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2. 2 The crisis negative influence on retail sales Dropping of sales volumes - Lowering of consumer demand - Consumption displacement aside cheaper goods

3. 3 Company (chain) Net debt, mln.$ 2007 Net debt, mln.$ 2008 The 7th Continent (Sed’moy Kontinent) 170196 Carrousel140154 Dixy186219 Magnet (Magnit) 557591 Х51,5421,994 Holiday273320 Kopek (Kopeyka) 402440 Growth of debt burden of chains

4. 4 Russian leading food retailers №Company FY 2008 Net Retail Sales (USD mln) % In Top-10 % in Total Market 1.X5 8,84426.1%4.0% 2.Magnit 5,32615.7%2.4% 3.Metro5,07715.0%2.3% 4.Auchan4,98314.7%2.2% 5.Lenta2,046.0% 0.9% 0.9% 6.Dixy1,9235.7%0.9% 7.Kopeyka1,89 5.6% 5.6%0.7% 8. Seventh Continent 1,5493.6%0.9% 9.Viktoria1,2284.6%0.6% 10.O’Key1,0533.1%0.5% Total33,913100.0%15.3%

5. 5 Formats of retail chainsFormat Sales area, sq.m.Assortment,items Share of Nonfoods, % Number of buyers per day Averagepurchase size,$ Hypermarket6000-20000 18000 - 4000047%450031,2 Supermarket1000-5000 7000 - 1500022%215513,4 Departmentstore(Economyclasssupermarket)500-30002000-700029%30407,5 Discounter3001000500-200015%15607,1 cash&carry6000-20000 20000 - 4000042%2211124,3 Convenience store 80-4001000-300018%12136,2

6. 6 Assortment of press products in supermarkets Assortment allocation in supermarket chains

7. 7 Format Number of periodical items Laying out area, r.m. Monthly average turnover per one POS Hypermarket 260-350SKU From 5 м and more 35 - 46 thousand euro Supermarket 125 – 260 SKU 125 – 260 SKU From 1 up to 5 м From 1 up to 5 м 4,5– 11 4,5– 11 thousand euro thousand euro Convenience store Department store 70 – 100 SKU 70 – 100 SKU From 1 up to 2,5 м From 1 up to 2,5 м 2,3 – 5,7 thousand euro thousand euro Discounter cash&carry 160 – 260 SKU 160 – 260 SKU 1,5 – 6,5 м 1,5 – 6,5 м 11,4 – 30 11,4 – 30 thousand euro Press in various retail chains

8. 8 The crisis impact on press distribution in retail chains

9. 9 Dualism of printed mass media The structure of Russian printed mass-media in 2008 Press goods have the dualism character : 1. The goods providing the required information for the buyer. 2. Advertising vehicle. The idea of dualism obviously highlights the possibility for the distributor to raise his profits referring to the dualism idea: - Dealing with the advertising tool (such as a newspaper or a magazine) the distributor should also get the certain income from the advertising placed in the titles.

10. 10 The costs breakdown of press distribution in supermarket chains Bonus costs: The conclusion of the long-term contract for goods delivery to the chain (under tender conditions). The distributor entrance bonus for one POS in supermarket chain make 1400 -5500 euro and about 12500 euro for one POS in hypermarket chain Trading & purchasing activity in POSes of chain. Initiating of the registration card of a commodity item in chain is about 70 - 280 euro for the title. Providing the retail POSes with the specialized trading equipment The cost of 1 running meter of the equipment for laying out and promoting the goods is about 300 - 600 euro. Bonus awarding for the sales volume gained. The payments for sales volume is about 5 - 15 % of the total profit gained for the goods sold in chain. Promo activity in POSes The payments for carrying out of the promo- actions and promo laying out can be 3 % -10 % of the sales volume of the ad goods or of the fixed amount for carrying out of single promo action

11. 11 The law on trade regulation Stipulates the following restrictions for chains in terms of dealing with suppliers  Cooperation among sales chains and suppliers will be subject to the contracts on deliveries and services;  Suggested to abrogate the practice to pay the bonuses (entrance bonuses ) except the awarding bonuses stipulated for the sales chains for sales volume gained;  Suggested to stipulate the refund terms for suppliers vis-a-vis sales chains  Suggested to avoid any direct and constantly ongoing prices restrictions  Suggested to review the issue on attributing to cost the awarding bonuses «for sales volume» by suppliers and on attributing to cost the losses of sales chains.

12. 12 The specific features of Russian press distribution in supermarkets chains.  Working on the basis of the contracts on purchase and sale  Remission is carried out on the basis of the repurchase agreement  Pricing forms according to trading margins  The price is not normally indicated on the cover of titles  The supplier must pay so called entrance bonus to get to the chain

13. 13 The strong parts of Russian press distribution system  The distributors fix both pricing and margin level  The distributor owns the goods  Various agreements and compromises might be reached with both the publishing houses and retailers  The refunds level makes 20-30%

14. 14 The future developments of distribution business  Sales of print runs of press products per single POS will continue to fall down  Distributor incomes of press sales will continue to fall down The possible approaches for success :  Developing of distribution and accompanying goods;  Developing such key factors as logistic and extra client services  Cost cutout by means of assortment shrinkage  The transition from printed goods distribution to content distribution.  Implementation of press dualism idea in order to scale up the distribution profits  Combining the contract on sales & purchases with the agents contracts for services

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