1 Kantar Retail
Who we are Experienced consultants and analysts All our people are specialists in winning in retail. Our analysts better understand retailers and shoppers than anybody. Our consultants have line-management experience in leading global companies. We are part of the Kantar Group, the insight and consulting arm of WPP, the world’s largest communications group.
Author Kantar Retail Research Team Contact: Jessica Campbell Senior Analyst [email protected]
Sources: Kantar Retail analysis and store visits; Kantar Retail ShopperScape®; NACDS; TNS data; & company material and websites
© 2014 – Kantar Retail LLC. All Rights Reserved. Disclaimer: The analyses and conclusions presented herein represent the opinions of Kantar Retail. The views expressed in this publication do not necessarily reflect the views of the companies covered by this publication. This publication is not en- dorsed, or otherwise supported, by the management of any of the companies covered herein. Copyright Notice: No part of this publication may be reproduced in any form or by any means without the express written permission ofthe copyright owner.
2 Retail Trends
Are you talking to your accounts about these? Do you have a strategy? • Retailers are investing in store growth and format changes, specifically looking at store segmentation and localization to address more specific needs • Growth in digital & multi-channel: eCommerce, mobile apps, websites, and connecting the physical store with the online experience • Focus on merchandising tactics: creating and having rel- evant assortments, leveraging lighting and signage, and creating an easy, relevant shopping experience • Loyalty programs are increasingly important, as retailers seek to understand the shopper and personalize the offers/ rewards available • Health and wellness is a core strategy with an important role throughout the store and online. Retailers are investing in becoming health and wellness destinations, providing more services and looking to spread the message across categories. • The Affordable Care Act stands to draw in new shoppers to pharmacy retailers creating a huge opportunity to capture them in the front-end as well
Source: NACDS
3 Having a Successful Conference
Schedule Tips Saturday Must Attend Events • Start early soliciting appointments—now is not too early • Develop a convincing proposition for each company as to • “Meet the Retailer” Program why they will benefit from a meeting with you • Strategic Exchange Appointments • Establish an individually specific agenda for each meeting • Inaugural Attendees Orientation • Make sure you have done your homework on the retailer. • Opening Celebration Check out their website, download their app, and learn as Sunday Must Attend Events much about them as you can. • Business Program I • Develop a “one pager” summarizing the important points • Strategic Exchange Appointments about your company, your key products, your point of Monday Must Attend Events difference, and any performance metrics that set you apart • NACDS Chain Members & PAC Breakfast from your competition (Chain Members, PAC Ticket Holders, and • Consider room-dropping an advance “thank you” for a Invited Guests Only) planned meeting to remind the person of the appointment • Strategic Exchange Appointments or an after-meeting “thank you” to recap what was • The NACDS Luncheon accomplished Tuesday Must Attend Events • Take notes and follow up after the meeting—this may be • Business Program II your most critical success factor • Strategic Exchange Appointments • Ask for a mobile phone number from the companies you • Board of Directors Reception have appointments with, should there be schedule changes • Board of Directors Reception Dinner, or location changes Awards & Entertainment Attire Attire for all NACDS events is Resort Casual, except for The NACDS Luncheon and the Board of Directors Reception, Din- ner, Awards, and Entertainment. Attire for The NACDS Lunch- eon on Monday is Dressy Daywear for ladies and Business for men. Attire for the Board of Directors Reception and Dinner on Tuesday is Cocktail for ladies and Business for men.
Source: NACDS
4 All Participating Retailers
• Ahold USA • Meijer, Inc. • Alliance Boots • Navarro Discount Pharmacies • The Bartell Drug Company • New Albertsons, Inc. • BJ’s Wholesale Club, Inc. • 99 Cents Only Stores • CARE Pharmacies Cooperative, Inc. • OMNICARE, INC. • Chain Drug Consortium, LLC • CostPharmaca Integrative Pharmacy • Costco Wholesale dba Costco Pharmacies • Rexall Pharma Plus • CSPN, Community Specialty Pharmacy Network • Rite Aid Corporation • CVS Caremark Corporation • Roundy’s Supermarkets, Inc. • Delhaize America, Inc. • Safeway Inc. • Diplomat Specialty Pharmacy • Sam’s Club • Dollar General Corp. • Sav-On Drugs • drugstore.com • Schnuck Markets, Inc. • Family Dollar Stores • Sears Holdings Corporation • Farmacia Guadalajara S.A. de C.V. • 7-Eleven, Inc. • Farmacorp S.A. • Shoppers Drug Mart Corporation • Farmatodo, C.A. • SUPERVALU INC. • Fruth Pharmacy . • Target • Good Neighbor Pharmacy • Thriftway/Zitomer Drug • H-E-B • Thrifty White Pharmacy • Haggen Food & Pharmacy • Topco Associates LLC • Health Mart • Ulta Beauty • Health House Pharmacies • USA Drug • Hi-School Pharmacy Services LLC • Wakefern Food Corp./ShopRite • Hy-Vee Inc. • Wal-Mart Stores, Inc. • Implozia Pharmacy Network • Walgreen Co. • Kerr Drug, Inc. • Walgreens Boots Alliance Development GmbH • Kinney Drugs, Inc. • Wegmans Food Markets, Inc. • Lewis Drugs, Inc. • London Drugs Limited • Medicine Shoppe International, Inc.
Source: NACDS
5 Table of Contents
Drug Alliance Boots Meijer Bartell Drugs Safeway CVS Schnucks Drugstore.com Supervalu Farmacia Guadalajara Wakefern Kinney Drugs Wegmans London Drugs Medicine Shoppe Discount Pharmaca 99¢ Only Rexall Dollar General Rite Aid Family Dollar Sav-On Drugs Shoppers Drug Mart Mass Thrifty White Pharmacy Kmart Ulta Target Walgreens Walmart Walgreens Boots Alliance Development GmbH
Club Grocery BJ’s Ahold USA Costco Albertsons Sam’s Club Hy-Vee
6 7 Alliance Boots
Key Initiatives Key Players • Increasing health care services • Stefano Pessina, Executive Chairman • Developing omni-channel offer • Ornella Barra, Chief Executive, Wholesale & Brands • Launching innovative new products • George Fairweather, Group Finance Director • Creating a global platform together with Walgreens • Simon Roberts, Managing Director Health & Beauty UK • Increasing sales of Boots product brands across & Republic of Ireland the world • Ken Murphy, Managing Director Health & Beauty International & Brands • Greg Wasson, CEO, Walgreens
• Increased negotiating power as a result of merger • Price perception (premium brand) • No.1 H&B retailer in the UK aided by: • Over-promotional – complicated system • Pharmacy-led business Weaknesses • Jaded marketing • Multi-format footprint • Store design – cramped • Strong brand perception & PL • Weak online business • Loyalty card (Advantage card) Strengths s w
Threats • International expansion o t • Best practice sharing from Walgreens in • Increasing competition from grocers within managing supply chain, bigger format beauty space stores, and pharmacy cost optimization Opportunities • Prescription reimbursement rate pressure • Food business • Loyalty card challenged by launch of Super drug, Tesco, • Health services H&B range • Private label opportunities through Walgreens
8 Alliance Boots
Sales and Store Forecasts
13E - '18E Sales in millions of US Dollar 2008 2013E 2018E 08 - '13E CAGR CAGR Drugstore with prescriptions 404.01 394.67 433.19 -0.5% 1.9% TOTAL Ireland 404.01 394.67 433.19 -0.5% 1.9% Drugstore with prescriptions 42.62 47.11 52.33 2.0% 2.1% TOTAL Italy 42.62 47.11 52.33 2.0% 2.1% Drugstore with prescriptions 303.93 259.57 290.15 -3.1% 2.3% TOTAL Netherlands 303.93 259.57 290.15 -3.1% 2.3% Drugstore with prescriptions 626.4 698.04 736.18 2.2% 1.1% TOTAL Norway 626.4 698.04 736.18 2.2% 1.1% Drugstore with prescriptions 105.63 169.12 228.9 9.9% 6.2% TOTAL Thailand 105.63 169.12 228.9 9.9% 6.2% Drugstore no prescriptions 656.11 212.54 224.85 -20.2% 1.1% Drugstore with prescriptions 9,565.11 7,018.92 7,585.15 -6.0% 1.6% Drugstore with prescriptions 936.27 2,236.15 2,427.06 19.0% 1.7% UK Drugstore with prescriptions 10,501.38 9,255.06 10,012.21 -2.5% 1.6% Online Retail 262.2 450.63 684.59 11.4% 8.7% Other Category Specialist 335.44 531.96 629.01 9.7% 3.4% TOTAL United Kingdom 11,755.13 10,450.20 11,550.67 -2.3% 2.0%
13E - '18E # of Stores 2008 2013E 2018E 08 - '13E CAGR CAGR Drugstore with prescriptions 51 74 79 7.7% 1.3% TOTAL Ireland 51 74 79 7.7% 1.3% Drugstore with prescriptions 20 20 20 0.0% 0.0% TOTAL Italy 20 20 20 0.0% 0.0% Drugstore with prescriptions 77 73 74 -1.1% 0.3% TOTAL Netherlands 77 73 74 -1.1% 0.3% Drugstore with prescriptions 149 158 165 1.2% 0.9% TOTAL Norway 149 158 165 1.2% 0.9% Drugstore with prescriptions 150 231 269 9.0% 3.1% TOTAL Thailand 150 231 269 9.0% 3.1% Drugstore no prescriptions 216 84 86 -17.2% 0.5% Drugstore with prescriptions 1,924 1,414 1,435 -6.0% 0.3% Drugstore with prescriptions 451 996 1,016 17.2% 0.4% UK Drugstore with prescriptions 2,375 2,410 2,451 0.3% 0.3% Other Category Specialist 148 631 660 33.6% 0.9% TOTAL United Kingdom 2,739 3,125 3,197 2.7% 0.5%
9 Alliance Boots
Merchandising & Marketing Highlights
Boots No7 is being rolled out across Walgreens U.S. locations
10 10 Bartell Drugs
Key Initiatives Key Players • New, customer-friendly website • George D. Bartell, Chairman and CEO • Convenient in-store health care awareness programs and • Jean Bartell Barber, Vice Chairman and CFO services • State of the art in-store and online digital services • Commitment to community • Environmental leadership
Bartell Drugs At-A-Glance Date Founded: 1890 Number of stores/Operating area: 58 stores located in Washington (King, Snohomish and Pierce counties) Ownership: Privately owned and operated by the Bartell family of Seattle, Washington. George D. Bartell, Chairman and CEO; Jean Bartell Barber, Vice Chairman and CFO Employees: 1,700 employee associates, all located in the Puget Sound region Notable: The company has only had three presidents, all members of the Bartell family, spanning three centuries of operation Website: Bartell Drugs (www.bartelldrugs.com) introduced a completely redesigned website in January 2012. The easy-to-navigate site offers health & wellness resources, express prescription refills, digital photo orders, current sale and coupon offers, social media sharing and community involvement, and store locator assistance.
