1. 1 Product Support Mr. Chris Burns Product Support Mr. Chris Burns June 10, 2010 Trends Mission Opportunities Focus

2. 2 Mission

3. 3 Manages centralized product support program for commissaries worldwide Manages Agency’s worldwide sales & customer savings programs including: −Merchandising – Promotion – Marketing - Shelving reset −Distribution - Transportation −Cataloging - Pricing −Guard/Reserve On-Site Sales program Functional store support & proponent for PS business systems for commissaries & CDC’s worldwide Acquisition support for all resale items −Added mission for Europe due to diminishing support Sales Directorate Mission Sales Directorate Mission

4. 4 Division Chief 5 DivisionsFunctions Larry HahnContracting Resale Contracting Michelle FrostSemi-Perishable General Grocery/Promotions/Grab-n-Go Brad McMinnPerishable Produce/Meat/Deli/Bakery/Chill/Freeze Gordon Jones Internet Sales, Transportation & Cataloging Transportation bookings to Europe/Caribbean, Catalog File Maintenance, Internet Shopping & Guard/Reserve On-Site Sales, Store Support Greg KochubaSpecial Projects Sales/Savings, Scholarships for Military Children, Resets, & OCONUS/CONUS Order Processing, Distribution Sales Directorate Division Functions Sales Directorate Division Functions

5. 5 Trends

6. 6 Consumer Price Index – Food at Home Inflation and Deflation information Consumer Trends DeCA & Industry Departmental Sales Comparisons Category Comparisons Top 20 Categories by DeCA 2010 Sales Coupons Trends

7. 7 Bureau of Labor Statistics Average Fiscal Year Food at Home Index Values Note: Values are Arithmetic Average of October – September Index Values (Source BLS Food At Home All Urban Seasonally Adjusted Monthly Table), FY 2010 thru April A falling CPI Food At Home Index – DeCA hasn’t seen this before!

8. 8 -2.8%-2.9%-2.4%-2.0%-1.5%-0.7% CPI Food at Home – Monthly Compare FY 2010 vs. FY 2009 -0.02% The deflationary trend appears to be ending!

9. 9 1.Restraint remains the new normal – at home matters most 2.Value is top priority 3.Store Brand growth continues 4.Grocery consolidation intensifies 5.Assortment wars escalate, product assortment is point of differentiation 6.Winning brands are innovative & different 7.Spending on healthy items is a solid measure of consumer confidence 8.Manufacturers get stingy with trade promotion spending 9.Direct to consumer options thrive Top Consumer Goods Trends in 2010

10. 10 Department Sales – DeCA vs. Industry (Nielsen Data – CONUS EX AK/HI 52 weeks ending 05/16/2010 vs. PY) Department Sales – DeCA vs. Industry (Nielsen Data – CONUS EX AK/HI 52 weeks ending 05/16/2010 vs. PY) DeCA $M $2,006 $389 $384 $180 $161 $153 $129 Total sales for all DeCA CONUS UPC Departments - last 52 weeks was $3,816M - this was down -2.51% vs. +0.19% for industry

11. 11 Department Sales – DeCA vs. Industry (Continued) (Nielsen Data – CONUS EX AK/HI 52 weeks ending 05/16/2010 vs. PY) Department Sales – DeCA vs. Industry (Continued) (Nielsen Data – CONUS EX AK/HI 52 weeks ending 05/16/2010 vs. PY) DeCA $M $123 $112 $92 $63 $11 $3 $2

12. 12 Top 20 CONUS Categories by Sales Source: Nielsen RMS Sales Rank Category DeCA Sales in Millions (52 Wks ending 05/16/2010) Sales Change DeCA Sales Change Industry DeCA Savings % 1CIGARETTES$1189.8%4.4%12.0% 2SALTED SNACKS$1030.6%3.4%23.2% 3CHEESE$99-16.4%-5.7%41.5% 4SOFT DRINKS$92-4.1%-0.3%9.3% 5FRESH BAKERY$87-6.3%-1.2%28.7% 6RTE CEREAL$81-3.3%0.0%17.0% 7MILK$81-16.0%-9.8%29.0% 8FROZEN ENTREES$79-2.0%3.0%28.1% 9DOG FOOD$747.2%3.8%24.4% 10TOILET PAPER$68-0.5%-0.6%14.4%

