1. Taking the “General” out of General Merchandise Wednesday-June 11, 2013

2. Confidential: Property of GMDC 2 From GM Resource to the ‘Hierarchy’ The GMDC/Nielsen Hierarchy is part of a New General Merchandise (GM) Resource The Hierarchy enables the industry to organize and analyze data in a consistent “framework” across the GM industry players (Retailers / Wholesalers and Suppliers) and channels…common language and definitions The Hierarchy is being used to prioritize research study “deep dives” and serves as the backbone for a new data and analytics delivery tool supported by Nielsen's’ “Answers”.

3. Confidential: Property of GMDC 3 DEFINING GM

4. Confidential: Property of GMDC 4 4 Size of the Prize: GM = $209 Billion Source: Nielsen All-Outlet Projection. Out of $814 Billion in Total All Outlet Sales 25.7% is General Merchandise, or $209 Billion Food represents 15.2% of Total GM, or… $32.8 Billion in GM Sales is within Food Channel GM Matters!

5. Confidential: Property of GMDC 5 5 Source: Nielsen All-Outlet Projection. …but, the largest % of GM is from outside Food/Drug channels

6. Confidential: Property of GMDC 6 6 Overall GM Department Channel Trends Sales trends are positive for Overall GM… Food $32.8B in Sales, 2.6% growth Drug $12.8B in Sales, -1.9% decline All Other $163.5B in Sales, 2.1% growth Source: GMDC / Nielsen Hierarchy Data: Total stores reporting 52 weeks through 9/25/12 (without projections)

7. Confidential: Property of GMDC 7 7 Defining the new GM Industry Hierarchy Confidential: Property of GMDC “Items for me or my family to enjoy and experience…” “Items I need to help run and manage our household…” Apparel Baby Candy Electronics & Personal Entertainment Pet Publishing (Reading Materials) Social Expressions Sporting Goods Toys Auto Electrical Appliances Hardware Home Household Kitchen Outdoor School and Office Seasonal 21 3 Source: GMDC/Nielsen Hierarchy.

8. Confidential: Property of GMDC 8 8 Next Levels of the Hierarchy… Confidential: Property of GMDC Level 1 Category No. of Level 2 Categories No. of Level 3 Categories Apparel613 Baby921 Candy824 Electronics & Personal Entertainment747 Publishing (Reading Materials)518 Social Expressions (Greeting Cards)1015 Sporting Goods1543 Toys1439 Seasonal1228 “Items for me or my family to enjoy and experience…” 1 “Items to better enjoy the seasons and holidays…” 3

9. Confidential: Property of GMDC 9 9 Next Levels of the Hierarchy… Confidential: Property of GMDC Level 1 Category No. of Level 2 Categories No. of Level 3 Categories Automotive541 Electrical Appliances314 Hardware1060 Home967 Household1141 Kitchen1037 Outdoor1257 Pet932 School and Office727 “Items I need to help run and manage our household…” 2

10. Confidential: Property of GMDC 10 Confidential: Property of GMDC 10 GM Performance: Retailer Quartile Overview ”Averages” don’t tell the whole story… 1-Q (Worst) 2-Q GM UPC Growth% GM Sales Growth% 4-Q (Best) 3-Q Source: The Nielsen Company, Radian.

11. Confidential: Property of GMDC 11 Confidential: Property of GMDC 11 …but the Best Performing Quartile Retailers have gained the most value from these categories… 3 rd Largest “Mega” Category 4 th Quartile Retailers: +6.1 point gap… 6th Largest “Mega” Category 4 th Quartile Retailers: +7.1 point… The Largest “Mega” Category 4 th Quartile Retailers: +5.9 point gap… Source: The Nielsen Company, Radian.

12. Confidential: Property of GMDC 12 Smaller Role Larger Role BASIC/CORE Minimal set of basic GM categories. RANGE OF ALTERNATIVES TRADITIONAL Basic/Core + extend around Seasonal. EXTENDED Broader presence in many categories. TARGETED GM Focus in “Signature” categories DESTINATION Broad deep in most GM categories.

13. MAGAZINES PRESENTATION GMDC INSIGHTS

14. Confidential: Property of GMDC 14 Agenda Publishing Category Channel Performance Level 2 Magazines Category Channel Performance Food Channel Magazines Performance Food Channel Magazines Sales and Shopper Trends Level 3 Magazines Subcategory Sales Trends and Drivers

15. Confidential: Property of GMDC 15 Overall Channel Performance Category: Publishing Level 1 Level 1 Publishing Category includes: Magazines, Books, Newspapers and Maps / Atlas FOOD CHANNEL $1.7 Billion (6%) 2012 Sale Decline 360 Average UPCs DRUG CHANNEL $0.5 Billion (2%) 2012 Sale Decline 150 Average UPCs ALL OTHER OUTLETS $1.8 Billion 2% 2012 Sale Increase 260 Average UPCs Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections)