1111 Bartell Drugs
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR Bartell Bartell Drugs 386,000,000 440,974,221 565,195,665 2.7% 5.1%
08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR Bartell Bartell Drugs 56 61 71 1.7% 3.1%
Merchandising & Marketing Highlights
CareClinic partnership offers services for shoppers in-store
12 CVS
Key Initiatives Key Players • Pharmacy growth: patient care excellence, expanding • Larry Merlo, President, CEO services, and catering to health needs throughout the store • Helena Foulkes, EVP, President CVS/pharmacy • Growing store base: expanding footprint • Judy Sansone, SVP, Merchandising • Differentiating the front store: Personalization through • Brian Tilzer, SVP, Chief Digital Officer ExtraCare, differentiated store brands, store clustering • Rob Price, Chief Marketing Officer
• ExtraCare Loyalty program • Variance in store base • Open to new ideas & experimentation • Inconsistent execution • Format innovation • Silo’d organization • Strong healthcare portfolio: Caremark, Weaknesses • Less convenient real estate than WAG MinuteClinic • Growth in digital services & offerings • Strong brand reputation Strengths s w o t Threats • Increased traffic from health care reform • Competition from drug retailers AND other channels • Increased personalization with ExtraCare with pharmacies • Store clustering Opportunities • Mandatory mail-order prescriptions • MinuteClinic & services expansion • Competition in loyalty: Balance Rewards & Wellness+ • Brazilian market with Onofre acquisition • Growth of small box formats, changing the fill-in trip & increasing need for differentiation
13 CVS
Sales and Store Forecasts
08 - '13E 13E - '18E Sales in billions of US Dollar 2008 2013E 2018E CAGR CAGR
TOTAL Brazil - 0.83 1.37 10.5% TOTAL Puerto Rico - 0.22 0.5 17.8% USA Drugstore with prescriptions 48.96 65.35 86.5 5.9% 5.8% USA Online Retail 0.19 0.4 0.94 16.1% 18.6% TOTAL USA 49.15 65.75 87.44 6.0% 5.9%
08 - '13E 13E - '18E # of Stores 2008 2013E 2018E CAGR CAGR
TOTAL Brazil - 44 49 2.2% TOTAL Puerto Rico - 19 35 13.0% TOTAL USA 6,537 7,606 8,307 3.1% 1.8%
14 CVS
Shopper Data
All Primary Monthly CVS Percent of U.S. Households Shopped CVS: 2013 Shopper Profile Household Shoppers Shoppers 32% Age 18–24 5% 5%
Top 5 Retailers Outside Drug Channel Cross- 25–34 17% 17% Shopped by CVS Shoppers (H1 2013) 35–44 18% 19% 45–54 20% 21% Walmart/Walmart Supercenter 63%* 55–64 19% 19% Amazon.com 59% 65+ 21% 20%
Target/SuperTarget 50% Household Income <$25K 25% 19% The Home Depot 40% $25K–$49.9K 25% 22%
Kohl’s 37% $50K–$74.9K 18% 18%
*Read as: 63% of CVS shoppers also shop at Walmart/Walmart $75K–$99.9K 11% 13% Supercenter $100K+ 21% 28% CVS Shopper Cross-Shopping in Presence of Own Children <18 in Household Drug Channel (2013) Yes 25% 25%
Walgreens 41%* No 75% 75%
Rite Aid 17% Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level) *Read as: 41% of CVS shoppers also shop at Walgreens
15 CVS
Merchandising & Marketing Highlights
Ship & Save auto replenishment offers an alternative myWeekly Ad offers a personalized circular based to Amazon’s Subscribe & Save on purchase data
CVS’s is clustering stores, and updating interiors to feature expanded beauty/vitamin, better on-shelf education, and cater to solutions & specific medical need states
Emphasis on solutions that span categories and manufacturers
16 Drugstore.com
Sales and Store Forecasts
08 - '13E 13E - '18E Format Banner 2008 2013E 2018E CAGR CAGR Online Retail drugstore.com 366.6 624.8 1,104.2 11.3% 12.1%
Merchandising & Marketing Highlights
Boots No7 has a large presence on drugstore.com
Beauty.com connects with shoppers with how-to’s, sneak peeks, and behind-the-scenes access to high-end beauty and fashion events that highlight products
17 Farmacia Guadalajara
At-A-Glance Key Players • Mexican drug retailer • Javier Arroyo Chavez, CEO • Super pharmacy model: one-stop shop that combines • Jaime Garay Nuno, CFO pharmacy and convenience store with Rx and health • Veronica Arroyo Navarro, Director of Brand Development services, HBA, home goods, food, etc. • Griselda Reynaga Balbaneda, Director of Promotions • Rapid expansion of stores throughout Mexico • Francisco Arroyo Jiminez, Director of Operations • Distribution center opened in 2009 offering better control Managers Coordination over inventory • Eng. Carlos Ordonez Pindter, Director of Purchase • Contract out distribution and photo services to • Julieta Mora Chavez, Director of Advertising smaller retailers • Wide variety of formats ranging from 200 square feet to 1,000 square feet
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR
Guadalajara Farmacias Guadalajara 1,505,132,757 2,247,108,349 3,166,381,324 8.3% 7.1%
08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR
Guadalajara Farmacias Guadalajara 651 1,142 1,522 11.9% 5.9%
18 Farmacia Guadalajara
Merchandising & Marketing Highlights
Online assortment crosses health and beauty, home goods, home improvement, toys, and home health products
Online services include medication information, health/condition education, and online doctor chat
19 Kinney Drugs
At-A-Glance Key Players • Located in Northern NY & VT • Craig Painter, CEO & Chairman of the Board • Value card loyalty savings program • Stephen P. McCoy, EVP, CFO • Prescription savings plan • Owen W. Halloran, EVP, Pharmacy Procurement • Rx delivery including front-end items • Bridget-Ann Hart, President, Kinney Healthcare Services • In-store immunizations • David C. McClure, VP, Real Estate • ProAct pharmacy benefit management company • James Spencer, President, Kinney Drug Stores • And mail-order pharmacy • Rick Cognetti, JR., VP Marketing & Merchandising • HealthDirect pharmacy services • David Warner, President, ProAct
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR Kinney Kinney 694,034,707 868,152,501 1,076,086,867 4.6% 4.4% 08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR Kinney Kinney 93 99 113 1.3% 2.7%
20 Kinney Drugs
Merchandising & Marketing Highlights
Private label brand
Exclusive discounts, offers, and savings on everyday items. Track your spending, get 10% off Premier Value products.
21 London Drugs
Key Players • Brandt Louie, Chairman of the Board • Wynne Powell, CEO (to retire in Feb. 2014) • Laird Miller, CFO • Clint Mahlman, COO
Sales and Store Forecasts
Store Retail Sales in billions of CAD Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
Canada Drugstore with prescriptions London Drugs $2,102 $2,470 $2,801 3.3% 2.6%
Total Retail Sales $2,102 $2,470 $2,801 3.3% 2.6%
# of Stores
’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
Canada Drugstore with prescriptions London Drugs 69 78 82 2.5% 1.0%
Total Stores 69 78 82 2.5% 1.0%
22 London Drugs
Merchandising & Marketing Highlights
23 Medicine Shoppe
At-A-Glance • Acquired by Cardinal Health in 1995 • Acquired Medicap Pharmacies, Inc. in 2003 • Health screenings, medication therapy management • Specialized Care Centers are Medicine Shoppe pharmacies that concentrate on a particular health focus (e.g., diabetes) • Assuramed: medical supply distribution for home delivery and wholesale chronic conditions
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR Cardinal Heath (MSI) assuramed - 515,000,000 641,710,237 4.5%
Cardinal Heath (MSI) Medicap 436,191,708 364,775,646 357,483,759 -3.5% -0.4%
Cardinal Heath (MSI) Medicine Shoppe 1,492,883,114 1,140,839,604 1,024,888,443 -5.2% -2.1% 08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR Cardinal Heath (MSI) assuramed - 0 0
Cardinal Heath (MSI) Medicap 190 152 144 -4.4% -1.1%
Cardinal Heath (MSI) Medicine Shoppe 610 448 391 -6.0% -2.7%
24 Pharmaca
At-A-Glance Key Players • Stores in California, Colorado, New Mexico, Oregon, • Mark Panzer, President, CEO Washington, with strong local connections • Michael Kruteck, CFO • Offers prescription services • Laura Coblentz, VP, Marketing & Innovation • Staff of professionals licensed in fields like nutrition, • Stu Gratz, VP, Pharmacy Operations skin care, herbal studies, etc. • Allison Janda, VP, Retail Store Operations • Offer professional grade supplements & OTC • David Janowicz, VP, Merchandising • Emphasis on natural beauty • Don Summerfield, VP Integrative Medicince • Dedicated to sustainability & eco-conscious brands
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR Pharmaca 84,348,174 108,121,878 135,767,295 5.1% 4.7% 08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR Pharmaca 23 24 27 0.9% 2.4%
25 Pharmaca
Merchandising & Marketing Highlights
• Feel Better Rewards loyalty program • Services include one-on-one consultations
26 Rexall
Key Initiatives Key Players • Patient care services and building pharmacist’s reach • Daryl A. Katz, Chairman and Chief Executive of Katz Group • Elevating private label offer via redesigns, new labels, • Frank Scorpiniti, Chief Executive Officer at Katz Group and promotions Canada/Rexall • Wellness advice and solutions across categories, aided by • Sharon Driscoll, Chief Financial Officer “feel good approved” messaging • Mary Kelly, EVP, Chief Merchandising Officer • Online presence, 1:1 shopper connection through its new MyRexall portal • Remodeling stores, enhancing beauty department, and wellness appeal
• Varied store conditions • Experience in the market • Over-indexing on elderly shoppers • Mail-order pharmacy – Rexall Direct • Over-reliance on the pharmacy first proposition • Katz’s ProPharm Weaknesses • Under-development of higher margin and trip • Trusted community-oriented provider driving categories (beauty, food) • Rexall private label • Lacking loyalty card, underdeveloped customer data program Strengths s w • Price perception
Threats • Expand private label o t • Further expand services, role of the pharmacist • Regulation – margin pressure • Develop beauty / Opportunities • Increased competition from outside of channel cosmetics presence (e.g., Walmart, Loblaw, Target) • eCommerce • Loss of relevance with younger shoppers • Advance customer insights • Serving aging Boomers • Serve convenience food trips
27 Rexall
Rexall Sales and Store Forecasts
Store Retail Sales in billions of CAD Dollar ’08 - ’13E '13E - '18E Country Banner Format 2008 2013E 2018E CAGR CAGR Drugstore with Canada Drug Trading $4,936 - - n/a n/a prescriptions Drugstore with Canada Medicine Shoppe $136 - - n/a n/a prescriptions Drugstore with Canada Pharmx Rexall $1,352 $1,862 $2,454 6.6% 5.7% prescriptions Katz Group $6,423 $1,862 $2,454 -21.9% 5.7% Total Retail Sales
# of Stores
’08 - ’13E '13E - '18E Country Banner Format 2008 2013E 2018E CAGR CAGR
Drugstore with Canada Drug Trading 1,560 - - n/a n/a prescriptions Drugstore with Canada Medicine Shoppe 142 - - n/a n/a prescriptions Drugstore with Canada Pharmx Rexall 430 550 645 5.0% 3.2% prescriptions Katz Group 2,132 550 645 -23.7% 3.2% Total Stores
28 Rexall
Merchandising & Marketing Highlights
29 Rite Aid
At-A-Glance Key Players • Wellness+: Including wellness65+ • John Standley, President, CEO • Wellness store remodels: merchandising innovations, • Ken Martindale, Senior EVP & COO wellness ambassadors, Genuine Wellbeing format • Frank Vitrano, Senior EVP, CFO & CAO • Store growth: Opportunity for relocations and new store • Tony Montini, EVP, Merchandising growth in 2+ years • Bob Thompson, EVP, Store Operations • Pharmacy services: Expanding role of pharmacist, • David Kelly, SVP, Store Development immunization services, ACA education & chronic • John Learish, SVP, Marketing care management • Wilson Lester, Jr. SVP, Supply Chain • Jon Olson, SVP, Merchandising
• #3 drug chain, leading East Coast presence • Less convenient real estate • Seasoned management team • Lacks #1 or #2 share in many markets • Relationship with customers Weaknesses • Sales productivity • Collaborative vendor relationships • Inconsistent execution • Strategic partnership with GNC • Weak credit profile • Wellness store format & Wellness+ loyalty program Strengths s w o t Threats
• Continued store reformatting • Competition from drug retailers AND other channels • More targeted marketing & shopper Opportunities with pharmacies segmentation through Wellness+ • Mandatory mail-order prescriptions & pressure on • Mobile and eCommerce expansion reimbursement rates • Expansion of health services in-store • Competition in loyalty – ExtraCare & Balance Rewards • Low Rx volumes • Failure to grow store base • Failure to meet shopper expectations
30 Rite Aid
Sales and Store Forecasts
13E - 08 - '13E Sales in billions of US Dollar 2008 2013E 2018E '18E CAGR CAGR USA Drugstore with prescriptions 26.19 25 24.89 -0.93% -0.09% USA Online Retail 0.1 0.12 0.17 3.71% 7.21% TOTAL USA 26.29 25.12 25.07 -0.91% -0.04%