13. 13 Top 20 CONUS Categories by Sales (Continued) Source: Nielsen RMS Sales Rank Category DeCA Sales ($M) 52 Wks ending 05/16/2010 Sales Change DeCA Sales Change Industry DeCA Savings % 11SHLF STAB JUICES & DRINKS$66-4.5%-2.8%21.2% 12LAUNDRY DETERGENT$62-2.1%-0.8%14.8% 13FRESH VEGETABLE & HERB$613.0%0.2%22.9% 14CANDY$60-2.8%7.1%27.1% 15COFFEE$60-1.7%2.2%24.6% 16LUNCHMEAT$53-4.4%1.6%41.0% 17SHELF STABLE VEGETABLE$52-1.6%4.9%28.0% 18CRACKERS$45-1.4%2.3%26.2% 19FRESH FRUIT$447.8%5.6%14.0% 20COOKIES$42-2.1%1.5%24.4%

14. 14 FY 2010 YTD (thru Apr 2010) FY 2009FY 2008 Coupon Dollars $66.92M (up 16% versus PY) $105.20M (up 12% versus PY) $93.74M Coupon Quantity 76.53M (Up 10% versus PY) 123.93M (Up 6% versus PY) 116.5M Average Coupon Amount 87.4 cents (Up 3% versus PY) 84.9 cents (Up 6% versus PY) 80.5 cents Coupons

15. 15 2009 Coupon Rank 2008 Coupon Rank Retailer 11Wal-Mart 22Kroger 35Supervalu 43Military Commissaries 56Publix 64Ahold 79Walgreens 87Target 98Meijer 10 Safeway 2009 U.S. Coupon Redemption Rankings Source: NCH Marketing Services, Inc.

16. 16

17. 17 Focus

18. 18 Savings Sales Basket Size Guard & Reserve Sales Customers Category Management Vendor Stocking Focus Areas

19. 19 Savings (after Tax and Surcharge) DepartmentSeptember 2009 Interim April 2010 CONUS Grocery (Scan Data)*23.8%25.3% CONUS Meat40.2%33.1% CONUS Produce40.6%38.9% Worldwide (Includes CONUS, AK, HI and Overseas) 31.7%31.6% Scan Data based on 26 weeks with Wal-Mart factor included Interim Survey designed to give general information Interim survey used only 6 stores for CONUS Meat and Produce vs. 30 stores in formal study. Also, mini survey did not include OCONUS survey as done in formal annual survey DepartmentSeptember 2009 Interim April 2010 CONUS Dairy25.4%28.3% CONUS Grocery – Food21.5%23.5% CONUS Frozen Foods25.6%26.8% CONUS Health and Beauty26.4%26.1% CONUS Non-Food Grocery27.5%28.1%

20. 20 39 (15.4%) of the largest stores generate 40% of total sales 138 smaller stores (54.3%) in mostly remote or overseas locations deliver 20% of sales Sales Directorate serves all Stores – Small & Large % of Sales % of Stores

21. 21 Sales and Customers (Data is October – April) Sales ($ Millions)FY 2010FY 2009Change% Change DeCA East $ 1,602 $ 1,659 $ (57)-3.4% DeCA Europe $ 302 $ 294 $ 72.5% DeCA West $ 1,529 $ 1,561 $ (32)-2.1% DeCA Total $ 3,433 $ 3,515 $ (82)-2.3% Sales ($ Millions)FY 2010FY 2009Change% Change Grocery $ 2,924 $ 2,991 $ (67)-2.2% Meat $ 241 $ 256 $ (15)-5.9% Produce $ 268 $ 267 $ 00.1% DeCA Total $ 3,433 $ 3,515 $ (82)-2.3% Customers (Millions)FY 2010FY 2009Change% Change DeCA East 23.34 23.74 (0.40)-1.7% DeCA Europe 6.57 6.43 0.142.2% DeCA West 24.90 24.73 0.170.7% DeCA Total 54.81 54.90 (0.09)-0.2%

22. 22 DeCA Fiscal Yr. Dept Sales %

23. 23 FY2008 FY2009 % Change FY2009 vs. FY2008 FY 2010 % Change FY 2010 vs. FY 2009 Oct $ 460.56 $ 514.5311.7% High growth from FY 2008 to FY 2009 means challenging FY 2010 monthly comparisons $ 511.51-0.6% Nov $ 487.89 $ 526.627.9% $ 487.21-7.5% Dec* $ 508.80 $ 522.752.7% $ 527.881.0% Jan $ 459.84 $ 512.9411.5% $ 492.27-4.0% Feb** $ 460.27 $ 458.12-0.5% $ 450.35-1.7% Mar $ 481.38 $ 493.882.6% $ 483.75-2.1% Apr $ 473.44 $ 485.662.6%$ 479.72-1.2% May $ 522.25 $ 524.470.4% Low growth from FY 2008 to FY 2009 may mean easier FY 2010 monthly comparisons Jun $ 465.17 $ 467.650.5% Jul $ 492.39 $ 490.97-0.3% Aug $ 521.36 $ 489.48-6.1% Sep $ 479.90 $ 493.862.9% *December 2009 was up 1.0% over December 2008 only because December 26, 2008 was Federal Holiday lowering December 2008 sales **February 2008 had 29 days, thus February 2009, even though down 0.5% was still a high growth month (if comparing 28 days) Monthly Sales Comparisons vs. Prior Year

