VALUE CHANNEL OUTLOOK Sustaining the rapid growth course SANDY SKROVAN April 2013 Research Director - US

Contents Macro Backdrop Value Channel Baseline Key Trends & Initiatives Rapid store expansion More ‘shoppable’ stores Consumables expansion Balancing the brand portfolio Moving toward multi-channel Outlook Implications

Value Channel Outlook: Sustaining the rapid growth course Planet Retail remains bullish on the value channel as a viable channel, not just for ‘down’ times, but for the long term. Value channel retailers began making many of the ‘right moves’ before the recession that positioned them to endure and thrive during tough economic times. An improved shopping experience, expanded consumables offer and sound retail management fundamentals make the value channel a viable channel for the long term. But just how much growth remains? This report investigates some driving factors in the macro landscape which are creating tailwinds for value channel retailers. It provides a baseline analysis of the value channel today, but more importantly focuses on where Planet Retail sees the sector heading. Key retailer initiatives and channel-wide trends are highlighted as well as the implications for retail competitors and suppliers. Note: Planet Retail defines the value channel to include dollar stores and limited assortment grocers (e.g. Aldi and Save-A-Lot). References to the ‘value channel’ throughout this report is inclusive of both sectors unless otherwise noted. © Aldi

1. Macro Backdrop

1. Macro Backdrop: ‘Fragile’ economy persists The value channel is thriving and outperforming other retail formats due to the prolonged weak economic environment and a shift in consumer mindset toward value shopping and bargain hunting. ‘Fragile’ economic conditions conducive to value channel shopping are dragging on. ‘Dollar store economy’ characteristics: Elevated unemployment. Continued job concerns. Wavering consumer confidence. Cautious shopper spending. Rising gasoline prices. Rising costs of services (e.g. healthcare, education, entertainment), personal debt reduction and retirement savings dictate what remains to spend on goods. Source: US Bureau of Labor Statistics Feb-13: 7.7% Unemployment remains elevated despite coming down from the 9-10% range where it hovered for 2.5 years through late 2011.