13E - '08 - '18E # of Stores 2008 2013E 2018E '18E CAGR CAGR TOTAL USA 4,901 4,573 4,506 -1.38% -0.29%
31 Rite Aid
Shopper Data
All Primary Monthly Percent of U.S. Households Shopped Rite Aid: 2013 Shopper Profile Household Rite Aid Shoppers Shoppers 13% Age 18–24 5% 5%
Top 5 Retailers Outside Drug Channel Cross- 25–34 17% 15% Shopped by Rite Aid Shoppers (H1 2013) 35–44 18% 16% 45–54 20% 23% Walmart/Walmart Supercenter 63%* 55–64 19% 21% Amazon.com 59% 65+ 21% 21%
Target/SuperTarget 45% Household Income <$25K 25% 24% The Home Depot 39% $25K–$49.9K 25% 24%
Dollar Tree 37% $50K–$74.9K 18% 18% $75K–$99.9K 11% *Read as: 63% of Rite Aid shoppers also shop at 13% Walmart/Walmart Supercenter $100K+ 21% 22% Rite Aid Shopper Cross-Shopping in Presence of Own Children <18 in Household Drug Channel (2013) Yes 25% 23%
CVS/pharmacy 41%* No 75% 77%
Walgreens 37% Note: Bolding/highlighting indicates a significant difference *Read as: 41% of Rite Aid shoppers also shop at CVS between column percentages (95% confidence level)
32 Rite Aid
Merchandising & Marketing Highlights
• Wellness+ specialized programs & updated website offer a more personalized experience • Merchandising trends include on-shelf education, solution sets, highlighting conditions in the front-end, and collaborating with vendors for unique offers • Wellness store format offers better sightlines, cleaner experience, brighter lighting, and simpler wayfinding
33 Sav-On Drugs
At-A-Glance • Southeast Michigan • Pharmacy including immunizations and Rx delivery • Rewards club program offers instant savings, special promotions, and discounts in-store
Sales and Store Forecasts
08 - '13E 13E - '18E Sales 2008 2013E 2018E CAGR CAGR Save On 540,839,964 571,991,964 632,078,271 1.1% 2.0% 08 - '13E 13E - '18E Number of Stores 2008 2013E 2018E CAGR CAGR Save On 559 592 632 1.2% 1.3%
34 Shoppers Drug Mart
Key Initiatives Key Players • Beauty expansion – BeautyBoutique • Domenic Pilla, CEO & President • Convergence of health, beauty, and wellness appeals • Bradley Lukow, EVP, CFO • Private label development • Michael Motz, EVP, Chief Merchandising Officer • Services – expanded role of the pharmacist • Dr. Dorian Lo, EVP, President, Pharmacy & Health Care • Serving seniors • Promotion optimization via loyalty card, 1:1 marketing • Convenience grocery offering • eCommerce and digital marketing
• Strong brand, loyal shopper base • Value perception on consumables • Broad store presence, convenience trip • Supply chain and backroom problems on high velocity SKUs, out-of-stocks • Private label strength Weaknesses • Optimum loyalty card program • High mix of sales from pharmacy • Authority in high-end beauty, wellness • Inconsistent store execution • Merchandising, in-store aesthetics • Convenience food proposition Strengths s w o t Threats
• Expand services, the role of the • Reliance on pharmacist operators in franchise model pharmacist Opportunities may limit flexibility • Integration with Loblaw: private label, • Rising competition (Walmart, Target) grocery proposition, promotional synergies • Government regulations • Further diversify formats • Margin pressure • Expand Beauty Boutiques • Over-indexing on private label vs. national brands at the • eCommerce development, expense of the basket, trip mobile shopping • Economic uncertainty, cautious spending • Urbanization, serving diverse populations • Management/strategy challenges arising from integration with Loblaw
35 Shoppers Drug Mart
Sales and Store Forecasts
Store Retail Sales in billions of CAD Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR Canada Health and Beauty Specialist Murale $15 $49 $55 25.7% 2.3%
Canada Drugstore with prescriptions Paragon Pharmacy - $73 $87 n/a 3.6%
Canada Drugstore with prescriptions Pharmaprix $1,247 $1,476 $1,808 3.4% 4.1%
Canada Drugstore with prescriptions Shoppers Drug Mart $7,418 $8,653 $9,894 3.1% 2.7% Shoppers Home Canada Drugstore no prescriptions $511 $495 $530 -0.6% 1.4% Health Care Shoppers Simply Canada Drugstore with prescriptions $232 $458 $655 14.5% 7.4% Pharmacy Total Shoppers Drug Mart Sales $9,423 $11,204 $13,029 3.5% 3.1%
Total Stores ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR Canada Health and Beauty Specialist Murale 2 6 6 24.6% 0.0%
Canada Drugstore with prescriptions Paragon Pharmacy - 19 19 n/a 0.0%
Canada Drugstore with prescriptions Pharmaprix 161 185 206 2.8% 2.2%
Canada Drugstore with prescriptions Shoppers Drug Mart 958 1,075 1,123 2.3% 0.9% Shoppers Home Canada Drugstore no prescriptions 66 62 62 -1.2% 0.0% Health Care Shoppers Simply Canada Drugstore with prescriptions 30 59 78 14.5% 5.7% Pharmacy Total Shoppers Drug Mart Stores 1,217 1,406 1,494 2.9% 1.2%
36 Shoppers Drug Mart
TNS Shopper Data Merchandising & Marketing Highlights
Shoppers Drug Mart: Regularly Shop for Grocery, Health & Beauty Care
Total 30%
Male 25% Gender Female 34%
18-34 37%
35-54 28% Age
55+ 26%
Less Than $35,000 33%
$35,000 - $79,999 26% Income
$80,000+ 33%
*Note: To interpret the rows, read as: of the male respondents, 25% stated that they “regularly shop” at Shoppers Drug Mart for grocery *Note:and/or Tohealth interpret & beauty the care rows, items. read as: of the male respond- ents, 25% stated that they “regularly shop” at Shoppers Drug Mart for grocery and/or health & beauty care items. Source: TNS April 2013 Data
37 Thrifty White Pharmacy
At-A-Glance Key Players • Stores in North Dakota, Minnesota, Montana, Iowa, South • Mark Panzer, President, CEO Dakota, Wisconsin • Michael Kruteck, CFO • Employee-owned pharmacy • Laura Coblentz, VP, Marketing & Innovation • Offer professional pharmacy services; quality products; and • Stu Gratz, VP, Pharmacy Operations unique, innovative practices • Allison Janda, VP, Retail Store Operations • David Janowicz, VP, Merchandising • Don Summerfield, VP Integrative Medicine
Pharmacy Services
• Med Synch synchronizes prescription refill service • Health Pack Rx organizes all scripts into individual packets labeled with all medications, date, and time to be taken • Ready Refill auto-refill service • Medication therapy management • Photo printing • Shopper rewards card • Prescription savings club • Telepharmacy store: allows a trained, certified, and experienced pharmacy technician to fill and dispense prescription medications after being verified by a pharmacist over an audio-video link. This arrangement allows a community to continue pharmacy services even though the local drugstore has closed or the community is too small to support a traditional drug store
38 Thrifty White Pharmacy
Sales and Store Forecasts
08 - '13E 13E - '18E Sales Banner 2008 2013E 2018E CAGR CAGR
Thrifty White Stores Thrifty White 314,676,887 399,788,603 508,662,102 4.9% 4.9%
08 - '13E 13E - '18E Number of Stores Banner 2008 2013E 2018E CAGR CAGR
Thrifty White Stores Thrifty White 69 87 98 4.7% 2.4%
Merchandising & Marketing Highlights
Online services include a health library to educate and help users manage conditions
39 Ulta
Key Initiatives Key Players • Accelerating new store expansion • Mary Dillon, Chief Executive Officer • Adding new brands, products, and services • Scott Settersten, Chief Financial Officer • Creating unique experience • David Kimbell, Chief Marketing Officer • Enhancing loyalty program • Janet Taake, Chief Merchandising Officer • Creating an active and loyal shopper base • Derek Hornsby, SVP, Supply Chain • Enhancing & expanding digital business • Alex Lelli, SVP, Growth and Development • Improving operating margins • Cynthia Payne, SVP, Store Operations • Creating strong vendor relationships across • Jeffrey Severts, SVP, Marketing product categories
Sales and Store Forecasts
13E - '18E Sales Banner 2008 2013E 2018E 08 - '13E CAGR CAGR
Ulta Ulta 1,081,829,321 2,552,136,517 5,490,809,593 18.7% 16.6%
Ulta ulta.com 2,816,679 13,649,950 155,449,720 37.1% 62.7% 13E - '18E Number of Stores Banner 2008 2013E 2018E 08 - '13E CAGR CAGR Ulta Ulta 311 675 1,200 16.8% 12.2%
40 Ulta
Merchandising & Marketing Highlights • Eye-catching displays and trial kiosks/consultations with staff • Range of products span both mass and prestige beauty • In-store salon offers haircuts, color, nail and skin care services • Hands-on product trial • On-shelf education & navigation
41 Walgreens
Key Initiatives Key Players • Delivering the Well Experience: Elevating the drugstore expe- • Greg Wasson, President, CEO rience and connecting with shoppers in and outside the store. • Mark Wagner, President, Community Management • Transforming Community Pharmacy: Bringing new services & • Sona Chawla, President, eCommerce offers to meet health care needs of shoppers. • Alex Gourlay, President Customer Experience & Daily Living • Creating and Unprecedented Global Platform: Working with • Bryan Pugh, Corporate VP, U.S. Merchandising Program Alliance Boots to expand the Walgreens brand internationally. Development & Execution • Moe Alkemade, DVP, GMM Seasonal, General Merchandise
• Most convenient real estate in the US • Limited price or competitive differentiation • Dominant market share & iconic brand Weaknesses • SKU intensive, low inventory turns for front-end as- • Operational excellence sortment • Industry leading sales & asset productivity • Inconsistent execution • Trusted pharmacy • Less developed loyalty program & slow adoption by shoppers • Omni-channel presence Strengths s w o t Threats
• Increased traffic from health care reform & • Competition from drug retailers AND other channels smokers from CVS Opportunities with pharmacies • Increased personalization & improved insights • Mandatory mail-order prescriptions & pressure on with Balance Rewards reimbursement rates • Store clustering & new formats • Competition in loyalty – ExtraCare & Wellness+ • Acquisition of Alliance Boots and partnership • Growth of small box formats, changing the fill-in trip & with AmerisourceBergen increasing need for differentiation • Expansion into health care with clinics & services
42 Walgreens
Sales and Store Forecasts
08 - '13E 13E - '18E Sales in millions of US Dollar 2008 2013E 2018E CAGR CAGR TOTAL Puerto Rico 1,459.57 2,079.50 2,963.15 7.3% 7.3% USA Drugstore with prescriptions 54,373.03 67,549.20 86,533.99 4.4% 5.1% USA Online Retail 220.5 1,092.14 2,258.45 37.7% 15.6% TOTAL USA 54,593.53 68,641.34 88,792.44 4.7% 5.3%
08 - '13E 13E - '18E # of Stores 2008 2013E 2018E CAGR CAGR TOTAL Puerto Rico 95 118 127 4.4% 1.5% TOTAL USA 6,348 7,998 8,919 4.7% 2.2%
43 Walgreens
Shopper Data
All Primary Monthly Percent of U.S. Households Shopped Walgreens: 2013 Shopper Profile Household Walgreens Shoppers Shoppers 35% Age 18–24 5% 4%
Top 5 Retailers Outside Drug Channel Cross- 25–34 17% 16% Shopped by Walgreens Shoppers (2013) 35–44 18% 17% 45–54 20% 20% Walmart/Walmart Supercenter 72%* 55–64 19% 19% Amazon.com 57% 65+ 21% 24%
Target/SuperTarget 49% Household Income <$25K 25% 24% Dollar Tree 39% $25K–$49.9K 25% 26%
The Home Depot 39% $50K–$74.9K 18% 18%
*Read as: 72% of Walgreens shoppers also $75K–$99.9K 11% 12% shop at Walmart/Walmart Supercenter $100K+ 21% 20% Walgreens Shopper Cross-Shopping in Presence of Own Children <18 in Household Drug Channel (2013) Yes 25% 25% CVS/pharmacy 38%* No 75% 75%
Rite Aid 14% Note: Bolding/highlighting indicates a significant difference *Read as: 38% of Walgreens shoppers also shop at CVS between column percentages (95% confidence level)
44 Walgreens
Merchandising & Marketing Highlights
• Steps with Balance Rewards combines H&W positioning with loyalty rewards & digital engagement • In-store merchandising focuses on cross vendor solutions, regimens, and tying health needs to the front-end • Well Experience and flagship store formats offer a cleaner in-store experience, interaction with pharmacists/professionals, and bring in Boots No7 brand • Balance Rewards now has 80million+ registered members, and the retailer is now shifting focus to rewarding the shopper & helping them understand the program fully – ads like this “translate” points for shoppers • Alex Gourlay from Alliance Boots now heads Walgreens’ daily living team
45 Walgreens Boots Alliance Development GmbH
At-A-Glance Key Players • Swiss joint venture between Walgreens & Alliance Boots • Jeffrey Berkowitz, President of WBAD, SVP of Pharmaceutical • Generic sourcing Development & Market Access for Walgreens • Agreement with AmerisourceBergen for sourcing generic medications for all Walgreens locations “Leads the company’s relations with branded & generic Rx manufacturers worldwide, and oversees Walgreens North American-based purchasing and branded pharmaceutical relationships.”
