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

2. Agenda

3. Agenda

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

5. Change is constant

6. 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

7. Business goals are also integral to moving DeCA forward1
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

8. 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

9. We must continue to unclutter our shelves

10. 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

11. 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

12. Private label is here to stay

13. 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

14. 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

15. 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

16. 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'

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

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

19. 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

20. 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

21. Teamwork is “key” as we move forward

22. Thank you for your support and teamwork!