Defense Commissary Agency Valued Benefit of a Global Force Industry Presentation May 16, 2018 Chris Burns Defense Commissary Agency

Agenda

Agenda

Agenda DeCA Objectives Overview of Transformation Accomplishments Transformation Details Ongoing and Upcoming Initiatives Collaboration with the Exchanges

Change is constant

Industry changing rapidly ...requiring us think about how we compete Industry is changing... Rapid push towards eCommerce Continued experimentation with pricing, growing sophistication Private label getting greater strategic focus Continued expansion of the 'hard discounters' Investment in store experience Potential for additional bankruptcies and consolidation going forward (less brick & mortar supermarkets) Enhancing the value we deliver to our customers (pricing and promotions) Ensuring we have the right products (private label, fresh quality) Competing on convenience (staying in-stock, click2go) 1 2 3 3

Business goals are also integral to moving DeCA forward 1 Category Performance Improvement Optimize our assortment to offer the best products to our patrons at a low cost to our taxpayers 2 Private Label 3 Variable Pricing Introduce commissary store brand products as a quality alternative to offer additional patron savings Test variable pricing while maintaining the patron savings benefit

Over 2 years, many accomplishments have been achieved Completed two waves of CPI addressing nearly half of DeCA's sales Achieved significant cost savings, passed on to patrons and taxpayers CPI Private label brand created and introduced items across CPI categories Managed private label procurement process and on-boarded a new supplier Developed a new internal team to manage private label brand and track performance Private Label Successfully designed and executed a store-based project variable pricing pilot Variably priced items across the store for the first time, including private label Preparing to launch campaign to improve patron value perception through 'Image Items' Developed new pricing capabilities, e.g. setting price based on multiple factors instead of cost-plus, executing variable prices to the store Assessed as-is promo process and identified gaps in current methodologies Developed roadmap to achieve desired future state Pricing / Promotions 5

We must continue to unclutter our shelves

Significant accomplishments to date Category performance initiative will continue into the future Significant accomplishments to date Path forward Category strategies developed and CSB Introduced Over 80 categories reset, covering nearly 18K items Positive results in categories touched CPI success improves promotional activities and footsteps Renewing and refreshing our wave 1 category assortments and agreements Monitoring negotiated pricing from wave 2 Wave 3 process to begin imminently Category refresh cycle to follow Product proposals from suppliers are encouraged

Private label sales continue to grow with consumers demand Significant accomplishments to date Private label sales showing strong growth More than 20M+ units and $40M+ in sales since CSB launch 500+ items currently available ~100 new items coming soon & we will continue to release products going forward Very positive customer reactions to quality and savings Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18

Private label is here to stay

PL penetration rates exceeding first year expectations Units sold Avg. Private Label Industry Penetration Freedom's Choice Casepack water ~51% industry penetration 25% Y1 Target Penetration HomeBase Trash bags ~54% industry penetration 27% Y1 Target Penetration TopCare Pain relief ~42% industry penetration 21% Y1 Target Penetration 5/21 6/4 6/18 7/2 7/16 7/30 8/13 8/27 9/10 9/24 10/8 10/22 11/5 11/19 12/3 12/17 12/31 1/14 1/28 2/11 2/25 3/11 3/25 8

Freedom's Choice Tomato Sauce/Paste Newly introduced products show positive adoption in early months Units sold Freedom's Choice Cheese ~45% industry penetration 23% Y1 Target Penetration HomeBase Food Storage Bags ~58% industry penetration 29% Y1 Target Penetration Freedom's Choice Tomato Sauce/Paste ~49% industry penetration 24% Y1 Target Penetration 5/21 6/4 6/18 7/2 7/16 7/30 8/13 8/27 9/10 9/24 10/8 10/22 11/5 11/19 12/3 12/17 12/31 1/14 1/28 2/11 2/25 3/11 3/25 9

Significant accomplishments to date Forward focus on pricing Variable Pricing initiatives continue to gain depth and complexity Significant accomplishments to date Forward focus on pricing ~8,000 items variably priced across the store Conducting pricing review to improve perception Imminently launching "image" item campaign Primary consideration across all strategies is maintaining customer baseline savings Leverage pricing technology Developing variable pricing strategies that will expand to additional items Variably pricing “image” items Monitoring customer responses & making adjustments

Image Items: 'Your Everyday Savings' 'Your Everyday Savings!' campaign "Image" items  Products that our patrons buy frequently and to which our patrons are most price sensitive. Campaign allows DeCA to: Lower priced on items patrons buy most Improve price perception to increase foot traffic This campaign is launching within the next 30 days and will be closely monitored for patron impact Image Items: 'Your Everyday Savings'

'YES!' campaign will be supported with a full marketing campaign Dangler Button Rack Card Shelf Tag Banner Front Back 117

Undergoing redesign Signage assortment will be updated Current State Path Forward Undergoing redesign

Currently exploring options to make promotions more impactful Introduce official in-aisle promotions Align pricing periods and display periods Run shorter, deeper promos Streamline decision process to put forward the most effective promotions for patrons

Numerous collaborative events planned with the Exchanges Opportunities to collaborate Leveraging available data from all to increase shopping across military resale Enabling targeted messaging & social media sharing Bounce back coupons promotions Military Star Card initiatives Gift cards sold across military resale Promotions May - Military Appreciation Month June - Healthy Lifestyle August - Back to School October - “DeCA/Exchanges Cares” (supporting deployed members) November - Veterans Day Commemoration December - Pay your MILITARY STAR Card bill January (2019) – Resolutions & Family Fit Lifestyle Sidewalk Sales Throughout the Year "Complimentary" –vs- "Competitive" Promotions

Teamwork is “key” as we move forward

Thank you for your support and teamwork!