1. Billa Bulgarien

6. RETAIL MARKET OVERVIEW  Early stage of development (market share of retail chains roughly 15%).  Relatively low competition: Metro (7) markets; HIT (2) and (5) local chains and some of them with unclear formats/concepts.  Consumers not yet differentiating between (e.g. supermarkets and cash & carry) retail format/concept.  Kaufland entry expected in 1 st half of 2006 with 27 openings within 3-4 years.  Discounters expected in early 2007.

7. Big potential market –Billa is one of the biggest chain retailar for F&V  The retail market is fragmented, modern trade is represented unsufficiently. The green markets still hold more than 80% market share  Low level of organization of the wholesale markets/exchange ;simple processing,handling and packaging; no standards in portion size  Fragmented production with local, regional distribution except of some greenhouses  Lack of modern, specialized logistic companies for fresh products ;CD platforms  Custom regulations and restrictions for imported goods – custom duties and quotas, minimum import price The result - monopoly on the market of some products. This leads to higher price for lower quality

8. Our complicated supply chain  We have 16 stores with 5 regional groups of suppliers.(Sofia and province)  Groupage deliveries for the main assortment  Lower purchasing prices in the province  Quality varies for each delivery, irregular timing  Quality control in each store (add.personnel costs and retour costs)  Inefficient logistic costs of the suppliers related to their turnover -result is higher prices per kg.

9. Problems for Billa – Producers,Importers,Distributors  Quality – cheep varieties, fertilizers We have problem with the freshness-(summer- tomatoes aging period)  Critical mass and price validity during promotions and for the daily deliveries. We have more than 10% turnover growth reserves if we manage to reduce the out of stock.  The producers do not have good planning, forecast for the quantities.  We developed our standards for the suppliers and we support the distributors to implement them on the production market

10. Problems for Billa – Producers,Importers,Distributors  The producers are not ready yet to invest in equipment - flexibility for portion size, packaging, labeling  They need trained personnel (like Billa’s employees) in order to work with modern retailers.  The logistic is oriented to wholesalers and not suitable for daily supplies to our stores  In most cases there are not interested to sell directly to us because of the postponed payment and bank transfers( VAT Acc.)

11. Problems for Billa –Producers,Importers,Distributors  The producers and importers have short- term strategies(price and quantity) We could develop product and quantity programs on annual base  We do not have enough information about supply and demand.(national Info- DB,Integrated Info-Systems)  The import products are concentrated in a small number of companies.Lack of strong competition, price regulation

12. Thank you for your attention !