16. Confidential: Property of GMDC 16 Overview – Contribution to Overall GM Category: Publishing Level 1 Publishing contributes 5% of overall GM sales in the Food channel and ranks 5 th or 18 GM Level 1 categories Although sales are slightly higher in all other outlets, Publishing only contributes 1% of their GM sales and ranks last The Food channel has had a steeper decline than Drug or All others and lags overall GM sales growth by 9%. All Other Outlets managed to grow Publishing sales in parallel with the rest of GM categories. Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections) Category Trend: DARK BARRest of GM Trend: LIGHT BAR

17. Confidential: Property of GMDC 17 Category Channel Performance Category: Magazines Level 2 Magazines drives the overall Publishing Level 1 Category sales with 50% to 60% of total sales Magazines are in substantial decline in both Food and Drug channels while Book sales have seen growth in both channels FOOD CHANNEL DRUG CHANNEL Level 2 Categories2012 Sales % of 2012 L1 Sales 2012 Sales Trend 2012 Sales % of 2012 L1 Sales 2012 Sales Trend MAGAZINES$1,023,881,30161%(8%)$292,587,24853%(7%) BOOKS$327,186,48120%1%$153,389,76828%11% NEWSPAPERS$321,625,16419%(6%)$101,627,56118%(1%) MAPS AND ATLAS$1,765,2020.1%(26%)$2,216,4570.4%(41%) Total Publishing Level 1$1,674,458,148100%(6%)$549,821,034100%(2%) Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections)

18. Confidential: Property of GMDC 18 Category Channel Performance Category: Magazines Level 2 Magazines UPC sold per period are declining as well but at a slightly slower rate than dollar sales. Average unit price is only 5% higher in the Drug channel compared to the Food channel. Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections) FOOD CHANNEL DRUG CHANNEL Level 2 Categories % of 2012 L1 Sales Trend in UPCs Sold per Period Average Unit Price % of 2012 L1 Sales Trend in UPCs Sold per Period Average Unit Price MAGAZINES61%(3%)$4.2453%(6%)$4.55 BOOKS20%(4%)$5.1028%(10%)$4.78 NEWSPAPERS19%0%$1.4318%(7%)$1.28 MAPS AND ATLAS0.1%(5%)$7.640.4%(28%)$7.16 Grand Total100%(3%)$3.14100%(8%)$3.12

19. Confidential: Property of GMDC 19 Food Retailer Performance Category: Magazines Level 2 – Quartile Sales 2 Year UPC Compound Annual Growth% 2 Year Sales Compound Annual Growth% Per Store Metrics $75K per year 534 UPCs / year $147 per UPC Per Store Metrics $71K per year 538 UPCs / year $129 per UPC Per Store Metrics $39K per year 459 UPCs / year $92 per UPC Per Store Metrics $68K per year 557 UPCs / year $118 per UPC Source: GMDC / Nielsen Hierarchy, Radian. Food Channel Analysis

20. Confidential: Property of GMDC 20 Food Retailer Performance Category: Magazines Level 2 – Quartile Statistics 1 st Quartile2 nd Quartile3 rd Quartile4 th Quartile 2012 Sales / Store (average) $38,863$67,980$75,466$71,111 2010 - 2012 Sales Growth (CAGR) (10.1%)(7.5%)(5.8%)(6.0%) UPCs / Retailer (average) 459577534538 2010 - 2012 UPC Growth (CAGR) (7.7%)(6.5%)(7.2%) Sales / UPC / Store (average) $92$118$147$129 The top three quartiles have a substantially higher sales per store basis. However, all quartiles are experiencing similar declines in sales and UPCs Source: GMDC / Nielsen Hierarchy, Radian. Food Channel Analysis

21. Confidential: Property of GMDC 21 Food Retailer Sales Trends Category: Magazines Level 2 Sales declines have been steady the last two years for most Food Retailer except the lowest performing quartile. Source: GMDC / Nielsen Hierarchy, Radian. Food Channel Analysis

22. Confidential: Property of GMDC 22 Food Retailer Sales Per Unit Trends Category: Magazines Level 2 All Food Retailer quartiles show a steady 2% increase in prices per year Top Quartile Trends The top quartile has the highest sales per unit in the last 3 years Price differentials by quartile are small and do not drive store selection Source: GMDC / Nielsen Hierarchy, Radian. Food Channel Analysis

23. Confidential: Property of GMDC 23 Food Retailer Shopper Trends Category: Magazines Level 2 Buyer conversion in the Food Channel has remained high over the last 3 years although it did decline 4% last year. A substantial percent of Food Channel customers purchase magazines. Dollars per shopper declined only in 2012. The key driver of sales decline is the frequency of purchase (number of trips where magazines were purchased). Shopper trip including Magazines declined outside the food channel at similar rates to inside the food channel. Source: GMDC / Nielsen Hierarchy, Radian. Panel Data Analysis