46 47 Ahold USA
At-A-Glance Key Players • Increased value message (from both a price and value beyond • Dick Boer, Ahold CEO price perspective) • Jeff Carr, Ahold CFO • Becoming a trusted source for health & wellness through new • James McCann, Ahold USA COO initiatives aimed at consumer wellness and diet • Dan Sullivan, Ahold USA EVP, CFO • Continue to bridge the gap between online and store by en- • Don Sussman, President – Stop & Shop NY Metro hancing its digital capabilities and digital elements in-store • Joe Kelley, President – Stop & Shop New England • Continued expansion of its Peapod delivery and pickup points • Gordon Reid, President – Giant-Landover • Rick Herring, President – Giant-Carlisle • Andrew Parkinson, President – Peapod
• Strong brand recognition • Poor performance and market share in • Strong real estate in valuable markets Weaknesses peripheral markets • Use of in-store technology • Lack of clear differentiation • Peapod source of high growth/key learning • Confused pricing strategies that risk shopper loyalty Strengths s w o t Threats
• Continued expansion of Peapod • Growing presence of low-price competitors • Partnership with EYC to build out shopper Opportunities (i.e., Walmart) insights program • Traditional and new channel competition • Center store innovation programs (limited-assortment, warehouse clubs, Wegmans) • Clarity of pricing and value strategies • Supplier resistance to high cost to serve • Increasingly competitive prices
48 Ahold USA
Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Convenience Giant to Go 7.22 11 11 15 23 27 30.2% Online Grocery Peapod 566 615 669 722 773 826 7.9% Supermarket Giant Food 5,699.00 5,813.00 6,067.00 6,222.00 6,395.00 6,542.00 2.8% Supermarket Giant MD 5,473.00 5,561.00 5,607.00 5,724.00 5,816.00 5,914.00 1.6% Supermarket Martins Foodstores (VA) 997 978 967 960 965 980 -0.3% Supermarket Stop & Shop 13,854.00 14,272.60 14,644.60 14,985.60 15,385.80 15,805.80 2.7% TOTAL Supermarket 26,023.00 26,624.60 27,285.60 27,891.60 28,561.80 29,241.80 2.4% TOTAL USA 26,596.22 27,250.60 27,965.60 28,628.60 29,357.80 30,094.80 2.5%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Convenience Giant to Go 2 3 3 4 6 7 28.5% Online Grocery Peapod 0 0 0 0 0 0 - Supermarket Giant Food 150 152 153 154 156 157 0.9% Supermarket Giant MD 169 168 166 167 167 168 -0.1% Supermarket Martins Foodstores (VA) 48 47 46 45 45 45 -1.3% Supermarket Stop & Shop 399 401 403 404 407 409 0.5% TOTAL Supermarket 766 768 768 770 775 779 0.3% TOTAL USA 768 771 771 774 781 786 0.5%
49 Ahold USA
Shopper Data
All Primary Monthly 2013 Shopper Percent of U.S. Households Shopped Ahold1: Household Ahold1 Profile Shoppers Shoppers 8% Age 18–24 5% 4%
Top 5 Retailers Outside Supermarket Channel 25–34 17% 17% Cross-Shopped by Ahold1 Shoppers (2013) 35–44 18% 18% CVS/pharmacy 59%* 45–54 20% 23% Amazon.com 57% 55–64 19% 19% Walmart/Walmart Supercenter 52% 65+ 21% 19% Target/SuperTarget 46% Household Income The Home Depot 38% <$25K 25% 14%
*Read as: 59% of Ahold1 shoppers also shop at CVS $25K–$49.9K 25% 16% 1 Ahold Shopper Cross-Shopping in $50K–$74.9K 18% 17% Supermarket Channel (2013) $75K–$99.9K 11% 16% Trader Joe’s 21%* $100K+ 21% 37% ShopRite 19% Presence of Own Children <18 in Household Whole Foods 14% Yes 25% 25% Supervalu2 13% No 75% 75% *Read as: 21% of Ahold1 shoppers also shop at ShopRite Note: Bolding/highlighting indicates a significant difference 1Includes Giant Foods and Stop & Shop banners between column percentages (95% confidence level) 2Includes Acme, Albertsons, Jewel, and Shaw’s banners
50 Ahold USA
Merchandising & Marketing Highlights
• Continuing to run as a high-low pricing retailer, Ahold heavily advertises short-term sales • Keying in on health & wellness • Pushing and focusing on local initiatives to stay regionally relevant. • Revamping and continuing growth of private label portfolio
51 Albertsons
Key Initiatives Key Players • Integration of former Supervalu banners • Robert Miller, Chief Executive Officer • Shedding underproductive assets • Bob Butler, Chief Operating Officer • Providing positive ROI for shareholders • Dennis Bassler, President, Northwest Division • Reasserting value proposition for shoppers • Wayne Denningham, President, Southern California Division • Process improvements and selected business investments to • Shane Dorcheus, President, Southwest Division drive operating expense reduction • Susan Morris, President, Intermountain Division • Mike Withers, President, Southern Division
• Clear strategic direction • Ambiguous value proposition for shoppers • Share leader in core markets Weaknesses • Newly acquired assets may adversely impact • Private equity roots gives it access to capital corporate profitability Strengths s w o t Threats
• Acquisition opportunities grow as • Growth of unconventional formats such as dollar stores, divestiture activity increases throughout Opportunities small box, and online the industry • Retailers with a clearly communicated and • Reestablish price leadership amongst differentiated brand newly acquired banners • Invest in new markets
52 Albertsons
Sales and Store Forecasts
Sales in millions of US Dollar Country Format Banner 2013E 2018E '13E - '18E CAGR USA Supermarket Acme 2,262.17 1,736.05 -5.2% USA Supermarket Albertsons LLC 9,795.35 7,969.75 -4.0% USA Supermarket Jewel 3,904.78 3,918.54 0.1% USA Supermarket Lucky (Southern California) 82.88 75.68 -1.8% USA Supermarket Shaws 3,235.47 2,933.53 -1.9% USA Supermarket Star Market 121.94 70.9 -10.3% USA TOTAL Supermarket 19,402.59 16,704.44 -3.0% TOTAL USA 19,402.59 16,704.44 -3.0%
# of Stores Country Format Banner 2013E 2018E '13E - '18E CAGR USA Supermarket Acme 94 77 -3.9% USA Supermarket Albertsons LLC 586 524 -2.2% USA Supermarket Jewel 172 168 -0.5% USA Supermarket Lucky (Southern California) 4 4 0.0% USA Supermarket Shaws 135 126 -1.4% USA Supermarket Star Market 6 5 -3.6% USA TOTAL Supermarket 997 904 -1.9% TOTAL USA 997 904 -1.9%
53 Hy-Vee
Key Initiatives Key Players • Developing stores in new markets and renovating stores • Randall Edeker, CEO in existing locations • Mike Skokan, CFO • Focusing on offering premium shopping experience • Tom Watson, EVP, East Division • Private label will play a larger role in marketing its • Jon Wendel, EVP, West Division value proposition • Ron Taylor, EVP, No. Division • Continue to grow its digital footprint by enhancing in-store • Jay Marshall, Pres, Marketing & Merch. technologies as well as grow its social media presence • Increase its health focus by participating in the “Healthiest State Initiative,” while providing services and programs that promote healthy living/healthy lifestyles
• Growing market position • Difficult to engage as a total chain due to store • Strong customer service independence – sacrifices some of its scale advantage • Highly engaged store managers, motivated Weaknesses • Thin population density in some markets creates by ownership shares limits to growth and efficiency • Extremely responsive locally with decision rights at individual store level Strengths s w o t Threats • Growth through acquisitions and • Operates in some crowded market areas store expansions • Increasing competition from new retailers and formats • Increasing eCommerce activities Opportunities (e.g., WMT Neighborhood Market, Dollar General • Expansion of experimental food Market, Family Dollar) service/restaurant offer • The conventional supermarket format is becoming • Enhancing its small store/convenience offer outdated as retailers move to smaller stores with limited assortments
54 Hy-Vee
Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Drugstore with prescriptions Hy Vee 236.86 243.59 251.94 264.13 274.15 291.55 4.2% Supermarket Hy Vee 7,247.40 7,470.54 7,710.66 7,982.79 8,257.25 8,532.12 3.3% 7,484.26 7,714.13 7,962.61 8,246.92 8,531.41 8,823.67 3.3%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Drugstore with prescriptions Hy Vee 21 21 21 22 22 23 1.8% Supermarket Hy Vee 215 216 218 220 222 224 0.8% 236 237 239 242 244 247 0.9%
55 Hy-Vee
Shopper Data
H1 2013 Shopper All Primary Monthly Percent of U.S. Households Shopped Hy-Vee: Household Hy-Vee Profile 2% Shoppers Shoppers Age 18–24 5% 3% Top 5 Retailers Outside Supermarket Channel 25–34 17% Cross-Shopped by Hy-Vee Shoppers (H1 2013) 18% Walmart/Walmart Supercenter 81%* 35–44 18% 16% Amazon.com 52% 45–54 21% 24% Target/SuperTarget 49% 55–64 18% 17% Walgreens 49% 65+ 21% 22% Kohl’s 41% Household Income <$25K 25% 19% *Read as: 81% of Hy-Vee shoppers also shop at Walmart/WMSC $25K–$49.9K 25% 24% Hy-Vee Shopper Cross-Shopping in $50K–$74.9K 18% 23% Supermarket Channel (H1 2013) $75K–$99.9K 11% ALDI 29% 12% Trader Joe’s 11% $100K+ 20% 22% Whole Foods 8% Presence of Own Children <18 in Household Save-A-Lot 5% Yes 26% 25% No 74% 75% *Read as: 29% of Hy-Vee shoppers also shop at ALDI Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level)
19 56 Hy-Vee
Merchandising & Marketing Highlights
• Revamping the store experience: • Table-service restaurant • Expanded prepared-foods offering • Digital initiatives leveraged throughout merchandising • New focus on “fresh” • Cooking technique stations throughout • Supporting major promotional events through compelling in-store merchandising displays • Emphasis on meal solutions (leverage Hy-Vee chefs)
57 Meijer
Key Initiatives Key Players • Relentless focus on value by pushing mperks, its three-tiered • Hank Meijer, CEO pricing strategy (price drop, etc.) and private label • Mark Murray, Co-CEO onto shoppers • Jim Walsh, CFO • Leveraging digital and online tools that allow Meijer to offer • JK Symancky, President targeted deals and create a personalized shopping experience • Janet Emerson, EVP, Retail Ops • Continue to develop strategies that help promote Meijer’s com- mitment to offering healthy living solutions for its shoppers • Grow its footprint in existing and new markets
• Privately owned longer-term vision compared to • Private ownership constrains capital availability publicly owned retailers • Smaller company wields less leverage in global • Strong brand recognition and loyal customer base sourcing than larger competitors like Walmart • Strong track record of successful food operations Weaknesses • Meijer has a defined EDLP strategy, but has • Price leadership and strong value perception multiple messages which may confuse shoppers. Strengths s w o t Threats • Experimentation with destination departments • Competitive environment: Walmart, Costco, Kroger • Further improve price perception in the market • Shopability: Not as convenient to navigate • Shopper data mining Opportunities • Losing share of wallet due to changing economic condi- • Continue development of eCommerce tions and trends away from stock-up trips and other digital capabilities • Known as a promotional supercenter, which conflicts with EDLP strategy
58 Meijer
Sales and Store Forecasts
Sales in millions of US Dollar 08 - '13E 13E - '83E Country Format Banner 2008 2013E 2018E CAGR CAGR USA Online Grocery meijer.com 9.4 66.77 189.05 48.01% 23.14% USA Supercenter Meijer 14,217.60 16,595.40 19,556.90 3.14% 3.34% TOTAL USA 14,227.00 16,662.17 19,745.95 3.21% 3.45%
# of Stores 08 - '13E 13E - '83E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Supercenter Meijer 188 203 211 1.55% 0.78% TOTAL USA 188 203 211 1.55% 0.78%
59 Meijer
Shopper Data
2013 Shopper All Primary Monthly Percent of U.S. Households Shopped Meijer: Household Meijer Profile Shoppers Shoppers 5% Age 18–24 5% 4% Top 5 Retailers Outside Mass Channel Cross- 25–34 17% 16% Shopped by Meijer Shoppers (2013) 35–44 18% 19% Amazon 52%* 45–54 20% 19% Kroger¹ 51% 55–64 19% 21% Kohl’s 47% 65+ 21% 21% Walgreens 42% Household Income JCPenney 33% <$25K 25% 21% *Read as: 52% of Meijer shoppers also shop at Amazon $25K–$49.9K 25% 25% Meijer Shopper Cross-Shopping in $50K–$74.9K 18% 21% Mass Channel (2013) $75K–$99.9K 11% 13% Walmart/Walmart Supercenter 61%* $100K+ 21% 19% Target/SuperTarget 44% Presence of Own Children <18 in Household Kmart 24% Yes 25% 25% No 75% 75% *Read as: 61% of Meijer shoppers also shop at Walmart/Walmart Supercenter Note: Bolding/highlighting indicates a significant difference 1Includes Dillons, Fry’s, King Soopers, Kroger, QFC, Ralphs, and Smith’s between column percentages (95% confidence level) banners
60 Meijer
Merchandising & Marketing Highlights
• Continuing to evolve its mperks program to offer personalized and/or targeted savings • Customized merchandising displays • Leveraging solution sets (either in food and non-food categories) • Execution of its price drop campaign to maintain a clear value perception • Creating compelling departments with store-within-a-store concepts • Continuing to market its eCommerce site to shoppers: • To expand store merchandise beyond the four walls • To communicate the convenience of online ordering, site-to-store, or delivery
61 Safeway
Key Initiatives Key Players • Revamping the Lifestyle format • Robert Edwards, CEO • Building loyalty through just for U • Peter Bocian, EVP, CFO • Digital development • Kelly Griffith, EVP, Retail Ops • Focus on alternative businesses for growth and added value • Diane Dietz, EVP, CMO for shoppers • Laree Renda, EVP, President of Safeway • Private label expansion & development • Creating a targeted store strategy (clustering stores) that aligns to local market demographics
• Significant market share in major markets • Profitability issues • Real estate (locations) and high percentage of Weaknesses • Margins remain high stores are Lifestyle format • Declines in traffic counts and basket size • Strong Corporate Brands program • No clear strategic response to current • Financially minded sales challenges • Blackhawk Network • Pricing Image Strengths s w o t Threats
• Continued development of Optura • Competition from Walmart, Costco, Target, Kroger, • Price optimization Opportunities and regional operators • Expanding online/digital platforms and • Competitors’ shopper insight programs growing online sales • Questionable long-term commitment to value- • Expand health initiatives conscious shoppers
62 Safeway
Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery safeway.com 707.9 843.82 1,008.36 1,211.04 1,470.20 1,792.18 20.4% Other Category Specialist Great Alaska Tobacco 18.21 18.39 18.54 18.69 18.73 18.91 0.8% Other Category Specialist Oaken Keg 8.04 8.1 8.15 8.21 8.24 8.3 0.7% TOTAL Category Specialist 26.25 26.49 26.69 26.9 26.96 27.22 0.7% Supermarket Carrs 381.23 383.51 385.43 388.51 389.29 394.35 0.7% Supermarket Dominicks 961.64 ------Supermarket Eagle 176.37 177.43 179.21 181 181.36 182.81 0.7% Supermarket Pak n Save 227.8 230.08 232.38 234.24 234.71 238.46 0.9% Supermarket Pavilions 701.76 676.67 657.5 648.77 638.67 633.91 -2.0% Supermarket Randalls Food Markets 1,208.25 1,192.05 1,168.66 1,159.20 1,161.51 1,163.84 -0.7% Supermarket Safeway 24,982.55 25,934.81 25,910.57 25,973.94 25,978.38 25,978.36 0.8% Supermarket The Market 28.96 29.54 30.1 30.7 31.35 32.04 2.0% Supermarket Tom Thumb 1,735.35 1,670.15 1,683.60 1,683.54 1,673.30 1,674.84 -0.7% Supermarket Vons 5,516.41 5,493.32 5,507.46 5,523.21 5,514.61 5,528.54 0.0% TOTAL Supermarket 35,920.33 35,787.57 35,754.91 35,823.11 35,803.18 35,827.15 -0.1% TOTAL USA 36,654.48 36,657.88 36,789.96 37,061.06 37,300.35 37,646.55 0.5%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery safeway.com 0 0 0 0 0 0 - Other Category Specialist Great Alaska Tobacco 7 7 7 7 7 7 0.0% Other Category Specialist Oaken Keg 1 1 1 1 1 1 0.0% TOTAL Category Specialist 8 8 8 8 8 8 0.0% Supermarket Carrs 13 13 13 13 13 13 0.0% Supermarket Dominicks 0 ------Supermarket Eagle 7 7 7 7 7 7 0.0% Supermarket Pak n Save 11 11 11 11 11 11 0.0% Supermarket Pavilions 29 27 27 27 26 26 -2.2% Supermarket Randalls Food Markets 43 41 41 41 41 41 -0.9% Supermarket Safeway 910 907 904 902 900 898 -0.3% Supermarket The Market 2 2 2 2 2 2 0.0% Supermarket Tom Thumb 63 62 62 62 61 61 -0.6% Supermarket Vons 242 240 239 239 238 238 -0.3% TOTAL Supermarket 1,320 1,310 1,306 1,304 1,299 1,297 -0.4% TOTAL USA 1,328 1,318 1,314 1,312 1,307 1,305 -0.3%
63 Safeway
Shopper Data
All Primary Monthly 2013 Shopper 1 Percent of U.S. Households Shopped Safeway1: Household Safeway Profile Shoppers Shoppers 13% Age 18–24 5% 4% Top 5 Retailers Outside Supermarket Channel 25–34 17% 15% Cross-Shopped by Safeway1 Shoppers (2013) 35–44 18% 17% Amazon 58%* 45–54 20% 21% Target/SuperTarget 52% 55–64 19% 19% Walmart/Walmart Supercenter 52% 65+ 21% 23% Costco 42% Household Income The Home Depot 41% <$25K 25% 18% *Read as: 58% of Safeway1 shoppers also shop at Amazon.com $25K–$49.9K 25% 21% Safeway1 Shopper Cross-Shopping in Supermarket Channel (2013) $50K–$74.9K 18% 18% Trader Joe’s 31%* $75K–$99.9K 11% 13% Kroger2 27% $100K+ 21% 30% Supervalu3 25% Presence of Own Children <18 in Household Whole Foods 17% Yes 25% 24% No 75% 76% *Read as: 31% of Safeway1 shoppers also shop at Trader Joe’s 1Includes Dominick’s, Randalls, Safeway, Tom Thumb , and Vons banners Note: Bolding/highlighting indicates a significant difference 2 Includes Dillons, Fry’s, King Soopers, Kroger, QFC, Ralphs, and Smith’s banners between column percentages (95% confidence level) 3Includes Acme, Albertsons, Jewel, and Shaw’s banners
64 Safeway
Merchandising & Marketing Highlights
• Lifestyle enhancements that include center store redesign, better adjacencies, H&W concept, better communicative, and navigational signage • H&W concept that extends the health message across the store • Pushing just for U savings and program onto shoppers to better its price perception • Focus on solution selling (to offer a more convenient and simple shopping trip to shoppers) • Expanded its private label portfolio across categories • New focus on capturing the Hispanic shopper
65 Schnucks
Key Initiatives Key Players • Expand H&W services (pharmacy services, in store health • Todd Schnuck, CEO programs, etc.) • Anthony Hucker, EVP, Chief Strategy Officer (will become COO • Continues to develop and enhance online and digital capabili- in March 2014) ties • Dave Bell, CFO • A strong culinary/cooking program currently still limited to select locations is likely to expand • Willingness to experiment with store formats
• Locally sensitive and responsive • Much of its market area is economically weak or at • Stronger information sets than many retailers of Weaknesses best low-growth similar scale • Brand is still insufficiently differentiated from other • Expansion outside its original core market area supermarkets has modestly broadened its base • Limited access to capital means moderate growth • Strong brand identity Strengths s w o t Threats • Continued geographic expansion • Highly exposed to Walmart and other competitors • Development of alternative formats, especially with more aggressive pricing small/convenience or a price-discount offer Opportunities • Growth of competitive small format stores that can • Expansion of its strong culinary program to steal trips and shopper attention additional locations
66 Schnucks
Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery schnucks.com 68.25 78.48 90.1 103.17 117.92 134.43 14.5% Supermarket Hilander 159.85 189.54 199.08 224.36 241.08 253.12 9.6% Supermarket Logli 269.79 271.95 274.67 277.69 281.02 283.83 1.0% Supermarket Schnucks 2,018.95 2,018.22 2,021.22 2,049.52 2,080.26 2,113.55 0.9% TOTAL Supermarket 2,448.59 2,479.71 2,494.97 2,551.57 2,602.37 2,650.50 1.6% TOTAL USA 2,516.84 2,558.19 2,585.07 2,654.74 2,720.29 2,784.93 2.0%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery schnucks.com 0 0 0 0 0 0 - Supermarket Hilander 6 7 7 8 8 8 5.90% Supermarket Logli 5 5 5 5 5 5 0.00% Supermarket Schnucks 89 88 87 87 87 87 -0.50% TOTAL Supermarket 100 100 99 100 100 100 0.00% TOTAL USA 100 100 99 100 100 100 0.00%
67 Schnucks
Merchandising & Marketing Highlights
• Leveraging digital and social media platforms for new, target marketing strategies • Establishing its local presence by partnering with local business and sponsoring local events • Continued focus on fresh
68 Supervalu
Key Initiatives Key Players • Independent businesses: fostering dialogue between • Sam Duncan, President & CEO Supervalu and its independent customers via a newly formed • Randy Burdick, Executive Vice President & national retail advisory group; drive private label growth Chief Information Officer • Save-A-Lot: increasing communication with franchisees; • Ritchie Casteel, President & CEO Save-A-Lot reducing the overall cost structure enabling stores to be more • Janel Haugarth, Executive Vice President; President, competitive; steering the assortment back to a more private Independent Business and Supply Chain Services label dominant mix • Bruce Besanko, Executive Vice President, CFO • Retail: moving to a decentralized organization that puts deci- • Mark Van Buskirk, Executive Vice President, sion rights in the hands of the banners; improving pricing on Merchandising and Marketing top 50 items in each market; enhancing the appeal of fresh • Rob Woseth, Executive Vice President, categories in order to leverage the perimeter as a trip driver Chief Strategy Officer
• Decentralized operations put decision making in • Structure of divestiture transaction and board of directors makes it liable to Albertsons if the hands of the banners Weaknesses • Ability to implement store level efforts that are performance struggles targeted an relevant to local market • Unproven management team • Reduced operating and expense structure • Decentralization creates complexity for suppliers • Rededication to core businesses • Less attention from suppliers Strengths s w o t Threats • Well-developed private label portfolio • Competitors with a clear and differentiated • Save-A-Lot banner well aligned to price value proposition sensitive shopper Opportunities • Greater competitive pressure from outside the • New management brings new perspective supermarket channel (e.g., drug, Amazon) • Reduced debt should enable more • Continued economic uncertainty price investment • Continued M&A activity within the channel • Greater freedom to reinvest in store creates volatility operations and shopper experience
69 Supervalu
Sales and Store Forecasts
Sales in billions of US Dollar Country Format Banner 2013E 2018E '13E - '18E CAGR USA Hard Discount Ltd Asst Grcy Save A Lot 6.69 7.24 1.6% USA Supermarket Cub Foods 1.49 1.61 1.6% USA Supermarket Farm Fresh 0.87 0.93 1.3% USA Supermarket Hornbachers 0.11 0.13 3.4% USA Supermarket Shop n Save 0.9 1.02 2.5% USA Supermarket Shoppers Food & Pharmacy 0.87 0.9 0.7% USA TOTAL Supermarket 4.25 4.58 1.5% USA Independent Businesses Independent Businesses 8.18 8.44 0.6% TOTAL USA 19.11 20.27 1.2%
# of Stores Country Format Banner 2013E 2018E '13E - '18E CAGR USA Hard Discount Ltd Asst Grcy Save A Lot 1,341 1,396 0.8% USA Supermarket Cub Foods 69 77 2.2% USA Supermarket Farm Fresh 43 47 1.8% USA Supermarket Hornbachers 6 6 0.0% USA Supermarket Shop n Save 42 46 1.8% USA Supermarket Shoppers Food & Pharmacy 56 60 1.4% USA TOTAL Supermarket 216 236 1.8%
70 Supervalu
Shopper Data
All Primary Monthly 2013 Shopper 1 Percent of U.S. Households Shopped Supervalu1: Household Supervalu Profile Shoppers Shoppers 11% Age 18–24 5% 4% Top 5 Retailers Outside Supermarket Channel 25–34 17% 16% Cross-Shopped by Supervalu1 Shoppers (2013) 35–44 18% 18% Walmart/Walmart Supercenter 62%* 45–54 20% Amazon.com 56% 20% 55–64 19% 19% Target/SuperTarget 52% 65+ 21% 23% Walgreens 48% Household Income The Home Depot 41% *Read as: 62% of Supervalu1 shoppers also shop at Walmart/Walmart Supercenter <$25K 25% 18% $25K–$49.9K 25% 24% Supervalu1 Shopper Cross-Shopping in Supermarket Channel (2013) $50K–$74.9K 18% 19% Safeway2 33%* $75K–$99.9K 11% 13% Kroger3 25% $100K+ 21% 27% Trader Joe’s 24% Presence of Own Children <18 in Household Whole Foods 14% Yes 25% 25% *Read as: 33% of Supervalu1 shoppers also shop at a Safeway banner No 75% 75% 1Includes Acme, Albertsons, Jewel, and Shaw’s banners 2Includes Dominick’s, Randalls, Safeway, Tom Thumb , and Vons banners Note: Bolding/highlighting indicates a significant difference 3Includes Dillons, Fry’s, King Soopers, Kroger, QFC, Ralphs, and Smith’s between column percentages (95% confidence level) banners
71 Supervalu
Focus on Operations & Execution
• Implementing uniform operating standards identified as key enabler of improved in-store experience: • Standardized labor hours • Enhance perishables merchandising • Clean store policy • Improve private label program • Buy on quality, not price
2013 Capex spend: USD150 million for maintenance, ops, and execution. Little allocated for new stores.
Retail Food Priorities
1. Decentralized decision making and planning 2. Establish store- and market-level relevance for shoppers 3. New promotional approach: fewer but bigger promotions on relevant items to drive traffic - No longer a trade fund extraction vehicle 4. Improved in-store operating standards
72 Save-A-Lot Save-A-Lot Priorities
1. Lowering internal margin targets by 50 basis points -Grow sales in key categories 2. Align merchandising to shopper pay cycle -Especially in meat department 3. Spotlight on fresh departments -Merchandising, quality control, handling 4. Improved center store merchandising -Smarter adjacencies, eliminate aisle stacks, more space for faster-turning items
73 Wakefern Key Initiatives Key Players • Continue to utilize online space for promotional and • Joseph Colalillo, Chairman, CEO marketing activities • Douglas Wille, CFO • Evolving its current technology and online grocery/ • Neil Duffy, President, PriceRite eCommerce model • David Figurelli, President, ShopRite • Focus on price perception and value beyond price • Jeff Reagan, SVP , Marketing • Cheryl Williams, VP, Digital Commerce & Innovation
• Ownership model allows for a high level of • Ownership model means in-store conditions autonomy at the store can vary widely by location • Very price competitive Weaknesses • Limited opportunities for partnering • Stores have low operating expenses • Promotional programs tend to be basic • High velocity • Execution can be an issue • Strong brand clarity Strengths s w o t Threats
• Glut of commercial real estate makes for • Shopper base exposed to economic downturn favorable expansion environment Opportunities • Competition from multiple channels • Tailoring assortment to local shopper base • Operates in a crowded market • Wholesale business expansion • Other value oriented, ethnic oriented retailers • Price Rite expansion
74 Wakefern Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery shoprite.com 72.32 94.74 122.21 152.76 186.37 225.51 26% Soft Discount Ltd Asst Grcy PriceRite 1,314.48 1,377.70 1,433.47 1,505.97 1,553.67 1,618.14 4% Supermarket ShopRite 12,713.20 13,967.68 14,621.08 15,195.68 15,796.84 16,325.16 5% TOTAL USA 14,100.00 15,440.12 16,176.76 16,854.41 17,536.88 18,168.81 5%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR Online Grocery shoprite.com 0 0 0 0 0 0 - Soft Discount Ltd Asst Grcy PriceRite 52 53 54 56 57 59 2.6% Supermarket ShopRite 262 267 271 274 278 281 1.4% TOTAL USA 314 320 325 330 335 340 1.6%
75 Wakefern Shopper Data
H1 2013 Shopper All Primary Monthly Household ShopRite Percent of U.S. Households Shopped ShopRite: Profile 5% Shoppers Shoppers Age 18–24 5% 3% Top 5 Retailers Outside Supermarket Channel 25–34 17% 12% Cross-Shopped by ShopRite Shoppers (H1 2013) Amazon.com 54%* 35–44 18% 19% Walmart/Walmart Supercenter 54% 45–54 21% 24% CVS/pharmacy 51% 55–64 18% 21% The Home Depot 44% 65+ 21% 21% Target/SuperTarget 42% Household Income <$25K 25% 13% *Read as: 54% of ShopRite shoppers also shop at Amazon.com $25K–$49.9K 25% 17% ShopRite Shopper Cross-Shopping in $50K–$74.9K 18% 18% Supermarket Channel (H1 2013) $75K–$99.9K 11% 15% Ahold1 35%* $100K+ 20% 36% Trader Joe’s 23% Presence of Own Children <18 in Household ALDI 15% Yes 26% 27% Whole Foods 14% No 74% 73% *Read as: 35% of ShopRite shoppers also shop at an Ahold Note: Bolding/highlighting indicates a significant difference banner between column percentages (95% confidence level) 1Includes Giant Foods and Stop & Shop banners
76 Wakefern Merchandising & Marketing Highlights
• Emphasis on its rewards programs and rewards perks to communicate value beyond price • Pushing online, conversation-oriented initiative to move shoppers toward more digital and online behaviors • Continue developing new online and digital initiatives • Emphasis on low price through both merchandising techniques (no-thrills) and marketing messages (no membership fees) • Using online to expand its product offering beyond what its stores carry
77 Wegmans Key Initiatives • Execution of “experiential” retailing Key Players • Continued emphasis on offering shoppers stable prices • Danny Wegman, CEO through its “Consistent Low Prices” marketing tactic that • Colleen Wegman, President clearly communicates EDLP message to shoppers • Emphasis on prepared meals and club packs to further communicate value message
