knight Frank, Cushman Wakefield, CBRE, BCG analysis 108 Copyright by© 2018 Acquisition challenges: lack of targets with country-wide presence, except for Eurotorg Estimation No. of outlets, 2017 Company Share of MT, 2017 Total Minsk Mogilev Vitebsk Grodno Gomel Brest Country Region Region Region Region Region Region Eurotorg ~40% 500 167 72 55 60 80 66

Korona ~8% 36 22 2 6 1 5

Almi ~5% 53 17 2 2 19 4 9

Vitalur ~5% 46 44 1 1

Rublevsky ~5% 74 56 5 2 6 4 1

Sosedi ~5% 76 56 5 6 9

Gippo ~5% 11 9 1 1

Belmarket ~4% 70 39 18 1 6 2 4

NO stores XX – No. of outlets below 10 Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data XX – No. of outlets 10 and above (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews

Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, BCG market model 109 Copyright by© 2018 High import duties on parcels from abroad nearly hinder cross-border e-commerce development in Belarus

E-commerce regulation Key characteristics

Import duties on High import duties on parcels from abroad create entry barriers for the parcels from abroad development of international online e-commerce players in Belarus • As of 14.04.2016 the allowance for duty-free import of goods for personal use sent via international parcels or express consignments is at 22 EUR and 10 kg for 1 recipient within 1 calendar month1 • Parcels valued above 22 EUR and/or weighing more than 10 kg are considered for commercial use and are subject to import duties of 30% of the excess amount but not less than 4 EUR per kg • In addition, each parcel is a subject to a customs fee to be paid for processing- generally ~5 EUR per parcel • The allowances for duty-free import of goods from abroad are expected to be harmonized among EAEU2 countries by 2021-22 and set at 200 EUR per recipient per month. However, member states of EAEU are entitled to increase allowances

1. Presidential Decree No.40 dated February 11th, 2016 2. Eurasian Economic Union members: Belarus, Russia, Kazakhstan, Armenia, Kyrgyzstan

Eurotorg Korona Almi Vitalur Rublevsky Formats1 41% 23% 36% 2% 22% 76% 4% 53% 43% 12% 76% 12% 10% 85% 5% Regions Uniform presence in all regions Focus on Minsk city; 5-6 stores Present in all regions, Almost exclusive focus Focus on Minsk city; in Minsk, Vitebsk, Brest regions focus on Grodno on Minsk city 1-6 stores in every other region Price Euroopt Hi-Lo, Brusnichka EDLP Hi-lo price strategy Hi-lo price strategy Hi-lo price strategy Hi-lo mixed with EDLP: froze prices on strategy Lowest prices vs competition Prices in line with country Prices in line with country average Prices in line with country key consumer products via direct Best price perception average, more premium average contracts with producers perception

Assortment Strong import network Wide range of non-food Almi, Zakrama: own production, Frozen and fresh fish (50 CS: Focus on regular top-up assortment specifics Focus on fruits and vegetables products, own bakery and bakery, PL SKUs in every outlet), SM: Fruit&Veg, ready-to-eat, bakery, ~800 PL SKUs managed under multiple ready-to-eat categories Spar: Fruit&Veg, “food to go", seafood, meat products, own Belarusian products independent CPG brands No PL bakery, PL bakery and ready-to-eat, No PL Belarusian farm products Cooperates with Russian retail chains Lenta PL: Almi, I'm Happy, and Magnit on PL orders to decrease costs Vasanta etc. PL: Vitalur (across categories)

Commercial Known for promo games - weekly lottery Loyalty card with 1-5% discount Loyalty card across banners with Loyalty card with 2-7% Loyalty card offering discounts on strategy with opportunity to win an apartment in depending on accumulated 2-5% cashback depending on discount depending on selected products Minsk; Bonstick collectible figures spending over 90 days, purchase amount purchase amount, Mobile app with digital coupons Loyalty card with 1-5% discounts depending regular promo catalogue, Regular promo catalogue client days/weeks with dis- Regular promo catalogue on total purchases in previous month, promo games (win prize or counts on everything, promo regular promo catalogue money) games (win prizes)

Future Focus on convenience, No public statement, expanding Expanding to 60 Spar outlets in Opening 7 new outlets and New format supermarkets with focus on expanding into rural areas into SM and CS since 2015 Belarus by 2020 refurbishing 2 outlets in Fresh, 1K sq m area, >10K SKUs, focus focus hypermarket format in Minsk on European design and European foods in 2018-2019

Other Owns online hypermarkets e-dostavka.by Initial focus on shopping malls Owned by serial entrepreneur who One of exclusive importers of Discounts for disabled people, The Boston Consulting Group, Inc. All rights reserved. and gipermall.by, household appliance chain with hypermarkets - extended used to own Almi in Russia and fish in Belarus; owns cargo pensioners, large families; financial Techno Plus assortment under one roof another retailer Viktoriya in Russia transportation company support to Association for the Disabled

1. Share of sales by format Convenience Stores Supermarkets Hypermarkets Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press- 2 2 2

releases and expert interviews. Formats distribution: convenience stores - <400 m , supermarkets – 400-2,500 m , hypermarkets- >2,500 m . Source: BCG analysis, BCG market model 112 Copyright by© 2018 Modern Trade Top 6-10 players: strategy summary Estimation

Sosedi Gippo Belmarket ProStore Santa Formats1 20% 64% 16% 9% 91% 17% 83% 100% 29% 71% Regions Focus on Minsk city; also present Focus on Minsk city Focus on Minsk city, Minsk region All stores in Minsk city Focus on Brest region; present in in Eastern regions and Mogilev; present in all regions all regions Price Hi-lo price strategy Hi-lo price strategy Hi-lo price strategy Hi-lo price strategy Hi-lo price strategy strategy Used to be one of the most Prices in line with country average expensive retailers 5 years ago, now average prices Assortment 3K-37K SKUs depending on the Wide selection of products, own Focus on top up assortment, ready 65K SKUs with high share of non- 90% of range are food categories, specifics format bakery and ready-to-eat foods foods, bakery food, ready-to-eat and ready-to- with focus on frozen and fresh fish Focus on fresh, ready-to-eat, PL: Ochen (across categories) PL: Belaya Khatka for food cook categories, Fruit&Veg, (>50 SKUs), regular top-up ready-to-cook, bakery categories and Elpi for non-food Belarusian products assortment, bakery, ready to eat PL: Umny Vybor (across No PL categories)

