Optimal Shelf Availability Proposal for an ECR Europe Action Plan

1. ECR Europe Supply Side Agenda 2006 Optimal Shelf Availability Proposal for an ECR Europe Action Plan

2. Background: Current Performance has not improved over the years • Global out-of-stocks still run at c. 8% • Promotions often run higher at between 9 - 16% • There has been little movement in global figure for past 10 years. • Almost 4% of sales are lost due to out of stocks. This is the biggest prize in our industry and we propose a plan to re-invigorate the initiative in Europe.

3. Background: Retailers and manufacturers lose when a consumer faces an empty shelf 46% lost opportunities for Manufacturer 30 % lost opportunities for Retailer Buys brand Returns later elsewhere 17% 21% Doesn't buy anything Buys different size 9% 16% Source: Roland Berger / ECR Europe Buys a different brand 37% 4 billion Euro of lost sales in Europe!

4. Background: Global scorecard shows that implementation across Europe is still low EUROPE • Average current implementation rate in Europe: • 1.2 (out of 4) • planning/pilot phase (full global scorecard benchmark) Average current out-of-stock rate in Europe 11% (global scorecard KPI section) There are varying degrees of implementation across countries. UK, France and Italy leading the way.

5. Measurement & Management lead to improvement

6. OSA Task force meeting on 12 May

7. Task force recommendations • No need for new OSA best practice recommendations • ECR Europe OSA blue book • National ECR blue books, training programmes • Measurement is key • Companies need to accelerate implementation • National ECRs need to galvanise membership around the topic • ECR Board members – « put the issue on your agenda »

8. Measurement is key – how to do it • 2 measurement methodologies currently used: • Physical audit (UK,…) • Automated continuous monitoring of sales patterns (France, Italy, …) •  Both are valid • National ECRs have slightly different OOS definitions and KPIs and have started measurement on that basis •  Cannot force national ECRs to harmonise Europe-wide; not really a problem as our proposed target is an improvement measure. • Recommendation : • Harmonised measurement at national level to allow for consistency in a market and identifcation of improvement; countries introducing measurement should aim for automated methodology based on ECR Europe white paper. This relies on communication of EPOS sales data.

9. Analyse root causes Use root cause catalogue Improve Implement improvement levers Report measurements Participate in learning programmes Set up learning programmes Aggregate measurement Share best practices Report measurements • Provide ressources • cross-functional teams • OSA champion Evaluate measurement against target Make OSA a priority in your company Reward OSA performance Adapt KPIs ECR Europe OSA action plan proposal – work at 3 levels • Measure • Physical audit • Automated tool Companies National ECRs ECR Europe Board members

10. Implementation will deliver significant results • Task Force agreed target: • 50 % reduction of Out-of-Stocks within next 3 years • Halve the gaps