• Strong local brand and loyal shoppers • Stores not efficient to shop-huge footprint, • People: empowered, well-trained staff hard to get in and out quickly • Excellent customer service • High prices on prepared gourmet foods limit • EDLP pricing strategy Weaknesses shopper penetration • High volume per store: sales per square foot 50% • Marginalized center store categories higher than industry average Strengths s w o t Threats • Expansion into new markets • Number of SKUs • Roll out new ideas and test results to Opportunities • Price competition from Walmart other stores • High-end prepared food competition • Good social media strategies are not matched from Whole Foods by an eCommerce capability or an in-store • Macroeconomic uncertainty: EDLP relies digital strategy on price stability
78 Wegmans Sales and Store Forecasts
Sales in millions of US Dollar '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR
Supermarket Wegmans 7,084.03 7,650.98 8,220.14 8,792.75 9,381.67 9,979.66 7.1%
# of Stores '13E - '18E Format Banner 2013E 2014E 2015E 2016E 2017E 2018E CAGR
Supermarket Wegmans 83 86 89 91 94 96 3.0%
79 Wegmans Shopper Data
All Primary Monthly H1 2013 Shopper Percent of U.S. Households Shopped Wegmans: Household Wegmans Profile Shoppers Shoppers 3% Age 18–24 5% 3%
Top 5 Retailers Outside Supermarket Channel 25–34 17% 17% Cross-Shopped by Wegmans Shoppers (H1 2013) 35–44 18% 18% Walmart/Walmart Supercenter 63%* 45–54 21% 17% Target/SuperTarget 56% 55–64 18% 23% Amazon.com 54% 65+ 21% 22% Lowe’s 43% Household Income The Home Depot 43% <$25K 25% 11% *Read as: 63% of Wegmans shoppers also shop at Walmart/Walmart Supercenter $25K–$49.9K 25% 18%
Wegmans Shopper Cross-Shopping in $50K–$74.9K 18% 22% Supermarket Channel (H1 2013) $75K–$99.9K 11% 17% ALDI 27%* $100K+ 20% 31% Ahold1 27% Presence of Own Children <18 in Household Trader Joe’s 20% Yes 26% 25% ShopRite 16% No 74% 75%
*Read as: 27% of Wegmans shoppers also shop at ALDI Note: Bolding/highlighting indicates a significant difference 1Includes Giant Foods and Stop & Shop banners between column percentages (95% confidence level)
80 Wegmans Merchandising & Marketing Highlights
• Running its “Consistent Low Pricing” marketing message to push its EDLP price position. Long-term pricing usually executed on seasonal items. • Offering a heightened shopping experience through compelling and unique displays and store format • High levels of customer and in-store services • Pushing “family packs” as a defense against competition, but also used as a value play • Leverage pharmacy as a trip driver (recently launched nationwide Rx delivery and online)
81 82 82 99¢ Only Key Initiatives Key Players • Establish differentiated position via specialty items • Stephanie Gonthier, President, CEO • Heighten brand excitement through events and promotions • Frank Schools, SVP, CFO • Ongoing expansion in Texas and Southern California • Michael Fung, CAO • Serve as primary destination for price sensitive shoppers • Michael Kvitko, EVP, CMO • Offer treasure hunt for shoppers seeking general merchandise items
• Straightforward business model • Adherence to 99¢ price point limits assortment • Strong brand equity in home markets and promotional opportunities • Sharp pricing appeals to increasingly • Tight in store labor budgets makes execution price-sensitive shoppers Weaknesses challenging • Ability to leverage events and local media • In-store conditions vary significantly by location to generate buzz • Shoppers unfamiliar with many of the lesser known brands carried in store Strengths s w o t Threats
• Expand digital capabilities to foster • Expansion of Dollar General, Family Dollar into interactive connections with shoppers Opportunities Southern California • Expansion into new markets • Other retailers accelerating investments in digital • Increasing visibility of national brands • Competitors with a more relevant, higher • Leveraging website as platform for quality assortment ancillary services • Improving financial situation may enable shoppers to cross shop other retailers
83 99¢ Only Sales and Store Forecasts
Store Retail Sales in billions of US Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Online Retail 99only.com - 1.46 4.11 N/A 23.0%
USA Single Price Point 99 Cents Only 1,262.12 1,785.36 2,600.66 7.2% 7.8%
TOTAL USA 1,262.12 1,786.82 2,604.77 7.2% 7.8%
Non Store Retail Sales in millions of US Dollar
# of Stores
’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Single Price Point 99 Cents Only 279 344 422 4.3% 4.2%
TOTAL USA 279 344 422 4.3% 4.2%
84 99¢ Only Shopper Data
All Primary Monthly 99¢ 2013 Shopper Percent of U.S. Households Shopped 99¢ Only: Household Only Profile Shoppers Shoppers 5% Age 18–24 5% 5% Top 5 Retailers Outside Dollar Channel Cross- 25–34 17% 18% Shopped by 99¢ Only Shoppers (2013) 35–44 18% 22% Walmart/Walmart Supercenter 72%* 45–54 20% 21% Amazon.com 54% 55–64 19% 14% CVS 53% 65+ 21% 20% Target/SuperTarget 47% Household Income Kroger¹ 47% <$25K 25% 33% *Read as: 72% of 99¢ Online shoppers also shop at Walmart/Walmart Supercenter $25K–$49.9K 25% 27% 99¢ Only Shopper Cross-Shopping in $50K–$74.9K 18% 17% Dollar Channel (2013) $75K–$99.9K 11% 9% Dollar Tree 44%* $100K+ 21% 14% Big Lots 30% Presence of Own Children <18 in Household Family Dollar 21% Yes 25% 26% Dollar General 21% No 75% 74%
*Read as: 44% of 99¢ Only shoppers also shop at Dollar Tree Note: Bolding/highlighting indicates a significant difference 1Includes Dillons, Fry’s, King Soopers, Kroger, QFC, Ralphs, and Smith’s banners between column percentages (95% confidence level)
85 99¢ Only Merchandising & Marketing Highlights
• Events create buzz, specialty items establish position • 99¢ Only “diet” gets national press coverage • Ethnic, gourmet, organic items; low-velocity items create trip driver opportunity
86 Dollar General Key Initiatives Key Players • Continue store opening and remodeling program • Richard W. Dreiling, Chairman & Chief Executive Officer • Continue testing of new services (e.g., fuel station, • David M. Tehle, Executive Vice President & Chief DG AutoDeliver) Financial Officer • Drive productive sales growth • Kathleen R. Guion, EVP, Strategic Planning & Real Estate • Increase growth profit rate • Todd Vasos, Chief Operating Officer, Store Operations, • Invest in process improvements and IT in order to reduce costs Merchandising and Supply Chain • Invest in talent retention and productivity • David D’Arezzo, Chief Merchandising Officer • Gregory A. Sparks, EVP of Store Operations • John W. Flanigan, EVP, Global Supply Chain • Robert Ravener, EVP, Chief People Officer
• Clear and easy to understand value proposition • Rapid expansion pressures supply chain • Consistent traffic and basket growth via strategic • Lean in-store labor model makes execution of focus on consumables programs a challenge • Assortment concentrated on high velocity, Weaknesses • Still viewed as “emerging” by many suppliers coupled need-based items with low levels of resource investment • Solution selling • Consumables growth is dilutive to gross margin • Low capital investment required for • Private label brands struggle with lack of store base expansion Strengths quality perceptions • eCommerce & social media platform s w • Lingering stigma about dollar stores among shoppers o t Threats • Growing attention from middle- and • Family Dollar is starting to gain speed as a higher-income shoppers real alternative • Improved supply chain Opportunities • Increased competition from Walmart via its • Expansion into new markets Neighborhood Market format • Private label getting increasingly sophisticated • Encountering unfamiliar competitors as it expands into • Preventative, self-managed health care in new markets advance of the Affordable Care Act • Contraction of SNAP benefits • New analytical and technological capabilities • Weakness within discretionary categories could cause augmenting multiple business functions adverse financial pressure • Shopper leakage from other channels (e.g., club) • Competitive private label brands with stronger • Enhanced eCommerce capabilities quality perception
87 Dollar General Sales and Store Forecasts
Sales in billions of US Dollar 08 - '13E 13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR USA Convenience Discount Dollar General 10.26 17.49 27.77 11.3% 9.7% USA Convenience Discount Dollar General Market 0.2 0.59 1.48 24.2% 20.2% USA Convenience Discount Dollar General Plus - 0.32 1.26 N/A 31.5% USA TOTAL Convenience Discount 10.46 18.4 30.51 12.0% 10.6% USA Online Retail dollargeneral.com - 0.16 0.51 N/A 26.1% TOTAL USA 10.46 18.56 31.02 12.2% 10.8%
# of Stores 08 - '13E 13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR USA Convenience Discount Dollar General 8,305 10,805 13,377 5.4% 4.4% USA Convenience Discount Dollar General Market 57 128 234 17.6% 12.8% USA Convenience Discount Dollar General Plus - 167 427 N/A 20.7% USA TOTAL Convenience Discount 8,362 11,100 14,038 5.8% 4.8%
88 Dollar General Shopper Data
All Primary Monthly Dollar Percent of U.S. Households Shopped Dollar General: 2013 Shopper Profile Household General Shoppers Shoppers 24% Age 18–24 5% 5% Top 5 Retailers Outside Dollar Channel Cross- 25–34 17% 16% Shopped by Dollar General Shoppers (2013) 35–44 18% 20% 45–54 20% 23% Walmart/Walmart Supercenter 85%* 55–64 19% 18% Amazon.com 51% 65+ 21% 19%
Walgreens 45% Household Income <$25K 25% 38% Lowe’s 37% $25K–$49.9K 25% 31%
CVS/pharmacy 35% $50K–$74.9K 18% 16% $75K–$99.9K 11% 7% *Read as: 85% of Dollar General shoppers also shop at Walmart/Walmart Supercenter $100K+ 21% 9% Dollar General Shopper Cross-Shopping in Presence of Own Children <18 in Household Dollar Channel (2013) Yes 25% 28% Dollar Tree 44%* No 75% 72%
Family Dollar 43% Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level) *Read as: 44% of Dollar General shoppers also shop at Dollar Tree
89 Dollar General Merchandising & Marketing Highlights
Goal: Improve productivity in older stores Scope: 3,000 legacy stores (many smaller, non-conforming layouts) The Work: Reset POG’s to maximize selling space, adding more productive SKUs to core categories, trimming down discretionary assortment Results: 1. Comp sales lift 2. Opportunities for future productivity gains 3. Refreshed shopping experience 4. Positive impression on shoppers 5. Establishes case for feasibility of smaller stores in urban environments
90 Family Dollar Key Initiatives Key Players • Refine and enhance consumables assortment • Howard R. Levine, Chairman of the Board and CEO • Strengthen value proposition by reinstating EDLP model • Mary A. Winston, EVP, CFO • Reaccelerate shopper traffic and grow trips • Barry W. Sullivan, EVP, Store Operations • Reduce infrastructure costs and simplify store level processes • Tammy L. DeBoer, SVP, Food • Continue aggressive store opening and remodeling program • Colin P. McGinnis, SVP, Store Operations Support, Store Devel- opment and Procurement • Holly L. Shaskey-Platek, SVP, Merchandising • Jason S. Reiser, EVP, Chief Merchandising Officer
• Clear and easy to understand value proposition • Rapid expansion puts pressure on supply chain • Consistent traffic and basket growth via strategic • Needs to build out capabilities and systems around focus on consumables multiple functions of its business • Assortment concentrated on high velocity, • Lean in-store labor model makes execution of need-based items Weaknesses programs a challenge • Strong perishables distribution network via • Margin-oriented mindset drives decisions throughout McLane partnership all functions of the company • Newly invigorated corporate culture via • Private label brands struggle with lack of enthusiastic senior management Strengths quality perceptions s w • Lingering stigma about dollar stores among shoppers o t Threats • Growing attention from middle- and • Dollar General remains the channel leader higher-income shoppers • Increased competition from Walmart via its • Expansion into new markets Opportunities Neighborhood Market format • Private label getting increasingly sophisticated • More sophisticated digital marketing efforts from others • eCommerce platform • Contraction of SNAP benefits • Continued growth of expertise around • Weakness within discretionary categories could cause seasonal selling adverse financial pressure • Preventative, self-managed health care in ad- • Competitive private label brands with stronger vance of the Affordable Care Act quality perception • Shopper leakage from other channels (e.g., club)
91 Family Dollar Sales and Store Forecasts
Store Retail Sales in billions of US Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Convenience Discount Family Dollar 6.98 10.39 16.51 8.3% 9.7%
TOTAL USA 6.98 10.39 16.51 8.3% 9.7%
# of Stores ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Convenience Discount Family Dollar 6,571 7,916 10,163 3.8% 5.1%
TOTAL USA 6,571 7,916 10,163 3.8% 5.1%
92 Family Dollar
Shopper Data
All Primary Monthly Family Percent of U.S. Households Shopped Family Dollar: 2013 Shopper Profile Household Dollar Shoppers Shoppers 18% Age 18–24 5% 6%
Top 5 Retailers Outside Dollar Channel Cross- 25–34 17% 19% Shopped by Family Dollar Shoppers 35–44 18% (2013) 20% 45–54 20% 23% Walmart/Walmart Supercenter 81%* 55–64 19% 16% Amazon.com 51% 65+ 21% 16% Household Income Walgreens 48% <$25K 25% 42% CVS/pharmacy 41% $25K–$49.9K 25% 31% $50K–$74.9K JCPenney 35% 18% 14% $75K–$99.9K 11% 6% *Read as: 81% of Family Dollar shoppers also shop at Walmart/Walmart Supercenter $100K+ 21% 7% Family Dollar Shopper Cross-Shopping in Presence of Own Children <18 in Household Dollar Channel (2013) Yes 25% 30% Dollar General 57%* No 75% 79% Dollar Tree 47% Note: Bolding/highlighting indicates a significant difference *Read as: 57% of Family Dollar shoppers also shop at Dollar General between column percentages (95% confidence level)
93 Family Dollar
Merchandising & Marketing Highlights
• Correcting shopper misperceptions of item quality continues to • Hot price points & attention-grabbing displays be a key challenge for Family Dollar. • Cross-category merchandising • Expect to see significant messaging efforts (in-store, print, and online) containing themes around comparability, reliability, and trust.
