New Grocery Formats Pres 0909

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New Grocery Format s :Walm a rt & Beyond

September 3, 2009

Today’s Panel and Webinar Log ist ic s

To ask a question:

– Click on the cartoon dialogue icon inthe lower right hand corner of your

screen – Type your question in the box

– Send your question to the host

Al Meyers

ameyers@retailforward.com

Senior Vice President

Sandy Skrovansskrovan@retailforward.com

Senior Vice President and Manager of the

Food/Drug/Mass, Wal-Mart World™ and

Target programs of the Retail Forward

Intelligence System™

Jennifer Halterman, Senior Consultant with

Retail Forward specializing in the food, drugand mass segments

Audio information Toll-free from within the U.S. or

Canada: (866) 775-2265

Toll call from anywhere: 1 (281) 913-0854

Passcode: 6143554009

No More One Size Fi t s Al l

From 2006 Retail Perspectives

“Supermarkets: One Size Does Not Fit All”

— Retail Forward

“Expect the supermarket landscape to look vastly different in 2010 than it does today. The cookie-cutter approach—to store format, layout,

product mix, merchandising, etc.— is out of date. Supermarkets are actively engaged in broadening their store portfolios to meet different shopper needs and shopping

occasions.”

Bui ld ing a Por t fo l io o f Form at s

Convenience

Extreme-value/price-

impact

Upscale/fresh/healthy

Ethnic specialty

Food/generalmerchandise combos

Online

Supermark et Indust ry Is Look ing for Grow t h

Supermarket Industry Sales Growth and Forecast(in $ Billions)

Sources: U.S. Department of Commerce and Retail Forward

Nominal SalesReal (2005)

Sales2003–2008 3.9% 0.6%2008–2014F 2.3% -0.3%

Compound Annual Growth Rate

Real sales growth remains flat

Nominal Sales

Real (2005) SalesForecast

$406$418

$435$448

$492 $494$506

$521$536

$550$565

$428 $427$435 $439 $443 $440 $433 $433 $433 $432 $432 $431

2003 2004 2005 2006 2007 2008 2009F 2010F 2011F 2012F 2013F 2014F

Espec ia l ly as Cent er St ore Is Pressured

Supermarket Category Sales Compound Annual Growth, 2002–2007

Sources: Progressive Grocer and Retail Forward

1Includes: grocery food, grocery non-food and health and beauty care.

Frozen &Ice Cream

Produce

Center Store1 0.4%

In-storeBakery

Pharmacy

Meat Poultry& Seafood

GeneralMerchandise

40% of store sales

High Frequenc y Merc handise Is Sold Everyw here

Shopper s Shi f t Food Shopping Pat t erns

Weekly Shoppers—Supermarket/Food Retailers(Percentage of U.S. primary household shoppers who shop weekly at format)

2007–08Difference

2005–08Difference

Source: Retail Forward ShopperScape™, October 2005, 2006, 2007 and 2008

Health/natural supermarkets

SuperTarget

Specialty food stores/ neighborhood specialty markets

Extreme-value/

warehouse supermarkets

Walmart Supercenter

Conventional supermarkets

2005200620072008

-3.6 +4.1

-0.2 +3.4

+0.9 +2.2

-1.0 +1.3

-0.5 +1.9

-1.2 +1.2

Shopper s Are Eat ing Out Less

Tactics Shoppers Are Using to Save Money on Food/Grocery

Buying more products to

cook from scratch more

Eating out at restaurants

less frequently or eating

out at less expensive

restaurants

Source: Retail Forward ShopperScape™, February 2009

So They Want I t A l l When Groc ery Shopping

Affordable

Grocery Shopping Factors(Percentage of U.S. primary household shoppers who strongly agree/agree with statement)

Prefer buying prepared or conveniencefoods rather than cooking from scratch

Like trying out or shopping in newfood stores

Often try new food products seen inthe grocery store

Want to get in-and-out fast whenfood shopping

Don’t buy fresh/healthy foodsbecause too expensive

Shoppers Are Ready t o Try New Food St ores

Shoppers Are Ready to Shop the New Breed of Small Food Stores*

64% 30% 6%Unnamedsmall-format food store

Definitely/probably

will shop

Might or might not shop Definitely/probably

will not shop

*Concept defined to include the following features:

- Specializes in fresh, prepared foods, e.g., "ready-to-eat" or "ready-to-heat and eat" meals- Carries a basic assortment of grocery staples at competitive prices- Carries gourmet, ethnic and organic specialty products- Neighborhood location- Is easy to shop, e.g., plenty of parking, not too big, smaller than the typical supermarket- Has a quick checkout

