The Right Tools + The Right Team = Reduced Unsaleables Presented by: Rob Shifter, Nestlé USA, Inc. Jessica Bryner, Rite Aid Corporation

Overview Components of Collaboration The Fruit of Our Labor Sufficient remaining shelf life Detailed unsaleables data SKU rationalization Improved store assortment planning Effective inventory management Item discontinuations The Fruit of Our Labor Lessons Learned & Recommendations

Avg remaining shelf life – deliveries to Rite Aid In most cases, newer is better. Internal initiative at Nestle Avg remaining shelf life – deliveries to Rite Aid Ambient beverage items 11-22 months Confections 8-12 months Baking ingredients 10-27 months Baby food 10-15 months Infant formula 16 months

Without a map, you might be running in the wrong direction. Detailed Data Without a map, you might be running in the wrong direction. Reporting capabilities Monthly updates High level tracking by category Trend results Detailed SKU results by a specific retail store

Returns & Allowance Summary Nestle #37812 Returns & Allowance Summary   FY09 FY10 A B C Total Purchases $x D&O D&O% x% Allow Funding Shortfall

Sometimes, things don’t work out like you planned. SKU Rationilization Sometimes, things don’t work out like you planned. Review performance as a team Determine the underlying issues causing high unsaleables Take the appropriate actions to remove poor performing items from distribution

Improved Store Assortment Planning Don’t use an axe when a scalpel will do the job. Some items do not need to be discontinued in ALL stores Store clusters with the right assortment

Butterfinger single (0009259) # of stores Sales %TTL D&O %TTL   # of stores Sales %TTL D&O %TTL Inventory %TTL % of stores A 3,574 81% 5% 73% 76% B 603 13% 26% 14% C 534 7% 70% 12% 11% Total 4,711 100% A+B 4,177 93% 30% 88% 89%

Effective Inventory Management We expect people to be productive; inventory should be, too. Inefficient use of company assets Rite Aid internal initiatives Markdown optimization tool Tighter controls on inventory flows to the stores Improved visibility to current inventory levels

Dealing with Item Discontinuations No self-respecting product wants to end up a banana box. Where should saleable items go? Formal store clearance program & phased markdown guidelines help sell-thru Helps keep food and packaging out of landfills

How It All Works Quarterly meetings to review standardized reports Who attends? Sales representatives Category management Inventory planning Supply chain What is discussed? Product assortment Promotion schedules Other areas that impact unsaleables

The Fruit of Our Labor D&O $ Sales $ FY '09 FY '11 % change Confections 100 26 -74% 97 -3% Warehouse and food 44 -56% 128 28%

Lessons Learned and Recommedations Remaining shelf life Key metric = # of days remaining at time of delivery Detailed data Needed to make the best decisions Collaboration task force Will ensure that the best decisions will be implemented Applicable regardless of returns policy