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1. China Retail: The Great Promise of Emerging Markets France48, Boulevard Montfleury06400 CannesTel: + 338 7040 6650 Argentina Alsina 2197 (C1090AAG) Buenos AiresArgentina Tel./Fax: (54-11) 4954-2001 Brazil Rua Major Sertório 349 Vila Buarque - São Paulo SP 01222-000 São Paulo - Brasil  Tel.: (55-11) 5686-8789 Fax: (55-11) 5523-4698 Center America 1era. Avenida 8-24, zona 10 Guatemala C.A. 01010Guatemala Tel: (50-2) 2410-9999 Fax: (50-2) 2410-9998 Mexico Río Nilo 80 Col. Cuauthémoc 06500 México D.F.México Tel. : (52-55) 5525-5200Fax : (52-55) 55 14 20 67

2. Country Data • Total population:1.336.718.015 people • Urbanism: 47 % of the population lives in urban areas • Currency: Yuan (USD 1 =6,78 RMB) • GDP: USD 9.872.000.000.000 • GDP per capita: USD 7.400 • GDP composition per sector: Industry (46,8%), Services (43,6%), Agriculture (9,6%). • Main cities: Beijing(capital), Shanghai, Chongqing, Shenzhen, Guangzhou. • Territorial organization: The country is divided in 23 provinces; 2 administrative regions (Hong Kong and Macao); 5 autonomous regions, Guangxi, Inner Mongolia, Ningxia, Xiniinang and Tibet; and 4 municipalities, Beijing, Tianjin, Shaghai and Chongqing. • Predominant religions: The large majority of Chinese people practice Taoism,buddhism and Confucianism. Source: CIA World Factbook

3. Introduction: China Food Retail • With the liberalization of investment laws in China for foreign investors in the 90’s, large international retailers such as Walmart, Carrefour, Tesco and Metro, entered the promising Chinese retail market, importing their most successful formats in order to conquer a market that, up to that point, was monopolized by the traditional channel. • Since 1996, sales in the Chinese modern channel have grown steadily, with a higher presence in the Eastern costal area of the country, where big retailers have set their base and from where they have planned their expansion. In these cities, the traditional channel has stopped being a predominant player, although it still goes strong in the central, more rural areas, where larger retailers are, however, beginning to set their eye. • Retailers of Chinese origin have great influence in the country if we take into consideration that the five international retailers together participate with 3% of the total food retail sales in the country. • The traditional channel in Chinese retail is made up of small neighbourhood stores, called xiaomaibus, which offer a selection of every day products that vary according to each community. Front of a traditional channel store in China

4. The Chinese Market in Figures Food Format Denomination • USD$1.6 Trillion: Are the estimated total sales of the China’s Total Retail industry. • USD$1 Trillion: Are the estimated sales of the China’s Grocery Retail industry. An increase of 10% is forecasted for 2011. • USD$100 Billion: Are the estimated sales of the modern channel, which represents approximately 10% of the total market. • USD$4,160: Are the estimated sales per square meter in China. • 3rd:Is the position that will hold China in 2015, becoming one of the biggest consuming market in the world, after USA and Japan. • 3%: is the percentage by which international chains contribute to total food retail sales. • 140:Is the number of stores of foreign capital that have open in 2010, meaning an increase of 22% compared to the previous year (this includes Walmart, Carrefour, Auchan-RT, Tesco and Metro) • Hypermarkets: The hypermarket is the favorite format handled by international groups like Carrefour, Auchan y Tesco, with which they started to operate in the country. Those groups began to operate in big cities and are now expanding themselves inside the country. • Supermarkets: This segment is dominated by a local chain, nevertheless, international competitors are now fighting in this segment. • Convenience stores: A format with big potential with chains like Quick or Lianhua, moving fast in this segment. • Discount stores: This format is still not developed as much and is currently only concentrated in the main cities. The first discount store appeared with Carrefour in 2003. • Department stores: This was the first modern retail format operating in the country, which includes food products that operate in the country, with stores like Shenzhen Suibao or Beijing Cuiwei. However, this format seems the be now a saturated market. Source: ILACAD World Retail - United States Department of Agriculture, National Bureau of Statistics

5. Top ten Food Retailers in China Source: ILACAD World Retail

6. 1. Main Retailer Profiles

7. China Resources Enterprise 1 • China Resources Enterprise, or CRE, is the biggest retail chain in China. Based in Hong Kong, it operates 3.189 stores with around ten different banners, Suguo and Vanguard, being the most known. One third of these stores are located in Jiangsu, meanwhile the other are split in 21 cities, all around the country. • Suguo, the most representative banner of the company, sold USD$ 1,6 billion in the first three months of 2011, representing a 20% increase compared to last year. Suguo operates around 700 supermarkets and mini markets through three banners: Suguo Superstore, Suguo CVS and Howdy CVS. • The group is forecasting an organic expansion, with the opening of 1200 stores in the next five years in Jiangsu, Anhui and Hubei. Source: CRE

