Overview of the European Market Basket Presented by

Overview of the European Market Basket Presented by Empower IT Heidelberg, Germany August 2008 1

“Here are the groceries Mom. Now can I go out and play? ” 2

Let’s begin by taking a look at Europe's Performance vs Con. US 3

Total De. CA Sales Con. US vs Europe Five-Year Trend (FY 2002 – 2007) Despite store closures, Europe has sustained 5. 3% growth in the past 5 years De. CA Sales FY 07 vs FY 03 Europe: +5. 3% Con. US: +9. 7% Source: American Logistics Association Site 4

De. CA Store Count The majority of store closures during the past 6 years has occurred in Europe Total number of stores open by year Store count includes CDCs and Nexmarts Source: De. CA Headquarters In the European market there are currently 47 stores. 5

Europe Average Dollar Sales per Store …and average sales per store in Europe have increased dramatically Source: De. CA Headquarters & ALA Site 6

Sales Performance Con. US vs Europe 52 -Week Trends 52 Wk Trend vs YAG $% Chg (Millions) Europe Con. US +0. 8% +4. 8% Pkg % Chg -4. 3% -0. 3% (Millions) 4 Wk Pd. Ending: Source: Tot. Cat 52 weeks ending 6/07/08 7

Sales Performance 25% (12) of the European stores are posting greater than 10% growth over yago! Con. US is showing similar trends in both dollar and package growth in their top stores. 8

Store Performance Europe Store Ranking Top six stores accounted for 40% of Europe dollar volume Europe Store Ranking based on Dollar Volume Source: Tot. Cat 52 weeks ending 6/07/08 9

Category Performance Power categories in Europe show dramatically different shopping patterns from U. S. military shoppers. They shop the commissary for a taste of home…something to snack on, a can of soda, American chicken, and fish. They stock up for baby needs and basic household items. 10

Commodity Ranking Europe Overview Top Commodities in Europe Dollar Volume (millions) Source: Tot. Cat 52 weeks ending 6/07/08 11

Commodity Performance Europe Overview Baby Products are twice as developed in Europe than in Con. US $ Shr Tobacco indexes only 47 compared to Con. US $ % Chg Europe Con. US Source: Tot. Cat 52 weeks ending 6/07/08 Index To Con. US 12

Category Performance Top 15 Categories by Dollars Top three categories are Beverages followed by Salty Snacks Source: Tot. Cat 52 weeks ending 6/07/08 13

An astounding 9. 4% of European dollar sales comes from only 50 SKUs! In the Con. US market, the top 50 best selling items account for only 4. 4% of all Con. US dollar volume. 14

Store Performance Assortment Most of the top European stores carry close to the full assortment of overall top items Most stores have more than 9% of their sales in the top 50 items. Only Lakenheath shows a considerably lower % of volume generated by the top items. Source: Empower IT, 52 Weeks End Dec 2007 15

Store Performance Dollar Ranking Top 25 European Items - Dollars Of the top 50 items… • • • 9 Soda 5 Milk 5 Bread 5 Frz Chicken 4 Water 3 Salty Snacks 3 Infant Nutritionals 3 Chill Juice 2 Cigarettes • • 2 Charcoal 2 Bacon 1 Toilet Paper 1 Sour Cream 1 Frz Fish 1 Energy Drink 1 Cheese 1 Butter • These 25 items generate 6. 4% of all Europe dollar volume • The top 50 generate 9. 3% Source: Empower IT, 52 Weeks End Dec 2007 16

Store Performance Package Ranking Top 25 European Items - Packages Source: Empower IT, 52 Weeks End Dec 2007 17

Key Category Performance Indicators Let’s examine Key Category Performance Indicators in the European Power Categories • • • Carbonated Beverages Water & New Age Beverages Canned Bottled Juices Salty Snacks RTE Cereal Confectionery Biscuits Infant/Nutritional Diapers 18

Carbonated Beverages Category Ranking Europe - #1 Category Development within Top 20 Stores 19

