The winning formats in Europe

1. The winning formats in Europe Planet Retail Ltd | September 2010

2. About Planet Retail • We are: The leading Global Retail Analyst firm since 1995. • We analyse: 7,000 retail operations across 211 retail markets. • We serve: • 14 of Top 20 Consumer Goods companies • 15 of Top 20 Retailers • 9 of Top 20 Retail Technology Vendors • We deliver: Critical insights that create competitive advantage.

3. Agenda • Consolidation in the European retail scene • Channel development in Europe • The most successful retailers and formats • The battle of domestic players with foreign retailers • Attractiveness of CEE • Conclusions

4. Market consolidation in Europe Europe • Western Europe is a homogenous market • Central and Eastern Europe is diverse Sweden Iceland Finland Norway Estonia Russia Latvia Denmark UnitedKingdom Lithuania Ireland Belarus Netherlands Poland Germany Belgium Czech Rep Luxembourg Ukraine Slovakia Austria Hungary Switzerland Moldova Slovenia France Romania Croatia Market share of TOP 5 grocery retailers up to 30% Bosnia & Herzegovina Italy Serbia Bulgaria Georgia FYRO Macedonia Albania Market share of TOP 5 grocery retailers 30% - 60% Armenia Spain Portugal Greece Azerbaijan Market share of TOP 5 grocery retailers over 60% Cyprus

5. Channel CAGR Growth Source: Planet Retail Ltd – www.planetretail.net e = estimated f = forecast

6. Western Europe – TOP leading retailers Carrefour losing its share, while Tesco and Schwarz Group set to grow fast Source: Planet Retail Ltd – www.planetretail.net e = estimated f = forecast

7. Central Europe – TOP leading retailers Schwarz Group will become the clear leader in Central Europe by 2014. Source: Planet Retail Ltd – www.planetretail.net e = estimated f = forecast

8. Eastern Europe – TOP leading retailers Foreign retailers in EE in the shadow of domestic players Source: Planet Retail Ltd – www.planetretail.net e = estimated f = forecast

9. The most successful formats and retailers Schwarz Group Present in 26 European countries with sales of EUR59 billion (USD82 billion) in 2009. 72% of revenue - Lidl discount stores 28% of revenue - Kaufland price orientated compact hypermarkets Around 18% of Schwarz Group’s total revenue generated in CE Leading discounter and second largest hypermarket operator in CE Aggressive expansion in almost all Central European countries Potential new markets: Romania, Bulgaria Lidl needs several years to break even in some markets

10. The most successful formats and retailers • Schwarz Group’s Lidl-the most successful discount format in Europe • Soft discount concept with around 2,000 items on offer • Sales area 700 – 1,000 square metres • PL account for around 70% of Lidl’s turnover • Move into convenience • locations in city centres • fresh bakery, instore oven • Butcher’s counter • Expansion of F&V

11. The most successful formats and retailers • Jeronimo Martin’s Biedronka is an impressive phenomena in the Polish discount scene • 1,500 Biedronka stores across Poland • Stores located in residential areas and city neighbourhoods • Sales area of around 550 square metres • Soft discount concept with up to 1,000 items on offer • PL account for around 60% of Biedronka’s turnover • Focus on private label products sourced from local manufacturers

12. The most successful formats and retailers • Tesco has introduced a convenience store format Tesco Express into Central Europe • Tesco operates over 1,000 Tesco Express stores in the UK • Product range up to 3,000 items • Sales area -300 square metres • Strong focus on lunch time snacks, ready meals and F&V • Expansion of the concept in the CEE

13. The most successful formats and retailers • Carrefour has introduced its new hypermarket format Carrefour Planet • Sales area around 14,000 sq m • Each hypermarket focuses on 9 key areas which include a market zone, organics, frozen foods, beauty, fashion, baby care, home and multimedia • The share of Carrefour-branded products within the concept has been increased • Estimated renovation cost at EUR20 million (USD24.4 million) per store

14. Domestic players fighting with foreign retailers Stiff competition in the Czech Republic

15. Domestic players fighting with foreign retailers CBA Hungary successfully competes with Tesco • CBA operates around 3,300 supermarkets and neighbourhood stores across Hungary • Its revenues grew by 0.5% to HUF548 billion in 2009, whereas Tesco saw decline by -3.6% to HUF634 billion • CBA has introduced a limeted range of private label products (only 500 SKUs in 2010) • Business consolidation - around 250 unprofitable stores closed in 2009

16. Walmart Walmart interested only in large markets in CEE • Walmart can use its cash-rich US operations to bank-roll international development • Has bitter experience from market entry into Germany. Apart from the UK, no experience of European retailing • Focus on expansion in Mexico, India and China • Walmart has been eyeing Russia and Turkey Source: Planet Retail Ltd – www.planetretail.net

17. Carrefour Carrefour will not become a leader in CEE • Leading position in Western Europe • However, a marginal position in many countries, without any obvious opportunity to achieve a TOP 3 position • Operations in Latin America and China have high growth rates • Exited the Czech Republic and Slovakia (2005) and Russia (2009) • Allocated funds for expansion in the Balkans • Carrefour’s expansion will depend on its recovery in France Source: Planet Retail Ltd – www.planetretail.net

18. Tesco Tesco likely to continue in its CEE success story at a smaller scale • Tesco focus on expansion in Turkey and Asia • GBP500 million investment in China in 2010 • Market entry into India in 2010 • Investment into the struggling US operations • New market entry in CEE likely through M&A of a strong local player • Tesco is likely to expand into a smaller country in CEE as a part of its regional expansion Source: Planet Retail Ltd – www.planetretail.net

19. Metro Group Metro Group to consolidate its position in CEE • Metro Group is a pan-European retailer • Early mover advantage in most of the countries • Expansion areas for the long-term will be China, CEE with focus on Russia and Ukraine • A smaller cash & carry concept to be tested in many CEE countries (Russia 2011) may be rolled out across Europe Source: Planet Retail Ltd – www.planetretail.net

20. Conclusions • Discount stores in WE and CE together with hypermarkets and price orientated supermarkets in EE will be the fastest growing channel • Schwarz Group will be the fastest growing retailer in CE soon with good prospects for success in the whole CEE region • Tesco - the pioneer of the convenience store concept in CE. Large potential for the concept in the long-term across CEE • Soft discount format like Lidl and Biedronka are the most successful • Domestic players losing their battles in many CE countries • Global market players focus on Asia. Russia and Balkans seem to be the only regions they are interested in in CEE • Retailing in CEE to be driven by the European retailers like Schwarz Group and Metro Group in the next few years

21. Contact details Miloš Ryba Senior Retail Analyst Planet Retail Ltd T: +44 (0)207 728 5600 F: +44 (0)207 728 4999 milos.ryba@planetretail.net United Kingdom:Greater London House, Hampstead Road,London,NW1 7EJUnited Kingdom T: +44 (0)207 728 5600F: +44 (0)207 728 4999 Germany:Dreieichstrasse 59, D-60594 Frankfurt am Main, Germany T: +49 (0) 69 96 21 75-6F: +49 (0) 69 96 21 75-70 USA: 350 South Northwest H’waySuite 300Park RidgeIllinois 60068USA T: +1 (1) 847 656 5378F: +1 (1) 847 656 5201 China: 10-1-202,88 Tongxing Road,Qingdao 266034,China T: +86 (0)532 85981272F: +86 (0)532 85989372 Japan:Minami-Magome 5-42-3-508, Ohta-ku, Tokyo 143-0025, Japan T: +81 (0) 3 3775 4158F: +81 (0) 3 3775 4162

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23. www.planetretail.net 2010