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Istanbul , October, 2006

Ashot Arutyunyan “GROSMART” trade chain Strategy Marketing Director a_arutyunyan@elexcor.ru. Istanbul , October, 2006. Contents. Company Overview Sales & Marketing Dynamics of food retail market in Russia “Grossmart” strategy in 2007-2010. I. Company Overview.

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Istanbul , October, 2006

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  1. Ashot Arutyunyan “GROSMART” trade chain Strategy Marketing Director a_arutyunyan@elexcor.ru Istanbul, October, 2006

  2. Contents • Company Overview • Sales & Marketing • Dynamics of food retail market in Russia • “Grossmart” strategy in 2007-2010 GROSSMART

  3. I. Company Overview GROSSMART

  4. Company mission and aims GROSSMART

  5. Company’s history Assignationof 15 shops to BILLA trading network and re-branding Acquisitionof ‘PI’ store chain in Vladimir city and Vladimir region (69 shops) Target for the end of 2006 – 109 Grossmart stores in Moscow and the regions 2006 Active expansion of the chain in the regional markets. Acquisitionof working chains: - 6 stores in Moscow ( “Prodmak” chain) - 4 stores in Kazan (“Riden” chain) - 4 stores in Kursk (“Apelsin” chain)” 40 shops in Moscow and the regions working under the Grossmart brand 2005 Contract on establishing a joint venture of BILLA Russia and REWE Group Opening first BILLA supermarket, its assignation to the joint venture and re-branding of 18 supermarkets 8 Grossmart stores in Moscow and regions 2004 2003 The number of SPAR superstores to be increased up to 18 Acquisitionof “Stolitsa Sever” chain. Regional expansion. The first Grossmart superstore in Kazan. 2002 Development of supermarkets chain as top priority. 6 SPAR supermarkets opened Sub franchising contract with Holland company SPAR signed The first SPAR superstore opened 2001 GROSSMART

  6. Strategic alliance with REWE Group On the 8th of June, 2004, during the Russian-German economic summit in Moscow in the presence of Mr. Putin, President of Russia, and G. Shchreder, Federal Chancellor of Germany, holding company “Marta” and REWE Group signed a contract on establishing joint venture - BILLA superstores chain in Russia REWE Group is the second trade operator in Germany after Metro group. The company owns more than 11.5 thousand retail stores in 13 countries in Europe, its gross turnover is approximately 40 billion Euros The parties intend to invest $500 mln in BILLA Russia and increase turnover up to $3 billion during the next 3-5 years GROSSMART

  7. Geographic presence At present “GROSSMART” is presented by approximately 100 stores of different formats in 14 regions of Russia GROSSMART

  8. Grossmart stores’ formats Grossmart manages four main sub formats • Hypermarket (format D) • Supermarket (formats A. B, C) GROSSMART

  9. Grossmart supermarkets • Convenient location • Wide assortment • High quality of goods with particular focus on fresh products • High level of service • Application of European operators’ experience • Comfortable atmosphere GROSSMART

  10. II. Sales & Marketing GROSSMART

  11. Marketing Strategy • Format of “Grossmart” supermarkets is aimed at an average consumer • Creating a strong recognizable brand • Opening 90% of new stores by 2010 in the regions approximately • “4 P” Rule: • Product • Price • Place • Promotion Key consumers belong to growing Russian middle class GROSSMART

  12. Price strategy • Competition on regularly bought products with such stores as “Sedmoy Continent” and “Perekrestok” • Regular price monitoring • “Best price” and “Product of the day” promotion. Promo price is supported in all the formats Price strategy: Competition on regularly bought products GROSSMART

  13. Loyalty Programmes Lotteries, coupons, promo on discounts on goods of day-to-day demand, publishing information about discounts in monthly advertising booklets Discounts system Different programmes for the clients Points collecting programme, congratulation on the birthdays, discount programme for pensioners Events, presents to the clients, tastingsand advertising/promo campaigns Special events GROSSMART

  14. III. Dynamics of food retail market in Russia GROSSMART

  15. Retail turnover in Russia and foodstuff sales Retail turnover in Russia (billion US$) Following incomes growth tendency, retail market is rapidly developing Retail sales of foodstuff (billion US$), 2000-2005 Russian foodstuff market has grown three times more since 2000 Source Goskomstat, evaluation of IRG *Source: according to Eurostat data, average growth in the first quarterof 2005 in 25 EC countries was 1.6% GROSSMART

