FOOD SCOTT MARSHALL CEO Supermarkets & Convenience Supermarkets & Convenience OUR DIFFERENCE WE HAVE A DIVERSE NETWORK OF LOCAL INDEPENDENT GROCERY STORES Convenient Everyday Our Vision is to be the locations value partner of choice for retailers and suppliers delivering a shopper- led range with the right Local Active in prices through a ranges their local responsive communities distribution network. Ability to partner with suppliers 2 MARKET CONDITIONS AND CHALLENGES THE LAST 5 YEARS The business . Intense competition has faced . Deflation significant . Roll out of value formats . Difficult economic conditions – WA headwinds . Retailer compliance and working relationships . Brand articulation . Net decline in store footprint Our key . Under-indexed in growing categories – well-being, fresh and private label challenges . Under-investment in stores . Cost pressures . Loss of large customer – SA 3 OUR JOURNEY EARNINGS STABILISED THROUGH COST OUT PROGRAMS SALES 1 ($m) EBIT ($m) 9,200 350 9,000 300 250 8,800 200 8,600 150 8,400 100 8,200 50 8,000 0 FY14 FY15 FY16 FY172 FY18 FY14 FY15 FY16 FY17 FY18 3 Future strategy focused on both sales growth & cost efficiencies 1. FY15 to FY18 Sales revenue has been adjusted to reflect the adoption of AASB15: Revenue from Contracts with Customers. 4 2. FY17 Sales revenue has been adjusted to reflect 52 trading weeks (FY17 included 53 weeks trading). 3. EBIT has been adjusted for AASB15 in FY18 only. CURRENT NETWORK A national network of >1,650 stores National network of stores Supa IGA 244 IGA 792 IGA-Xpress 215 Foodland 130 QLD 254 Total IGA stores 1,381 WA 239 SA Friendly Grocer / Eziway 285 213 NSW Total network stores 1,666 324 VIC 351 Supported “Australia’s widest distribution network through five to the independent retail sector” major distribution centres & smaller regional centres MAJOR DISTRIBUTION CENTRE 5 GLOBAL GROCERY TRENDS DRIVEN BY SOCIETAL, COMPETITIVE AND TECHNOLOGICAL FORCES Smaller, more More small Less time More demand More eating More individual frequent shops stores, more spent in store for eat now/ out & eating on & more convenient make now site personal In Australia locations Today it’s <20mins, BAYN trips are and forecast to be Today it’s 20% of Eat on site has More open to a now 3X more Globally, 26% of <10mins in the basket, tomorrow it appeal but less than personalised food than MAIN grocery stores future is forecast to be 1 in 4 stores offer it and grocery are “small” & 40% globally experience they cover 70% of all trips Demand for Reinvention of Health Rising prices & Expansion of Social faster delivery the instore consciousness premiumisation e-commerce awareness & pick-up experience & seamless services Better for you Expect shoppers to omnichannel Shoppers will want Shoppers become movement with a favour quality, experiences to make sustainable more willing to “Natural Wellness” convenience and and ethical choices experiment with focus healthfulness over shopping and meal price preparation Historical under-investment in responding to global trends 6 Source: Euromonitor International, 20 Mega trends to shape the world by 2030; Nielsen 2016 Global Retail Strategies Report; Nielsen Homescan MAT to 29 December 2018; IGD 2018 Shopper of the Future OVERVIEW – KEY INITIATIVES OUR STORE FOOTPRINT POSITIONS US TO CAPITALISE ON THE MARKET TREND TO LOCAL AND CONVENIENCE We will do this by being the partner of choice for: RETAILERS SUPPLIERS . Right brand and offer by format and location . Wholesale – right range by location – Range – including Fresh . Flexible cost efficient supply chain – Price . Consistent execution of offer – Shopper experience . National route to market 7 OUR WAY FORWARD INCREASED SHOPPER FOCUS Retail network & brand clarity – WHAT? Retail network & brand clarity – HOW? . We will deliver channel clarity to meet shopper . Delivered through acceleration of DSA program trends . Retailer compliance – opt in to new offer . Right brand by format (previously we have . Rewards for execution stretched the IGA brand too far) . Aligned shopper experience by format . Match location to shopper mission – ‘Best Store in Town’ . Competitive everyday pricing . Unmatched local service . Default control brand for less compliant retailers Brand clarity underpins our strategic initiatives 8 A NEW IGA BRAND PROPOSITION ALIGNED WITH STORE EXPERIENCE AND SHOPPER MISSIONS We will fundamentally change our retail network by having: . A clear proposition for shoppers . A differentiated range and price aligned to format . Enforced standards that protect the integrity of the brand . Better pricing for retailers who comply with promotional programs . New trading terms for each brand that drive and reward the right behaviours . A program to refurbish stores . Alternate