Dealing with Dutch Food Retail..

Commercial insights and which pitfalls to avoid

Board Bia Head Office, Clanwilliam Court, Lower Mount Street, Dublin 2 22 April 2009 Pim Haasdijk, Green Seed The Netherlands

Table of contents

The Dutch Retail Scene..a brief overview Who are the main players?....brief account profiles Entering the Dutch market Setting the Scne Strategy (Launch) Preparation (Trade) Introduction Launch How do we work? The Daniels Group case Summary: The 9 key drivers for successful exports

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The Dutch retail scene

Developments in Dutch retail

Internationalisation

Increasing concentration

Development Own labels

Innovation UK Fascia as brand

Own label is gaining share in many main product groups

Private label value share per supergroup

Food open markets Totaal Gemeten Groepen (1.2%) Houdbaar (0.8%) Dranken Houdbaar (0.3%) Kruidenierswaren (2%) Zoetwaren & Snacks (0.3%) Diepvries (1.1%) Vers (vast gewicht) (2.5%) Drogmetica (0.1%) Personal Care (0.4%) Papier (0%) Home Care (0.4%) Tabak (-0.4%)
( ) = % growth vs. PY

29.1 30.3 20.6 21.4 16.2 16.5 21.7 23.6 27.3 27.6 27.8 28.8 49.1 51.7 23.6 23.7 5.9 6.3 42.2 42.2 20.2 20.6 1.1 0.7 2007 2008

Source: AC Nielsen 2008

Own label developments

OL share rapidly increasing

Stronger need for retailers to position store format Development of premium own labels Desire of retailers to decrease power of A-brand suppliers

Characteristics of Dutch supermarkets

Average selling space of 750 m2

Small assortments (1 facing high order frequency) Listing means de-listing Small outer cases Just in time (JIT) logistics Short order lead time

The total supermarket turnover was 30 bln 4,800 supermarkets Average turnover of 7,928 per m2

Retail margins

No listing fees VAT rate on food products is 6% 19% VAT on non-food and high alcoholic drinks

Formula 1 (other supermarkets) (RSP-VAT) buying price = profit margin Profit margin / (RSP-VAT) = profit margin in %

Formula 2 (Albert Heijn) (RSP-VAT) buying price = profit margin Profit margin / RSP = profit margin in %

Market shares within Retail

Market Share within Total Food Retail NL 2008

Aldi 9% Super de Boer 7%

Lidl 5%

Other 5% Albert Heijn 30%

C1000 13% Super Unie 31%

Source: AC Nielsen 2008

Who are the main players?

100% subsidiary of Ahold Euro 7,48 billion (+ 7,9%, 2007) 30.0 % market share (2008), Market Leader / innovator Growth Success: Market leader in size and innovation. Strong focus on OL development increasing OL segmentation with focus in Premium 753 stores (2008), 200 franchise 2006: + 23 Konmar stores 2008: + 56 C1000 stores -> market share > 30% Multi format : Albert Heijn (686), AH XL (27), AH to go (40)

Positioning Make everyday grocery affordable and the special available Up-market full service supermarket Middle of the market -> improved price image Pricing is at / slightly above average Strong focus on fresh products Wide and deep Assortment (12.000 skus) Customer profile - High education scale - 1 + 2-persons HH, focus more on young families with children - Welfare class A and/or B Suppliers strategy - Low & High involvement = Buying & Merchandising - Euroshopper = international => via AMS - Exclusive suppliership for OL Centralized Logistics - (Nieuwegein, chilled and slow movers; Geldermalsen, slow movers; Pijnacker, Tilburg, Zaandam, Zwolle, fresh products; Culemborg, cheese) - VVM (today for tomorrow)

30.7% market share - Plus 6.1 % - Jumbo 5,0% - Koopcom 4.4 % Boni-Markten, Boon, Co-op, Deen, Dekamarkt, Jumbo, Em-T, Golff, Hoogvliet, Jan Linders, Nettorama, Poiesz, Sanders Supermarkten, Sligro, Spar, Sperwer (Plus), Vomar Voordeelmarkt Number of Stores 1910: - Plus 278 (++) - Jumbo 117 (+) - Sligro 200 retail stores (Golff, Meermarkt + EM-TE) and 50 cash & carry) - Koopcom 90 stores

Central buying organisation 2007 : 15 members July 2008 : new member Koopcom (Drik v/d Broek bedrijven, +4,4 %, 90 stores)

National and Regional multiples Multiples regionally very strong Positioning - Full service supermarkets + discount - Every member has its own characteristics Logistics - Through warehouses for dry-grocery, frozen and chilled foods - Central depots or per member