Carbonated Beverages Category Quick Facts: • Carb Bev $ sales in Europe -6. 0% 52 wks, with Con. US trends down substantially less at -2. 4%. The weak U. S. dollar has been a key driver for dollar volume losses, as U. S. bottled product average price has fallen substantially compared to Foreign bottled competitive product. • With Average price down more than 11% across the category, Package sales are growing at a rapid pace , up 5. 6% in 52 -wk and +14. 4% YTD. These trends are far outperforming the U. S. market, where package sales remain in negative growth. • Diet Sodas have outperformed Regular Calorie items, up +11. 7% 52 -wk, compared to only +2. 7% for regular calorie. YTD both Diet and Regular segments have growth of greater than 12%. 20

Carbonated Beverages The top 20 selling UPCs account for more than 63% of total category sales. 21

Carbonated Beverages Many stores were able to post Dollar and Package growth for the year, outpacing Total Europe trends 22

Water & New Age Beverages Category Ranking Europe - #2 Category Development within Top 20 Stores 23

Water & New Age Beverages Category Quick Facts: • TTL category sales for Europe are up +3. 3% and for Con. US +7. 6% , current 52 -wk. YTD category growth in Europe is explosive at +13. 3%. • TTL Category growth is being driven by one key segment -- Energy Drinks, which have increased in sales by 141% YTD and share + 15 pts vs yago to 28. 4% of total category sales. • Currently Energy Drinks hold a 24% share of the distribution points among all New Age Beverages, yet account for 50% of all New Age Beverage sales. Juice Based NAB and RTD Teas are very heavy in distribution share ( 19. 5 and 41% respectively) while accounting for only 7% and 28% of NAB sales. Is your store taking full advantage of the growth surge in Energy Drinks? • Approximately 20% of total category $ volume is driven by promotion. For the PET water segment, that number jumps to almost 30%. However in the last 52 -week promoted volume in PET water was down -16% dollars and -32. 5% packages. Have fewer water promotions been a possible source of lost revenue opportunity for stores? • PET Water remains one of the strongest growth categories in the Con. US market and is a key category for Europe. U. S. sales grew 6% last year, while Europe sales were down -9. 6%. Flavored/Enhanced waters are driving growth in the U. S. , but in Europe have not been as well received. Flavored Enhanced in Europe has 23% of category sales, but 71% of category distribution points and sales are down -13%. On the other hand, purified water products have 48% of category sales in Europe, but only 18% of distribution points and sales are down far less at -5%. Water products in some regions are likely to be much more “locally” driven. Strong European brands such as Vera, San Benedetto, and Culligan may not be reflected in the POS sales for De. CA, and likely explain low index for stores such as Naples. 24

Water & New Age Beverages Opportunities abound for growth in Water; Energy drinks perform well in most all stores. Few stores lack overall category growth. 25

Canned/Bottled Juice Drinks Category Ranking Europe - #3 Category Development within Top 20 Stores 26

Canned/Bottled Juice Drinks Category Quick Facts: • The largest segment in shelf stable juices and drinks is Juice Blends at 35%, followed by Sports Drinks at 22. 3% of dollar sales. • Sports Drinks are driving strong dollar and package growth in the category in the Con. US market (+12% and +46%). Again, the weak U. S. dollar has hampered dollar growth, but package sales for Europe are up 19. 2% and share of sales in the category are up +3. 9 pts. The launch of new Sports drinks such as Gatorade G 2 and Accelerade appear to have brought new buyers into the segment. • Both Juice Blends and Apple Juice show dollar increases of 3%, due a great deal to rising average product prices as production/food prices climb. Package sales fell -2. 5% and -7% respectively. These trends follow closely the trends in the Con. US market. • Promotion is extremely important to the success of the shelf stable juice category, accounting for more than 30% of category dollar volume and 37% of package volume. For Sports Drinks, the number is even greater, at 35% of dollar volume and 47% of package sales. Promoted dollars in Sports Drinks are up 39% YTD in 2008. 27

Canned/Bottled Juice Drinks Stores with heavily declining category sales are consistently showing strong declines in Sports Drinks 28

Salty Snacks Category Ranking Europe - #4 Category Development within Top 20 Stores 29

Salty Snacks Category Quick Facts: • Salty Snacks dollar volume in Europe fell -0. 6% and package sales fell -2. 3% for curr 52 -wk. Con. US sales grew +5. 6% dollars and package sales are flat. • Potato Chips segment showed very positive growth, increasing in both dollars +2. 3% and packages +2. 2%, but the highest growth rates have come from the Multi-Grain segment ( +14. 3% dollars and +19. 1% packages), as patrons seek healthier snack alternatives. • Processed Chips have also contributed heavily to dollar volume gains ( +11. 6% ), but package sales remain down -3. 5% for the segment. 30