8. Carrefour 2 • Carrefour, the second largest retailer in the world, operates 426 stores in China. • Its USD$7,02 billion sales in 2010 represent a 12,5% increase in comparison to the previous year. At comparable stores, sales also increased 3.3%. • Carrefour opened 20 hypermarkets in 2010, increasing 9.2% its store area. The retailer has said it aims to increase the number of openings in 2011 to maintain its competitive edge facing its international rival, Walmart. Fuente: ILACAD World Retail

9. Auchan & RT-Mart 3 • French retailer Auchan first entered China in 2004. • Auchan and Taiwan RT-Mart merged two years ago to create Sun Holding, company which currently operates 155 RT-Mart hypermarkets and 41 Auchan supermarkets. • Sun Holding is now ready to be introduced in the local stock exchange market, aiming to get about $ 1 billion. Source: ILACAD World Retail

10. C&U Group 4 • Zhejiang, the supermarket chain of C&U Group, began operating as part of the group’s portfolio in 1997. • The group’s retail division operates several formats, including hypermarkets, supermarkets and convenience stores, both stores owned by the company as privately owned through franchises. The retailer also has a distribution center, acquired in 2000, which aims to support its private label offer, in addition to supply the groups supermarket network. • The group operates throughout the country, with a store network that extends through Wenzhou, Shangai and Zhejiang, amongs others. Source: C&U

11. Shanghái Lianhua 5 • With sales of USD$3.9 billion last year, Shanghái Lianhua is the fifth largest retail chain of China. It currently operates a total of 5.172 (143 hypermarkets, 3.014 supermarkets y 2.015 Convenience Stores), under the following banners: Century Mart, Lianhua Supermarket, Hualian Supermarket and Lianhua Quick (that also operates under a franchise scheme). • The Hypermarket segment represents 56% of the group’s sales, registering a 12% increase last year. Century Mart hypermarkets offer a wide range of food products, general merchandise and services. The supermarket segment, which represents 36% of annual sales, focuses on urban areas providing products for basic needs. • Quick convenience stores contribute 7% of total sales. Sales at comparable stores grew last year a 4.4%. These stores offer a faster buying experience, with stores opened 24 hours a day, offering a shorter assortment at higher price. Source: Shanghái Lianhua

12. 6 Walmart • Walmat, the world’s leading retailer, arrived to China in 1995. It currently operates 333 stores in 124 cities, employing more than 50.000 people. Almost 95% of goods sold by the company are locally provided. • Walmart operates 104 Trust Mart Hypermarkets, 217 Walmart Supercenters, 2 Neighborhood Markets, 4 convenience stores Smart Choice, and 6 Sam’s Club in the country. • This year, the group announced a possible expansion to smaller cities, and forecasted it will reach 17 Sam’s Club in the next five years. According to its Vice President, Sandy Tam, the group should complete the acquisition of Trust Mart hypermarkets, of which it now controls the majority, by the end of this year. • With aims to expand its online presence in the country, the North American retailer acquired in April the online retail platform, Yihaodian, which offers over 75.000 references. Source: ILACAD World Retail

13. 7 Beijing Hualian • Beijing Hualian – with estimated sales of USD$ 2,3 billion in 2010 – operates 120 supermarkets and hypermarkets in 35 cities and 23 provinces of the country. • The hypermarkets, with an average sales area of more than 10.000 square meters, offer a wide assortment of food products and general merchandise. The chain has its own distribution center and processing factory. • Moreover, supermarkets -called BHG Market Place- offer a wide selection of high quality products at higher prices than in hypermarkets. In the stores, customers can find an assortment of products imported from Italy, France and Japan, fruits and vegetables, seafood, all meats, wines and European meals ready to go. Source: Beijing Hualian Group

14. 8 Wenfeng Great World Development • The Chinese group Wenfeng Great World Development Co. Ltd, began operating in the country in 1996, centered specially in Nantong City, in Jiangsu. • The retailer operates a multiformat strategy, with department stores under the Wenfeng Great World banner; supermarkets under the Wenfeng banner and electronic stores called Wenfeng Electronics. Through these three banners, the group aims to achieve a synergy between the three brands in an effort to bring clients the possibility to satisfy their shopping needs in one stop. • The retailer has a membership strategy called Post, which offers benefits to its over 348.000 members. Source: Wenfeng Great World Development

15. Wumart 9 • Wumart, number nine in the Top 10 ranking, operates 492 stores, 350 of which are convenience stores, and 142 hypermarkets. • All stores are located in the North-East side of the country, in the cities of Beijing, Tianjin and Hebei. • In 2010, Wumart sales reached close to USD$ 2,2 billion (14 billion Yuan), representing a 21% increase compared to the previous year. Source: Official Wumart webpage

16. Bailian Group Co. Ltd. 10 • The retailer operates a multiformat strategy that includes both food retail units, in addition to real estate business. As for food retail units, Bailian operates hypermarkets, supermarkets, convenience stores, department stores and specialized stores. • Active since 2003, Bailian Group – of Chinese capitals– owns six companies which, in total, add up to 7.518 stores that include both food retail, in addition to pharmacies and financial services, amongst others. • Amidst the company owned businesses, Bailian has a minority stake of Shangha Lianhua, the fifth retailer in our ranking. Source: Bailian Group Co. Ltd.