24. 24 DeCA Basket Size

25. 25 Guard and Reserve Sales Growth Update Fiscal Year# EventsSales# Customers FY 2008104$4,438,930 41,347 FY 2009164$9,100,584 82,509 FY 2010 (thru May 28) 87$5,384,226 43,357 $ Per Customer$ Per Event

26. 26 -3.7% -5.6% -2.3% -1.2% -3.9% +0.9% +1.9% -0.0% -1.5% +1.5% +3.9% 363385332Stores313308299296292290281276275 +2.5% 273 -3.3% +0.9% +2.2% +5.0% +2.9% 268264254260 Commissary Sales FY 1993 thru FY 2009 FYTD 2010 Sales through April are $3.43B which is down 2.33% from FY 2009

27. 27 Our Goal… $6 Billion Sales in 2011

28. 28 What will it take to achieve $6 Billion in Sales in FY 2011? Increase of about 1.7% over FY 2010 About +$100M increase will be needed Any one of these factors would do it: About ½ item more per basket (29.5 to 30) 19 more customers/day at average store About 4 cent increase in average item price (from about $2.24 to $2.28) About a $0.69 increase in basket size  Based on 94.75M transactions/yr we would need $63.32 basket size (up from $62.63 FYTD 2010) "It is not necessary to do extraordinary things to get extraordinary results." – Warren Buffett

29. 29 -4.6% -5.2% -0.8% -6.3% -5.1% +1.1% +0.2% +0.5% -2.5% +1.2% +1.8% 363385332Stores313308299296292290281276275 +0.1% 273268 -2.1% -1.1% +1.6% +1.9% 264260254 Commissary Customers FY 1993 thru FY 2009 FY 2010 Customers through April are 54.81M which is down 0.2% from FY 2009

30. 30 Our Goal… 100M Customers in 2012

31. 31 What will it take to achieve 100M Customers? Growth in 2 years = 5M Customers FY 2011: 2.5 Million or +2.6% FY 2012: 2.5 Million or +2.6% Average Monthly Sales Average Monthly Trans 2.6% Increase (Month) Average Days Open Average Daily Trans 2.6% Increase (Day) >$5M81.0K2.1K72,67169 $4-$5M66.7K1.7K72,20057 $3-$4M52.7K1.4K6.61,73745 $2-$3M38.7K1.0K6.31,27533 $1-$2M26.5K0.7K6.287423 $0-$1M9.8K0.3K5.53238

32. 32 Ensure Reviews are: −Standardized, fair, consistent across all categories Ensure we have: −Premium, mid, value lines in all categories that make sense Do reviews at strategically right time −Know process timeline - preclude lost sales −The “right” number of reviews each year Optimize SKUs −Right product - right time - right price −Item savings meet category goals Category Management

33. 33 Where we were: Conducted a store web-base survey (at 183 commissaries)  Survey period – October 2008 – April 2009  Tracked top 33 manufacturer’s performance  Buyers/Category Managers shared results with business partners Where we are: Conducting a follow-up survey  Survey periods – March – May 2010  Compare survey results Where we are going: Continue team approach to improve the process  Bottom Line…It’s all about getting the products on the shelf Vendor Stocking Vendor Stocking

34. 34 Opportunities

35. 35 Capturing more of Patrons’ Shopping $ Meat & Produce Focus Promotions Store Hours Target Thursday – Sunday Communication Opportunities

36. 36 Page 36 Source: The Nielsen Company Homescan panel of 100,000+ in- home scanning households that demographically & geographically represents Total DeCA Trade Area 1,700 Commissary Shoppers 2,500 Eligible Shoppers Period: Annual 2009 (52 Weeks Ending 12/26/09) Volume: Total Store Dollars (UPC Coded Products) Geography: DeCA Total Trade Area Research Design Source: Nielsen Homescan 2009 DeCA Trade Area (Excl. AK & HI)

37. 37 - 1.4 Source: Nielsen Homescan 2009 Cross Outlet Facts DeCA Shoppers Spend more in Commissaries than in any other Specific Channel