Private Brand SKUs Added 600
400
200
0 2013 2014
94 9595 Kmart Key Initiatives Key Players • Declining sales, comps, and planned waning store base • Edward Lampert, CEO and Chair of the Board • ShopYourWay membership program encourages loyalty • Jeffrey Balagna, EVP & CIO • MyGofer.com offers same day home delivery or store pickup • Ronald Boire, EVP, CMO, President of Sears and Kmart • Lease-to-Own program gives members financing on • Imran Jooma, EVP & President, Online, Marketing, Pricing 600K+ items & Financial Services • Year-round layaway gives shoppers another way to manage • Robert Schriesheim, EVP & CFO their cash flow
• Strong brand recognition, particularly • Shrinking store base among Hispanics • Sales, productivity, and returns waning • Distinct shopper loyalty programs • Shopper penetration continues to trend downward, • Loyal core consumer Weaknesses demonstrating an overall shrinking shopper base • Strong core real estate • Minimal capital investment in stores weakening • Innovative digital marketing efforts in-store appeal • National retailer network • Store execution is lacking Strengths • Price leadership position lagging versus s w channel competitors o t Threats • Leverage ShopYourWay Rewards platform • Loosing relevance with shoppers, particularly Gen Y as an independent offering Opportunities • Vendors tightening terms for inventory • Capturing share with Hispanic shoppers • Increased competition from new rivals, including and elderly shoppers Amazon and dollar stores • Developing online and multi-channel selling • Lack of confidence from investor tightens liquidity, • Advance understanding of shopper insights and credit for vendors • Capturing Millennial shoppers via mobile tools, social media, and other digital vehicles
96 Kmart Sales and Store Forecasts
Store Retail Sales in billions of US Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Mass Merch Big K 13.1 10.9 9.8 -3.6% -2.2%
USA Supercenter SuperKmart 1.7 0.6 0.1 -17.2% -0.5%
USA Online Retail Kmart.com 0.6 0.9 0.9 8.2% -31.2%
Total Retail Sales 15.4 12.4 10.8 -4.1% -2.9% Non Store Retail Sales in millions of US Dollar
# of Stores`
’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
USA Mass Merch Big K 1294 1152 1079 -2.3% -1.3%
USA Supercenter SuperKmart 46 19 3 -16.2% -30.9%
TOTAL USA 1340 1171 1082 -2.7% -1.6%
97 Kmart Shopper Data
All Primary Monthly Q3 2013 Shopper Household Kmart Percent of U.S. Households Shopped Kmart: Profile Shoppers Shoppers 15% Age 18–24 5% 6% Top 5 Retailers Outside Mass Channel Cross- 25–34 17% 20% Shopped by Kmart Shoppers (Q3 2013) 35–44 18% 17%% Amazon.com 56%* 45–54 20% 21%
The Home Depot 42% 55–64 19% 19% 65+ 21% 18% JCPenney 40% Household Income Lowe’s 40% <$25K 25% 32% $25K–$49.9K 25% 29% Kohl’s 38% $50K–$74.9K 18% 18%
*Read as: 56% of Kmart shoppers also shop at Amazon.com $75K–$99.9K 11% 8%
Kmart Shopper Cross-Shopping in $100K+ 21% 14% Mass Channel (Q3 2013) Presence of Own Children <18 in Household Walmart/Walmart Supercenter 78%* Yes 25% 27% No 75% 73% Target/SuperTarget 49%
*Read as: 78% of Kmart shoppers shop at Walmart/Walmart Supercenter Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level)
98 Kmart Merchandising & Marketing Highlights
99 Target Key Initiatives Key Players • Refocusing on building loyalty among non-VIP guests through • Gregg Steinhafel, President & CEO Pay Less emphasis • Kathee Tesija, EVP Merchandising & Supply Chain • Increasing loyalty with REDcard and Pharmacy Rewards • John Mulligan, EVP & CFO • Differentiating the store experience through tailored service, • Jeff Jones, EVP & CMO such as beauty • Beth Jacob, EVP & CIO • Expand multi-channel & Flexible Fulfillment options for guests • John Griffith, EVP Property Development • Geographic expansion in urban US with CityTarget and • Tina Schiel, EVP Stores in Canada • Anthony Fisher, President, Target Canada
• Strong brand recognition & reputation for innovation • Price comping limits gross margin in consumables/ • Market positioning leader commodities, but consumer still perceives prices are higher • Good real estate • Out-of-stocks more problematic with lean inventory • Loyal core guest with higher disposable income vs. competitors management, especially in consumables and sale items • Clean stores, wide aisles, very shoppable • Margin implications of food as a larger proportion of the • Efficient supply chain geared for lean inventory management mix, margin reductions associated with 5% Rewards, • Strongly coordinated social media campaign capabilities Weaknesses particularly as penetration goal climbs above 20% of sales • REDcard offers a strong and simple value proposition • Narrow margin of error, small deviations become expensive • Excellent corporate reputation for charitable giving • Planning calendar can limit ability to make last minute • Strong, popular exclusive/private label changes brands in discretionary • Multi-channel is limited and behind biggest competitors Strengths s w • Shopper penetration continues to trend downward • New store segmentation process & tools to optimize assortment Threats • Converting shopper to increase visits through fill-in o t • Increasingly tight inventory controls potentially restrict trips for food & frequently purchased categories, sales and limit flexibility when there is suddenly then purchase more discretionary items unexpectedly high demand • Urban CityTarget format pilots have been • Repeated OOS in commodities may frustrate shoppers successful, particularly with garnering high foot Opportunities who will dismiss PFresh’s fill-in value proposition, traffic, and the format’s much smaller stores will have reducing trip frequency increased site availability • Continued shrinking shopper base • Capturing Millennial shoppers via mobile tools, social media, • High-level transitions may lead to uncertainty on other digital vehicles strategic continuity • Greater integration between physical store, website, mobile • Target’s historical “best” guest focus still hamper efforts to • Communicating the “Pay Less”/price comp message to expand beyond its most loyal shopper base different guest segments 100 Target Sales and Store Forecasts
Store Retail Sales in billions of US Dollar ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR Discounter Target Discount 51.6 59.8 66.5 3.0% 2.1% Supercenter Super Target 10.1 11.6 11.7 2.7% 0.2% Discounter CityTarget 0 0.3 0.7 n/a 17.9% Ecommerce target.com 1.2 1.4 2.4 4.3% 11.0%
Total Retail Sales 62.9 73.1 81.3 3.1% 2.1% Non Store Retail Sales in millions of US Dollar
# of Stores ’08 - ’13E '13E - '18E Country Format Banner 2008 2013E 2018E CAGR CAGR
Discounter Target Discount 1443 1534 1597 1.2% 0.8% Supercenter Super Target 239 251 249 1.0% -0.2% Discounter CityTarget 0 8 18 n/a 17.6% TOTAL USA 1682 1793 1864 1.3% 0.8%
101 Target Shopper Data
Monthly Q1 2013 Shopper All Primary 1 Household Target1 Percent of U.S. Households Shopped Target : Profile Shoppers Shoppers 39% Age 18–24 5% 6% Top 5 Retailers Outside Mass Channel Cross- 25–34 17% 24% Shopped by Target1 Shoppers (Q1 2013) 35–44 18% 23% Amazon.com 62%* 45–54 21% 19%
Walgreens 46% 55–64 18% 15% 65+ 21% 12% Kohl’s 42% Household Income CVS/pharmacy 42% <$25K 25% 13% $25K–$49.9K 25% 21% The Home Depot 41% $50K–$74.9K 18% 20% *Read as: 62% of Target shoppers also shop at Amazon.com $75K–$99.9K 11% 16% 1 Target Shopper Cross-Shopping in $100K+ 21% 31% Mass Channel (Q1 2013) Presence of Own Children <18 in Household Walmart/Walmart Supercenter 69%* Yes 26% 36%
Kmart 20% No 74% 64%
*Read as: 69% of Target shoppers shop at Walmart/Walmart Supercenter Note: Bolding/highlighting indicates a significant difference 1Includes Target general merchandise stores and SuperTarget between column percentages (95% confidence level)
102 Target Merchandising & Marketing Highlights
• Online purchases are picked up at Guest Services, enabling immediate consumption purchases • Health and wellness link multiple departments in-store • Target has over 4 million Cartwheel users, and the platform enables guests to share their offers to friends on Facebook • Subscriptions would lock guests into regular deliveries, alleviating the threat of lost trips as trip drivers move online • Target will be emphasizing quick trips through “Target runs” in 2014 • This “Grab and Go” section features low price point foods for either sampling, or as an affordable luxury for guests. Target is merchandising sections in other departments similarly by price point.
Rx & OTC
Fitness H & W Food
Home & HBA
103 Walmart
Key Initiatives Key Players • Assert core mass merchandiser proposition • Doug McMillon, CEO, Walmart, Inc. (broad & local assortment) • Charles M. Holley, CFO, Walmart, Inc. • Drive productivity loop (EDLP, EDLC) • David Cheesewright, President & CEO, Walmart International • Expand store reach in core markets • William Simon, President & Chief Executive, Walmart US • Build new growth vehicles—online, smaller-format stores • Duncan Mac Naughton, Chief Merchandising Officer, • Develop “market ecosystem” across its multi-format Walmart US store portfolio • Stephen Quinn, Chief Marketing Officer, Walmart US • Advance leverage of sophisticated analytics • Gisel Ruiz, EVP, Chief Operating Officer, Walmart US • Cindy Davis, EVP, Global Customer Insights • Neil Ashe, President & CEO, Global eCommerce
• Scale and cash flow • Historical over-reliance on new stores • International format portfolio and • Long-term decline in general merchandise management expertise Weaknesses category sales • Market development and logistics model • Over-reliance on the Supercenter’s one-stop, stock- • Information technology up proposition, limits the retailer’s ability to serve • Insights capabilities other trip types effectively • Inconsistent store experience Strengths s w o t Threats • Increased global and domestic sourcing • Rising competition, including Aldi, Amazon • Neighborhood Market, Walmart Express - • Lack of alignment between website and stores serving fill-in and immediate consumption trips Opportunities • Pressure on loyalists from economic uncertainty • Integration of Walmart.com, site-to-store, and • Negative publicity and litigation brick-and-mortar “ecosystem” • Sourcing, developing, and retaining enough people • Health care services and initiative expansions • Loss of perceived price leadership in the market • Expanding credibility with consumers to sell in • Over-filling mid- and high-share markets with more categories, build cross-category basket Supercenters, unnecessarily cannibalizing sales • Urban markets • Neighborhood Market cannibalizing the Supercenter
104 Walmart Sales and Store Forecasts
Walmart US Retail Sales Sales (USD Billions) CAGR Continent\Country Retailer Banner (2008- (2013E- 2008 2013E 2018E 2013E) 2018E) North America\Puerto Rico Walmart Amigo $0.61 $0.58 $0.60 -0.9% 0.6% North America\Puerto Rico Walmart Walmart $0.38 $0.37 $0.38 -0.6% 0.6% North America\Puerto Rico Walmart Walmart Supercenter $0.61 $1.04 $1.32 11.1% 4.8% North America\USA Walmart Walmart Small Format* $0.01 $0.19 $1.12 103.6% 43.0% North America\USA Walmart Neighborhood Market $3.39 $6.17 $17.59 12.7% 23.3% North America\USA Walmart Supermercado de Walmart n/a $0.04 $0.04 n/a 1.1% North America\USA Walmart Walmart $43.41 $23.18 $10.84 -11.8% -14.1% North America\USA Walmart Walmart Supercenter $206.42 $244.16 $282.70 3.4% 3.0% North America\USA Walmart walmart.com $2.47 $5.94 $10.61 19.2% 12.3% North America\USA Total US Retail Sales $257.30 $281.67 $325.19 1.8% 2.9%
Walmart US Store Count Number of Stores CAGR Continent\Country Retailer Banner (2008- (2013E- 2008 2013E 2018E 2013E) 2018E) North America\Puerto Rico Walmart Amigo 31 24 24 -5.0% 0.0% North America\Puerto Rico Walmart Walmart 7 7 6 0.0% -3.0% North America\Puerto Rico Walmart Walmart Supercenter 8 11 12 6.6% 1.8% North America\USA Walmart Walmart Small Format* 4 29 135 48.6% 36.0% North America\USA Walmart Neighborhood Market 149 340 813 17.9% 19.0% North America\USA Walmart Supermercado de Walmart - 2 2 n/a 0.0% North America\USA Walmart Walmart 891 495 221 -11.1% -14.9% North America\USA Walmart Walmart Supercenter 2,612 3,272 3,798 4.6% 3.0% North America\USA Total US Stores 3,702 4,180 5,011 2.5% 3.7%
*Walmart Small Format includes Express and On Campus
105 Walmart Shopper Data
All Primary Monthly H1 2013 Shopper 1 1 Household Walmart Percent of U.S. Households Shopped Walmart : Profile Shoppers Shoppers 65% Age 18–24 5% 5% Top 5 Retailers Outside Mass Channel Cross- 25–34 17% 17% Shopped by Walmart1 Shoppers (H1 2013) 35–44 18% 18% Amazon.com 52%* 45–54 21% 21%
