Industry Outlook / Authors Grocery Channel John Rand Senior Vice President Mike Paglia Senior Analyst Alida Destrempe Analyst April / 2012

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Macro Environment 6-14 A Glimpse of Major Players and Performance A Look at “The Big Three” Shopper Loyalty is a Muddle The Supermarket Pricing War Key Channel Initiatives / Table of Contents 3

/ A Glimpse of Major Players and Performance Channel Performance –Forecast Snapshot by Channel – Edible/Non-Edible Sales Changes in Rank – Scale Does Not Equal Success – Retailer Rankings – Channel Growth Comes from the Middle Market Share- Who is Winning and Losing?

US Sales by Format Supermarkets Growing Share Source: Kantar Retail analysis; Company Reports NOTE: Data as of 11/17/2011 5

Where Else Do Conventional Grocery Shoppers Go? If 100% of the sample shops grocery stores, the following %’s also shop these channels: Source: Kantar Retail ShopperScape ®, January – December 2011 (Past Four-Week Shoppers, January-December 2011) 6

Non-Edible Grocery Sales % $706$887$1,086 USD Billions Note: %s are Kantar Retail estimates Supermarkets have the highest % of non-edible sales, yet losing ground. Source: Kantar Retail analysis; Company Reports 7

Edible Sales % by Channel Grocers Lose Share But Still Dominant $445$554$679 Supermarkets share declines in edibles are quite modest compared to past years. Source: Kantar Retail analysis; Company Reports 8

/ A Glimpse of Major Players and Performance Channel Performance –Forecast Snapshot by Channel – Edible/Non-Edible Sales Changes in Rank – Scale Does Not Equal Success – Retailer Rankings – Channel Growth Comes from the Middle Market Share- Who is Winning and Losing?

Top 3 US Grocers Account for USD162 Billion by 2016E (US Supermarket Sales) Kroger leads, Safeway follows, and Supervalu is just trying to stay in the race. “All Other” grocers beyond the Top 6 continue to keep pace in growth Kroger leads, Safeway follows, and Supervalu is just trying to stay in the race. “All Other” grocers beyond the Top 6 continue to keep pace in growth Source: Kantar Retail analysis; Company Reports 10

(Total Edible Grocery Sales Only) “Fifty-Fifty” for the Top 10 Grocers National Retailers Ranked Top 5, Yet Remaining are Regional Note: %’s are Kantar Retail estimates. Data as of 11/17/11 Source: Kantar Retail analysis; Company Reports Total Edible Grocery Sales Only 11

Growth No Longer Consolidated to a Few Large, Efficient Players *Total Grocery only. NOTE: All data as of 11/17/11 Source: Kantar Retail analysis; Company Reports Top 20 Supermarket Retailers Account for 90% of Sales Added from

Growth From the Middle 2 nd and 3 rd tier grocers account for roughly 30% of growth through 2016E. Includes: Ahold Delhaize HEB Wakefern Winn Dixie Whole Foods Sales Growth as a % of Total Growth: ’11E – ’16E Source: Kantar Retail analysis; company reports NOTE: Data as of 11/17/

Total Square Footage Added By KR Chains E E –2016E Average: 63 MM SqFt 2008 – 2011E: Square footage added by only most well-grounded chains 2006–2007 Average: MM SqFt Source: Kantar Retail analysis; Company Reports

Stores Are Getting Smaller as Well Median Total Store Size – Square Feet Source: Kantar Retail analysis; Food Marketing Industry Speaks Square Footage 15

Scale Doesn’t Always Equal Success: Regional Retailers Doing Better 2011E Supermarket Sales Growth Over PY 2011E Supermarket Sales Growth Over PY Source: Kantar Retail analysis; company reports 16

Forecast Regional Stores Perform Better Average Sales Per Square Foot Source: Kantar Retail analysis; company reports Kroger, Safeway, Supervalu 17

Regional Store Growth Slight Growth Across all Banners Source: Kantar Retail analysis; company reports 18

Regional Performance Outlook Above Industry Average Retailer Store '11E - '16E CAGR Sales '11E - '16E CAGR Ahold US 1.10%2.80% Delhaize US 0.80%2.00% Giant Eagle 2.30%3.60% H-E-B 2.40%4.00% Meijer 0.50%4.00% Publix 3.20%3.90% Wakefern 2.30%5.40% Wegmans 2.90%8.00% Supermarket Channel 1.40%3.50% Source: Kantar Retail analysis; company reports Greater than industry average 19