Euro 4,09 billion 13.2% market share (2008) 2008 : AHOLD sold all 73% shares => got 56 C1000 stores 2008: CVC capital partners 443 stores (2007) -> 387 (2008) = 90% Independent entrepreneurs (franchise) Mission; help the customer save money, time and troubles during the daily shopping in a pleasant way

Market follower Full service supermarket Wide and undeep assortment -> more upgrading : quality & fresh & innovation -> increasing focus on OL Customer profile - families with children -> also more focus 1 + 2 pers. HH - social class C and D Logistics Decentralised 5 depots (Gieten, Raalte, Breda, Woerden, Eindhoven) Central chilled distribution center

Euro 2,08 billion 2008: Laurus -> Super de Boer N.V. 2008: Casino increased their share to a total of 63,3%

2006: Laurus sold off - Konmar stores to Albert Heijn (29) and Jumbo (12) - Edah (223) stores to Sperwer (Plus) and Sligro (EMTE and Golff) 6.8% market share Number of stores 305 > 50% franchise

Policy full service to their shoppers Wide and deep assortment Customer profile - High education scale - 2-pers. HH and families with childeren - Welfare class A and/or B Logistics Beilen, Den Bosch, Veenendaal en Drachten

Hard Discount

(2006) 9.6% ->(2007) 8,9% market share 442 stores Customer profile: - social class C and D - also Fun shoppers 100% subsidiary of Aldi North, Germany Positioning as hard discounter Very small and undeep assortment with many fancy labels ( 800 a 850 SKUs) Logistics - 7 depots

4. 0% market share 249 stores Customer profile: social class C and D

Largest discounter network of Europe Positioning as hard discounter Small and undeep assortment Value for money strategy Logistics - 4 depots

Entering the Dutch market

Entering the Dutch market Setting the scne

Dutch vs. UK Retail scene similarities: High trade concentration high buying power Coalition vs. conflict model Severe price competition Focus on Adding Value / Category Growth e.g. no listing fees Focus on (Premium) Own Label Sophisticated Logistic infra-structure (Central deliveries, JiT, IT-driven) Risk avoiding vs. entrepreneurial attitude

Entering the Dutch market Setting the scne

Dutch vs. UK Retail scene differences: Clear retail leader vs. followers More limited resources for Category management Lower price points Relative small outlets impact on assortments, packaging, logistics Importance multiples vs. franchise chains (discipline)

Entering the Dutch market Setting the scne

Very open trading mentality no mental nor logistic barrier Good (English) language skills Strong focus on UK developments High food retail concentration 5 players > 90% share Increasing focus on OL (chilled, ambient and frozen) Diversification in OL (price defensive, standard, Premium & Organic) Clear preference for direct commercial approach Exclusive supply vs. non-exclusivity Foreign suppliers to adapt to (IT) systems and procedures

Entering the Dutch market Strategy

Internal SWOT-analysis companys success drivers Customer selection + understanding profile Strategic decision OL vs. brand resources (human, financial, time path) In-direct vs. direct OL per definition direct Logistic infra structure adapt to local needs

Entering the Dutch market Preparation

Just knocking on the door is not enough anymore.so

DO YOUR HOMEWORK FIRST Understanding customer(s) + commercial environment 1. Market share and mentality 2. Fascia concept + positioning their consumer, multiple vs. franchise 3. Commercial strategy pricing, assortment, promotional, assortment revision time slots 4. Buying structure + trading conditions 5. Logistics depot + ordering structures, administration procedures, EDI / GDSN + crate systems 6. Regulations: VAT, Packaging tax costs etc.

Entering the Dutch market Preparation

DO YOUR HOMEWORK Understanding local consumer in relation to product concept 1. Brand vs. OL 2. Comprehensive market assessment Development of category Competition pricing, investments, outer case specs Available space assortment, pack design, outer case specs 3. Product concept testing qualitative / quantative

Entering the Dutch market Preparation

DO YOUR HOMEWORK Simulate commercial viability 1. Distribution scenarios vs. account investments 2. Rate of sale projections 3. Pricing / margin strategy 4. Sales forecast yr 1, 2 and 3

Profitability analysis per account

Entering the Dutch market Introduction to Trade

1. Initial contacting 2. You did your home work Dutch market + retailer understanding and UK experience. but NL UK 3. You understand THEIR concept , problems & needs 4. Company credentials + product concept 5. Present business case based on assumptions: Distribution levels Assortment composition (no. of SKUs) Investments (support plan) Other underlying assumptions e.g. rate of sale, pricing/margin contribution, product ranking vs. competition etc. Trading conditions (payment terms, overriders) 6. Present Supply Chain incl. ordering structure (lead times, warehousing and data exchange)

Entering the Dutch market Introduction

While presenting 1. Be ambitious but realistic in objectives 2. Discuss openly relation between distribution and investments 3. Focus on your added value 4. Rather than just attacking competition . 5. Convince preferably based on hard facts While discussion conditions 1. Include immediately all conditions / costs.avoid surprises afterwards 2. Keep the lead rather than reacting defensively

Entering the Dutch market Launch

1. Base your critical launch time plan on retailer specific time slots 2. Product administration (GDSN, manual product spec sheets incl. palletization 3. System set-up: EDI + supply chain build up direct contacts with logistic managers GDSN VAT regulation / packaging tax

How do we work?