brands to house less-compliant stores Redesign of brands based on target shopper mission, store size and retail offer 9 RESETTING OUR RETAIL BRANDS GREATER FLEXIBILITY Standards & Execution HIGHHIGH LOW IGA IGA ENDORSED (OPT-IN) INDEPENDENT CONTROL BRANDS . Highest IGA brand standards . Level of IGA brand standards . Independent brand standards . Core, mission-based & localised . Mission-based & localised range . Range and price guide range & price & price . No compliance checks . Reward for compliance . Reward for compliance . Local area marketing . National IGA marketing campaigns . Local area marketing . Base promotional program . IGA promotional program . Channel specific promotional program . Store blueprints . Store blueprints ~70% of stores ~20% of stores ~10% of stores Tailored solutions to meet both retailer requirements and shopper missions 10 CURRENT INITIATIVES DSA DIAMOND STORE ACCELERATOR PROGRAM OLD PROGRAM NEW PROGRAM TO ACCELERATE GROWTH . 320 stores & over 250 retailers have participated . Linked to brand strategy and global supermarket trend . Average sales improvement >10% achieved . Simplified process for retailers . Retailers rewarded through rebates . ~500 stores identified based on demographic analysis . No capital investment by Metcash . Metcash willing to support investment in stores . Retailer take-up through ‘opt in’ . Dedicated team in place to drive execution Accelerated DSA program is core to delivery of brand strategy 11 CURRENT INITIATIVES DSA EXAMPLES NOOSA OUTLOOK IGA | QLD Sales . Complete store transformation increase . New flooring, lighting and signage throughout . Expanded fresh departments & new service deli . New product ranges ~17% ROSEBERY IGA | NSW Sales . New flooring, lighting & signage increase . Fresh departments relocated to front of store . Deli re-ranged including hot food section & coffee . Grocery, dairy, frozen reflowed ~19% MOSMAN PARK | WA Sales . Reconfigured checkouts and entry increase . Fresh produce moved to front of store . New categories including ‘health and wellness’ . Full brand signage kit throughout ~17% Stores now aligned to global trend 12 CURRENT INITIATIVES CORE RANGING AND PRICING FEATURES BENEFITS . Core range now more price focused Retailers improved price . Price focused key competitiveness value lines to drive of key lines sales . Range can vary by state and store to provide a Suppliers differentiated localised greater retailer offer compliance . Format specific ranging & pricing versus “one size fits all” . Lower pricing supported Shoppers by existing Metcash investment and more better everyday effective utilisation of value supplier support 13 NEW INITIATIVES GROW NETWORK FOOTPRINT Store closures have been a significant headwind (closures mostly larger stores while openings mainly smaller stores) Rate of decline has stabilised New store openings and strong pipeline of new stores underpinned by increased retailer confidence Brand and channel segmentation, and right offer by location driving retailer confidence Metcash support Expect to move to net store growth going forward Improved retailer confidence has underpinned a strong pipeline of new stores 14 CURRENT INITIATIVES PRIVATE LABEL GROWING STRONGLY 1 2 3 Private label Grow private Community Co under-indexed label through growing strongly in at ~5% of award winning brand awareness Metcash sales Community Co and network brand coverage 4 5 6 Total Community Opportunity to 10 product of the Co products on expand in fresh / year awards for offer ~250 ready meals Community Co Improvement in competitive position – opportunity to increase private label offer to ~750 products 15 CURRENT INITIATIVES CUSTOMER LOYALTY / INSIGHTS Targeted, IGA REWARDS relevant, personal 30 Store Pilots running in WA since April 18 Based on Smarter actual shopper Marketing behaviour 50k shopper members Margin management 50% Retailer engagement (half the stores in WA Increased and now QLD have signed up) Smarter flexibility Promotions 75% of our marketing content to members is unique and Detailed personalised, and more relevant information for suppliers shopper behaviour Smarter Measurable marketing We’ve achieved significant member sales uplifts Insights impact in the pilot (over 11 months) Significant insight opportunities for marketing, ranging, category management and store planning 16 SMALL FORMAT CONVENIENCE OFFER Shopper trends reflect preference for small format stores . Fastest growing format globally . Australia well behind global trend Metcash has competitive advantage through existing footprint . Typical store size 220 – 280 square metres . Stores located in easy to access, convenient locations Growth opportunity . Identified market opportunity ~$1bn sales p.a. ~500 IGA Xpress and smaller IGA stores