1. © IGD 2012 Special Analysis, Series 1 - August 2012

2. © IGD 2012 In Focus: The Asia grocery market Welcome to the first in a new series of regional updates focusing on Asia. In this series, we will be providing data and insight on a fast growing region made up of vastly different local markets. Results from the world’s major retailers in Asia, illustrate that this remains a key area of growth and IGD investigates how this is informing strategies. In this first update, we investigate how two of the region’s most exciting markets, Thailand and Vietnam, are developing. We hope you find this useful and don’t hesitate to email the team your thoughts and feedback to shape the series moving forward. Source: IGD Research Welcome Vicky Ray Head of Asia Follow us on Twitter @RetailAnalysis victoria.ray@igd.com Need something else? Email askIGD.comaskIGD.com Call +44 (0) 1923 851954

3. © IGD 2012 Content The trading climateWho’s winning and retailer prioritiesKey consumer trendsMarket Watch: Thailand and Vietnam

4. © IGD 2012 Economic growth is slowing Source: IGD datacentre, IMF % GDP growth With the exception of the Philippines, Thailand and Japan economic growth across Asian markets has eased. However 2012 growth forecasts remain well ahead of Europe and the US. Although Asian exports to Europe have weakened, robust domestic demand in a number of Asian markets has helped to offset this. Growth in China is forecast to remain relatively strong, bolstered by investment and consumption. India’s growth could become an issue if high interest rates and uncertainty around policy are not tackled soon. The trading climate

5. © IGD 2012 Inflation is easing across the region Source: World Bank, country National Statistics offices We have seen rising inflation across the region in recent years, dampening consumer confidence and impacting shopper behaviour. However, the outlook in most countries is positive as inflation has eased in the first half of 2012. It does however remain a concern in India, Vietnam and Indonesia. The trading climate

6. © IGD 2012 Top 5 retailers’ value share in 2011 Source: IGD Datacentre. Data is for the combined share of the Top 5 retailers in Grocery channels. Most Asian retail markets remain high fragmented China, India, Indonesia, Philippines and Vietnam are the least consolidated markets providing growing retailers with long-term opportunities for growth The retail markets in South Korea, Thailand and Malaysia are more mature but there is still scope for growth Japan is the most consolidated and the only market where the top 5 retailers share more than a third of the market There remains plenty of scope for expansion and it is also likely that consolidation will continue across the region The trading climate

7. © IGD 2012 Top Grocery Retailers in Asia Source: IGD Datacentre (dataset at 25/08/2012). IGD Turnover excludes VAT but includes sales of petrol by grocery retailers (1)Asia = China, Hong Kong, India, Indonesia, Japan, Malaysia, Macau, Philippines, Singapore, South Korea, Taiwan, Thailand, Vietnam (2)Sales from all grocery formats incl. cash & carry. Excludes wholesaling, foodservice, health and beauty formats and non-food activities Who’s winning? RankRetailer 2011 Grocery sales US$ million Operating countries (in order of sales) 1 Seven & I Holdings 76,164Japan, Thailand, Taiwan, South Korea, Malaysia, Philippines, Indonesia 2 AEON 32,138Japan, China, Malaysia, Thailand, Hong Kong 3 Wal-Mart Stores 18,204China, Japan 4 Tesco plc 17,682South Korea, Thailand, China, Malaysia, India 5 Carrefour Group 11,645China, Taiwan, Indonesia, Malaysia, Singapore 6 Auchan Group 10,130China, Taiwan 7 Shinsegae Group 9,887South Korea, China 8 China Resources Enterprise 8,652China, Hong Kong 9 Dairy Farm 6,739Hong Kong, Singapore, Taiwan, Indonesia, Malaysia, India, Vietnam, Macau 10 Lotte Shopping 6,669South Korea, China, Vietnam, Indonesia 11 Casino Group 3,470Thailand, Vietnam 12 AS Watson 2,782Hong Kong, China, Macau 13 Wu Mart 2,544China 14 SPAR International 1,212China, Japan, India 15 Dia 363China

