1. Defense Commissary Agency
Valued Benefit of a Global Force
American Logistics Association May 16, 2018
RDML(R) Robert J. Bianchi
Director, Defense Commissary Agency

2. Agenda Director’s Guidance
Bringing Back Patrons and Improving Operations
Commissary Store Brands
Sales Performance
Image Items
EBS Update
On the Horizon
Partnering for Success

3. Charting a course for success
Build sales and maintain the relevance of the commissary benefit
Reaffirm "customer first" principles that make commissaries a valued benefit
Enhance stakeholder collaboration
Enhance collaboration and partnering with military resale community to leverage our combined strengths
Improve our technological capabilities to ensure we have the right products at the right price on well-stocked shelves
Collaborate with industry – develop joint plan focusing on retail's best practices for bringing customers back to military resale

4. Industry is an integral part of achieving our goals
Our Customers
Increase foot traffic and reverse declining sales trend
Maintain baseline patron savings percentage
Increase Customer Service ratings
98% product availability through improved stocking capabilities
Continue rollout of CSB items
Competitive pricing of image items
Expand our selection of natural and organic product offerings
Cross promotions with exchanges
Improve use of social media
Ensure savings stays consistent with baseline through variable pricing initiatives and improved, mutually beneficial working relationships with our vendors
Focus will be on Commissary Customer Service Survey – supplemented with other third party satisfaction measurements
Industry is an integral part of achieving our goals

5. Our Business
Develop business processes to support a P&L mindset
Improve data analytics and technology platforms
Optimizing resale and point of sale processes
Improve emphasis on ensuring fair, sustainable relationships that enhance performance for our vendors and drive savings for both patrons and taxpayers
Fully implement variable pricing
Establish a retail-based accounting system that recognizes revenue/margin generation and ensures auditability
Improve data analytics capabilities by maximizing our item movement data and leveraging our customer relationship management
Replace legacy IT systems to improve business processes
Deploy Commissary Advanced Resale Transaction System Replacement Modernization, optimizing our Point of Sale to enhance convenience and increase additional capabilities
Technology will pave the way for more effective partnering with industry

6. Bringing Back Patrons and Improving Operations
Actions to Date:
Make the commissary an integral part of the community through installation leadership engagement and active listening
Military Star Card (MSC) program
Coupon savings cross promotion
DeCA/Exchange sales & merchandising cooperative efforts
“Baggerless” lanes
Adjusting operating hours/days to increase convenience and increase efficiciency
Upon coming on board at DeCA, I reached out to every installation command structure to introduce myself and bolster the relationship between our store management team and installation leadership.
Military Star Card: Total MSC Sales (thru 30 April) - $99.5M
Total MSC Transactions (thru 30 April) – 1.4M
Avg transaction amount - $73
Revenue generated (1%) - $995K
Cross promotion: 8 locations - December 18th - 24th
Spend $50 at the commissary and receive $5 off with purchase totaling $25 or more at selected Navy exchanges locations Total of 54,827 transactions over $50. Cumulative commissary transactions at 8 locations down slightly over 2% versus same period FY 2016 but trended better than enterprise December decrease of 3.6%. 3 bright spots - Jacksonville, San Diego and Annapolis grew transactions slightly. Of the 54,827 potential coupons, 5,739 or 10.5% were redeemed at the NEXCOM locations. This is far above the 1% average coupon redemption rate cited by our clearing. The initiative benefited overall military resale as NEXCOM's transactions grew by 14% versus the same period last year.
Exchange/Commissary sales and merchandising cooperative efforts.
Baggerless lanes
Increased operations to 7 days at Mountain Home, Twenty-Nine Palms, and McConnell. Test will be for 6 months to determine is we grow sales or simply spread them out of more days.

7. Commissary Store Brands
Commissary store brands are a cornerstone in the effort to rebuild store traffic
Category penetration is progressing as expected or better in some cases
Customer response is extremely positive
More than 500 items currently available
Steady growth of both sales and units every week
32 additional items become available during the second half of the FY 2018
Admiral Bianchi:
Tippy Toes Baby Food currently in 65 CONUS stores. There are 10 varieties. Baby food projected to be available in OCONUS mid-May.
OCONUS availability for CSB is 4-6 weeks on average following CONUS availability.
There have been over 500 private label items introduced. DeCA's goal is to have our private label brands reach half of the industry category penetration rate within the first year of the items being introduced. Categories are be ing monitored closely. Examples thus far include:
 * 24 pack water and trash bags have already reached industry penetration rate
* pain relief products and food storage bags have exceeded half the industry penetration rates
* cheese which was recently deployed in all CONUS stores and tomato paste and sauce are still growing towards the half of the industry penetration
rates