Walgreens 39% 55–64 18% 18% 65+ 21% 20% Dollar Tree 35% Household Income The Home Depot 33% <$25K 25% 28% $25K–$49.9K 25% 27% Lowe’s 32% $50K–$74.9K 18% 18% *Read as: 52% of Walmart shoppers also shop at Amazon.com $75K–$99.9K 11% 11% Walmart1 Shopper Cross-Shopping in $100K+ 21% 16% Mass Channel (H1 2013) Presence of Own Children <18 in Household Target/SuperTarget 40%* Yes 26% 28% Kmart 18% No 74% 72%
*Read as: 40% of Walmart shoppers also shop at Target/SuperTarget Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level) 1Includes Walmart discount store and Walmart Supercenter
106 Walmart Merchandising & Marketing Highlights
• Simplified focus on brand, price, and item/solution with clear, bold displays; also emphasizing cross-box solutions • Expanding health care services • On value: clear Good-Better-Best navigation and quantifying the savings for the shopper
107 108108 BJ’s Wholesale Key Initiatives • Improving membership recruitment and retention by increas- Key Players ing the number of BJ’s Reward members and driving trials • Laura Sen, President and CEO • Optimizing and strengthening private label, in part, through the • Robert Eddy, EVP and CFO development of organic and environmentally friendly brands • Cornell Catuna, EVP, Club Operations • Advancing technological and insights sophistication • Christina Neppl, EVP, Merchandising and Logistics • Expanding within current markets • Peter Amalfi, EVP, CIO • Competing primarily with local grocers as reflected in large • Lon Povich, EVP, General Counsel, Secretary club assortment and smaller pack sizes relative to • Neil Ashe, President & CEO, Global eCommerce club counterparts
• Loyal members, especially in Northeast and Florida • Low sales per warehouse compared to Costco, • Focus on consumer member as point of Sam’s Club differentiation within channel • Reliance on consumable SKUs • Lack of discount grocer presence where it operates Weaknesses • Value proposition is less dynamic and defensible • Strong regional presence and promotional • Lack of discipline – deviation from fundamental club activity = increased member awareness/equity business model • Private label with less brand equity than competitors Strengths s w o t Threats • Talent development • Costs of extra SKUs, credit card, and coupon acceptance • Increasing leverage of membership margin • Competition – Expansion of Costco in East Coast, Sam’s • Optimizing private label offering Opportunities Club brand evolution, regional grocers and Amazon • Growth in transactional website • Debt could stifle investments • Increasing social media presence • Lack of capital, scale relative to key competitors to drive expansion • Reliance upon merchandise margin
109 BJ’s Wholesale Sales and Store Forecasts
Club Retail Sales in billions of US Dollar (online retail in millions) Banner 2008 2013E 2018E ’08 - ’13E CAGR '13E - '18E CAGR BJ’s 9.993 13.023 16.815 5.44% 5.24% bjs.com 34.500 124.967 216.129 29.36% 11.58%
Total Retail Sales 10.027 13.148 17.031 5.57% 5.31%
# of Clubs ’08 - '13E - 2018 Banner 2008 2013E ’13E '18E E CAGR CAGR BJ’s 180 205 227 2.64% 2.06%
110 BJ’s Wholesale Shopper Data
Percent of U.S. Households Shopped BJ’s : H1 2013 All Primary Monthly BJ’s Shopper Household Shoppers 6% Profile Shoppers Age Top 5 Retailers Cross-Shopped by BJ’s 18-24 5% 4% Shoppers (H1 2013) 25-34 17% 14% 35-44 18% 19% Walmart/Walmart Supercenter 64%* 45-54 21% 24% Amazon.com 58% 55-64 18% 20% 65+ 20% 19% CVS/Pharmacy 51% Household Income Target/SuperTarget 50% <$25K 26% 13% $25-$49.9K 25% 19% The Home Depot 49% $50K-$74.9K 18% 18% *Read as: 64% of BJ’s shoppers also shop at Walmart/Walmart Supercenter $75K-$99.9K 11% 18% BJ’s Shopper Cross-Shopping in Club $100K 21% 33% Channel (H1 2013) Presence of Own Children <18 in Household Costco 16%* Yes 26% 28% No 74% 72% Sam’s Club 13% *Read as: 16% of BJ’s shoppers also shop at Costco Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level)
111 BJ’s Wholesale Merchandising & Marketing Highlights
• Simplified focus on brand, price, and item/solution with clear, bold displays; also emphasizing cross-box solutions • Expanding health care services • On value: clear Good-Better-Best navigation and quantifying the savings for the shopper
CookingLight Exclusives, Framingham, MA, 8-7-2013
Generation Earth Private Label, Digital Integration, Framingham, MA, 8-7-2013 Northborough, MA,1/13/2014
112 Costco Key Initiatives Key Players • Maximizing Membership and Renewal by upgrading members • Craig Jelinek, President & CEO to executive status • Richard Galanti, EVP, CFO • Collaborating with vendors on item innovation, packaging, • Paul Moulton, EVP, CIO and solutions (including sustainability) • Douglas Schutt, EVP, COO Merchandising • Increasingly (and better) leveraging social media, online, mo- • James Murphy, EVP, International bile, and MVMs as promotional vehicles • Franz Lazarus, EVP, Administration • Growing the organic portfolio of its national brands • Tim Rose, EVP, Ancillary Businesses, Manufacturing, and • Expanding into untapped markets in Europe and Asia; Business Centers better leveraging its global supply chain • Optimizing assortment to drive more localized member relevance
• Adherence to a proven financial and • Management continuity can limit breakaway merchandising model What’s Next? thinking • Loyalty of members • Slow pace of decision making • Continuity in management and strongly ingrained Weaknesses • Information value chain management corporate culture • Reliance on word of mouth marketing (although this • Commitment to members/employees has not proven ineffective, it limits opportunities to • Recognition of strong private label maximize marketing amid increased social use of Strengths digital media and changing demographics) s w • Conservative adherence to the club model o t Threats • New markets via international expansion • Increasing competition from within and outside the club • Going green through enhanced global sourcing, channel, especially online retailers like Amazon redesigning, and developing sustainable packaging Opportunities • Changing sales mix to more consumables • Hispanic market, especially given Costco’s • Vulnerability to gas and FX fluctuations geographic concentrations in the US and Mexico • Relatively strong BJs presence in East Coast may create • Co-branding amid increasing private label mix barrier to expansion • Growing integration of club services and solutions • Sam’s gaining brand strength
113 Costco Sales and Store Forecasts
Club Retail Sales in billions of US Dollar Country 2008 2013E 2018E ’08 - ’13E CAGR '13E - '18E CAGR Asia\Japan 1.616 3.438 7.473 16.29% 16.80% Asia\South Korea 0.441 0.763 1.578 11.61% 15.63% Asia\Taiwan 0.635 1.492 3.039 18.65% 15.28% Australasia\Australia - 0.661 1.788 - 22.03% Europe\France - - 0.235 - - Europe\Spain - - 0.411 - - Europe\United Kingdom 2.360 2.612 3.679 2.04% 7.09% North America\Canada 9.871 17.810 22.920 12.53% 5.17% North America\Mexico 2.098 2.830 4.742 6.17% 10.87% North America\Puerto Rico 0.580 0.753 1.129 5.36% 8.43% North America\USA 56.323 74.740 104.463 5.82% 6.93% Total Sales 73.924 105.099 151.457 7.29% 7.58%
# of Clubs Country 2008 2013E 2018E ’08 - ’13E CAGR '13E - '18E CAGR Asia\Japan 8 18 25 17.61% 6.79% Asia\South Korea 6 9 13 8.45% 7.63% Asia\Taiwan 5 10 12 14.87% 3.71% Australasia\Australia - 3 9 - 24.57% Europe\France - - 2 - - Europe\Spain - - 3 - - Europe\United Kingdom 20 25 27 4.56% 1.55% North America\Canada 75 85 98 2.53% 2.89% North America\Mexico 31 33 41 1.26% 4.44% North America\Puerto Rico 4 4 5 0.0% 4.56% North America\USA 394 447 506 2.56% 2.51% Total Clubs 543 634 741 3.15% 3.17% 114 Costco Shopper Data
Percent of U.S. Households Shopped Costco: Q3 2012 All Primary Monthly Costco Shopper Profile Household Shoppers 18% Shoppers
Age
Top 5 Retailers Cross-Shopped by Costco Shoppers 18-24 5% 3% (Q3 2012) 25-34 17% 19%
Walmart/Walmart Supercenter 58%* 35-44 18% 19% 45-54 21% 20% Amazon.com 58% 55-64 18% 16%
Target/SuperTarget 57% 65+ 20% 22% Household Income The Home Depot 48% <$25K 26% 11% CVS/ Pharmacy 43% $25-$49.9K 25% 16% $50K-$74.9K 18% 20% *Read as: 58% of Costco shoppers also shop at Walmart/Walmart Supercenter $75K-$99.9K 11% 16%
Costco Shopper Cross-Shopping in Club Channel $100K 21% 38% (Q3 2012) Presence of Own Children <18 in Household Sam’s Club 16%* Yes 26% 28% BJ’s Wholesale 6% No 74% 72%
Note: Bolding/highlighting indicates a significant difference *Read as: 16% of Costco shoppers also shop at Sam’s Club between column percentages (95% confidence level)
115 Costco Merchandising & Marketing Highlights
Kirkland Signature, 40 YO Scotch, Grand Piano Sale, Sarasota, FL, 1/18/2014 Brookfield, CT, 1/12/2014
USDA Organic Aisle, Avon, MA, 1/10/2014
116 Sam’s Club Key Initiatives Key Players • Growing sales by increasing member trips and basket size • Rosalind Brewer, President & CEO • Improve returns with better inventory management and • Todd Harbaugh, EVP, Operations & Membership labor productivity • Charles Redfield, EVP, Merchandising • Leveraging parent company’s efficiencies of scale to reduce • Michael Dastugue, SVP, CFO operating costs • Ismat Mirza, SVP, Sam’s Club, People • Using Big Data and member insights to maintain relevancy and • Jamie Iannone, Samsclub.com CEO & President develop private label offerings • Curating assortment and services to demonstrate “unique value” to club members • Increasingly differentiating through digital integration, exclusives, and experience
• Insights and analytics capabilities • Lower membership renewal, growth rates • Walmart corporate oversight, resources • Sales per club – asset productivity • Digital platforms and capabilities Weaknesses • SKU productivity performance • Relatively fresh leadership talent • Confusion due to historical pendulum swings • Openness to testing and implementing novel between business & individual member focus marketing and merchandising approaches • Inconsistency of format locations, in-club presence, and sales volumes across US Strengths s w o t Threats • Instant Savings promotions, coupon book • Price perception versus key club competitors • Expanded marketing efforts to build engagement, • Competition from other retailers, such as mass and especially via new and emerging media (digital, Opportunities online, especially Amazon mobile, freeosk, etc.), H&W • Significant shopper overlap with Walmart • Sustainability as emotional connector and for add- • Channel blurring in club packs with Walmart ed efficiencies • Growing private label penetration • Growing private label penetration
117 Sam’s Club Sales and Store Forecasts
Club Retail Sales in billions of US Dollar (online retail in millions) Country Banner 2008 2013E 2018E ’08 - ’13E CAGR '13E - '18E CAGR Asia\China Sam’s Club 0.105 0.350 0.829 27.23% 18.82% Sam’s Club North America\Mexico 5.930 7.872 10.287 5.83% 5.50%
Sam’s Club North America\Puerto Rico 0.731 1.218 1.682 10.75% 6.67%
Sam’s Club North America\USA 46.784 57.426 76.172 4.18% 5.81%
North America\USA samsclub.com 937.000 1,666.058 2,746.800 12.20% 10.52% Sam’s Club South America\Brazil 0.843 1.181 1.308 6.98% 2.06%
Online included Total Retail Sales 55.330 69.713 93.025 4.73% 5.94% (billions)
# of Clubs
Country Banner 2008 2013E 2018E ’08 - ’13E CAGR '13E - '18E CAGR
Asia\China Sam’s Club 3 10 20 27.23% 14.87% North America\Mexico Sam’s Club 91 150 181 10.51% 3.83% North America\Puerto Rico Sam’s Club 9 11 13 4.10% 3.40% North America\USA Sam’s Club 602 620 669 0.59% 1.53% South America\Brazil Sam’s Club 22 27 32 4.18% 3.46% Total Clubs Sam’s Club 727 818 915 2.39% 2.27%
118 Sam’s Club Shopper Data
Percent of U.S. Households Shopped Sam’s Club: H1 2013 All Primary Monthly Sam’s Shopper Profile Household Club Shoppers 17% Shoppers Age 18-24 5% 4% Top 5 Retailers Cross-Shopped by Sam’s Club Shoppers 25-34 17% 16% 35-44 18% 19%
Walmart/Walmart Supercenter 84%* 45-54 21% 20%
Amazon.com 57% 55-64 18% 20% 65+ 20% 22% Target/SuperTarget 51% Household Income Walgreens 48% <$25K 25% 15% $25-$49.9K 25% 23% Lowe’s 42% $50K-$74.9K 18% 21%
*Read as: 84% of Sam’s Club shoppers also shop at Walmart/Walmart Supercenter $75K-$99.9K 11% 15%
$100K 21% 25% Sam’s Club Shopper Cross-Shopping in Club Channel (H1 2013) Presence of Own Children <18 in Household Costco 14%* Yes 26% 30% No 74% 70% BJ’s Wholesale 5%
*Read as: 14% of Sam’s Club shoppers also shop at Costco Note: Bolding/highlighting indicates a significant difference between column percentages (95% confidence level)
119 Sam’s Club Merchandising & Marketing Highlights
Speaker w/ Display and Demo, Worcester, MA, 1/13/2014 Immunization Promotion, Worcester, MA, 1/13/2014
Pet Care at Pharmacy, Worcester, MA, 1/13/2014
120 121