8. © IGD 2012 Top three retailers: Last Quarterly Results Like-for-like (LFL) sales Source: IGD Research, Retailers (Up to 21/08/12) Results for the top three global retailers have been mixed across Asia: Walmart has delivered the most consistent performance, with LFL growth in both China and Japan. Carrefour’s Asian LFL growth was negative in Q2, pulled down by performance in China. LFL growth was reported in Carrefour’s Indonesian and Taiwanese businesses. For Tesco, LFL performance in Q1 improved versus Q4 in all Asian markets except China; its Thai business has recovered well following a difficult period affecting by flooding; it’s South Korean business has been impacted by legislation affecting store opening hours; Malaysia has improved from -3.4% LFL in Q4. Q2 (May-July) Who’s winning? Q2 (Jan-March) Q1 (March-May)

9. © IGD 2012 Strategic priorities of international retailers Source: IGD Research, Retailers Slow expansion in China and focus on improving profitability and moving to everyday low pricing. Continue to build on improvements to Seiyu stores in Japan. Focus on improving performance and developing the online proposition in key markets including China and Indonesia. Leverage the skill and scale of the Group through development and delivery of a multi- format and multi-channel proposition; some consolidation in China. Continue to integrate Carrefour acquisition and develop its ‘ Big C Extra’ format in Thailand. Maintain strong growth in Vietnam as the only foreign player. Continue strong growth in China, leveraging the partnership with RT Mart. Enter the Indian market through a joint venture with Landmark Group. Extend reach across the region through recent market entry in Cambodia and Philippines. Retailer priorities? Expansion focused in the convenience sector, while improving performance of its larger format stores in Japan and China. Continued focus on innovation in products and formats. Ambitious multi-format expansion plans in China; targeting the convenience market in less developed markets like Indonesia and Philippines.

10. © IGD 2012 Smart shopping has increased the emphasis on price and promotions Thailand’s Tesco-Lotus launched its successful ‘No. 1 for Price’ campaign earlier this year Suppliers give away free gifts in Big C, a common practice in Vietnam Source: IGD Research Key consumer trends Asian consumers are feeling the pressure on household incomes, driven by inflation in food and fuel prices. Savvy shopping is prevalent, with consumers shopping around more for the best prices and promotions, becoming less loyal to retailers and brands. Retailers are responding through more aggressive price and promotional strategies. Price communication is bolder e.g. Tesco-Lotus ‘No. 1 for Price’ campaign. Retailers are also focused on delivering value to customers through bigger packs and private label. Although inflation is easing, price will remain high on the agenda and we can expect to see more price cutting initiatives across all major retailers. Tesco-Lotus highlights ‘Better Value’ though its ‘Clubpack’ in Thailand ‘Buy 2 get 1 free’ in Carrefour China as the retailer up weights price communication in-store

11. © IGD 2012 Focus on food safety and health Central Food in Thailand highlights its ‘Natural’ meat ranges In Vietnam, Big C has its own Butchery and Raw Food Processing Centre to make certain all meat products meet international standards Source: IGD Research Key consumer trends Across Asia food safety and health are both high priority issues for customers and retailers. Contamination in the supply chain, especially in China, and in key categories like baby milk, fresh pork and fish has raised awareness among shoppers. Guaranteeing food safety needs to be high on the agenda of both retailers and suppliers through more rigorous supply chain processes. Retailers are investing more in this area to improve food quality and communicate this to customers. In most of the Asian markets, healthy food means food that is fresh and free from chemicals and pesticides. In more developed Asian countries such as South Korea, there is an increasing demand for low calorie and low fat alternatives. Walmart China’s ‘Vegetable Pesticide Inspection’ aims to reassure shoppers on fresh food quality and safety