Implications: CPG companies have historically invested more with large-scale retailers – Unfortunately, scale alone is not a predictor of success – It was before the recession – But we’re in the post modern marketplace now – Real dollar sales growth is coming from companies with smaller scale Standard or all-channel approaches to customers aren’t very well aligned to the unique circumstances of working with regional retailers Source: Kantar Retail analysis 20

/ A Glimpse of Major Players and Performance Channel Performance –Forecast Snapshot by Channel – Edible/Non-Edible Sales Changes in Rank – Scale Does Not Equal Success – Retailer Rankings – Channel Growth Comes from the Middle Market Share- Who is Winning and Losing?

Store Productivity vs. Market Share Share in Market Store Productivity (Sales per square foot) Hi Share/Hi Productivity Defend and Grow Hi Productivity / Low Share Invest and Grow or Harvest Low Share/Low Productivity Market exits / Swaps High Share / Low Productivity Decline or Change A market level look at your retailer allows you to target your resources more effectively Source: Kantar Retail analysis 22

Before Going Further…Here’s the Key to Understanding These Charts Banner name Sales per sq. ft Directional change of market share (‘09-’11) Store count in market Banner name Sales per sq. ft Directional change of market share (‘09-’11) Store count in market Source: Kantar Retail analysis 23

Store Productivity vs. Market Share Houston Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data Houston belongs to H-E-B HEB is the one regional chain whose market share takes up nearly two-thirds of the local supermarket dollar in two Texas metro areas. The retailer’s habit of tailoring individual stores to the specific needs of neighborhoods has fueled much of that growth and strong market position. 24

Store Productivity vs. Market Share Atlanta Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data Regional and National Grocery vs. Walmart: Kroger has held its own and even made strong gains while competing with Walmart in Atlanta, as it continues to implement strategies such as renovating stores as well as improve areas where Walmart doesn’t have its greatest strengths. Publix is also gaining share in Atlanta which has come after years of expansion, marketing, and focus on quality and store presentation. Publix also is only in five Southern states, which could give the company a better handle on the southeastern consumer. 25

Cincinnati is Kroger Territory Kroger is the dominate retailer in Cincinnati and has either the number 1 or 2 market share position in all markets of operation. Kroger has been able to maintain and grow its market share by offering competitive low prices and loyalty programs that offer shoppers discounts. Store Productivity vs. Market Share Cincinnati Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data 26

West Coast is Safeway’s Core Market, yet Kroger Leads Share Safeway’s core operating market is in the West Coast. Yet within the Los Angeles market, Kroger banner Ralphs stores are more productive and are gaining share faster than Safeway. Ralphs has the potential to continue to gain share profitability in the future as the retailer recently launched a new EDLP strategy for its stores. Store Productivity vs. Market Share Los Angeles Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data 27

Philadelphia: A Market of Regional Dominance Regional supermarkets are the key players that are gaining store profitability on top of share within Philadelphia, where national retailers such as Supervalu and Walmart are losing their dominate position. Store Productivity vs. Market Share Philadelphia Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data 28

Florida is Publix Territory Publix continues to be the dominate player within many Florida markets as Florida is the retailer’s primary operating state and it saturates the market. With its strong brand and store penetration, Publix continues to gain share and beat competitors by emphasizing service and a family-friendly image. Store Productivity vs. Market Share Miami Store Productivity (sales per square foot) Share in Market Source: Kantar Retail analysis; Trade Dimensions Market Scope data 29

Retail Leadership Coming From One of Two Basic Areas Leaders are growing in one of two primary ways: – Market Density – Maximize Market Share - Tailors Market density and saturation Format prototyping Store of the community “I know the markets I operate in” – Consumer Segmentation – Expand Share of Wallet From a Chosen Focused Consumer - Choosers Differentiated brands/stores/experiences New category introduction Loyalty card for 1:1 marketing Aggressive brand marketing “I know the person/people I’m selling to” 30 Source: Kantar Retail analysis

John Rand Senior Vice President Mike Paglia Senior Analyst Alida Destrempe Analyst John Rand Senior Vice President Mike Paglia Senior Analyst Alida Destrempe Analyst