Commercial Loyalty card with 1% cashback Loyalty card with 5-10% discount Loyalty card with 5% discount in Loyalty card with 1% cashback Loyalty card with 5% discount strategy Regular promo catalogue on 1 purchase per month few selected stores only regular promo catalogue Regular promo catalogue Cross-promo with other businesses Personalized offers based on Regular promo catalogue Cross-promos with restaurants and Up to 40% discount on ready-to- Co-branded credit card purchase history Multiple promo games – other retailers eat categories after 8pm with Alpha Bank Regular promo catalogue e.g. win an iPhone every day Google Play app for kids Future Renovation of existing stores, 2 more hypermarkets with Was acquired by player #7 Gippo Opening 6th hypermarket in Minsk Plans to reach 100 stores developing PL, personalization of 6-7K sq m area to be built in Minsk with 11K m2 area in 2018-2019; by end of 2018 focus loyalty program and Vitebsk by end of 2019 work on supermarket concept development

Other Active SR position - e.g. launch of Acquired #8 player Belmarket in Defines all stores as “Convenience Launched Retail academy Part of Santa Impex group that The Boston Consulting Group, Inc. All rights reserved. “silent cashiers” with deaf or hard 2018; Belmarket expected to be supermarkets” program (6 months rotational owns strong brands Santa Bremor of hearing cashiers kept as a separate banner paid internship) to attract talent (fish and seafood) and Savushkin Product (dairy) 1. Share of sales by format Convenience Stores Supermarkets Hypermarkets Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press- releases and expert interviews. Formats distribution: convenience stores - <400 m2 , supermarkets – 400-2,500 m2, hypermarkets- >2,500 m2; Eurotorg stores are categorized based on retailers' own 113 Copyright by© 2018 classification from May 2018; Source: BCG analysis, BCG market model Modern Trade Key players market share stable within 2013-2017 Estimation The only two players with significant change are Eurotorg, which grew by 4p.p., and Gippo, which dropped by 2p.p.

Market share of key players in grocery retail sales, %

Eurotorg Korona Almi Vitalur Rublevsky Sosedi Gippo Belmarket ProStore Santa Other players

2013 36% 8% 6% 4% 5% 5% 7% 4% 4% 2% 19%

Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews. Source: BCG analysis, BCG market model 114 Copyright by© 2018 Modern Trade Top-5 players developed in all regions – except Vitalur, which focused on Minsk The evolution of the geographic footprint within Belarus for key players (I/II)

No. of outlets Eurotorg Korona Almi Vitalur Rublevsky by region

1 1 2 2 2 1 1 1 1 1 2 2 1 2 2 1 1 1 5 5 5 1 1 1 1 46 66 67 72 1 1 2 32 1 1 1 4 4 2 4 1 2 4 6 6 1 4 2 2 3 1 4 6 4 3 4 12 13 2 24 31 53 56 60 19 2 2 19 19 2 2 1 1 2 2 1 4 5 32 50 73 72 80 1 4 1 3 4 4 3 5 1 4 4 55 55 1 2 30 43 54 2 2 2 7 40 5 31 37 40 45 66 8 8 9 61 61 17 20 51 53 45 54 Mogilev region 29 Grodno region 6 6 Gomel region 85 3 8 14 17 8 8 9 21 37 72 75 Vitebsk region 3 Brest region 9 Minsk region 35 7 46 59 67 82 8 8 8

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert

interviews. Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, BCG market model 115 Copyright by© 2018 Modern Trade Players 6-10 remained in their regions – Sosedi and Gippo couldn't enter Grodno The evolution of the geographic footprint within Belarus for key players (II/II)

No. of outlets Sosedi Gippo Belmarket ProStore Santa by region 1 1 1 1 1 3 4 5 5 1 2 2 3 5 1 1 1 1 1 2 2 8 2 1 3 5 5 6 3 9 1 15 15 17 18 4 1 1 1 1 3 1 4 4 5 1 2 4 3 6 1 4 5 5 5 5 6 5 1 5 6 1 2 1 2 2 2 1 2 2 4 4 1 4 4

4 5 5 5 5 13 17 17 18 40 45 55 16 25 9 9 8 8 17 9 Mogilev region 35 38 43 41 51 Grodno region Gomel region Vitebsk region 15 22 24 Brest region 23 15 Minsk region 1 1 2 2 Minsk city 2 2

2 2 2 4

2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017

Note: Analysis is based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space and outlets (MART), company press-releases and expert interviews

Source: Belarus National Statistical Committee, Belarus Ministry of Antimonopoly Regulation and Trade, BCG market model 116 Copyright by© 2018 #1 Eurotorg is the largest player in Belarus with 40% market share Eurotorg LLC Estimation Company background Revenue (M BYN) Geographical presence 34% Regions No. of outlets Key facts 2017 3,800- 4,000- 2,500- 3,200- 950- 1,600- 3,900 4,100 Minsk city 82 Sales (M BYN) 4,000-4,100 2,600 3,300 1,000 1,700 Minsk region 85 Market share of MT 40% Gomel 80 2012 2013 2014 2015 2016 2017 No. of outlets 500 Mogilev 72 Selling space ('000 m2) 280 Brest 66 Grodno 60 CAGR ('12-'17) 34% Vitebsk 55 No. of employees ~34,200 No. of outlets 500 438 453 HM 298 Ownership Private, 203 SM 1 121 336 343 385 3 Shareholders 221 CS Novopolotsk Gorodok 156 Polatsk Gorki Glubokoe # of 2012 2013 2014 2015 2016 2017 Vitebsk 2 outlets Postavy Formats Barysaw Baran' Smorgon Osipovichi Mstislavl Hypermarkets 38 Oshmyany MaladzyechnaMogilev Berezovka Stolbci Minsk Byhov Krichev Supermarkets 77 Outlets penetration Novogrudok Shchomyslitsa Klimovichi Grodno Bobruisk Kostiukovichi Nesvizh Rogachev Convenience stores 385 102 101 108 Vawkavysk Dzerzhinsk 75 Baranavichy Soligorsk Dobrush Gantsevichi Gomel Jabinka Bereza Zhitkovichi Banners Brest Ivatsevichi Kobrin Petrikov Drogichin Ivanovo Mozyr