Salty Snacks A majority of stores outperform Europe in dollar and package trends 31

RTE Cereal Category Ranking Europe - #5 Category Development within Top 20 Stores 32

RTE Cereal Category Quick Facts: • In Europe, Total RTE Cereal is down -2. 8% in packages, up +1. 8% in dollars. • Losses on the Kraft cereals are driving declines, with total Kraft down -17. 1% in packages and -3. 2% in dollars vs year ago. Also down are Ralston (-14. 4% dollars, -14. 7% packages) and Malt-O-Meal (-7. 3% packages). Trends are similar for all players except Ralston, which is showing strong growth in Con. US. • Ralston’s declines are being driven by deletions on a number of SKUs. • 37% Of RTE Cereal dollars were sold on promotion during the latest 52 -weeks. >% Product Sold on Promotion <% Product Sold on Promotion RAMSTEIN AB, GERMANY (E 28) DEXHEIM, GERMANY (E 2 H) BAMBERG, GERMANY (E 3 E) VOGELWEH AB, GERMANY (E 23) ANSBACH, GERMANY (E 4 C) VILSECK, GERMANY (E 41) INCIRLIK, TURKEY (E 5 Y) MANNHEIM, GERMANY (E 2 T) BITBURG AB, GERMANY (E 2 E) SEMBACH AB, GERMANY (E 2 Z) Source: Empower IT, 52 -Week P/E July 5, 2008 43. 1 42. 3 42. 0 40. 8 40. 5 39. 0 38. 9 38. 7 KELLEY BARRACKS, GERMANY (E 4 Q) LAJES FIELD, AZORES (E 5 L) WUERZBURG, GERMANY (E 33) NEUBRUECKE, GERMANY (E 2 U) MINEO, ITALY (E 6 G) RAF MENWITH HILL, ENGLAND (E 1 Q) RIYADH, SAUDI (E 5 M) CAIRO, EGYPT (E 5 B) LIVORNO, ITALY (E 5 J) NAPLES, ITALY (E 5 X) 26. 3 27. 6 29. 3 29. 5 29. 6 29. 8 30. 3 30. 5 31. 2 31. 6 33

RTE Cereal Among the larger stores, more stores outpaced total Europe performance; however, several of the stores that declined posted significant declines. Source: Empower IT, 52 -Week P/E July 5, 2008 34

Confectionery Category Ranking Europe - #6 Category Development within Top 20 Stores 35

Confectionery Category Quick Facts: • Total Confectionery dollars are +6. 3% on package growth of +1. 3% in Europe. Growth is being driven by Chocolate (+5. 9% dollars), Gum (+5. 9% dollars), and Non-Chocolate (++12. 5% dollars). The only segment posting decline is the very small Mints segment (-20. 1% dollars). • The Gondola portion of category sales accounts for 65% of total dollar sales and is posting growth of +4. 9%. Seasonal sales account for 27% of dollars and are posting growth of +15. 2% v. year ago. Front End Confectionery (-8. 1% of dollars) is down -7. 2% v. year ago. • Five Highest Growth and Decline Brands (Actual Dollars): Source: Empower IT, 52 -Week P/E July 5, 2008 36

Confectionery Most of the larger stores posted dollar gains – significant losses were seen in only a select few stores Source: Empower IT, 52 -Week P/E July 5, 2008 37

Biscuits Category Ranking Europe - #8 Category Development within Top 20 Stores 38

Biscuits Category Quick Facts: • Pack sales movement is split exactly evenly between Cookies and Crackers in Europe. Pack losses in Cookies (-4. 9%) is driving Total Biscuit declines of -2. 4%. Cracker pack sales are up nominally (+0. 3%). Dollar volume is off very slightly in both segments, resulting in category dollar declines. • All manufacturers, except Pepperidge Farm, show pack declines in Europe vs year ago. More than 85% of total category sales are moved by Nabisco and Kellogg’s. Nabisco shows dollar increases of +0. 5% while Kellogg’s is down -2. 9%. • Five Highest Growth and Decline Brands by Segment (Actual Dollars): Source: Empower IT, 52 -Week P/E July 5, 2008 39