24. Confidential: Property of GMDC 24 Subcategory Sales Details Category: Magazines Level 3 Subcategories “Magazines Unknown” represents unclassified titles including many new titles FOOD CHANNEL DRUG CHANNEL Level 3 Categories2012 Sales % of 2012 L1 Sales 2012 Sales Trend 2012 Sales % of 2012 L1 Sales 2012 Sales Trend LIFESTYLE AND ENTERTAINMENT $346,904,95534%(13%)$95,432,21533%(11%) MAGAZINES UNKNOWN $267,543,30326%6%$78,215,95627%4% WOMENS $151,746,56615%(12%)$39,781,02314%(14%) SPORTS, HUNTING, OUTDOOR $59,191,6656%(6%)$14,005,9095%(3%) FAMILY / HOME AND FOOD $52,709,0165%(15%)$5,218,9232%(6%) OTHER MAGAZINES $39,739,5744%(3%)$10,520,6344%1% GAMES AND PUZZLES $29,765,9993%(8%)$16,818,2006%(7%) HEALTH AND FITNESS $28,442,1723%(7%)$11,393,1744%(9%) TABLOIDS AND NEWS $20,351,7562%(14%)$8,805,1853%(5%) TEEN AND CHILDREN $15,121,9561%(21%)$7,863,8153%(22%) AUTOMOTIVE $12,364,3341%(17%)$4,532,2122%(17%) TOTAL Magazine Level 2 $1,023,881,296100%(8%)$292,587,246100%(7%) Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections)

25. Confidential: Property of GMDC 25 Subcategory Sales Details Category: Magazines Level 3 Subcategories “Magazines Unknown” represents unclassified titles including many new titles Source: GMDC / Nielsen Hierarchy Channel Data: Total stores reporting 52 weeks through 9/25/12 (without projections) FOOD CHANNEL DRUG CHANNEL Level 3 Categories % of 2012 L1 Sales Trend in UPCs Sold per Period Average Unit Price % of 2012 L1 Sales Trend in UPCs Sold per Period Average Unit Price LIFESTYLE AND ENTERTAINMENT 34%(5%)$3.8633%(6%)$4.02 MAGAZINES UNKNOWN 26%3%$5.8527%1%$5.90 WOMENS 15%(8%)$2.6414%(12%)$3.61 SPORTS, HUNTING, OUTDOOR 6%(5%)$5.765%(5%)$5.37 FAMILY / HOME AND FOOD 5%(11%)$6.332%(3%)$5.91 OTHER MAGAZINES 4%(3%)$5.334%0%$5.30 GAMES AND PUZZLES 3%(5%)$3.666%(12%)$3.63 HEALTH AND FITNESS 3%(4%)$4.744%(9%)$4.99 TABLOIDS AND NEWS 2%(13%)$7.443%(11%)$7.56 TEEN AND CHILDREN 1%(18%)$4.263%(20%)$4.21 AUTOMOTIVE 1%(11%)$5.792%(3%)$5.85 TOTAL Magazine Level 2 100%(3%)$4.24100%(6%)$4.55

26. Confidential: Property of GMDC 26 Food Retailer Performance Category: Quartile Statistics – Relative Growth Rates Overall GM Level 1 Publishing Level 2 Magazines 1st Quartile(4.6%)(8.9%)(10.1%) 2nd Quartile(1.9%)(6.7%)(7.5%) 3rd Quartile2.1%(5.2%)(5.8%) 4th Quartile6.5%(4.9%)(6.0%) Best to Worst: Growth Rate Advantage (pts) 1144 The top quartile retailers outperform the bottom quartile retailers by 4 points in Publishing and Magazines (but still a negative trend line) Source: GMDC / Nielsen Hierarchy, Radian. Food Channel Analysis

27. Confidential: Property of GMDC 27 All main subcategories are in sales decline – most in double digit decline this last year New titles and small distribution titles (Unknown and Other subcategories) have shown growth in the last year, mitigating a small amount of the overall category decline The Sports, Hunting and Outdoors subcategory and the Health and Fitness subcategory have about ½ the decline rate of other subcategories but account for just 9% of total sales Subcategory Sales Insights Category: Magazines Level 3 Subcategories

28. Confidential: Property of GMDC 28 Magazines is a $1B dollar business and rank 5 th in overall GM sales - This is an important category to manage proactively Although Magazines are in a long term decline like other print media, 25% of Food Retail customers purchase this category – This is an important category for your customers New and low volume titles have sales growth that mitigate the overall decline – Retailers have to support assortment updates and regular category refinements Implications for Retailers Category: Magazines Level 2

29. Confidential: Property of GMDC 29 Suppliers have to refine their go-to-market strategies and supply chains to remain profitable in a declining market The Food channel is central to the overall success for the Magazines category. Category refinements and title updates are critical to slowing the sales decline. Price increase have trimmed the overall sales decline but purchase frequencies are declining and is a critical risk to customer engagement and readership. Implications for Suppliers Category: Magazines Level 2

30. Confidential: Property of GMDC 30 Improve overall data elements to capture clearer picture of the category Provide “clean” and complete list of UPCs for new titles Identify Mainline vs. Check stand titles Identify retailer best practices that are mitigating decline Cross-merchandising Outposts Renew emphasis of contribution margin of category Category is still over $1 Billion in sales and delivers a 2 to 3 times greater “contribution” margin than most any other category in the store. Implications for Suppliers Next Steps

31. Confidential: Property of GMDC 31 Thank You Mark Deuschle GMDC markd@gmdc.org