1. Sergey Litvin (49,75%), Vladimir Vasilko (49,75% share), Andrei Zubkou (0,5%). Sergey Litvin and Vladimir Vasilko are longterm business partners with a diversified asset portfolio that includes retail, alcohol, banking and agriculture; 2. Eurotorg stores are categorized based on retailers' own classification from May 2018 Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

releases and expert interviews. CS – Convenience stores; HM – Hypermarkets; SM – Supermarkets; MT – Modern Trade. Source: BCG market model, BCG analysis 117 Copyright by© 2018 #1 Eurotorg (Eurotorg LLC): strategy overview

1993: Launched as a wholesale business 1997: First retail store opened 2010: First Belarusian grocery retailer to achieve presence in all Belarusian regions History 2012: 100 stores operated 2017: 500 stores operated by the end of 2017; ~350 M USD Eurobond placement; "Brusnichka" banner launch; 75 outlets in localities with population below 10,000 Expansion plans: Rural areas penetration (63 net stores opened with focus on rural areas in Jan-April 2018)

41% 36% 23% Share of sales by format, % Sales Convenience Stores Hypermarkets Supermarkets concentration 2017 21% 17% 16% 13% 12% 11% 10% Share of sales by region, % Minsk City Minsk Region Gomel Region Vitebsk Region Mogilev Region Grodno Region Brest Region Customer proposition: improving quality of life for Belarusian residents by offering the best prices and rigorous range Euroopt: high-low pricing strategy; Brusnichka: every day low pricing (EDLP) strategy Owns online hypermarkets e-dostavka.by and gipermall.by, household appliance chain Techno Plus Customer Assortment focus: better access to import goods, best Fresh infrastructure which leads to better purchasing power promise and lower prices Private labels Euroopt: ~800 SKU, ~10% of total sales; multiple private labels managed as independent CPG1 brands Private label banners: Gusto, Oggo, Café Primero, Britton, Khmelnov etc. - some very strong on national scale Combines Private Label purchase with large Russian retailers (Lenta, Magnit) to get better costs and margins Loyalty Program: Discount card E+ allowing up to 5% discount depending on total monthly purchases Commercial Promo types: "Krasnaya Tsena" weekly catalogue with up to 50% discounts strategy Promo Games: Udacha v Pridachu – weekly lottery with opportunity to win apartment in Minsk if certain SKUs are bought; collectible "Bonsticks" toys that are received with every 15 BYN purchase; Cross-promos with Sbarro and Burger King Real estate: ~80% of outlets leased, ~20% owned Supply We are ready to open a store in any locality Transport: mixed (~200 trucks owned, the rest leased) with population above 200 people

chain ― Eurotorg website The Boston Consulting Group, Inc. All rights reserved. 3 DCs: 2 owned, 1 leased; cumulative 77K m2 DC capacity + 13.5K m2 leased Fruit&Veg capacity EBITDA (margin), 2017: 372M BYN (9.5%) Other "Brand of the year 2017" award in the category "Food and non-food products retail" Social responsibility: $4M invested in sponsor projects (including Sport support) in 2016

1. Consumer Packaged Goods; Source: Company data, store visits, press search, industry interviews, BCG analysis 118 Copyright by© 2018 Source: Store visits, visits, press search Store Source: impressions store Euroopt: 119

Company background Revenue (M BYN) Geographical presence Key facts 2017 27% Regions No. of outlets 600-650 700-750 750-800 Minsk city 16 Sales (M BYN) 750-800 350-400 500-550 200-250 Minsk region 6 Market share of MT 8% Vitebsk 6 2012 2013 2014 2015 2016 2017 No. of outlets 36 Brest 5 Selling space ('000 m2) 71 Mogilev 2 Grodno 1 CAGR ('12-'17) 27% No. of outlets No. of employees ~10,000 36 28 HM Novopolotsk Ownership Private, owner 11 16 11 1 SM Vitebsk Pavel Topuzidis 6 9 19 5 11 14 CS Maladzyechna Barysaw 2012 2013 2014 2015 2016 2017 Mogilev Minsk Bobruisk # of Grodno outlets Soligorsk Formats Outlets penetration 16 Baranavichy Hypermarkets >2,500 m2 11 11 Gomel 6 2 Brest

Supermarkets 400-2,500 m 19 2 1 The Boston Consulting Group, Inc. All rights reserved. Convenience stores <400 m2 6 0-10K 10-50K 50-200K 200-500K >500K Cities by population 1. Korona is a part of Tabak-Invest company, the largest private tobacco producer & importer in Belarus owned by Pavel Topuzidis, one of the most influential businessman in Belarus Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

121 Copyright by© 2018 releases and expert interviews. CS – Convenience stores; HM – Hypermarkets; SM – Supermarkets; MT – Modern Trade. Source: BCG market model, BCG analysis #2 Korona: strategy overview

First shopping mall opened in 2006 in Minsk, 11 shopping malls by 2015 History "Shop-in-shop" mall concept: grocery hyper, consumer electronics & appliances, apparel & footwear, entertainment & food – all under one roof As of 2015 expansion in grocery in smaller format – supermarkets & convenience stores

76% 22% 2% share of grocery sales by format, % Sales Hypermarkets Supermarkets Convenience Stores concentration 2017 42% 16% 14% 12% 8% 8% 0 share of grocery sales by region, %

