1. Restoring health Partnering with pharmacies to survive and thrive Miranda AdamsEddie RobinsonMadison UreKatharine Ward

2. Three changes in the convenience industry create new opportunities 1 1 Channel blurring between supermarkets and convenience stores 2 2 3 3 Increasing regulation around tobacco sales Increasing labour costs

3. Industry revenue growth indicates a need for change Source: IBISWorld, 2014 Change in industry revenue (%)

4. Population increasingly health conscious As consumer preferences change, health and wellness have taken on increased importance Increasing engagement with digital advertising Expectation for 24/7 availability Increasing OTC medicine consumption Source: Australian Institute of Health and Welfare, 2013 Consumer Trends Value ($ mil)Growth (%) Medicinal267.3 Beverages2356.2 Grocery742.1 Personal Care360.1 Confectionery396 Retail Growth Source: Aztec & Retailer Contribution, 2013

5. Strategy Overview: Repositioning convenience stores and redefine convenience 1 $ New revenue stream Expand Over-the- Counter (OTC) pharmaceutical range 2 Alliance with the Pharmacy Guild 3

6. The convenience store industry requires a long term and far reaching solution What does a solution require? Source: Aztec & Retailer Contribution, 2013 Scalable Innovative, to gain a first mover advantage Capitalise on key consumer trends Short and long term sustainable benefits

7. Convenience stores can advertise through LED screens on street front Coca Cola used biometrics and facial recognition technology via a clear LED digital screen on fridges. The screen serves ad campaigns, collects sales data and can detect customer interaction. This has boosted sales by 12% compared to standard fridges. Source: Coca-Cola Is Using Facial Recognition Technology On Fridges In Australia To Sell More Drinks, May 2014, Business Insider Benefit for convenience stores Maximise street frontage Supplement POS advertising Generate new revenue How will it work? 1.Convenience stores install LED screens 2.Digital advertising space available to sell Will it work? Interactive capabilities provide new content experiences that can boost a product’s sales and brand loyalty $ A quick win for convenience stores

8. Expanding pharmaceutical offerings will provide additional convenience for consumers Currently Some OTC products sold Limited knowledge and awareness of pharmaceutical offerings Limited association of ‘health and wellness’ with convenience stores Opportunity for convenience stores Increase and market OTC product range Opening hours and locations provide an opportunity to meet consumer demand Pain relief, in your hour of need Community Pharmacy Agreement - Up for review 2015

9. Positioning now to benefit from growth and anticipated demand for pharmaceutical products and services Proven success from the hybridised value of pharmaceutical and convenience stores Positioning now to improve the accessibility of health services in urban and regional settings Meet consumer health and wellness needs

10. The pharmaceutical and convenience industries share characteristics, making it an ideal partnership Benefits for convenience stores Access a wider range of consumers Legitimise health and wellness focus Point of differentiation Motivations for pharmacies New growth opportunity Cost reductions Increased presence

11. An alliance between AACS and Pharmacy Guild will provide consolidated strength against supermarkets 1: Woolworths in new bid for pharmacy, October 2013, AFR; Small grocers shocked at proposed increase in hours of trade, May 2014, Dynamic Business. Why will this deliver value? How will value be realised? Face a shared market pressure Collaborative efforts will provide new value Stronger voice Increased Lobbying power Access to a shared consumer base Shared resources Combined marketing efforts Legitimising existing healthy offerings Gain strength through collaboration

12. The Restoring Health strategy will generate a net present value of $259,000 over three years per store Components $259,000 by 2017 (Net-Present-Value for 3 years) Range (accounting for uncertainty) VariableMinMax Initial market share 10%25% Market share growth 2%10% Advertising Revenue $10,000$12,000 Fixture Costs $30,000$80,000 Store Closing Cost $5,000$20,000 Pharmacist Cost $45,000$67,000 Advertising Cost $500$2,000 Source: IBISWorld, 2014 Break even in 18 months 87% ROI Net Present Value of $259,000 per store

13. Restoring Health can be implemented over three years 6 monthsYear 1Year 2Year 3 Pharmaceutical expansion LED screen Communication Planning

14. Restoring Health can be implemented over three years Commence talks with pharmacy guild Planning 6 monthsYear 1Year 2Year 3 Pharmaceutical expansion LED screen Implement OTC range Establish and begin the alliance Expand OTC range Move towards hybridised stores Communication

15. Restoring Health can be implemented over three years Procure and install LED screens Commence talks with pharmacy guild Planning 6 monthsYear 1Year 2Year 3 Pharmaceutical expansion LED screen Sell advertising space Communication Implement OTC range Establish and begin the alliance Expand OTC range Move towards hybridised stores Expand LED functionality Understand and adapt Restoring health Partnering with pharmacies to survive and thrive

16. Probability distribution for strategy net present value

17. DCF Industry Initiative per Store Years Passed0123 Year2014201520162017 Tax Effect Revenue from pharmacy sales$269,273.09$280,779.87$292,778.36 Advertising$13,482.67$14,024.02$14,587.09 Less cost of goods sold-$188,491.16-$196,545.91-$204,944.85 Less pharmacist wages-$60,443.23-$62,237.97-$64,086.00 Less maintenance -$840.51-$874.26-$909.36 Taxable Income$32,980.86$35,145.75$37,425.24 Tax Payable $13,192.34$14,058.30$14,970.09 Net Cash Flow Revenue from pharmacy sales$269,273.09$280,779.87$292,778.36 Advertising$13,482.67$14,024.02$14,587.09 Less COGS-$188,491.16-$196,545.91-$204,944.85 Less pharmacist wages-$60,443.23-$62,237.97-$64,086.00 Less fixtures costs$50,552.48 Less costs of closing for installation$10,610.33 Less advertising maintenance-$840.51-$874.26-$909.36 Net Cash Flow$61,162.81$32,980.86$35,145.75$37,425.24 Discounted Cash Flow Discount Factor10.9405005820.8319116480.692076991 Discounted Cash Flow$61,162.81$31,018.52$29,238.16$25,901.15 NPV$147,320.63 Discounted cash flow analysis of strategy

18. Variables used in DCF of strategy VariablesMinMaxMeanDeviationNorminvar Revenue from Pharmacy Products Revenue from a pharmacy$2,000,000.00$2,500,000.00$2,250,000.00$375,000.00$2,342,769.55 Market share taken in 1st year10%25%18%3%16% Growth in product sales2%10%6%1%5% Costs from Pharmacy Products COGS$1,400,000.00$1,750,000.00$1,575,000.00$262,500.00$1,469,789.72 New fixtures in store$30,000.00$80,000.00$55,000.00$9,166.67$46,695.48 Cost of closing store for installation$5,000.00$20,000.00$12,500.00$2,083.33$12,172.87 Cost of pharmacist$45,000.00$67,000.00$56,000.00$9,333.33$51,657.69 Wage increase for pharmacist2%4%3%1%2% Revenue from Advertising Per week revenue$100.00$400.00$250.00$41.67$289.13 Revenue growth2%5%4%1%4% Number of weeks52 Costs from Advertising Installation$5,000.00$20,000.00$12,500.00$2,083.33$12,518.43 Maintenance (yearly)$500.00$2,000.00$1,250.00$208.33$1,446.83 Tax Rate40% Discount Rate6%8%7%1%9%