Bank of Ireland Business Banking ROI Sectors Team Retail Convenience 2015 Review / 2016 Outlook The CSO Retail Sales Index for 2015 (issued 28th January 2016) outlines continued growth in Irish retail sales with an annual increase in sales volume (excluding motor) of 6% v 2014 – this underpins a positive outlook for activity in the sector in 2016. Retail Convenience: 2015 Review Sector Developments: & 2016 Outlook Summary Investment and Consolidation • • Continued Growth: Continued positive trend in retail Applegreen completed an IPO which will allow the sales volume and value in 2015 v 2014. business to expand its forecourt interests in Ireland and the UK. • Consolidation Activity Continues: Musgrave purchase • of Superquinn and the more recent acquisitions of Londis Avoca Group purchased by US listed catering group, (c.200 stores) by BWG and Topaz (c.450 stores) by Aramark, for a reported figure of c.€60m, with plans Couche-Tard (subject to competition approval) illustrate to internationalise the brand. the competitive nature of the market and continued focus • Topaz Group purchased by Canadian-based on growth by leading symbol brands. Couche-Tard for a reported figure of c.€450m. • Funding Activity: Strong pipeline of refinance and • The Avoca and the Topaz multi-million euro deals, revamp proposals to continue in 2016. completed in H2 2015, are currently subject to • Competitive Market: Sales increases in 2016 will competition approval. be driven by increased volume as opposed to price. Competitive pricing techniques will continue between 2015 – Sector Developments: larger grocery-focused brands. Key Numbers 2015 Key Trends €23m Price paid by BWG for ADM Londis. • While strong price competition for market share between leading symbol brands continues to curb growth in total Funds raised by Applegreen on the sales values, 2015 did see positive growth in both volume €92m Irish and London Stock Exchanges. (+6%) and value (+3%) of sales. • Supervalu and Tesco continue to vie for the no. 1 spot in Price received by Musgrave Group grocery market share with Dunnes regaining market share €59m from Booker for its UK business on (up 0.3% to 23.8%) through strong discounting activity a cash-free, debt-free basis. in 2015. Combined number of Aldi and Lidl • Aldi / Lidl market share growth slowed in 2015 for the first 265 stores in ROI as both enter time since 2008. Current market share c.20% combined. consolidation phases. • Convenience retailers, in particular Centra and Spar, continue to perform very well, reflecting a sustained shift Milestone anniversary celebrated in consumer preference / requirement for convenient by Barry Group (owner of shopping solutions (basket v trolley shop). 60 yrs Costcutter brand in ROI). Key Activity in the Sector in 2015 Approval Activity Value % – 2015 • BOI Business Banking financing approved in 2015: 4% +100% on 2014 approvals. 7% Working Capital Revamp • Strong refinance activity opposite exiting banks is a key driver of growth. • Revamp / freehold purchase activity increased as year 19% progressed – improved activity projected in 2016. Freehold Purchase 59% Refinance 11% Greenfield Bank of Ireland Information Classification:Green - Public Bank of Ireland is regulated by the Central Bank of Ireland Bank of Ireland Business Banking ROI Sectors Team Retail Convenience 2015 Review / 2016 Outlook Continued growth in sales volume, competitive pricing strategies employed by Tesco / Dunnes, increased refinance and revamp activity linked to exiting banks and the relaunch of Eurospar / Londis brands forecast for 2016. 2016 Key Numbers • Aggressive promotional activity from Tesco and Dunnes anticipated in 2016 – targeted attempt to recapture market share, which may present some challenges for other players. Growth in retail sales volume in • ⬆ 2015 with positive trend expected Supervalu’s strategy continues to focus on quality and local 6% to continue in 2016 credentials as a differentiating factor: 3 – 4 new Supervalu stores per annum projected for 2016 and 2017. Ongoing Grocery market share held by monitoring of promotional activity of other players will continue to inform strategy. 73% Supervalu (24.6%), Tesco (24.1%) and Dunnes (23.8%) in December 2015 • Aldi / Lidl growth to taper as their combined market share as competition for number one spot reaches c.20% – rumoured reallocation of resources to focus intensified further during the year on UK market where both brands are under-represented. • Forecourt store category to become increasingly competitive with Topaz / Couche-Tard, Applegreen and Maxol Mace Number of stores operated globally competing with Spar and Centra forecourt retailers for by Couche-Tard, acquirer of Topaz convenience / transient shopper. business (450 stores nationwide) 15,000 Funding Activity • Strong refinance activity to continue linked to exiting banks and loan book purchasers seeking to deleverage. National minimum wage rate introduced in Budget 2016 and effective from 1st • Revamp activity to increase linked to a strong relaunch of January 2016 the Eurospar and Londis brands, and the proactive strategy €9.15 anticipated from competitors - Supervalu, Centra and Costcutter. Bank of Ireland • Bank of Ireland is excited by the potential that this sector 2016 Retail Convenience Sector presents in 2016. Our proven financial capabilities and appetite, combined with comprehensive sectoral expertise, Outlook: led by our Head of Retail Convenience, provides us with a Grocery: Competitive strong platform to meet the funding requirements of Irish retailers. Convenience: Positive Growth • We understand the investment cycle, including the need for Market regular expenditure to maintain growth and profitability in this • A sustained increase in retail sales results is projected dynamic sector, and we have a strong appetite to support in line with improved consumer spending power and progressive, innovative retailers in the further development of sentiment. their businesses in 2016. Owen Clifford Head of Retail Convenience Owen joined Bank of Ireland in January 2015 as Head of Retail Convenience. Owen previously worked for Musgrave Retail Partners Ireland where his role involved supporting independent retailers to maximise their profitability and to develop long- term, sustainable business models. During this time, Owen developed significant knowledge of finance, operations and legal/regulatory requirements specific to the retail convenience sector. Owen holds a BA in Law and Accounting from the University of Limerick and is an Associate of the Institute of Chartered Accountants Ireland and the Irish Taxation Institute and previously held roles with Pricewaterhouse Coopers and Deloitte. Email: [email protected] Mobile: 087 907 9002 Phone: 076 624 2825 Sources: CSO, Checkout magazine, Shelflife magazine, Kantar Worldpanel, Retail Ireland: IBEC Bank of Ireland Information Classification: Green - Public Bank of Ireland is regulated by the Central Bank of Ireland.