Minsk City Minsk Region Brest Region Vitebsk Region Grodno Region Mogilev Region

Customer promise: a wide range of food and non-food products, high level of service, high quality products Customer Assortment focus: own production of bakery & ready-to eat categories for hypers; regular top-up assortment (dairy, meat, bread) for supers promise No private label Pricing: in line with country average for Modern Trade grocery Loyalty program (started in 2014) with up to 5% discount card based on accumulated purchases; card price is 2 BYN Commercial High-low price strategy: weekly price reductions up to 50 % for 3 day periods; coupons for the next purchase strategy Contests & games: purchase-register-win prize or money ("Korona Superprize", "Time of wonderful moments" etc.) Lifestyle magazine Korona: launched every 2 months, includes recipes, Korona ads, and thematic articles

Real estate: shopping malls owned, supermarkets leased Supply Transport mixed, mostly owned chain

DC owned The Boston Consulting Group, Inc. All rights reserved. No public statements about further expansion plans Other No. of employees per shopping mall: ~600-800 people Villages and country regions should have the same level of service ― Pavel Topuzidis, CEO Tabak-Invest

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. Source: Press search Press Source: space m 39,000 with Belarus in centers shopping largest the of one and store flagship is Korona a Castle Note: store impressions store Castle Korona: s hopping mall: hopping 2 of sellingof 125

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. #3 Almi is the 3rd largest player with a 5% market share Unifood CJSC Estimation Company background Revenue (M BYN) Geographical presence 21% Key facts 2017 Regions No. of outlets 500-550 500-550 350-400 450-500 Grodno 19 Sales (M BYN) 500-550 250-300 200-250 Brest 9 Market share of MT 5% Minsk region 9 2012 2013 2014 2015 2016 2017 No. of outlets 53 Minsk city 8 Selling space ('000 m2) 64 Gomel 4 Vitebsk 2 CAGR ('12-'17) 21% Mogilev 2 No. of employees ~4,000 No. of outlets (Belarus) 53 48 50 Ownership 5 CJSC, 34 40 4 1 HM Alexander Zaribko 25 33 32 32 28 30 SM 22 Vitebsk # of 11 14 16 CS Formats outlets 2012 2013 2014 2015 2016 2017 Vileyka Orsha 2 Barysaw Hypermarkets >2,500 m 5 Maladzyechna Minsk Lida Mogilev 2 Shchuchyn Supermarkets 400-2,500 m 32 Outlets penetration Maryina Grodno Masty Horka Bobruisk 2 14 Convenience stores <400 m 16 11 Skidzyel’ Zelva Zhlobin 10 Vawkavysk Baranavichy Slonim Svietlahorsk Banners 3 Brest Gomel Pinsk

0-10K 10-50K 50-200K 200-500K >500K Cities The Boston Consulting Group, Inc. All rights reserved. 37 16 2 by population 1. Alexander Zaribko is a serial entrepreneur in retail business - started in Russia as co-founder of Viktoriya supermarkets chain (acquired by Dixy in 2011), sold Russian part of Almi business (40 stores) in 2016 and nowadays focuses solely on Belarusian retail business. Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press- releases and expert interviews. CS – Convenience stores; HM – Hypermarkets; SM – Supermarkets; MT – Modern Trade

Mr.Zaribko is a serial entrepreneur in the retail business: co-founder of the Viktoriya supermarkets chain (acquired by Dixy in 2011); founder & owner of Almi with ~40 outlets in Russia & ~40 outlets in Belarus by 2014; owner of Zakrama convenience stores as of 2005 History In 2015: Bonds placement to accelerate Almi Belarus growth, however did not grow as planned (56 outlets target vs. 39 actuals in 2017) In 2016: Focus solely on Almi Belarus, as Almi Russia acquired by new YourPark retailer In 2017: Spar exclusive license to open both company-owned and independent retailer run stores; 1st Spar opened Minsk (Aug'17) Expansion plans: 60 Spar outlets by 2020 in top Belarusian cities

53% 43% 4% share of sales by format, % Sales Supermarkets Convenience Stores Hypermarkets concentration 2017 31% 26% 19% 13% 8% 2% share of sales by region, % Grodno Region Brest Region Minsk City Gomel Region Minsk Region Vitebsk Region Mogilev Region

Almi's Customer Promise: optimal assortment of high quality goods at fair prices => assortment focus: own production of ready-to-cook & ready-to-eat Customer bakery categories, as well as bread & bakery made in-house promise SPAR assortment focus: Fruit&Veg, "food to go", in-house fresh bakery, ~100 private label including European SPAR SKUs Zakrаma: compact convenience stores (70-120 m2; 1500 SKUs) in small cities 2-50K population => assortment focus: in-house bakery and PL

Private labels for 3 banners: "Almi", "I'm Happy", "Vasanta", "Gurt", "My Village" etc.

Commercial Loyalty program Vygoda for 3 banners: earn bonuses with every purchase and use bonuses as discounts for the next purchase strategy High-low price strategy: weekly promo digest with price reductions of 15-50% for a 3 day period

Real estate: mostly leased, some trade centers owned Supply Transport mixed, mostly owned The Boston Consulting Group, Inc. All rights reserved. chain Our main goal is to meet our customers needs and make them happy DC 15,000m2, owned ― Almi website

Other Net profit: $313K (2014); $327K (2013)

Source: Unifood bonds emission prospect; www.almi.by, www.zakrama.by; store visits, press search, industry interviews, BCG analysis 127 Copyright by© 2018 Source: Store visits Store Source: impressions store Almi : 128

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. #4 Vitalur is the 4th largest player with a 5% market share Vitalur ALC Estimation Company background Revenue (M BYN) Geographical presence

Key facts 2017 34% Regions No. of outlets 500-550 350-400 Minsk city 40 Sales (M BYN) 500-550 250-300 250-300 100-120 180-200 Minsk region 4 Market share of MT 5% Mogilev 1 2012 2013 2014 2015 2016 2017 No. of outlets 46 Grodno 1 Selling space ('000 m2) 30 CAGR ('12-'17) 34% No. of employees ~4,800 No. of outlets 42 46 HM Ownership ALC, founder 36 24 25 SM Vitebsk 1 21 25 Alexander Yatsuk 11 22 15 17 CS 9 13 16 20 Barysaw 2012 2013 2014 2015 2016 2017 Mogilev