12. © IGD 2012 Premiumisation Source: IGD Research Key consumer trends Rapid growth of the middle classes across a number of Asian countries – China and Thailand in particular – has given rise to a demand for more premium products. Upmarket customers are looking for differentiation, uniqueness and are increasingly prepared to spend a little more for a premium product. Imported foods and chilled ready meals or ‘food for now’ are fast growing categories with opportunities for product development. 7-Eleven is expanding its range of chilled foods and ready to eat meals in Thailand Norwegian Atlantic Salmon is sold in Tesco-Lotus Thailand with the message ‘eat seafood live longer’ Premium private label ranges – Tesco Lotus have launched ‘Finest’ and Big C has launched ‘Delight’ Central Retail in Thailand makes a feature of imported European wines

13. © IGD 2012 Thailand at a glance Market Watch: Thailand Thailand has suffered severe political instability and flooding in recent years, both of which have had a tremendous impact on people and businesses. The country serves as a regional production hub and both imports and exports were down as a result of the heavy impact of the floods. Nevertheless Thailand remains a key export market to the west. There remains a large disparity in income levels and development between Bangkok and ‘upcountry’ Thailand. However, in less affluent parts of Thailand, traditional retailers continue to use modern hypermarkets & cash and carry stores as their suppliers – wholesale packs remain an important feature of the market. GDP growth was flat last year after a strong performance of 8% in 2010. Growth is expected to return to 6% by the end of this year (Bank of Thailand & IMF). Inflation dropped to 3% in July 2012 but remains a concern for consumers, despite being lower than other southeast Asian countries. Source: IGD Research

14. © IGD 2012 Thailand: IGD Grocery Retail Market Shares Source: IGD Datacentre Retailer201020112012e Tesco Lotus 10.7%11.5%11.9% Seven & I Holdings 7.6%8.2%8.4% Casino 5.9%7.1%7.2% Central Retail Corporation1.7%1.9% FamilyMart Co0.4%0.5% Market Watch: Thailand Despite Casino’s acquisition of Carrefour, Tesco-Lotus continue to lead the market in grocery market share

15. © IGD 2012 Expanding the offer through ‘Extra’ stores Source: IGD Research Fresh food offer differentiated through broader ranges and new initiatives Extended non-food ranging including lifestyle displays Improved ranging Greater focus on premium fresh food products, especially in deli and bakery Broader range of imported products A more premium offer An optician, pharmacy and financial services have been introduced Free Wi-Fi is available to all customers Service-led offer Stores are easier to navigate, with cleaner lines of travel and clear signage to aid movement Clearer stores and signage Examples of Tesco-Lotus’s first Extra in Thailand – Rama IV, above, and Big C’s first Extra, below. These two stores trade head to head in Bangkok. Market Watch: Thailand Leading retailers Tesco-Lotus and Casino’s Big C have begun to convert some hypermarkets to ‘Extra’ format stores

16. © IGD 2012 The growth of convenience Source: IGD Research InnovationMeal solutions Caring for customers on the move Selection of hot and cold drinks at Tesco- Lotus Express Providing for top-up missions with fresh meat and vegetables remains key Affordable ready-to- eat solutions intended to compete with street vendors Market Watch: Thailand Tesco Express has brought ‘cafe culture’ in store 7-Eleven trailing European style in-store bakery 7-11 has enhanced its offer though hot food and bakery counters

17. © IGD 2012 Trading in Thailand: 5 things you need to know 1 Market growth has recovered following last year‘s historic flooding supported by monetary easing and a large fiscal package in reponse to the floods. Consumer confidence has improved but shopper attitudes and behaviours will take some time to recover to pre-flooding levels. 2 Flooding also highlighted weaknesses in the supply chain and distribution network. We can expect to see retailers optimising and improving their infrastructure in 2012/13: opening new distribution centres, upgrading systems, increased demand for refrigerated trucks and improving on shelf availability through better lead times. 3 The convenience market continues to grow strongly in Thailand, with Big C, Tesco-Lotus and Central Food Retail all seeking growth through faster new store expansion and in-store innovation. Retailers are also looking to maximise the opportunity from a growing middle class sector, seeking ‘eat now’ and ‘ready to cook’ products. 4 Private label remains relatively undeveloped in Thailand but is growing rapidly. All the major players are focusing on the leveraging their three-tier ‘own brand’ strategy giving it more prominence in store. 5 The online retail channel is in its infancy in Thailand but online shopping, social media and group buying sites are all increasing in popularity. Big C has launched ‘Click & Collect’ in Bangkok and Tesco-Lotus is also preparing to introduce its dotcom service to the capital. Source: IGD Research Market Watch: Thailand

