Chief Executive Officer. Home Office, El Segundo

Transcription

1 Tim Mason Chief Executive Officer Home Office, El Segundo 27 November 2007

2 Agenda The fresh&easy team Our speakers: Simon Uwins Building the brand John Burry Developing a unique product offer Tony Eggs Creating our store network Doug Rutledge Applying the Tesco operating model Remco Waller Economics of fresh&easy

3 Core purpose and values

4 A great place to work Flexible and fun Magic Monday Life skills, technical and leadership training Competitive salary, bonus scheme and benefits Staff satisfaction survey

5 A fresh&easy place to shop

6 A good neighbor

7 Environment

8 Issues Americans care about Loss of neighborhood Loss of neighborly values Jobs that provide good benefits Food deserts Obesity Global warming

9 Simon Uwins Chief Marketing Officer Home Office, El Segundo 27 November 2007

10 We listened to people.

11 We tested our understanding

12 We used a grass-roots approach to establish the brand...

13 Strong, simple branding

14 Our own media

15 Talking to our neighbors

16 We appear to be on the right track 100% 80% 60% 40% 20% 0% 97% 96% 95% 94% 93% 90% 74% 93% % fairly / very satisfied customers Friendly & helpful Freshness Quality Ease of shopping Prices Checkout Stock level Overall shopping experience Source: Fresh & Easy Insight Unit

17 John Burry Chief Commercial Officer Home Office, El Segundo 27 November 2007

18 Product ranging c. 3,500 SKU s Covers all regular household needs Includes major brands in each category

19 Great food you can trust No artificial colors No artificial flavors No added trans fats Limited use of preservatives Strong organic range

20 Design and packaging

21 Design and packaging Need images inc recycling logo on packaging Extensive use of display ready packaging Custom designed returnable crate system Highly productive All outer packaging recycled or reused

22 The supply base Recruiting the right buying team Innovative, committed suppliers UK Investment on key fresh food Wild Rocket Foods (Produce) 2 Sisters Food Group (Meat and Poultry) Implementing and maintaining quality and technical standards

23 The fresh&easy kitchen Prepared fresh foods unique 20 years of UK experience World-class production facility adjacent to our Riverside depot owned and operated by us Fresh supply chain is a vital component

24 Tony Eggs Chief Real Estate Officer Home Office, El Segundo 27 November 2007

25 A great opportunity Clean sheet of paper Sophisticated market Unbelievable amount of real estate Good ratio of real estate price versus spending power

26 A flexible and fast approach Small stores Open-minded about location Blue = hard corner Magenta = end cap Yellow = back of strip mall

27 A flexible and fast approach Freeholds, ground lease and leaseholds Buy more land than required if necessary Larger buildings can create income stream Disciplined but simple process to allow us to move quickly

28 What we have done Reinvented site identification Shared our strategy with brokers Removed real estate executives from initial site finding Gained trust, knowledge and speed Substantial number of sites approved

29 Our developers

30 Invested in new technology Quickbase data system to track project progress Accessed by consultants and internal teams Reliability paramount due to volume and speed of roll-out

31 Infrastructure Hawthorne developed as training and merchandising center Home office fitted-out 88 acres acquired in Riverside Developed in record time to allow launch in four markets

32 Property management and maintenance Lease administration and facility management Outsourced to Jones Lang LaSalle

33 The future Solid pipeline sustainable for many years Around 200 stores planned by end February 2009 Acquisition and development teams ready to grow

34 Doug Rutledge Chief Information Officer Home Office, El Segundo 27 November 2007

35 Tesco operating model Japan Turkey China

36 fresh&easy operating model Based on Tesco operating model Mature set of systems and processes

37 Enabling us to focus on what s important Getting the right property Delivering a great shopping trip Being a good neighbor Great place to work

38 Utilising our Tesco expertise Fresh food ordering system and processes Space, range and merchandising tools Point of sale software Warehouse management and distribution systems

39 Tailoring the fresh&easy model Tesco operating model was refined to: Ensure legally and fiscally correct Remove complexity built in for running multi-format, large SKU businesses Add kitchen systems to run food manufacturing business

40 Tailoring the fresh&easy model Goal of being a 21 st century retailer and good neighbor: Internet to attract and recruit our people Automated administration processes Electronic portal for policies and procedures

41 A collaborative effort Tesco people from eight countries Partnered with IBM, Oracle, NCR and Retalix 18 processes and systems 7 new to Tesco Tesco service center (HSC) to support finance, HR and IT back office

42 What it s all about Delivering a fresh&easy shopping trip which is simple to operate and gets things right first time

43 Remco Waller Chief Financial Officer Home Office, El Segundo 27 November 2007

44 Key economic drivers Strong sales densities supported by competitive pricing Sales mix driving gross margin Low cost operating model Grow store portfolio to utilise infrastructure Capital efficient stores High inventory turn

45 Sales density Sales per sq ft per week 2006 ($) Supercenters Supermarkets Drug Stores fresh&easy Trader Joe s Source: MVI, UBS

46 Measuring up to our competitors

47 Competitive whilst maintaining margin Prices typically 10 25% lower than supermarkets Supermarket-type gross margins Delivered through: High fresh participation Own brand around half of SKU count High sales per SKU

48 Low cost operating model Simple and efficient processes in store: No service departments and flat structure Shelf-ready packaging One touch replenishment / deep shelves Conforming layouts State-of-the-art systems and processes Fully automated replenishment All performed on the shop floor Assisted self checkout Integrated information systems Payroll as % of sales well below the supermarkets and close to club operators / Aldi Use the Tesco service center (HSC) in India for back office processes to reduce support costs

49 Driving our store network Small format requires significant central infrastructure investment Distribution network designed to enable quality fresh offer Our format facilitates rapid roll-out so we can penetrate in a selected market Ink-spot strategy after first DC / kitchen Capacity of our Riverside DC: Several hundred stores Larger capacity for Kitchen with Kitchenette

50 Managing capital costs Stores conformity can drive our costs down Currently the market is predominantly leasehold Efficiently managing our inventory Inventory turn SFW SVU KR PBX WFM f&e Source: MVI, UBS, fresh&easy

51 Tesco in the United States 2007 Certain sections of the presentations by Tesco PLC ( Tesco ) and Fresh & Easy Neighborhood Market Inc. ( Fresh & Easy ), a wholly owned subsidiary of Tesco, contain forward-looking statements that are based on management s expectations about our future operating or financial performance. Words such as expects, anticipates, plans, believes, scheduled, estimates, will, may, continuing, ongoing and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are based on our current expectations and involve certain risks and uncertainties, which are difficult to predict and may be beyond our control, as well as assumptions. If assumptions prove to be incorrect or if known or unknown risks and uncertainties materialize into actual events or circumstances, actual results may differ materially from what is forecast due to a variety of factors. All forward-looking statements speak only as of the date of our presentations. Neither Tesco nor Fresh & Easy undertake any obligation to update or distribute any revisions in forward-looking statements to reflect events, circumstances or changes in expectations after the date of these presentations.