Lida Minsk Bobruisk # of Grodno Formats outlets Outlets penetration 40 Gomel Hypermarkets >2,500 m2 1 Salihorsk Brest Supermarkets 400-2,500 m2 25 4 0 1 1 Convenience stores <400 m2 20

1. Vitalur is a part of Vitalur Ltd., founded and managed by Alexander Yatsuk; original focus of the company since its founding in 1995 was on food distribution (fish and seafood product import), then it started opening its own stores in 2005; Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

releases and expert interviews. CS – Convenience stores; HM – Hypermarkets; SM – Supermarkets; MT – Modern Trade. Source: BCG market model, BCG analysis 131 Copyright by© 2018 #4 Vitalur: strategy overview

1995: company established as a fish and seafood importer and named after the founder's 2 sons 2005: first "Vitalur" outlet opened in Minsk (store size ~200m2) History 2007-2010: "Vitalur" is one of 29 companies that has exclusive rights to import fish to Belarus 2013: opening of first larger format stores in Minsk (1,000-1,500m2) and Soligorsk (3,600m2) 2014-2017: opening stores of different format, expansion focused on Minsk only Expansion plans: open 7 new outlets in Minsk in 2018-2019 and refurbish 2 outlets – all in hypermarket format

76% 12% 12% Sales Share of grocery sales by format, % concentration Supermarkets Hypermarkets Convenience Stores 2017 2 % 77 % 18 % 3 % Share of grocery sales by region, %

Minsk City Minsk Region Grodno Region Mogilev Region Multi-format chain with stores that range all the way from 27m2 to 3,600m2 but always offering high quality fish Customer promise: a wide range of fish and seafood products, high quality, affordable prices, friendly atmosphere, and service Customer Assortment focus: frozen and fresh fish (50SKUs in every outlet), fish fillets, sea-food, meat products, own bakery and ready-to eat categories, promise products from Belarusian farms Private label: Vitalur– for food and non-food products (active development) Loyalty program: 2-7% discount depending on purchase amount Commercial High-low price strategy: biweekly price reductions up to 50% for 2 week periods strategy Partnership program: loyalty card provides a discount at more than 35 partner businesses (e.g. cafe) "Client days/weeks" (e.g. every Wednesday 7% on everything) Promo games: purchase-register-win prize or money ("Dream Kitchen", "Game of Vitalur" etc.) Real estate: hypermarket owned, supermarkets and convenience stores leased Supply Transport mixed, mostly owned: 22 refrigerator trucks and 24 insulated trucks Vitalur provides cargo transportation (regions in Belarus, Lithuania, Latvia, Estonia, Poland, Germany, Russia) chain The Boston Consulting Group, Inc. All rights reserved. DC owned (1,500m2) Company is managed by its founder and his 2 sons Vitaliy and Yuriy Other Active in social responsibility projects: e.g. "Meter of Kindness" Customers are still coming back to our shops for the best fish and bakery products (collection of goods donations for hospitals / orphanages) ― Aleksandr Yatsuk, Vitalur CEO

Company background Revenue (M BYN) Geographical presence Key facts 2017 22% Regions No. of outlets 500-550 450-500 Minsk city 54 Sales (M BYN) 450-500 250-300 350-400 160-180 200-250 Grodno 6 Market share of MT 5% Mogilev 5 2012 2013 2014 2015 2016 2017 No. of outlets 74 Gomel 4 Selling space ('000 m2) 52 Vitebsk 2 Minsk region 2 CAGR ('12-'17) 22% Brest 1 No. of employees ~4,000 No. of outlets 67 71 74 Ownership Private 48 54 HM Aleksey Loyko 38 50 53 56 30 37 SM 1 24 Vitebsk Georgy Rogazinsky CS 16 16 17 17 Orsha 2012 2013 2014 2015 2016 2017 Maladzyechna Zhodino Mogilev # of Grodno Minsk Bobruisk Formats outlets Outlets penetration 56 Slonim Hypermarkets >2,500 m2 1 Gomel Svietlahorsk 12 Brest Supermarkets 400-2,500 m2 56 Rechytsa 0 1 5 Convenience stores <400 m2 17 0-10K 10-50K 50-200K 200-500K >500K Cities The Boston Consulting Group, Inc. All rights reserved. by population 1. Rublevsky is a part of RTL (Retail Trading Logistics) Holding that encompasses Mostra Group (importer of international food products), "Tut&Tam Logistics" (provision of warehouse and distribution logistics services), and the Burger King franchise in Belarus; Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press- releases and expert interviews. CS – Convenience stores; HM – Hypermarkets; SM – Supermarkets; MT – Modern Trade. Source: BCG market model, BCG analysis 135 Copyright by© 2018 #5 Rublevsky: strategy overview

2003: first convenience store in Belarus - "Rublevsky" opened in Minsk 2008, 2011, 2013, 2015: RTL holding receives 4 tranches of credit from the International Finance Corporation to finance development on the Belarusian market History 2009: chain expands beyond Minsk, opening first store in Gomel 2010: launched discounter chain "Bazar" which operated for 3 years before being closed down 2017: new format supermarkets launched (focus on fresh, 1,000m2 area, >10K SKUs, European design, European ready foods, food tastings) Expansion plans: announces plans to open new outlets in Minsk and regions

85% 10% 5% Share of grocery sales by format, % Sales Supermarkets Convenience Stores Hypermarkets concentration 2 % 2017 69 % 9 % 9 % 6 % 3 % 2 % Share of grocery sales by region, %

