3 rd PASTA WORLD CONGRESS Changing Competitive Dynamics In Food Retailing Lamberto Biscarini Barcelona - October 24, 20

1. 3rd PASTA WORLD CONGRESSChanging Competitive Dynamics In Food RetailingLamberto BiscariniBarcelona - October 24, 2005 THE BOSTON CONSULTING GROUP

2. TODAY PASTA IS AN INTERNATIONAL BUSINESSMain pasta countries according to Unipi Russia Germany Germany France US Italy Turkey Spain Venezuela Brazil Peru Argentina • Source: UNIPI, Countries statistics offices

3. TRADE INTERFACE IS BECOMING CRITICALIN MOST PASTA COUNTRIES Top 5 retailers cumulated market share, 2004 • Mature • retail markets •  62%(2) • Developing • retail markets •  30% (Moscow, St. Petersburg) • 10% • In the Moscow and St Petersburg area, the only 2 with tangible modern retail presence • Top 100 US Metropolitan Statistical areas (60% of population) • Source: M+M Planet Retail, BCG analysis

4. TOP 3 GLOBAL RETAILERSBUILDING SOLID POSITIONS BY COUNTRY# Ranking in each market (only if in top 3) • France • Germany • Spain • United states • Italy • Argentina • Turkey • Brazil • Peru • Venezuela • Russia • 1 • 3 • 1 • 1 • 3 • 1 • 2 • 2 • 1(1) • 2 (1) Including C&C business Source: M+M Planet Retail, BCG analysis

5. 4 MAIN TRENDS EMERGING IN MATURE RETAIL MARKETS • Discounters' growth, behind a trading-down shift in consumer behaviour • Price-focused horizontal competition among retailers • Repositioning of Private Labels towards lower price levels, shifting from margin generators to price leadership vehicles • Additional pressure on Branded players • Shrinking of # of suppliers, particularly in mid size surfaces • Max 1-2 players in each category 1 2 3 4

6. 1 DISCOUNTERS GAINING CONSUMER LOYALTY...Example France % 16.3 20.7 16.1 18.3 Average ticket € Frequency rate Loyalty index Value SoM Groceries - Chilled Source: Consoscan, TNS

7. Avg. supermarket 1 Price 2 Convenience Advantage on price, convenience, and affinity 3 Innovation 4 Affinity 5 Trust No major disadvantage on trust, product range, and service 6 Product range 7 Service 8 Advertising Consumers evaluation ... REFLECTING A CHANGEIN CONSUMER PERCEPTIONExample: Spain 1 "I don't shop Lidl because I can't afford to shop in a supermarket, it's just that if I can save money on shopping I will" Consumer interview, Madrid, July 2005 Source: 6 000 consumers interviews across Europe, 2005

8. France Italy UK Sweden Germany Netherlands 2 HORIZONTAL COMPETITION MAINLY BASED ON PRICEReal food prices in Western Europe, 1999-2004, index Real food price (index) CAGR 99–04 CAGR 02–04 0.6% (0.9%) 0.4% 0.0% 0.0% (0.4%) (0.4%) (1.4%) (0.6%) (1.6%) (1.2%) (2.9%) Note: Real food price index is defined as consumer price index for food / consumer price index Source: Eurostat; Planet Retail; Press; BCG analyses

9. 3 CHANGING ROLE OF PRIVATE LABELFew examples Margin overbranded products Role to retailer # SKUs 240-500 2.100-6.500 350-400 +3% +3% - (-5%) (-5%) - (-15%) Premium • Image of innovator, exclusivity, solution provider (e.g. diet, allergy) • Increasingly used as loss leaders in traffic building categories • Low price image • Defense from Discounters Mainstream Value/first prices Source: Websites; BCG Experience

10. 4 RATIONALIZATION OF SUPPLIER PORTFOLIOExample, Spain store checks, major dry pasta brands • Pasta brands • Brand • Format • Gallo • Barilla • Ardilla • El Pavo • PL/ 1st prices • Hyper • Hyper • Super • Super • Discount • Discount •  •  •  •  • - •  •  •  •  •  •  •  •  •  •  •  •  •  "Brands have to tell me why I should have them all in my portfolio" Pasta buyer, leading retailer in Spain Source: Store checks, Oct '05

11. EVEN FASTER TRENDS IN DEVELOPING MARKETS1. Retail consolidation - Turkey 2005 Market shares 2002 Market shares • 7.4% • 4.8% • 3.5% • 3.1% • 2.6% • 21.4% • 4.2% • 3.1% • 2.3% • 2.2% • 2.1% • 13.9% Acquisition of Tansas Acquisition of Gima Share of top 5 +7.5 p.p. in less than 3 years "We aim to become either leader or # 2 in each Country we decide to invest in" Carrefour Investors report, October 2005 Source: M+M Planet Retail, BCG analysis

12. Carrefour Metro Migros Bim Yimpas EVEN FASTER TRENDS IN DEVELOPING MARKETS2. Price competition – Turkey (grocery sample products) Delta % +0.8% (2.2%) +1.5% (3.4%) (2.4%) Source: October 2005, BCG analyses

13. EVEN FASTER TRENDS IN DEVELOPING MARKETS3. Discounter penetration - Turkey # Stores Market Share (%) • ~ 1 200 • ~ 290 • ~ 200 • 3.5% (3° player) • 2.4% • 1.1% Over 1 800 Discount stores today in Turkey Source: Datamonitor, M+M Planet Retail, retailers data, BCG analysis

14. EVEN FASTER TRENDS IN DEVELOPING MARKETS4. PL role and supplier portfolio – Quotes from Trade interviews "We will get to more than 20% PL share quite soon, and brands know it... at our last on-line tender [for PL production] we got an incredible battle" Food Buying Director, Russia "PL penetration will grow rapidly... we are investing resources and would like to see at least 20% of sales" Food Buying Director, Brazil "Portfolio rationalization is not yet a hot topic in Pasta, as it is still growing very fast for us. But it will soon happen " Pasta Buyer, Russia Source: Interviews, October 2005

15. KEY CHALLENGES FOR PASTA SUPPLIERS • Clear business strategy • Strong leading brands ? • Private label manufacturing? • No long term space left in between • Local market know-how and product customization capabilities • Food retail expectations still local • Partnership with retail country leaders • Coherently with all channels you want to access (Ho.re.ca.?) • Cost leadership • To face fiercer Trade Margin requests