1. PROGRAM ASSOCIATED WHOLESALE GROCERS 2014 Gravitec Store Location Conference Presented by AWG Real Estate Department

3. ABOUT AWG 2 nd largest retailer-owned grocery cooperative 2 nd largest retailer-owned grocery cooperative Headquartered in Kansas City, KS Headquartered in Kansas City, KS Fort Worth, TX Fort Worth, TX Kansas City, KS Kansas City, KS Oklahoma City, OK Oklahoma City, OK Pearl River, LA (Gulf Coast) Pearl River, LA (Gulf Coast) Southaven, MS (Memphis) Southaven, MS (Memphis) Springfield, MO Springfield, MO Goodlettsville, TN (Nashville) Goodlettsville, TN (Nashville)

4. NOTABLE AWG RETAILERS

5. HISTORY OF CASH SAVER 1958 Cost Plus World Market 1988 Food Depot Cost Plus, Conyers, GA The first AWG-supplied Cost Plus was Froogel’s, Biloxi, MS

6. CASH SAVER Store concept/format developed in the Memphis Division in early 2010 Project image of value/savings (COGS + 10%) Fresh, high quality perishables Convenient store layout and front-end operation Clean, friendly, contemporary conditions and décor High merchandising and operational standards Variety - SKUs

7. CASH SAVER PROGRAM underperforming stores that faced closure Due to increasing competition, the great recession and the need to develop a turn-key program for our underperforming stores that faced closure Gary Jennings, AWG Memphis Division, developed the Cash Saver program Design/Decor Operational standards Training Merchandising recommendation Advertising support Dedicated support team to manage format conversion and post openings

23. WHAT IS “COST”? Cost of Goods + Freight (zone) + Markup % = Shelf price (cost)

24. PROFORMA HIGHLIGHTS Sales increase: Year 1 = 30%+ Sales increase: Year 1 = 30%+ Years 2-3 = 10%+ Years 2-3 = 10%+ Gross margin = 17.0 – 18.4% before patronage and includes 10% at the register Gross margin = 17.0 – 18.4% before patronage and includes 10% at the register Payroll = 6.5 - 8.5% Payroll = 6.5 - 8.5% Rent target = 1.5% or less Rent target = 1.5% or less Advertising =.35% or less Advertising =.35% or less Supplies = 1.1 - 1.3% Supplies = 1.1 - 1.3%

25. Stores are freestanding or strip Stores are freestanding or strip Range from 20,000 to 50,000 square feet Range from 20,000 to 50,000 square feet No bakery/deli No bakery/deli $30,000 to $50,000 to convert $30,000 to $50,000 to convert Décor Décor Paint Paint Signage – hard and soft Signage – hard and soft CASH SAVER OPERATIONS

26. BEST SUCCESS STORY Memphis division has been fortunate to have all but one location be successful. Really the best success story is the fact that 5 of these locations probably would have been closed. Of the 5 stores mentioned, our Midtown Memphis location has had a 325% increase over 4 years. Gulf Coast identified one of their recently converted Cash Savers recently converted has had a 100% increase with AGBR retailers next to the location and a Walmart less than 10 miles away.

27. WHAT IS THE SUCCESS RATE? WHY DO SOME NOT WORK? Success rate is really high. Not everyone has the rate of increases as the examples mentioned but the majority do have double digit increases. Most of successful retailers have bought into program. Stayed true to program markups…kept it simple Stayed true to program markups…kept it simple Negotiated a working lease Negotiated a working lease Controlled all expenses / payroll Controlled all expenses / payroll Better understanding how to buy and bridge deal product Better understanding how to buy and bridge deal product Changed mindset from services and conditions to low price and fully stocked store Changed mindset from services and conditions to low price and fully stocked store Discontinue or reduce advertising while growing sales Discontinue or reduce advertising while growing sales

28. OTHER NAMES UNDER THE “COST PLUS” FORMAT Memphis…Foodwise and Gordin’s Butcher Shop Gulf Coast…Simoneaude’s Cost Pluls, Food 4 Less, Pic N Sav, Cost Plus, Food Champs, Grocery Advantage, Mizer’s Budget Saver, Froogel’s

29. CASH SAVER LOCATIONS Licensed areas for more than 130+ stores: Alabama Alabama Arkansas Arkansas Florida Florida Illinois Illinois Indiana Indiana 10 Kansas Kansas Kentucky Kentucky Louisiana Louisiana Missouri Missouri Mississippi Mississippi Ohio Ohio Oklahoma Oklahoma Tennessee Tennessee Texas Texas

30. STORE/SITE CHARACTERISTICS Cash Savers can either be new market entries or conversions of underperforming conventionals New market entries are usually housed in second- use retail facilities Majority of stores operate under the Cash Saver banner although there are additional names in use (i.e., Froogel’s, Mizer’s, Price Less Foods) Box sizes and offerings vary by location All “Cash Savers” have a standardized exterior and interior decor

31. AWG ASSISTANCE Store development/real estate/market research functions Store development/real estate/market research functions Store engineering, fixture layout and equipment procurement Store engineering, fixture layout and equipment procurement Exterior/interior decor and signage Exterior/interior decor and signage Financing Financing Employee training Employee training Advertising Advertising Retail pricing maintenance Retail pricing maintenance Systems upgrades Systems upgrades Ongoing retail support Ongoing retail support

32. Find sites (new stores) Find sites (new stores) Conduct Customer Origin Studies (conversion stores) Conduct Customer Origin Studies (conversion stores) Define trade areas Define trade areas Define current and future customer population bases Define current and future customer population bases Understand trade area customer demographics Understand trade area customer demographics Assess the competition Assess the competition Develop sales projections based on size and location Develop sales projections based on size and location Assist retailers in making an informed decisions Assist retailers in making an informed decisions AWG MARKET ANALYSIS

33. Cash Saver primary trade areas are typically larger than conventional store primary trade areas Cash Saver primary trade areas are typically larger than conventional store primary trade areas 3-mile urban radius 3-mile urban radius 5+-mile rural radius 5+-mile rural radius Conversion stores require a Customer Origin Study Conversion stores require a Customer Origin Study Retailers vary by performance and acceptance (images typical range between 90 and 110) Retailers vary by performance and acceptance (images typical range between 90 and 110) Pulling powers of Cash Savers can have up to a 10- point advantage Pulling powers of Cash Savers can have up to a 10- point advantage SALES FORECASTING

34. RESULTS Does not work everywhere! Does not work everywhere! Retailers must adhere to strict operating standards Retailers must adhere to strict operating standards 100% sales increase in select areas for some operators 100% sales increase in select areas for some operators

35. QUESTIONS?