Minsk City Mogilev Region Grodno Region Gomel Region Vitebsk Region Minsk Region Brest Region Customer promise: walking distance from home (outlets located in residential areas), balanced range at affordable prices, focus on service Customer Range focus: regular top-up assortment (dairy, meat, bread) for convenience outlets; Fruits&Veg, ready-to-eat, in-house fresh bakery for new format promise supermarkets; Belarusian origin products (up to 80% of the assortment in some categories) No private label Pricing high-low mixed with EDLP: froze prices on key consumer products below average market prices (granted via direct contracts with producers) Discount program (started in 2015): special price offers for card holders; 50% of buyers are estimated to hold the discount card Commercial eSkidki mobile app: digital discount coupons on certain range of products that can be used together with discount card strategy Weekly price discounts up to 50% for 6 days periods (up to 250 SKUs)

Real estate: 40% built by "Wonderland Retail" and owned, 60% leased Supply Transport owned and leased The goods are made by producers, we are the

Other Social Responsibility: everyday 3% discount during certain hours for disabled people, pensioners, and large families, and one day per week 7% discount for pensioners; hockey club sponsorship, financial support to Association for the disabled, etc. `

Company background Revenue2 (M BYN) Geographical presence Regions No. of outlets Key facts 2017 25% 450-500 Minsk city 51 Sales (M BYN) 450-500 250-300 350-400 140-160 200-250 200-250 Gomel 9 Market share of MT 5% Vitebsk 6 2012 2013 2014 2015 2016 2017 No. of outlets 76 Mogilev 5 Selling space ('000 m2) 41 Minsk region 5 CAGR ('12-'17) 25% No. of outlets No. of employees ~3,000 76 51 57 59 Ownership Private, 45 36 HM Vitebsk 34 30 30 Alma Jauntsemene1 23 26 SM 18 38 23 25 27 20 CS Baran Orsha Maladzyechna 2012 2013 2014 2015 2016 2017 Barysaw # of Mogilev Formats outlets Zhodino Minsk Asipovichy Bykhaw Hypermarkets >2,500 m2 2 Grodno Outlets penetration 55 Zhlobin Supermarkets 400-2,500 m2 36 Gomel Kalinkavichy 2 Brest Mazyr Rechytsa Convenience stores <400 m 38 9

2 5 5 The Boston Consulting Group, Inc. All rights reserved. 0-10K 10-50K 50-200K 200-500K >500K Cities by population 1.Alma Jauntsemene is a serial Lithuanian investor in retail and Horeca businesses, who also owned the Tropinka convenience store chain (rebranded as Sosedi in 2016), Frutimport food distribution company, Pizza Tempo and Vasilki restaurants in Belarus; 2. Revenue estimates do not include Zorina stores as they are not attributed to Modern Trade; Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews. CS – Convenience

2001: First supermarket Sosedi opened in Minsk 2002-2010: Expansion focused on Minsk and Minsk region, with stores having smaller formats (convenience stores or supermarkets) 2011-2012: Opening of 2 hypermarkets in Minsk; these are the only hypermarkets Sosedi has History 2013: Started expansion from Minsk region to the biggest cities of Eastern Belarusian regions 2017: Rebranding: new logo, corporate identity, category management introduction, active use of new equipment in stores and DCs 2017: Discussed possible acquisition with Belmarket, but could not agree on the price

Sales 64% 20% 16% Share of sales by format, % concentration Supermarkets Hypermarkets Convenience Stores 2017 67 % 16 % 7 % 6 % 4 % Share of grocery by region, % Minsk City Gomel Region Mogilev Region Minsk Region Vitebsk Region

Customer promise: a wide range of food and non-food products, high level of service, high quality products Customer Range: from 3K SKUs in Convenience stores (focus on regular top-up assortment: dairy, meat, bread) to 37K SKUs in Hypermarkets promise (including in-store bakery production, ready-to eat & ready-to-cook categories in Supermarkets and Hypermarkets) Private label: "Clever choice" – for food and non-food products (active development) Pricing: used to be one of the most expensive chains 5-6 years ago, now in line with country average for Modern Trade grocery

Loyalty program (started in 2014): earn bonuses with every purchase to use for the next purchase Commercial High-low price strategy: biweekly price reductions up to 50 % for 2 week periods strategy Cross-promo with other businesses: Sosedi loyalty card provide a discount at beauty salon, fitness club, etc. Co-branded credit/debit card with Alfa-Bank: get 4 times more bonuses Real estate: owned and rented Supply We are a store you can come to in your slippers

Transport mixed, mostly leased The Boston Consulting Group, Inc. All rights reserved. chain ― Alma Jauntsemene, Sosedi co-owner DC leased (5,000m2) Other Active SR position: e.g. launch of "silent cashiers" (with deaf or hard of hearing cashiers)

Source: https://sosedi.by/; store visits, press search, industry interviews, BCG analysis 139 Copyright by© 2018 Source: Store visits Store Source: impressions store Sosedi : supermarket , press search 140

Company background Revenue (M BYN) Geographical presence Key facts 2017 17% Regions No. of outlets 450-500 Minsk city 8 Sales (M BYN) 450-500 300-320 300-350 300-350 400-450 200-220 Minsk region 1 Market share of MT 5% Gomel 1 2012 2013 2014 2015 2016 2017 No. of outlets 11 Mogilev 1 Selling space ('000 m2) 38 CAGR ('12-'17) 17% Vitebsk No. of employees ~3,600 No. of outlets 2 Mogilev 12 11 11 Ownership Private, owner 10 10 10 Minsk 1 HM Grodno Oleg Baranovskiy 6 6 6 8 7 7 SM 4 4 4 4 4 4 Gomel Brest 2012 2013 2014 2015 2016 2017

# of Formats outlets Outlets penetration 9 Hypermarkets >2,500 m2 7 In March 2018, it was announced that Belvillesden IP has acquired #8 player Supermarkets 400-2,500 m2 4 13 1 0 0 Belmarket, which would make

Belvillesden #2 Modern trade player The Boston Consulting Group, Inc. All rights reserved. 0-10K 10-50K 50-200K 200-500K >500K Cities in Belarus after integration by population 1. Belvillesden IP (UK) also manages Momo shopping center in Minsk. Oleg Baranovskiy is the 58th most successful businessmen in Belarus 2017, and also owns Aquapromresource (distribution of fish and seafood products) and Belhimenergo (maintenance in the oil & gas sector) companies; 2. HM in Grodno was opened in 2015 and closed after 6 months; 3. 1 km from Minsk; Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and expert interviews.