How to go about in exports?

Trade & Consumer Insight Opportunity Assessment Trends & Developments Scanner Data (Nielsen) Brand Planning Trade & Consumer Promotion Event Management Public Relations

Market Entry Strategy Product Proposition Evaluation Sales & Profitability Projections Partner Search & Introduction Sales Strategy & Planning Broker Selection and Management Channel & Category Planning Key Account Management

We Advise, We Execute & We Deliver

How does the Green Seed Group assist?

An international network giving access to key export markets in Europe, North America and Australia A consistent approach for our clients across the different markets Sales and marketing is what we do; is what we are good at Your commercial international projects: we will manage it for you, with you you have a direct relationship with your clients You score

We Advise, We Execute & We Deliver

A case study from the UK

Daniels Group

Launch of freshly squeezed juices in leading Dutch department store HEMA followed by.chilled premium cheesecakes to leading Dutch retailer ALBERT HEIJN

Who is Daniels Group ?

Makes chilled, fresh, natural foods without compromising on taste Manufactures in brand & private label for major UK & European retailer & foodservice

currently operates over 7 owned manufacturing sites in the UK

Is committed to growing our Business in Europe both through UK Export & in potential manufacturing acquisition & set-up on the continent

Annual turnover > 219 million

Daniels Group is committed to developing 5 core categories

1. Chilled Ready Meals 2. Soup 3. Fresh prepared fruit 4. Fresh Drinks 5. Traditional chilled puddings / desserts
Brand & OL consumer understanding Development expertise

Working with Green Seed offices Daniels has more than doubled the size of our Export business in two years (previously static)

8.000 7.000 6.000 5.000 4.000 3.000 2.000

1,343 1.453 1.830 3.307

7.500

Development plan with GS Offices

3.825

PLAN

PLAN

ACT

ACT

1.000 Sales Revenue 000s 0

ACT.

ACT.

2005

2006

2007

2008

2009

2010

Daniels Group

Client briefing Department store chain Hema changed 2007 strategy within Food and Beverage, emphasizing more on healthy and fresh concepts. Hema was interested in finding a chilled juice supplier who was able to supply according to these new objectives and targets. Green Seed's response Utilizing its broad manufacturers network, GreenSeed The Netherlands introduced Hema to Daniels PLCs drink division. GreenSeed The Netherlands was asked by Daniels to coordinate the development and launch of a new juices and smoothies range, in line with Dutch consumer preferences and Hemas new strategy. GreenSeed The Netherlands dealt with the pre-launch preparation, organising factory visits, labelling, logistics and marketing for the launch. The results A range of currently 10 SKUs were launched successfully at Hema in both Retail and Foodservice (in-house restaurants). New drink line extensions are being prepared to be launched soon.

Albert Heijn tray bakes launched Sept 08

Same Dutch retailer was looking for something new & different in mainstream desserts fixture

Key considerations in developing a range of desserts for the Dutch market

UK & OTHER EUROPEAN DESSERTS INFLU. CLASSIC DUTCH DESSERTS DUTCH FAVOURITES
AB1 HIGH BASKET SPEND DRAW TO AH, PREMIUM, INNOVATION SERVES 2, 4, 6 + TABLE PRESENTABLE THAT FINISHING TOUCH / FEEL INVOLVED

STROOP WAFFLE

BITTER KOEKJES

GRIESMEEL PUDDING

VLA

CONSUMER

DUTCH FRUITS & ING.

OCCASSION EASTER 09
SUCCESS / LEARNINGS

FAMILIARITY

EVENT

HOT THE

FAMILIAR UNKNOWN OR FAMILIAR & APPROACHABLE MAIN FOCUS HISTORIC AS EXP. HOT

HOT or COLD

COLD

NEW CATEGORY

Albert Heijn Cheesecake launched Easter into the entire +700 store estate

Key rules for successful exports

1. Understand your potential customer and the competitive environment 2. Invest in time and resources 3. Get local advice 4. Go step by step, market by market 5. Invest in sales people, not just linguists 6. International project needs full support from company top management 7. Develop and implement support programmes: get your product off the shelf 8. Have patience! 9. Do your homework properly = Be Committed

Thank you!

We Advise, We Execute & We Deliver