EUROCASH Empowering modern retail entrepreneurs
Eurocash Group – executive summary NO. 1. WHOLESALE DISTRIBUTOR IN POLAND with 27% market share & the biggest (3bn Pln) FMCG ecommerce platform DYNAMICALLY ENTERING INTO RETAIL already no. 7 with objective to become no. 3 retail chain in Poland WITH INNOVATION AND BUSINESS DEVELOPMENT PROJECTS DELIVERING RESULTS addressing digitalization, personalization & automation needs AS THE DOMINANT SMALL FORMAT & PROXIMITY STORE OPERATOR supported by globally changing trends & consumer habits 2
Eurocash Group: steady strategy execution to build 2nd biggest purchasing power Eurocash Group sales evolution (PLN bn) Ranking of FMCG distributors & retailers (sales, PLN bn) 25 48 Biedronka 32 17 23 25 Eurocash 22 19 20 20 (Pro-Forma) 7 16 20 Lidl 11 5 18 17 17 11 Tesco 10 9 16 10 14 Kaufland 8 5 12 10 10 Auchan 11 10 10 10 8 Carrefour 7 9 8 6 6 7 6 5 Intermarche 5 3 3 2017 7 4 2 Żabka 4 2 1 2 7 2013 Metro (Makro C&C) 7 0 9 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5 Dino 1,7 Pro 2009 3 Forma Selgros 3 Source: Company data 3 Source: RZ500 Building scale and purchasing power to bring competitiveness to small stores 3
Poland is a place for proven concepts of small stores Demographics: small towns, small living quarters, daily shopping nearby assure mom & pops stores half of the market Share of distribution channels in food sales in Poland Percentage of population living in cities/rural area LTM July 2018, % 32,8% 42,0% 28% Rura ral Small Format Cities 0-2 Ci -20K 40% Supermarkets 300-2500 Cities 20-5 Ci -50K Hypermarkets 2500+ Ci Cities 50-1 -100K 8% Discounters Cities 100K+ Ci 9,8% 11% 15,4% 13% 60% of Poles live in villages & small towns Small living quarters have limited space to store food As a result, Poles shop almost every day Source: GUS, Nielsen 4
Food market growth Small format stores accelerating their growth Food market growth by channels Food market growth by small format channels (YTD Sep 2018, YoY) (YTD Sep 2018, YoY) 13,2% 12,2% 8,8% 9,4% 7,8% 6,3% 4,2% 2,0% 3,4% 1,2% 0,8% 0,1% -0,5% -0,9% -0,4% -5,2% Discounters Hypermarkets 2500+ Supermarkets 300-2500 Small Format YTD 2017 YTD 2018 Small Supermarkets Convenience 40-100 Small Grocers -40 Specialized & Others 100-300 Food sales in Total Poland increased by 5.3%, while in Small Format stores increase was of 6.3% 5 Source: Nielsen, Total Poland, All Food
Inflation Small Format stores sales growth accelerated with lower inflation than other segments % Food basket inflation Food inflation by categories (YoY, YTD Sep 2018) Large format categories Small format categories 4,4% 1.7% difference 9,8% 3,3% 3,1% 3,1% 7,2% 2,7% 2,2% 2,1% Food average 4,0% 3,4% 3,3% 3,0% 2,5% 2,3% 2,0% 1,2% 1,2% 1,1% Discounters Hypermarkets Supermarkets Small Format Small Convenience Small Grocers -2,8% 2500+ 300-2500 Supermarkets 40-100 -40 Fats Fruits Dairy Food Meat Bread and Coffee & Tobacco Fish Beverages Alcohol incl. Vegetables Sugar, 100-300 Cereals Tea Spirits, sweets, Wine Beer jams Source: Own estimation based on Nielsen Source: GUS 2018 (I-VI) 2018 (I-IX) Eurocash inflation much below the market average: wholesale prices in Delikatesy Centrum: -1.0%, retail prices +0.8% in 9M 2018 YoY 6
Wholesale: No. 1 distributor in Poland Building scale and purchasing power to bring competitiveness to small stores Wholesale market share Dedicated distribution platforms covering different store profiles • Local sub-wholesalers Eurocash • Producers own distribution • Specialized & categories not Generalists Group 25% covered by Eurocash Cash&Carry 4,3 27% Sales (PLN bn) Others 51% 25% Eurocash Distribution 4,4 13% Alcohol Delivery Makro - FMCG Distribution 2,3 (C&C) 6% Specialized Selgros (C&C) Tobacco & Impulse 32% Distribution 4% 5,7 PT Dystrybucja (T) 4% 5% Distribev (A) 3% HoReCa PHUP Gniezno Bać -Pol 2% 0,8 (T) 1% Alti (A) 1% T- Tobacco; A-Alcohol, 7
Wholesale sales dynamics Wholesale segment supported by increased competitiveness of small format stores Wholesale sales evolution by formats C&C LFL (9M 2018 YoY) 11% 3% 7% 10% -1% 6% 3,8% 3,6% 2,7% 49 2,6% 31 93 -16 1,5% 283 0,7% 338 0,3% 0,3% 0,0% 1,3% -0,4% -1,3% -2,2% 13 377 -3,6% -3,5% +778m 12 599 -2,7% +6.2% -4,0% -4,6% -4,9% -5,2% Wholesale Distribution Cash&Carry Tobacco Alcohol Food Other Wholesale 9M 2017 Service 9M 2018 Wholesale accelerated growth from 4.6% in 2Q 2018 to 6.9% in 3Q 2018 C&C LFL in 3Q 18 at +3.8% and 2.8% in 9M 2018 - best performance in last 5 years. ECD sales to franchisees (Lewiatan, PSD, Euro Sklep, Groszek) increased by 11.9% in 3Q and 10.3% in 9M YoY 8