2005: Opened first hypermarket in Minsk 2008-2010: Expanded to Mogilev and Gomel; opened hypermarket in Grodno in 2015 but it closed after 6 months, unable to attract sufficient traffic 2 History 2009-2012: Expanded to supermarkets; however, focus on stores with selling space of ~4000 m has been the most economically effective for Gippo 2018: Purchased #8 player Belmarket in 2018, which plays in smaller formats; Belmarket expected to be kept as a separate banner Expansion plans: 2 more hypermarkets with selling space of 6000-7000 m2 area to be built by the end of 2019 – in Minsk and in Vitebsk

91% 9% Share of sales by format, % Sales Hypermarkets Supermarkets concentration 2017 72% 14% 11% 3% Share of sales by region, %

Minsk City Gomel Region Mogilev Region Minsk Region

Mission to become customer's Favorite store, motto "I love it and that's it!" Customer promise Key values are quality & freshness, customer care, trust, team, and continuous improvement Wide selection of products, own bakery and own production of ready-to-eat foods Strong Private Label "Ochen!" (meaning "Very") across different categories; 10-15% cheaper than branded products

High-low price strategy: promo catalogue issued every 3 weeks, with price reductions up to 50% for 3 days Commercial Loyalty card "Asoba" offering differentiated discount depending on customer spend the previous month strategy Targeted offers for loyalty card owners based on previous purchases Google Play app for kids – collect a virtual collection of dinosaurs in Gippo stores Real estate owned (including Momo shopping mall), mostly standalone buildings that were built by Gippo Supply Transport mixed, mostly leased chain 2 DC leased (4,000 m ) The Boston Consulting Group, Inc. All rights reserved.

Other "Brand of the year 2017" award in the category "Food and non-food products retail (hypermarkets)" – silver award

Copyright © 2018 by The Boston Consulting Group, Inc. All rights reserved. #8 Belmarket is the 8th largest player with a 4% market share BelMarketCo IOOO (acquired by Belvillesden IP in 2018) Estimation

Company background Revenue (M BYN) Geographical presence Regions No. of outlets Key facts 2017 31% 400-450 Minsk city 22 Sales (M BYN) 400-450 250-300 250-300 350-400 100-120 170-200 Mogilev 18 Market share of MT 4% Minsk region 17 2012 2013 2014 2015 2016 2017 No. of outlets 70 Grodno 6 Selling space ('000 m2) 40 Brest 4 Gomel 2 CAGR ('12-'17) 31% Vitebsk 1 No. of employees ~3,500 No. of outlets 66 71 70 Ownership A1 investment company, 60 39 45 45 part of Alpha Group 33 40 44 SM Vitebsk 19 23 1 CS (Mikhail Fridman) 27 26 26 26 Maladzyechna Barysaw Zaslavl Mogilev 2012 2013 2014 2015 2016 2017 Kolodishi Lida Minsk Zhodino Senitsa # of Grodno Gomel outlets Formats Outlets penetration Baranavichy Slutsk 24 22 Rechytsa Supermarkets 400-2,500 m2 44 Brest 16 Pruzhany 2

Convenience stores <400 m 26 2 6 The Boston Consulting Group, Inc. All rights reserved. 0-10K 10-50K 50-200K 200-500K >500K Cities by population 1. Mikhail Fridman is a Russian businessman who owns 47.9% of the largest retailer in Russia – X5 Retail Group; owns Alpha Bank and Beeline (largest private bank and Top 3 Telecom in Russia) Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-

2007: The first Belmarket store opened in Bobruisk. The original plan was to create a network of 128 stores within a 5-7 year investment cycle for subsequent sale 2008: Acquired a controlling stake in two supermarket chains in Mogilev – Arma and Voskhod History 2009: Belmarket receives a $16M International Finance Corporation credit to develop a Belarusian national retailer network 2012: Belmarket reached 39 stores; management announced plans to exit the investment within 2-3 years 2018: Belmarket purchased by Belvillesden IP, which also owns #7 player Gippo; at the time of sale, the retail chain consists of 71 stores

83% 17% Share of sales by format, % Sales Supermarkets Convenience Stores concentration 2017 33% 27% 16% 10% 9% 3% 1% Share of sales by region, % Minsk City Minsk Region Mogilev Region Brest Region Grodno Region Gomel Region Vitebsk Region

Belmarket doesn't differentiate its stores by format – all of them are positioned as "Convenience supermarkets" Customer Targeted at customers who "prefer to save time and money in a comfortable setting" promise Key values are convenience, service, wide range, freshness, and reasonable prices Has bakery, ready foods section, and café at selected stores Cross-category Private Labels "Belaya Khatka" for food and "Elpi" for non-food – launched in 2015

Commercial High-low price strategy: weekend promo discount on selected items strategy Discount card very limited: 5% discount in few selected stores only; 3% discount at specific time for disabled, pensioners, multi-child families Multiple promo games – e.g. win an iPhone X every day Multiple growth models – looking to purchase land / premises, lease premises of 350-1000m2, make franchising agreement Supply Transport mixed, mostly leased chain 2 3,000m DC leased in Hatezhino (Minsk region) The Boston Consulting Group, Inc. All rights reserved.