Infant/Toddler Nutritionals Category Ranking Europe - #13 Category Development within Top 20 Stores 40

Infant/Toddler Nutritionals Category Quick Facts: • Total Infant/Toddler Nutritionals is down -9. 1% in package sales, but down only -0. 1% in dollars for the year. Trends show a distinct switch from traditional Milk and Soy Formulas to Mild Milk Based and Specialty Formulas. That said, Milk Formula remains the largest overall segment. Toddler Formula and Toddler Nutrition show strong pack and dollar gains. • With space at a premium, it is not surprising that distribution levels on traditional Milk and Soy formulas were reduced; however, given that consumer purchase of Mild Milk Based and Specialty Formulas have not offset those declines, it may be that consumers are not finding their desired formula in the commissary. Source: Empower IT, 52 -Week P/E July 5, 2008 41

Diapers Category Ranking Europe - #12 Category Development within Top 20 Stores 42

Diapers Category Quick Facts: • Total Diapers/Training Pants is down -6. 8% in packages and +5. 8% in dollars. Diapers (-8. 5% packages), which account for 82% of the dollars and 75% of packages, is driving pack declines and dollar increases (+7. 2%). Training pants are down slightly in both packages (-1. 3%) and dollars (-0. 3%). • P&G (-14. 3% packagers, +3. 1% dollars) is driving the category’s overall pack decline, while Kimberly Clark has posted pack (+2. 1%) and dollar (+10. 0%) gains. Source: Empower IT, 52 -Week P/E June 7, 2008 43

Differences in Seasonality between Con. US and Europe Seasonality in some highly seasonal categories is slightly off-shifted in Europe. Traditional “summer” categories seem to begin their upward shift much earlier, peak and then fall off before Con. US. With the variance it is important to make sure that product displays are up early (or retained later) and special pricing programs are available for those early adopters. 44

Seasonality Europe Weekly $ Sales Index C/C/A/S Seasonality Looks Different in Europe, with Increased Sales Lasting Longer into the Spring and Starting Later in the Winter $ SDI—Con. US v. Europe Cough/Cold/Allergy/Sinus Source: Empower IT, Inc. 2007 Weekly Sales 45

Seasonality Europe Weekly $ Sales Index While Suncare Presents Much More of a Balanced Bell Curve in Con. US With Peak Sales around Memorial Day, European Suncare Sales are Much More Strongly Concentrated in Mid/Late-April $ SDI—Con. US v. Europe Suncare Source: Empower IT, Inc. 2007 Weekly Sales 46

Seasonality Europe Weekly $ Sales Index The High Season for Pest Control Starts Earlier in Europe as Well $ SDI—Con. US v. Europe Pest Control Source: Empower IT, Inc. 2007 Weekly Sales 47

Seasonality Europe Weekly $ Sales Index Hot Dogs Show Upward Sales Trends Beginning in March, While Con. US Seasonality Starts in May $ SDI—Con. US v. Europe Frankfurters Source: Empower IT, Inc. 2007 Weekly Sales 48

• • • Key Market Facts Great performance in this marketplace, despite store closures. Growth in the past 5 years, dollar sales are up 5. 3%. Average sales per store are up to $8. 3 M. 25% (12) of the stores are posting more than 10% dollar growth The top 50 items in Europe are key, they represent more than 9. 3% of the dollar volume. 50% of the new age category sales comes from energy drinks, but only equate to 24% of the distribution points. Water is locally driven by strong European brands such as Vera, San Benedetto, and Culligan and may not be reflected in the sales. This would explain the low index of sales for Naples and various stores in Italy. 49

Key Market Facts Continued • Off shelf promotions are key for growth in the canned and bottled drinks category. • In the salty snack category, potato chips and multi-grain chips are leading the growth. • 37% of dollars in the RTE Cereal category is sold off promotion. • Confectionery is growing in all segments, with the exception of mints. The gondola represents 65% of the dollar sales of the category. Seasonal candy represents 27% of the category dollar sales and is up more than 15%. • In the biscuit category there are two major players; Nabisco and Kellogg’s, which represent more than 85% of the dollar sales. • In infant formula and nutritional category, customers have switched from soy based products to mild milk based products. The right SKU assortment is essential. 50

Vielen Dank! 51