And They’re Wi l l ing t o Give Walm art a Try

Shoppers Are Ready to Shop the New Breed of Small Food Stores*

Walmartsmall-format food store

Unnamedsmall-format food store

Definitely/probably

will shop

Might or might not shop Definitely/probably

will not shop

*Concept defined to include the following features:

- Specializes in fresh, prepared foods, e.g., "ready-to-eat" or "ready-to-heat and eat" meals- Carries a basic assortment of grocery staples at competitive prices- Carries gourmet, ethnic and organic specialty products- Neighborhood location- Is easy to shop, e.g., plenty of parking, not too big, smaller than the typical supermarket- Has a quick checkout

I t ’s About T im e, and T iming

From 2004 report“Wal-Mart 2010”

— Retail Forward

“By 2010, Wal-Mart will have a broader portfolio of formats to satisfy more consumer needs and shopping occasions.

“Retail Forward believes several venues ... hold potential for Wal-Mart going forward.”

Walm ar t Supercent er Is H it t ing t he Wal l

Walmart Supercenter vs. Conventional Discount StoreUnit Growth and Projection

Sources: Company reports Retail Forward projections

344441

564721

1,0661,258

2,840 2,9202,980 3,030

1,960 1,921 1,8691,801

1,7361,647

1,568 1,4781,353

1,2091,075

971891

827 777 737 707 682

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009F 2010F 2011F 2012F 2013F

Walmart SupercentersConventional Walmart discount stores

Forecast

Uni t Ex pansion Is Slow ing Dow n

+ 157 – 177+ 222+ 305 – 330+ 332 – 340+ 335 – 365Total U.S. Expansion

+ 15 – 20+ 21+ 20 – 30+ 31 – 33+ 30 – 40Sam's Club

+ 17+ 23+ 15 – 20+ 11 – 12+ 25 – 30Neighborhood Market/Grocery formats

0+ 2+ 5 – 10+ 13 – 15+ 40 – 45Walmart conventional stores

+ 125 – 140+ 166+ 190 – 200+ 277 – 280+ 240 – 250Walmart Supercenters

20092008200720062005Unit Growth Plans

Planned Number of New U.S. Wal-Mart Stores

Sources: Company reports

2005 2009Planned new Walmart Supercenters +250 +125

Planned total new U.S. units +335–365 +157–177

Sm al l Form at s Wi l l Change t he Food Landsc ape

Source: TNS Retail Forward

Trader Joe’s

Fresh & Easy (Tesco)

The Fresh Market

Sprouts Farmers Market

Sunflower Farmers Markets

Famima!! (FamilyMart)

Giant Eagle Express

Marketside (Walmart)

The Market by Von’s (Safeway)

Urban Fresh by Jewel (Supervalu)

Heartland Pantry (Hy-Vee)

FRESH (Brookshire Grocery)

Schnucks Culinaria

Giant To Go (Giant Food/Ahold)

Small-Format Grocers(illustrative list, not all-inclusive)

Source: yelp.com

Retail Forward

Walm ar t In t roduces Market s ide

Four Marketside stores

Open October 2008

Phoenix area

– Chandler – Gilbert

– Mesa

– Tempe

Retail Forward

Source: www.marketside.com

At Marketside, we provide fresh,innovative answers to the daily

question, “What’s for dinner tonight?”

Prepared Foods Selec t ion Serves as Test Lab

All photos by Retail Forward

Serv ic e Sel ls Fresh Com ponent

Basket Pr ice Bragging Rights

Source: Marketside April 29, 2009 Weekly Flyer

April 29, 2009 ad (Cinco de Mayo) May 20, 2009 ad (Memorial Day)

Market s ide St ar t s t o Leverage Walmar t Brand

Source: Marketside April 29, 2009 Ad Source: Marketside May 20, 2009 Ad

A Miss : Edi t ed Assor tm ent , but St i l l Too Much

A Miss : Pot ent ia l t o Siphon Of f Superc ent er Tr ips

Marketside

Walmart Supercenter

Walm ar t Do ing More t o Cat er t o Loca l Mark et s

2008: Opens Hispanicsupercenter in Garland, Texas

– Expanded produceselection

– More ethnic grocery brands

– Fresh prepared specialtyfood items

Recent introductions

– Supermercado de Walmart

• Houston, April 2009

• Phoenix, June 2009

– Mas Club• Houston, August 2009

Retail Forward

Source: Más Club

Storefront and Exterior, Includes Outdoor Eating Area

Superm erc ado Ins ide Ent ranc e Suggest s Fresh

Storefront and Exterior, Includes Outdoor Eating Area

In-St ore Bak ery and Tor t i l la-Mak ing

Ful l -Serv ic e Meat /But c her Shop

But Sam e Walm art Case-Ready Meat s Too

Retail Forward

In -St ore Prepared Foods “La Coc ina” Is Busy

Hispanic Grocery Brands Merchandised Side-by-Side with U.S. BrandsFresh Over Frozen: Only One Frozen Ais le