Other Before deal with Gippo, Belmarket was Sosedi's (#4 player) M&A target, but requested price was too high

Company background Revenue (M BYN) Geographical presence 13% Key facts 2017 Regions No. of outlets 300-350 250-300 200-250 200-250 Minsk 5 Sales (M BYN) 250-300 130-150 170-200 Market share of MT 3% 2012 2013 2014 2015 2016 2017 No. of outlets 5 Selling space ('000 m2) 26 Vitebsk CAGR ('12-'17) 13% No. of employees ~1,500 No. of outlets Mogilev 5 5 5 5 5 Ownership Private, owner 4 3 Minsk Yuri Chizh1 Grodno HM

2012 2013 2014 2015 2016 2017 2018 Gomel

5 Brest # of Formats outlets Outlets penetration 2 Hypermarkets >2,500 m 5 0 0 0 0 0-10K 10-50K 50-200K 200-500K >500K

1. ProStore is a part of Triple Holdings: ProStore, "Triple" (wholesale oil products trade), SC "Triple-Agro" (agriculture), JV "AquaTriple" (beverages), football club "Dinamo" (Minsk) and catering, wellness, tourism, pharmaceutical, real estate industries; Yuri Chizh is one of the richest and most influential businessmen in Belarus, however, he has lost some influence and capital after being briefly arrested in 2016 for tax evasion; Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company press-releases and

2006: first ProStore hypermarket in Minsk (owned 50% by Triple Holdings, 50% by Russian retailer Sedmoi Kontinent) 2009-2010: two more hypermarkets open in Minsk 2011: Triple Holdings bought back 50% shares from Sedmoi Kontinent 2013: Built and opened "Arena-City" shopping mall in Minsk History 2016: six-month detention of ProStore owner Yuri Chizh led to financial difficulties: hypermarkets were sold to banks and then leased out under a financial lease 2017: 4 rounds of ProStore bond issues (total volume – 6M BYN; yields -12%, 15%, key interest rate) made it possible to handle overdue payments and normalize the relationships with the suppliers Expansion plan: plan to open 6th hypermarket in Minsk in 2018-2019 with 10,700m2 selling space; working on supermarket concept development

100% Share of grocery sales by format, % Sales Hypermarkets concentration 100 % Share of grocery sales by region, % 2017 Minsk City Customer promise: a wide range of food and non-food products, reasonable prices, high-quality service, free buses to hypermarkets, numerous Customer parking spots promise Range: 65K SKUs with own production of bakery, sushi, ready-to eat/ready-to cook categories; Fruit&Veg (salad bar opening in April '18); local Belarus products (70-80% of assortment on certain categories) Private label: ProStore (food and non-food), Pro (food), Prosto (food and non-food) ~2% of the assortment Loyalty card: 1% of amount spent is returned on the card and can be used on next purchase High-low price strategy: weekly price reductions up to 50% for a 7 days period Commercial Other discounts: "Family day" (10%), "Pensioner day" (10%), social discount (3%) strategy Partnerships: cross-promo with restaurants (e.g. Domino's Pizza, Pizza Tempo) and other retail chains (e.g. Mile) Real estate: owned Supply Transport mixed, mostly leased chain The Boston Consulting Group, Inc. All rights reserved. No distribution center – hypermarket warehouse used for storage Launched Retail academy program (6 months rotational paid program) in April '18 to Other attract talent

Company background Revenue (M BYN) Geographical presence 33% Regions No. of outlets Key facts 2017 250-300 150-170 170-200 Brest 55 Sales (M BYN) 250-300 80-100 100-120 50-70 Gomel 6 Market share of MT 3% Minsk city 4 2012 2013 2014 2015 2016 2017 No. of outlets 73 Grodno 3 Selling space ('000 m2) 25 Minsk region 2 Vitebsk 2 CAGR ('12-'17) 33% Mogilev 1 No. of employees ~2,500 No. of outlets 73 60 Polatsk Ownership Private, owner 53 25 17 Alexander Moshensky1 36 14 SM Vitebsk 19 26 39 43 48 CS 16 20 25 Barysaw 2012 2013 2014 2015 2016 2017 Mogilev Lida Minsk Slutsk # of Grodno Formats outlets Outlets penetration Baranavichy Zhlobin Bereza Ivatsevichi 2 25 Jabinka Supermarkets 400-2,500 m 25 Drogichin Luninets Gomel 12 Brest Mikashevichi 2 Kobrin Pinsk Kalinkovichi Convenience stores <400 m 48 6 Ivanovo Stolin Mozyr'

0 Malorita The Boston Consulting Group, Inc. All rights reserved. 0-10K 10-50K 50-200K 200-500K >500K Cities by population 1. Santa is a part of Santa Impex Brest, which owns some of the strongest brands in Belarus and the CIS: Santa-Bremor (fish and seafood distribution) and Savushkin Product (dairy leader) Note: Company revenues are estimated based on BCG market model built bottom-up using national statistical data, company sales data (Euromonitor), selling space & outlets (MART), company

1998: Foundation of joint Belarusian – German company "Santa Bremor" to focus on frozen fish import and selling in Brest History 2008: First "Santa Fish" - specialized fish outlet is opened 2011: Acquisition at a municipal auction of grocery chain "Produkty" in Pinsk 2012-2013: Brest-Service and Vostok outlets acquisition in Brest Expansion plans: Santa plans to reach 100 stores by end of 2018

Sales 71% 29% Share of grocery sales by format, % concentration Convenience Stores Supermarkets 2017 85 % 9 % 2 % Share of grocery sales by region, % Brest Region Gomel Region Minsk City Grodno Region Minsk Region Mogilev Region Vitebsk Region

Customer promise: fresh products, wide range of fish and seafood products, fair prices, walking distance from home Customer Range: 90% of the range are food categories, frozen and fresh fish (>50SKUs), regular top-up assortment (dairy, meat, bread) and bakery & promise ready-to eat categories No private label (however, active promotion of Savushkin Product dairy and Santa Bremor fish and seafood products)

Discount program: 5% price discount with loyalty card Commercial High-low price strategy: biweekly price reductions up to 50% for a 2-week period; strategy 5-40% discounts on ready to eat categories after 8pm Real estate: 90% of the outlets are owned, 10% leased; open to lease new stores Supply Transport mixed, mostly owned

2 Other 25% of Santa stores are <100m I believe that convenience stores nowadays are the most optimal format ― Vadim Kravtsov, Deputy Director “Santa Retail”

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