  16. “Grossmart” in RBC report, 2005 • The market is fragmented. 5 leading players own only 6.1% of the foodstuff market • Consolidation of the market will take place • Keeping such growth dynamics, Grossmart aims to enter top 10 operators group of Russian retail foodstuff market by 2010 GROSSMART

  17. Our achievements National award “The Company of the year 2005”, nomination “Trade chain’ Social award ”Russian trade Olymp 2006” “Golden Chains” prize-winner (3 awards) 2004 – Nomination “Supermarkets” 2005 – “Russian retail consolidation leader” 2006 - Nomination “Best of the best”, “Managing company in the retail market” category GROSSMART

  18. “Grossmart” strategy for 2007-2010 GROSSMART

  19. Our aims • To be present in the majority of Russian cities with the population more than 300 thousand people • Enter top ten federal food retailers in Russia GROSSMART

  20. Development strategy Strategy • Market leader in the Russian supermarkets segment on a national level • Brand recognition in the regions – 83% • Transparent and well organized business with an effective management system Plan • Quick expansion in regional markets • Opening of its own new stores • Acquisition of existing operators • Stores and consumer groups’ segmentation, sub formatsandconsumer groups’ determination • Establishing its own trade mark • Strengthening consumer’s loyalty to the brand (quality of service, value added services, promo campaigns and discount programs) GROSSMART

  21. Development strategy in the regions in 2006-2008 2006 2007 [Rostov-Volgograd]; [Izhevsk-Perm-Ufa]; [Ekaterinburg] 2008 [Yaroslavl-Ivanovo]; [Novgorod-Pskov]; [South Ural] GROSSMART

  22. Acquisitions programme Advantages of acquisition: • Keeping/increasing profitabilitywith the help of operationalsynergies at aggressive business growth • Strengthening interaction with suppliers • Optimization of logistic • Optimization of business management structure • Saving on scale • Applying the standards of corporate management and reporting,according to international standards Choosing companies for acquisition: • Reputation of the company • Similar format, geographical coverage • Developed technologies GROSSMART

  23. Objects GROSSMART

  24. Grossmart in the regions: Kazan, Tatarstan Republic • 10 supermarkets in Kazan First Grossmart supermarket was open in Kazan in 2003. At present there are 10 shops in the city. Supermarkets in Kazan: Total space – 13 900 sq. m. Sales space – 7 000 sq.m. GROSSMART

  25. Grossmart in regions:Kursk • 4 supermarkets in Kursk Three Grossmart supermarkets were open in Kursk in 2006 • ТC «TC Triumph • TC “Crystall” • TC “Grand” Supermarkets in Kursk. Total space 6 141 sq.m. Sales space – 3 607 sq.m. The fourth Grossmart supermarket was open in Kursk in 2006 GROSSMART

  26. Grossmart in regions:Vladimir • 2 supermarkets in Vladimir The first Grossmart supermarket was open in Vladimir in 2006 The second one was open in July 2006 • TC “Valentina”, Dvoryanskaya St., 10 • Belokonskaya St., 17 B Supermarkets characteristics: Total space – 2 026 sq.m. Sales space – 1 145 sq.m. GROSSMART

  27. Grossmart in the regions:“PI” chain in Vladimir region 69 objects in Vladimir and Vladimir region As of June 2006, Grossmart owns 67 shops and logistic center of PI trade chain in Vladimir and Vladimir region Vladimir – 32 shops + warehouse (total space 12 090 sq.m.) Gus-Chrustalny – 10 shops (total space: 1 536 sq.m.) Kovrov – 18 shops(total space: 7 436 sq.m.) Kolchugino – 7 shops(total space: 950 sq..m.) PI Trade chain stores Total space – 22 012 sq.m. Sales space – 10 347 sq.m. GROSSMART

  28. Grossmartin regions :HYPERMARKETinYekaterinburg HYPERMARKET in Yekaterinburg • 2005: HYPERMARKETwas open in entertainment center Park House Hypermarkets' characteristics: Total space – 6 325 sq.m. Sales space – 4 000 sq.m. GROSSMART

  29. Grossmartin Moscow:stores “near the house” Stores in Moscow Total space – 11 361 sq.m. Sales space – 5 426 sq.m. • 7 shops in Moscow • Concept – «next-door-to-home-store» GROSSMART

  30. Thank you very much for your attention! www.marta.ru/grossmart.php

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