17. 2. Other International Retailers in China Extra Top 10 Cadenas de capital internacional

18. China, a priority for most international retailers • The top five foreign chain’s turnover reached over USD$ 22.4 billion during 2010. In the last decade, China has become one of the most attractive emerging markets for major international chains. In the ranking of the ten largest retailers in the country, three are from American or European origin. • The main Food Retailers, Tesco, Metro, Auchan, Carrefour and Walmart bet on the Chinese market and now plan to continue expanding in the country. Besides focusing on the largest cities by population density, the chains have now began to expand and enter into smaller towns, some ports, and Yancheng, Jiangsu, Xiangfan, Hubei, and Changde. • Their presence in the country also means the introduction of new formats like the wholesale chain Sam's Club, electronics stores Media Market, and metro centers LifeSpace, in addition to smaller stores, such as Tesco Express. Source: ILACAD World Retail

19. Tesco • Tesco, the leading British retailer in the UK and fourth worldwide, was one of the last foreign chains to enter the Chinese market. He did so in 2004 and today, seven years later, operates a network of 105 outlets in ten provinces. • During 2010, the division of the group in China registered sales of USD$1.6 billion. Throughout the Asian region, in addition to China, and including South Korea, Thailand, Malaysia and Japan, the group’s turnover reached close to USD $ 14.9 billion. • Most of the stores that are under Tesco’s control in China operate under the hypermarket format, with an average surface of about 9,000 square meters. These provide up to 55,000 references for all shopping needs under the same roof. • In addition to operating hypermarkets and Express stores -under a format similar to the chain convenience stores - , the retailer innovated in the market with shopping centers named "LifeSpace" which have areas of about 75,000 square meters. Source: ILACAD World Retail

20. Metro • The German chain Metro, third in the world after Walmart and Carrefour, entered the Chinese market in 1996 opening the first Cash & Carry wholesale store in the province of Shanghai. Today, the chain has 49 stores in 35 cities. • Last year, the group launched its first sales center for electronics, Media Market, a concept that plans to expand and under which the retailer aims to operate up to 100 stores over the next five years • During fiscal 2010, Metro reported an increase in sales of international sector –that is, countries where it operates out of Germany– of 61%. Metro has announced that during 2011, it will open 110 stores in China, India and Russia, in addition to entering Indonesia, another country with great potential for the retail industry. • In China, the group has said it will expand its presence in cities with high population density such as Shanghai, Beijing and Guanzhou. Source: ILACAD World Retail

21. 3. Trends and conclusion

22. The e-commerce in China • E-commerce sales in China of all retail areas ascended to close to USD$ 40 billion. The main retailers now offer on line services, and bet to expand them through organic grow or external purchases. This is the case of Walmart, which announced the acquisition of a minority stake in • Chinese online retailer Yihaodian. This digital platform, launched in July 2008 - offers some 75,000 references under categories such as food, mainly, in addition to baby products, clothing and electronics. Moreover, it employs about 2,000 people and has logistics networks in Shanghai, Beijing and Guangzhou. • In addition, Walmart announced it will open a center dedicated to monitoring and managing its online business in Shanghai. The vice President of the division in the country, Barry Friedman, said that e-commerce will play a "key" part in the group’s future in that market. The group expects that Chinese online business will reach the U.S. in terms of market share and turnover within the next few years. "The level of online sales in China has grown rapidly and is projected to match that of the U.S. in the upcoming years. We are very optimistic about online commerce market in China and its growth potential, " M-Commerce Although it is still not as popular among Chinese consumers, the mobile shopping channel begins to compete with others. Mobile Internet users reached 288 million, and sales conducted through mobile devices grew 64% in just one year. Source: ILACAD World Retail

23. Trends for the future • With a population of more than 1,336 million people, a total retail market of USD$2.1 trillion and sales growth of large retail chains of almost 15% last year, it is not hard to imagine why China has become one of the most promising emerging markets for the retail industry. • Since the liberalization of investment laws of international capital in the country in the 90, major retail chains like Walmart, Carrefour, Tesco and Metro entered into the Chinese market, importing their most successful formats, like the case of Supercenters or Carrefour hypermarkets. Now, some of them start to innovate to continue growing in the market. Currently the market is experiencing an expansion of the modern channel, with the opening of new stores every year. • E-commerce has been one of the new channels that retailers have taken on, in ther efforts to further their growth in this market. Both international and national chains have began operating in this segment, which promises to keep growing. In 2010, e-commerce generated sales for USD $ 40 billion. • In addition to e-commerce, large retailers have now began to open smaller formats, such as the Tesco Express, in an effort to reach the ever growing and flourishing Chinese middle class. • In recent years, levels of urbanization in China have risen, as well as registering an increase in per capita income in the country, bringing the number of consumers with greater purchasing power, giving advantage to the Modern channel, and becoming more loyal to the big chains that have already made ​​a name in the Chinese market. This sector should go on growing fast, and look for more concentration in main actors.