THE GATEWAY STORY Arlene Shepard October 25, 2016

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1 THE GATEWAY STORY Arlene Shepard October 25, 2016 We have been in business since Our business is continually evolving, adapting to meet the needs & wants of our customers. Our focus is first & foremost on the bottom line, ensuring profitability both corporately and for our franchisees at store level. Press was 35% of our business in Today it is approximately 20% of overall sales.

2 BCE PLACE, TORONTO MAGAZINES RULE! BCE Place in Toronto is a press destination location, one of several still in existence today. Despite digital nipping at our heels for many years, it is a beautiful thing to stand in this store, watch people browsing the sections and then walk to the cash desk with several of their favourite magazines. Many find new titles in this store due to the diverse product mix we offer.

3 IMPORT & SPECIALTY MAGAZINES BCE and the other press destination locations boast large sections of import & specialty magazines. With fewer stores offering these products, we draw customers from far & wide. Today s stark reality? It is getting harder & harder to maintain the space allocated to magazines. Other products with higher margins, more turns & larger promotion budgets are slowly but surely eroding space previously allocated to press.

4 DOMINANCE OF BEVERAGE 6 Doors of new Pepsi coolers uprooted 28 feet of magazines from the original BCE Place. The store was successfully reconfigured to accommodate for this lost space by adding gondolas. Still missing was the massive WALL OF MAGAZINES. The good news? Magazine sales have remained strong, UP 22% over the same period last year in this store.

5 SOUVENIRS IN TOURIST LOCATIONS Souvenirs have come on strong in stores with tourist traffic. High margins & turns are a big plus for stores.

6 INCREASE IN SPECIALTY & SEASONAL PRODUCTS Specialty products appeal to tourists. Seasonal products come on strong over the holidays and require valuable in-store space. All of these products plus many more make it very challenging for magazines to compete for space at BCE, as well as many of our small footprint stores.

7 PRESS DOMINATES! BCE Place still features magazines very prominently at the front entrance. It is still very clear what we sell in this store! Ongoing support of publishers to promote magazines in this high profile, press destination location is the key to maintaining valuable space inside the store.

8 LARGE CONSUMER BRANDS TAKING OVER More & more store signage is dedicated to other categories that put large marketing & promotion dollars behind their brands. Magazines need to step up to maintain presence at retail level.

9 BIG BRANDS WITH BIG BUDGETS Many major brands with major dollars to promote at retail visually become the dominant categories within the store. Magazines have to get creative to compete.

10 NEW STORE CONCEPTS The gradual transition from Newstands to ON THE GO. Breaking away from a traditional brand and introduction of new ones. Magazines have maintained space in most transit locations for now. The future remains difficult to predict for these high traffic, impulse driven locations.

11 LOTTERY TICKET SALES GOING UP, UP & UP! Lottery sales are on the increase in all Gateway locations. We operate stand alone locations in addition to instore lottery with most locations lottery sales increased by 15% with a record number of multi million dollar jackpots, $50 million PLUS is up a further 5% with no sign of decline or leveling off in the near future.

12 NEW STORE CONCEPTS: FOOD Also under the GATEWAY ON THE GO banner, new concept stores featuring fresh food plus hot & cold beverages are on the rise. Magazines are part of the mix, but lack dominance.

13 GATEWAY ON THE GO Offering a full selection of high margin & high demand food products & beverages. Main feature is coffee.

14 THE PROFITABILITY OF FREE Our division, GATEWAY DIRECT MEDIA manages the distribution & display of free publications. Free publications have their own struggle to maintain advertising dollars. We distribute 24 HOURS daily PLUS 25 additional free publications in the TTC. Displays, once included paid newspapers & magazines Now 100% space for FREE publications.

15 GOOD NEWS FOR GATEWAY S FUTURE GROWTH On our horizon are two exciting new locations! The Oculus in the new WTC in New York opening in December 2016 We will offer digital media advertising for all categories including magazines.

16 FULTON STATION, NYC And two locations in the bustling Fulton Station We will deliver record high foot traffic in both these locations!

17 GATEWAY: THE FUTURE Magazines continue to offer fresh, timely & entertaining products for consumers. The landscape is changing & the magazine category must change with it. We speak about rose coloured glasses, and taking them off to see the reality of our surroundings. Magazines are a consumer product vying for valuable space with other consumer products offering margins PLUS marketing dollars. The time is now to step up, be competitive & creative to survive today s challenging retail environment.