1. Growing with the discounters Planet Retail Ltd | February 2010 www.planetretail.net part of Discounters: By Matthias Queck, Research Director www.planetretail.net part of Rapid growth or gross myth? February 2010

2. www.planetretail.net - Planet Retail 2010 Discounters: Rapid growth or gross myth?2  Discounters are forecast to continue outperforming the modern grocery market as a whole, but remain a European (mainly German) dominated business.  Schwarz Group’s Lidl (#1 in Europe) is poised to overtake Aldi on a global level, but is unlikely to do so within the next five years.  The economic crisis has partially hit discounters as a result of lower consumption and higher competition. Signs of consolidation and restructuring can be seen in the sector, with declining sales and readjustments of concepts as well as range rationalisation.  Discount operators are creating all-purpose destinations or ‘Über discounters’ by systematically and selectively focusing on the most lucrative features of other channels.  Reactions from competitors include range streamlining, increasing price aggressiveness, dedicated private labels and their own (hybrid) discount concepts.  Manufacturers must not underestimate the various idiosyncrasies of the channel.  Growth markets to watch include several non-European markets including North and South America, Asia/Oceania and northern Africa.  Discounters are forecast to continue outperforming the modern grocery market as a whole, but remain a European (mainly German) dominated business.  Schwarz Group’s Lidl (#1 in Europe) is poised to overtake Aldi on a global level, but is unlikely to do so within the next five years.  The economic crisis has partially hit discounters as a result of lower consumption and higher competition. Signs of consolidation and restructuring can be seen in the sector, with declining sales and readjustments of concepts as well as range rationalisation.  Discount operators are creating all-purpose destinations or ‘Über discounters’ by systematically and selectively focusing on the most lucrative features of other channels.  Reactions from competitors include range streamlining, increasing price aggressiveness, dedicated private labels and their own (hybrid) discount concepts.  Growth markets to watch include several non-European markets including North and South America, Asia/Oceania and northern Africa. While it may be a common presumption that discounters are benefitting from the downturn, is this really the case? This report will analyse the opportunities, threats and idiosyncrasies of the channel with the following key findings:

3. www.planetretail.net - Planet Retail 2010 Discounters: Rapid growth or gross myth?3 1.Global Overview 2009-2014  Leading Discount Markets  Leading Discount Retailers 2.Leading Discounters  Top 10 Rankings  What is Moving the Top 5 3.Discounters: The All-Purpose Destination  Fighting Other Channels  New Features & Trends 4.How competitors can raise the gauntlet  Range Rationalisation  Marketing and Price Promotions  Tailored Discount Private Labels  New Discount-Oriented Hybrids 5.How manufacturers can benefit  Supplying Brands  Supplying Private Labels 6.Implications This presentation features animation. Please navigate by either clicking the slide or using the arrows on your keyboard for optimum viewing.

4. www.planetretail.net - Planet Retail 2010 Discounters: Rapid growth or gross myth?4 Global Overview 2009-2014

5. www.planetretail.net - Planet Retail 2010 Discounters: Rapid growth or gross myth?5 The discount channel is one of the most dynamic retail formats in modern grocery distribution (MGD) and has been outperforming the MGD sector as a whole. 1.Global overview  The discount channel is set to further outgrow the MGD sector at an even higher speed, but growth may come from numerous smaller, upcoming players  Despite being a relatively successful model in general, discounters have suffered to some extent from consolidation and increasing competition.  Even discounters are not completely immune to economic vagaries and the more mainstream and upmarket they become, the more exposed they are to changes in consumer spending. Discount Stores: Global Sales, 2004-2014f (USD mn) f - forecast Source: Planet Retail Ltd - www.planetretail.net MGD: Total Global Sales, 2004-2014f (USD bn) f - forecast Source: Planet Retail Ltd - www.planetretail.net