18. © IGD 2012 Vietnam at a glance Market Watch: Vietnam Vietnam is one of the world’s five remaining one-party communist states. The Communist Party are expected to keep a fairly firm grip for the foreseeable future, ensuring a largely stable political environment. Vietnam has benefited from a program of internal restructuring, a transition from the agricultural base toward manufacturing and services, and a hard working, youthful population. State control and intervention in commercial activities, especially for foreign businesses, continues to present a challenge. Construction permits and access to electricity are pertinent issues. For retailers the key risk is the government’s ‘economic needs test’ which they are required to pass for all new store approvals. Local operators can be favoured in this process. Economic growth has slowed after tightening in 2011, although GDP growth is still forecast to be 5.9% in 2012. Inflationary pressure, which was running close to 20% in 2011, is easing and FX reserves have improved, but still are strained. As wages rise in China, traditionally Asia’s main manufacturing hub, more businesses are choosing to invest in Vietnam. Source: IGD Research

19. © IGD 2012 Vietnam: IGD Grocery Retail Market Shares Source: IGD Datacentre Retailer201020112012e Saigon Co.op 1.8%2.0%2.1% Casino Group 1.1%1.3%1.4% FiviMart 0.5%0.6% G7 Mart 0.3% 0.4% Lotte Shopping0.2% 0.3% Dairy Farm0.1% Market Watch: Vietnam

20. © IGD 2012 Traditional retailing in Vietnam Source: IGD Research Although modern trade is growing in importance, traditional trade still dominates (approx. 85% of the grocery market). Most Vietnamese families shop at least once daily in traditional markets close to home, where fresh food in particular is bought and prepared for each meal - homes have limited storage space and not all have a refrigerator. Sachets are common as a way of managing household budgets as well as giving shoppers the opportunity to try new products on the market as personal care is still a relatively new growth category. Housewives will often have great loyalty to rice vendors who then deliver the product to home. Processing and trading cooperatives such as Vissan Meat are seeing strong growth, particularly since recent food safety issues as shoppers seek reassurance over product quality and sourcing. Market Watch: Vietnam

21. © IGD 2012 Feature on Big C in Vietnam Source: IGD Research Banner Total sales 2011 (USDm) Format Number of stores 2011 Sales area (sqm) Average sales area (sqm) Big C 371 Hypermarkets & convenience 23120,7505,250 Casino Group entered Vietnam in 2001 and now operates over 20 Big C Supercentre hypermarkets, with the majority located around the country’s two biggest cities; Hanoi in the north and Ho Chi Minh City in the south. Store sizes vary between 4,000 sqm and 10,000 sqm with each carrying an assortment of up to 50,000 products, over 90% of which are sourced from Vietnam. Guaranteeing low prices is a key element of Big C’s strategy. It runs a variety of discount and promotional campaigns as well as aiming to ensure price stabilisation for key product categories. Big C also creates a point of difference against the rest of the market through the focus it places on food safety and quality control within its fresh supply chain. It has invested significantly in building links with local producers, creating food processing hubs and training staff across the business. Market Watch: Vietnam

22. © IGD 2012 Big C: key initiatives strategy Clear focus on low prices Developing innovative in-store concepts Investing in the fresh supply chainBuilding customer services Market Watch: Vietnam

23. © IGD 2012 ‘Low prices for every family’ Clear focus on low prices Big C’s slogan in Vietnam is ‘low prices for every family’. In addition to regular discounts on a variety of everyday products, bi-weekly promotional campaigns, supported by printed brochures and media advertising, offering reductions of between of up to 50% are an essential part of reinforcing the association with low prices. This focus on price is clear to see in-store, with a wide range of highly visible point-of-sale units and eye-catching signage across all departments.

