Southeastern Europe: engine for growth Kostas Macheras, CEO Southeastern Europe

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1 Southeastern Europe: engine for growth Kostas Macheras, CEO Southeastern Europe 29/11/ Agenda Strategic context Macro-economic context Drivers of success at Alfa Beta and Mega Image Why Maxi? Maxi: opportunities What have we done so far What to expect going forward 29/11/

Strategic context New Game Plan Accelerate organic growth in newer operations Solid contribution expected from SEE & Asia * Excluding acquisitions ** Greece, Romania, Indonesia,

and external growth has led to rapid expansion of Delhaize Group s Greek and Romanian businesses and at Delta Maxi # stores 600 487 CAGR: 71.

2 Strategic context New Game Plan Accelerate organic growth in newer operations Solid contribution expected from SEE & Asia * Excluding acquisitions ** Greece, Romania, Indonesia, Serbia, Bulgaria, Albania, Montenegro, B&H *** Bottom Dollar Food, Red Market 29/11/ Strategic context Southeastern Europe: a fast growing market A combination of organic and external growth has led to rapid expansion of Delhaize Group s Greek and Romanian businesses and at Delta Maxi # stores CAGR: 71.8% stores 500 end Q CAGR: 15.5% 243 stores end Q Q Greece Romania Delta Maxi CAGR: 21.8% 94 stores end Q /11/

3 Strategic context Southeastern Europe outpaces the Group s growth Proportion of Delhaize Group revenues and operating profit coming from Southeastern Europe 25.0% 20.0% Revenue growth 12.0% 10.0% 8.0% 15.0% 10.0% 0% 5.0% 0.0% Q3 YTD 6.0% SEE Revenue Growth DG Revenue Growth 4.0% 2.0% 0.0% Q3 YTD Proportion of DG revenues coming from Southeastern Europe Proportion of DG operating profit coming from Southeastern Europe 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% Operating profit growth Q3 YTD SEE PFO Growth DG PFO Growth 29/11/ Macro-economic context Challenging though full of opportunities GDP / capita (USD) 2011e Evolution of GDP (%) 60,000 10% 50,000 8% 6% 40,000 4% 30,000 2% 0% 20,000-2% ,000-4% 0-6% Serbia Bulgaria Portugal Greece Spain Average* -8% Source: Economist Intelligence Unit Romania Serbia Greece Source: IMF September Consumer spending / capita (EUR) Romania Serbia Greece Source: IGD % 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% Growth - private consumption/head Serbia Bulgaria Average Germany, France, U.K. * Average includes Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, Netherlands, Norway, Sweden, Switzerland, U.K. 29/11/

4 Macro-economic context A fragmented competitive landscape % of the market owned by the top 3 food retailers Belgium Serbia 74% 29% Greece 38% Romania 19% Serbia Steady growth of supermarkets Hypermarkets / Supermarkets Traditional groceries Drug stores Source: AC Nielsen Retail Audit. Note Romania super- & hypermarkets market share as % of total market 60% 50% 40% 30% 20% 10% 0% Source: AC Nielsen Almost 50% today Bulgaria household expenditure by format 15% 4% 44% 1% 36% Source: EURO Panel, GFK, TNS 18% 3% 1% 47% 1% 29% 21% 7% 3% 44% 1% 25% Supermarkets / Hypermarkets Small Grocery Shops Discounters Cash and Carry Street vendor and Open Markets Other 22% 14% 2% 42% 1% 20% /11/ Macro-economic context Consumer behavior is impacted by the crisis Shopping MORE often Buying LESS 22% 20% Private brand as % of revenues at Alfa Beta More frequent customer visits but less items sold at Alfa Beta and Mega Image 18% 16% 14% 12% 10% Q Positive real net growth for both countries for Q At Alfa Beta, private brand growth is 3 times higher than in the rest of the market with a 2.4% market share gain in private brand 29/11/

Drivers of success at Alfa Beta and Mega Image The strength of our brands inspire trust 8.6 8.4 8.2 8 7.8 76 7.6 7.4 7.

5 Drivers of success at Alfa Beta and Mega Image The strength of our brands inspire trust Alfa Beta leadership in value for money Alfa Beta Sklavenitis Veropoulos Lidl Alfa Beta price perception Very cheap Cheap Fair price Expensive Very expensive Strong price perception p leading to market share increases 20% 19% 18% 17% 16% 15% 14% 13% 12% 11% 10% Alfa Beta market share evolution Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q /11/ Drivers of success at Alfa Beta and Mega Image Strong network expansion Revenue (25% CAGR) and store count (24% CAGR) evolution at Mega Image e Revenues Number of stores Mega Image outpacing the rest of the market Taking advantage of acquisition opportunities: 2008 La Fourmi (14 stores) 2009 Prodas (4 stores) 2010 Primavera (2 stores) 2011 Gima (3 stores) e Comparable store sales growth Mega Image Food market evolution 29/11/

Drivers of success at Alfa Beta and Mega Image Adapted concepts and

in Greece Rebranded 11 Red Market stores to Mega Image in Romania

for money assortment Premium Core Value Natural & Organic Health &

6 Drivers of success at Alfa Beta and Mega Image Adapted concepts and formats Seizing opportunities: Acquired 13 stores from competitors in Greece Rebranded 11 Red Market stores to Mega Image in Romania to simplify the operations, reduce advertising costs and take advantage of Mega Image brand awareness Multi format approach 29/11/ Drivers of success at Alfa Beta and Mega Image Value for money assortment Premium Core Value Natural & Organic Health & Beauty Non Food Continued price investments Targeted marketing 29/11/

Drivers of success at Alfa Beta and Mega Image What does it take to be successful Defend and grow share through brands that inspire trust wallet Share of wallet: Share of heart: Gain

Highly compatible network of food stores Revenue split of Maxi operations Q3 2011 8% 6% 2% (3.8m) (21.