38. 38 Commissary frequency & basket size is down slightly Source: Nielsen Homescan 2009 Cross Outlet Facts

39. 39 -0.7 When a Heavy Commissary Shopper is not shopping in the Commissary, they are shopping… Source: Nielsen Homescan 2009 Cross Outlet Facts

40. 40 -1.6 Light Shoppers share is 2x in Wal-Mart compared to Heavy Shoppers When a Light Commissary Shopper is not shopping in the Commissary, they are shopping… Source: Nielsen Homescan 2009 Cross Outlet Facts

41. 41 DeCA’s Heavy & Light Shopper Demographics 21% of the Light shoppers are under 35 years old Source: Nielsen Homescan 2009, Account Shopper Profiler

42. 42 Source: Nielsen Homescan 2009, Account Shopper Profiler DeCA’s Heavy & Light Shopper Demographics

43. 43 Source: Nielsen Homescan 2009, Account Shopper Profiler DeCA’s Heavy & Light Shopper Demographics Overall Nielsen Homescan panel of all commissary shoppers (combined heavy and light shoppers) has White: 63%, African American 22%, Asian 5%, Hispanic 12%

44. 44 67% 61% Source: Nielsen Homescan 2009, Account Shopper Profiler DeCA’s Heavy & Light Shopper Demographics

45. 45 Opportunities from Nielsen Homescan Data DeCA’s Shoppers increased trips to Wal-Mart & Safeway Continue to offer club packs in prominent locations Focus on destination categories (milk, bread etc.) Greatest cross-spending threat in Mass, Supercenters & Club Identify top selling items within these channels Monitor pricing at competition Focus on converting light shoppers to heavy 25% of DeCA’s light shoppers are African American – why? Determine reasons and convert more to heavy shoppers Communicate value and benefits to convey the message “Commissary It’s Worth the Trip” Working with Nielsen to determine zip codes of 2,500 persons in Homescan panel

46. 46 Continued Focus on Meat & Produce High savings & quality = a reason to shop commissaries! Build a meal around Health & wellness Opportunities

47. 47 Meal Solutions Promotion Develop Product Image USDA Choice & Targeted USDA Select “Choice Meats for select customers” HMR Test in Meat Department 24 week test period +8% in dollars & +4% in units 23 Fresh Meat Promotions Reflective of our top 10 processed items Core Merchandising Based on individual store top 20 processed items Meat Department Opportunities

48. 48 Consumers are focusing on health and value Health  Educate patrons on the health benefits of FF&V  FF&V offer healthy/convenient options for ANY meal or snack Value  Focus on promotions, build big and up front  Utilize “SALE” signage to draw their attention Consumers are preparing meals at home Offer & provide meal solutions Young consumers - fastest growing segment Target younger consumers with FF&V Market organic produce Produce Department Opportunities

49. 49 DeCA Plant/Flower sales average slightly less than $6M/yr Incremental sales that won’t cannibalize other categories! FY 2011 GOAL = $10 MILLION! See below… Produce Department Opportunities FY 2009 Plant/Flower Sales # of Stores Over $400K1 1 Store sold > $1,168 in plants and flowers per day $200K - $400K2 $100K- $200K11 $50K - $100K23 $10K - $50K74 $5K - $10K27 143 Stores sold <$30 a day of plants and flowers $1K - $5K40 <$1K76 Lots of untapped Sales!!!

50. 50 Right promotions to attract patrons −In between pay week focus −In & out items, treasure hunt etc. Thanksgiving & Christmas −Win the Holidays −Keep authorized customers in commissary Case lot sales – relook/refine May Case Lot Sale and Family Fun Fitness Festival – THANKS for your support! Cross merchandising opportunities Okay to test new things! Regional items Opportunities

51. 51 Signage – looking to refresh Look for Thurs-Sun sales opportunities −4 days = 63.4% of business…be ready −Need good vendor stocking support After 4 P.M. Shopper Are some stores closing too early? Corporate Communication Partnership – driving Sales and Patron Awareness Listen to our customers Chiefs/Category Managers are: Riding with Zone Managers - visiting stores Tap patron interface points for insights Front End, Deli, Bakery, Produce, Managers etc. Opportunities "Your most unhappy customers are your greatest source of learning." – Bill Gates

52. 52 THANK YOU FOR ALL YOU DO TO SUPPORT OUR VALUED PATRONS & THIS BENEFIT!! “Individual commitment to a group effort – that is what makes a team work, a company work, a society work, a civilization work.” – Vince Lombardi