24. © IGD 2012 Providing alternatives to brands Clear focus on low prices Private label brands offer the opportunity to provide customers with a wider choice of price options and Big C is continually developing in this area in food and non-food. It currently has two locally produced private label brands. ‘WOW – Attractive Price’: distinctively packaged value brand offering the most competitive price in the market for a variety of products. ‘Big C’: standard private label with a wide range of high quality grocery products which are 15% to 30% cheaper than leading brands.

25. © IGD 2012 Creating points of difference Developing innovative in-store concepts Traditional outlets still dominate the grocery retail market in Vietnam and Big C has adapted its store to include various ‘market style’ concepts such as live fish displays and a self-service rice unit. However, it also attempts to create points of difference against traditional markets by ensuring product information is clear displayed as well as emphasising the importance of hygiene and cleanliness in-store. Many Vietnamese consumers are becoming increasingly wary about food safety and Big C is keen to display its credentials in this area.

26. © IGD 2012 Best in class sales concepts Developing innovative in-store concepts Innovation is a core value of the Big C Supercentre model and it is has launched a number of specialist sales concepts in its stores. One of the most notable is the B-bread counter which can be seen above. This operates alongside the store’s main bakery counter, offering a premium range of traditional European bakery products which are prepared in-store. Its distinctive branding, striking fixtures and high quality assortment all help to set it apart from the rest of the store and reinforce the choice which Big C offers.

27. © IGD 2012 Developing skills across the business Big C’s commitment to the fresh supply chain goes beyond infrastructure and providing training for staff at all levels of the business is also a vital part of this. In addition to training staff in hygiene and the preparation of fresh food at its processing and export facilities, Big C also provides management and store operations training at its national training centre which opened in 2008. The majority of training is done ‘in-house’ by senior Big C managers whilst the business also has an association with a number of institutions which provide vocational courses in a range of areas. Investing in the fresh supply chain Source: Big C

28. © IGD 2012 Trading in Vietnam: 5 things you need to know 1 Vietnam is a dynamic but challenging market - growth has eased, as has inflation which ran to 20% at its peak last year. The regulatory environment is not straightforward and has held back the growth of modern retail. 2 However, the opportunity is vast – modern trade still only represents 20% of the market and there is a young, opened minded and brand hungry population. 3 Most Vietnamese families still shop daily in local markets, with less frequent (on average weekly) trips to modern stores. Convenience is key and the convenience store channel is expected to develop rapidly, assuming regulatory restrictions can be overcome. 4 Price remains the key motivator when shoppers are choosing where and what to buy – single use sachets are very popular allowing consumers to manage a budget as well as trial new brands and products. 5 Food safety is a major issue and the supply chain is undeveloped in terms of infrastructure and processes; the government run checks on local markets but contaminated products still make it onto the market and consumers are highly wary. Source: IGD Research Market Watch: Vietnam

29. © IGD 2012 For more information about the region...33 See our latest store visits across Asia markets: Visit the IGD Retailer Hubpage on Retail AnalysisIGD Retailer Hubpage 2 Obtain answers to your business’ most important CEE related questions Speak to IGD about our Customised service 1 Get statistics on Asia retail operations by banner and country: Visit the IGD Datacentre on Retail AnalysisIGD Datacentre View the Top 30 CEE grocery retailers on Retail AnalysisTop 30 CEE grocery retailers 44 Get in-depth insights on the retailer’s international expansion strategies: Visit the IGD Retailer Hubpage on Retail AnalysisIGD Retailer Hubpage