Retail Forward

St ore Is Fi l led w i t h H ispan ic Spec ia l t ies

Hispanic Grocery Brands Merchandised Side-by-Side with U.S. BrandsLarge Baby Area for Young Grow ing Fam i l ies

Bi l ingual Sign ing and Fam i l iar Pr ic e Message

Good Idea , But St i l l Feels Very “ Walm art -y”

Upsca le Produc t s Appeal to H igher Inc om es

Displays Tai lored t o Af f luent Surroundings Too

Retail Forward

In t roduc ing Warm er Color Palet t e in Food

T t i C M h di i Ef f t

Test ing Cross-Merc handis i ng Ef for t s

P id Sh i t h M l S l t i

Prov ides Shoppers w i t h Meal Solut ions

Anot her New Conc ept : One ais le $1 or less

Anot her New Conc ept : One a is le . $1 or less .

Out of St oc k s Suggest Dem and for $1 I t em s

Out -of -St oc k s Suggest Dem and for $1 I t em s

Fresh Bak ery and Peet ’s Cof fee

Fresh Bak ery and Peet s Cof fee

And Many Convenienc e St aples Too

Giant Eagle Int roduc es Ex press Conc ept

Giant Eagle In t roduc es Ex press Conc ept

2007: 1st opened inPittsburgh

Now plan 3–5 more

14,000 sq. ft.

Combines elements of:

– Supermarket

– Drug store – Convenience store

Retail Forward

Som e Trad it iona l Depar tm ent s

Lot s of Easy-Prep and Ready-t o-Eat Opt ions

y p y p

Tem pt ing Ready-t o-Go Meals

Retail Forward Source: Giant Eagle, Inc.

Fi l l s a Convenient Good-for-You Fresh Nic he

User-Fr iendly Del i Feat ures K iosk

Giant Eag le Launc hes Upsc a le Market Dis t r ic t

2007 opening

2 Pittsburgh locations – 3rd unit planned in

Columbus, Ohio

Differentiates on freshand gourmet – Prepared foods

– Grab-and-go – Gourmet/specialty

Mark et -l ik e Feel in Produc e Depar t m ent

Foc us on Fresh Prepared and Gourm et

Lo t s of Made-t o-Orde r and Grab-and-Go Opt ions

Nat ural /Organ ic Offer Rivals Whole Foods

K roger Opens Mor e Fresh Fare St ores

Opening more units asFresh Fare

Focus:

– Gourmet/specialty

– Fresh, prepared

– Convenience andstock-up

Targets upscale and busy,time-pressed shoppers

Inv i t ing , Upsca le Am bience and At m osphere

At t rac t ive Disp lays , Convenienc e Of fer

Prepared Foods a Plent y

Target In t roduc es PFresh Prot ot ype

Convenienc e Selec t ion of Produc e

Meat Case, L im i t ed Prepared or Tak e-out

Big Lo ts Int roduc es “ Nex t Genera t ion” Layou t

Food/Consum ables Is t he Foc al Point

Bold Signing and Wider Ais les Greet Shoppers

Toys “ R” Us Debut s “ R” Mark e t

Retail Forward

Feat ures an Ex panded Groc ery Assort m ent

Ot her Househo ld Essent ia ls Are Of fered Too

Baby Basi c s Moved Up Front for One-St op Shop

Ex pec t More Food, Food Everyw here

Sprouts Farmers Market

Sunflower Farmers Markets

Add photo of:Giant To Go

Other?

Shoppers Want I t Al l . .. When They Want I t

Service

For Less

EffortTime

ConvenienceConsistency

Quality Selection

2009 St ra t eg ic Out look Conferenc e

Explore the short-term and long-termimplications of key macroeconomic issuesfor the retail sector.

Discover crucial challenges that lie ahead

in the post-recession retail landscape. Findout how retailers' and manufacturers'growth strategies will need to align.

Leverage the proliferation of socialnetworking and the evolution of in-store

technologies to create more meaningfuland actionable dialog with target shoppers.

Take a tour of new retail business modelsand innovations.

Maximize your digital marketing strategytoday to win online tomorrow.

Membership includes 10 seats!

WHEN AND WHERE:

Sept. 10, 2009—Rosemont, ILSept. 30, 2009—NYC

Oct 15, 2009—TorontoOct. 27, 2009—Bentonville, AR

New Grocery Formats Pres 0909

Documents

0909 - September 2009

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