1. Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Management Ventures, Inc. The evolving meaning of value in the current environment Presented by Vincent Verdier MVI November 2008

2. 2 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Copyright and Disclaimers Copyright © 2008 Management Ventures, Inc. All Rights Reserved. 20 University Road, Cambridge, MA 02138 USA (617) 588-4100 hzimmerman@mventures.com No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photography, recording, or any information storage and retrieval system now known or to be invented, without the express written permission of Management Ventures, Inc. The printing of any copies for back up is also strictly prohibited. Disclaimers The analyses and conclusions presented in this seminar represent the opinions of Management Ventures, Inc. The views expressed do not necessarily reflect the views of the management of the retailer(s) under discussion. This seminar is not endorsed or otherwise supported by the management of any of the companies covered during the course of the workshop or within the following slides.

3. 3 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Defining what VALUE stands for is becoming more complex Customers told us we were not giving them value. From that day on we determined to follow the customer and not the competition. Terry Leahy 2004, CEO Tesco Source: Tesco, Financial Times, May 2008 In response to why more ABC1 shoppers are visiting Aldi: If you went back 10 years, the majority of what I sold was in tins and packets. Now what Im selling has switched over to fresh foods, chilled foods and ready- prepared foods, and this is a far more appealing range to that kind of consumer. Mr Paul Foley, MD Aldi UK & Ireland

4. 4 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI VALUE is a ratio between quality and price: but room to manoeuvre shrinks Low Quality Perception High Quality Perception High Price Perception Low Price Perception Source: MVI Research and analysis Premium Supermarkets Discounters Traditional Supermarkets EDLP Supermarkets VALUE

5. 5 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI For non-grocery, Amazon has built the best VALUE positioning Source: MVI Research and analysis Low Quality Perception High Quality Perception High Price Perception Low Price Perception VALUE AMAZON Lower price of shipping Added categories, including premium products and brands Global credit card, access to loyalty card support

6. 6 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Retailers position their VALUE offer by different means Value private labels EDLP strategy giving the best value Good value? A mix of price and quality Our consumers are spending less. It is about them getting better value from Waitrose. M. Price, MD Waitrose Source: MVI Store visit; Financial Times, Nov. 2008 Tesco, UK Wal-Mart, Argentina Carrefour, Romania Auchan, Russia

7. 7 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI And VALUE does not have the same meaning everywhere, which impacts place of purchase There are wide geographical differences defining in which type of stores the cheapest product can be found... 1. Western Europe: Fragmentation of the historical HM shopping trip in favour of price-focus retailers 2. US/LatAm/China: Consolidation of the HM shopping trip, still seen as the cheapest place where to shop...Which impacts retailers strategies: 1. Strategies focusing on building Frequency: –Straight discounts; Focus on destination categories (i.e. fresh) 2. Strategies focusing on building Basket: –3 for 2 promotions, cross-merchandising

8. 8 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI So how do retailers evolve to achieve the best VALUE offering? Retailers as shoppers defender Redefining value in shoppers minds Private labels: focus on price or quality? Implications

9. 9 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Being on the side of the consumer is becoming more important Source: MVI Store visit; Lidl; Leclerc; Dia Argentina - CIES Lidl Spain: We have negotiated for you! Dia Argentina: If you pay more, its because you want it! Leclerc France: More purchasing power for you, now!

10. 10 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Redefining VALUE in shoppers minds: the advantages of EDLP retailers All retailers which became successful, such as Wal-Mart and Tesco, did so by implementing a clear EDLP strategy Gilles Petit, ex-MD Carrefour Spain An efficient business model that reinforces the value positioning Source: El Pais, May 2007; MVI Store visit Mercadona, Spain Kaufland, Poland

11. 11 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI But even EDLP retailers must keep refreshing the way they communicate on price Source: MVI Store Visit At Colruyt, you constantly take advantage of promotions run at other retailers. To do so, we collect all circulars, look for promotional prices and compare them with our prices. When necessary, we adapt our prices. Every week, 4,000 prices are collected this way, on top of the regular checks we are undertaking. So you can enjoy the best prices for each product, anytime. At Colruyt, you benefit from all promotions run at other stores! Colruyts Extra reductions card Source: Colruyt, MVI Store Visit

12. 12 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Private label is receiving more marketing attention in-store Globally, retailers are increasing communication on their ranges of private labels In the current environment, mainstream retailers are trying to increase awareness of price competitive private labels At the same time, the discounters have found that messages concerning quality are increasingly effective

13. 13 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI For traditional SM, trading down shoppers through PL can a risky strategy Tesco has put signs across the front of its UK stores to promote its new discounter private label ranges. Hit is advertising a wider range of discounter private labels as German price sensitivity has increased Source: MVI store visits

14. 14 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI While discounters like Lidl are communicating quality and value of their private labels Source: MVI store visits Germany France Hungary

15. 15 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI And supporting PLs quality and added-value at POP allows retailers to gain market-share Source: MVI Store Visit Price advantage Functional elements Emotional elements Quality communication

16. 16 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVIConclusions The crisis is global, however retailers responses are local: Which channel/retailer drives the VALUE positioning in your market? How can you align to this positioning? –4Ps –Basket driven strategy? –Traffic driven strategy? PL are gaining greater exposure, especially at POP Shopping environments which reduce the amount of point of purchase advertising benefit private label sales

17. 17 Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI So where are your brands positioned in this environment? Low Quality Perception High Quality Perception High Price Perception Low Price Perception Source: MVI Research and analysis VALUE

18. Thank You!... A Partner in Your Success Corp. Site: MVI-Worldwide.com, Licensed site: MVI-Insights.eu © 2008 MVI Vincent Verdier Analyst EMEA MVI EMEA Headquarters 6 More London Place Tooley Street London SE1 2QY +44.207.031.0260 vvincent@mventures.com