8. Sales Performance to Date
-6.3%
-4.9%
Estimated Loss based on DiRep data through 5/7/2018
DeCA Retail Sales thru 5/13/2018
Loss estimated using the average sales per hour for each store and assuming DeCA would have captured these sales
Note: March 2018 was impacted by Easter (April 1, 2018) falling earlier in April and closed with (5) Saturdays compared to (4) Saturdays in April had negative impacts from the calendar effect because it closed with only (4) Saturday sales days compared to (5) in 2017.
Total projected sales for May - $384,356, (-3.01%)
FY17 Avg. % Change = -6.31% /// FY17 % Change = -6.34%
FYTD18 Avg. % Change = -4.92% /// FYTD 18 thru May 13 % Change = -4.88%
Prepared by the Business Analytics Team on 5/15/2018
Source: DeCA Retail Sales; May 2018 (thru 5/13/2018)*

9. Bringing Back Patrons and Improving Operations
Ongoing/Future Actions:
Increase use of variable pricing to make savings more consistent across the store and improve price perception
Kick off the “YES” program
Continue to aggressively introduce Commissary Store Brand to lower the basket cost of shopping at the Commissary
Expanding natural and organic items selection at top stores
Sell commissary gift cards in exchanges and exchange gift cards in commissaries
Improve shelf in-stock position – 98% in stock is paramount to increase sales
Test new stocking model using Navy Exchange employees to stock shelves at Little Creek commissary—started 15 May
Improve fill rates
Del Myrick will be providing a pretty specific briefing on fill rate analytics and it is very eye-opening. This is one area we must improve.
Distribution fill rates hover at 89% average for all distributors
33% of items never filled are items with significant movement

10. Image Items: 'Your Everyday Savings'
"Image" items are those products that our patrons buy frequently and to which our patrons are most price sensitive. Competitive pricing on these items will help both DeCA and vendors.
We are identifying the right "Image Items" for our patrons. We would like to work with you to lower prices on the identified items to drive sales growth and value perceptions.
This will be great for our patrons as well as for both of our businesses
Will give us the opportunity to lower prices on some of the items our patrons buy most
Will improve our price perception and ultimately help bring patrons back to the store
Image Items: 'Your Everyday Savings'
Rolling out 97 items on June 1

11. Vendor Portal Bill Back Manager
EBS Update
Fort Eustis Pilot
Deployment of Increment 2 Store Replenishment Suite - Proof of concept pilot brings DeCA’s operational model in line with commercial industry and enables DeCA to make the data driven decisions regarding space allocation, item assortment, and inventory levels necessary to compete and win
Vendor Portal Bill Back Manager
Great value in overall industry feedback following test with industry participation
Training feedback has been very positive
Go live date pushed into June to provide time to fine tune issues identified by industry
Fort Eustis Pilot:
New CLICK2GO
New POS
New ordering system – Power DAX
Store-specific planogram to facilitate shopping experience
Improved customer relationship management
I want to thank you -- Industry participation was great. I know that there were some hiccups and we
learned some valuable lessons that will make future resets go more smoothly.
Bill Back Manager
Bill Back Manager is a system designed to allow systematic tracking of promotional monies (scan-based bill backs) owed to DeCA by generating invoices to brokers, manufacturers, and DSD vendors for various types of promotional activities.
In the Vendor Portal vendors can electronically create, negotiate, and finalize scan-based promotional agreements with DeCA for Manager's Specials, Hot Deals, Seasonal Markdowns, and Local Store Promotions.   
Simplifies tracking of promotional program compliance to ensure full reimbursement VCM reduction at store level by using BBM for store local promotions Systematic invoice transmission to vendors by , eliminating current manual workload required to send out invoices Automatic creation of financial receivable transactions, eliminating current
workload required for manual entry Enhanced compliance with GAAP by systematically recording promotional
transactions as a reduction to Cost of Goods Sold rather than Revenue
 Thanks to all of the vendors who participated in our testing.
Instead of going live 14 May we will be going live about 25 June to fix what we found in testing thanks to having vendors come in early and participate in our testing (good foot stomper)!!!!

12. On the Horizon Meal solutions Meal kits
Expansion of prepared food options
Expand CLICK2GO
Explore additional partnering opportunities with base QOL activities (MWR/exchanges) to “bring patrons back to the base”
Implement new real-time customer feedback tool
Admiral Bianchi:
Tippy Toes Baby Food currently in 65 CONUS stores. There are 10 varieties. Baby food projected to be available in OCONUS mid-May.
OCONUS availability for CSB is 4-6 weeks on average following CONUS availability.

13. Forward together, successful together
Partnering for success
Driving benefit for the patron and the business forward
Collaborative business planning
Open lines of communication
Transparency
Ensure that shelves are fully stocked
Provide high demand items at competitive prices
Innovate with industry – bring your ideas!
Forward together, successful together

14. Questions?
Thank you