Wholesale: eCommerce FMCG - globally unique, Poland’s biggest A revolution that ensures ongoing competitiveness of the independent market and gives opportunity to integrate wholesale assets Smar mart b t busi usiness ness dec decisi sions ons Today: Eurocash Distribution Mod odule " ule "In In Y You our r Ne Neighb ighbou ourho rhood od" Tomorrow : all wholesale Alcohol Distribution, Tobacco, Cash&Carry, Others Demographic data of consumers from the shop area, 3 85 85 preview of promotional leaflets of local competitors, bn bn information about the best-selling products in the % neighborhood. Sec Section " tion "I Kn I Know Mo More" e" of Eurocash Distribution B2B customers order via e-commerce sales Over 1000 professional articles, legal advice, personnel electronic channels management, information on products advertised on TV, advice on the display of products. Ti Time me sa saving ving Intelligent, shopping lists based on advanced algorithms. The fastest on the market, "learning" of the user, product search engine. Mob Mobil ility ity The first mobile application on the market supporting store management. 9
After many years of growth we are now able to focus on profitability 150 M PLN by 2020 - identified potential for cost reduction WHOLESALE RETAIL Logistics: ECD Merger with ECA Retail Head Office Head Office EC C&C then ECS impulse cost optimization cost optimization restructuring ~40m PLN up to ~40m PLN ~60m PLN ~10m PLN (2020) (2019-2020) 9M 2018 EBITDA* evolution (PLN m) Improvement +21.6% -6.9% 291 257 239 of Wholesale -17.8m EBITDA +52m 2,18% 2,09% 1,90% 9M 2016 9M 2017 9M 2018 10
Retail: 1st nationwide proximity supermarket chain in Poland Entering retail through market consolidation, followed by operational integration, with LT objective to become no. 3 retailer in Poland EV/Sales Ranking of retailers (2017 sales, PLN bn) 1 527 stores 7.4 bn PLN 39% (JMT) Biedronka 48 Lidl 16 538 LT 36% (TSCO) 3,1 Tesco 11 Own objective Auchan 10 Kaufland 10 22% (CA) Carrefour 10 989 4,3 Delikatesy Centrum ? 7 consolidated 5.1 Franchise Żabka 7 62% (PE) Retail Sales Number Intermarche 7 (PLN bn) Of Stores 114% (DIN, IPO) Dino 5 Netto 3 +5 bn PLN +900 stores Acquisitions E.Leclerc 3 > Retail Sales > By 2023 49% (PE) Stokrotka 3 Green Field Polomarket 2 2-3Y integration to ensure Franchise Chain Piotr i Paweł standardized business 2 68% (PE) Profi (Romania) with unified processes 49% Average *PE- Private Equity deal 11
Retail: Consistently investing in the future position Bumps on the road are expected, but potential is huge and Eurocash has proven record for executing challenging business plans Selling area (k sqm) Polish peers EBITDA Margin (2017 or 2016) Sales revenues (PLN bn) 394 7,4 8,5% +66% +60% 4,6 237 7,2% 6,6% 6,3% 6,2% 5,9% 2016 2017 2016 2017 4,5% incl. EKO&Mila incl. EKO&Mila No. of stores Sales per sqm (k PLN) 2,1% 20,1 1 527 1 086 +41% 18,1 Żabka 2016 2017 3Q 2018 Biedronka Kaufland Dino Netto 2016 2017 2016 2017 Eurocash Retail incl. EKO&Mila incl. EKO&Mila INTEGRATION: SALES EXPANSION HO & OPERATIONS STORES REMODELING DEVELOPMENT ACCELERATION EKO – 183 stores (Sept),191 (Oct 2018) Mila start in 2019 2018 2017 2019 2020 2021 12
Projects: delivering innovative form of category development Each start-up was unprofitable in initial phase, but nowadays gives competitive advantage and profits FRESH PROJECT WHISKY FAKTORIA WIN Break even point in 3.5 years Reinvented wine category Total market has been recently developed mainly by small format stores in small stores Further potential for growth: Whisky market share Increase of Delikatesy Centrum penetration Example how to bring large Development to Lewiatan, Gama, Euro Sklep, Groszek format category to small stores 35% 2017 2018 YTD 33% 32% 30% Expansion with own retail chain 19% 17% 17% 16% Fresh Project sales evolution (PLN m) Small Format stores market share Discounters Hypermarkets Supermarkets Small Stores 156 146 34.7% 137 Whisky sales dynamics in 2018 (July YTD) 132 121 98 83 30.6% 29.6% 17% 14% 57 45 35 3% 3% 1Q 2016 2Q 3Q 4Q 1Q 2017 2Q 3Q 4Q 1Q 2018 2Q Discounters Hypermarkets Supermarkets Small Stores 2013 2015 2017 Source: Nielsen 13
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