7 Drivers of success at Alfa Beta and Mega Image What does it take to be successful Defend and grow share through brands that inspire trust wallet Share of wallet: Share of heart: Gain market share Share of stomach: Gain trust through consistent execution Offer attractive assortment 29/11/ Why Maxi? Highly compatible network of food stores Revenue split of Maxi operations Q % 6% 2% (3.8m) (21.5m) 824 stores combined at the end of Q % EUR 20 million EBITDA synergies expected from the end of 2013 (0.6m) (3.2m) (7.4m) (7.6m) Combined presence in 7 countries 76% (10.8m) Serbia Bulgaria Bosnia & Herzegovina Montenegro Albania Market of 55 million people equivalentto UK (# inhabitants) employees combined 29/11/

Maxi: opportunities Opportunities differ by country Serbia - Strong store network, excellent locations - Concept to be clarified by format - Competitive landscape dominated by former domestic

8 Maxi: opportunities Opportunities differ by country Serbia - Strong store network, excellent locations - Concept to be clarified by format - Competitive landscape dominated by former domestic competitors Bulgaria - Strong concept, high brand awareness - Network to be strengthened - Competitive landscape is very fragmented and similar to Romania Bosnia & Herzegovina, Montenegro, Albania - Opportunity to increase our store density - Fragmented market 29/11/ Maxi: opportunities Brand building is a key priority Consumers expect Quality assortment Price competitiveness Local communities expect Closer connection to the European Union with Delhaize Group acting as a bridge Local suppliers expect Opportunities to export to other countries where Delhaize Group is present 29/11/

9 Maxi: opportunities Valuation based on strong synergy generation and on dynamic long-term growth EUR 20 million EBITDA synergies as from end of 2013 EUR 7 million annual interest savings as from 2012 Dynamic growth through more than 100 stores over next the 3 years INVENTORY LOSS REDUCTION - Based on benchmark other Delhaize Group operations - Focused on creating visibility - Aligning store procedures - Adapting procurement processes to drive behavior changes PROCUREMENT - Common sourcing for certain categories - Integrating volumes in AMS - Improve supplier payment terms with biggest suppliers - Private brands SUPPLY CHAIN - Increased centralization of volumes through building new warehouses in Serbia and Bulgaria - Backhauling initiatives ORGANIZATION - Link Maxi to Delhaize Europe 29/11/ What have we done so far Great progress has already been made Restored relationship with local suppliers Improved in-store conditions eliminated stock outs and improved comparable store sales growth Strengthened management bench to ensure alignment Rallied associates around the New Game Plan and the change in management Bulgaria improvement in comparable store sales growth Serbia comparable store sales growth evolution August September October week 44 week 45 week 46 August September October week 44 week 45 week 46 29/11/

What have we done so far and solid plans

PRICING 29/11/2011 19 What have we done so

Bulgaria and Albania Rebranding more than

in Lion Maxi / Mini Maxi banner Lion step,

10 What have we done so far and solid plans have been defined BRANDS FORMATS ASSORTMENT PRICING 29/11/ What have we done so far Internal and external alignment on brands BRANDS Started new branding in Serbia, Bosnia & Herzegovina, Montenegro, Bulgaria and Albania Rebranding more than 300 old Maxi, Pekabeta and C market stores in Lion Maxi / Mini Maxi banner Lion step, Maxi member of Delhaize Group Magazine ad 29/11/

What have we done so far Store format strategy FORMATS We will continue to operate 3 formats Supermarket Convenience Store Hypermarket Urban discounter Convert Tempo

2012 29/11/2011 21 What have we done so far Opportunities in private brands ASSORTMENT Opportunities to - Expand assortment with Delhaize Group products - Use Delhaize

11 What have we done so far Store format strategy FORMATS We will continue to operate 3 formats Supermarket Convenience Store Hypermarket Urban discounter Convert Tempo Express to Maxi and Mini maxi Define Maxi store format of the future - Redesign Maxi format - New direction for store expansion plan - Flagship store by the end of Q /11/ What have we done so far Opportunities in private brands ASSORTMENT Opportunities to - Expand assortment with Delhaize Group products - Use Delhaize Group best buying practices Today private brands represent 11% of revenues in Serbia Delhaize Serbia Premium segment Mid / High. Basic Value No Name C Brand 29/11/

What have we done so far Pricing strategy in line with New Game Plan PRICING A clear pricing strategy will change price reality as well as help improve price perception p - Defining our pricing

750 items in Bulgaria (November 2011) «Prices are melting» Started to introduce the first 365 products in Serbia, Bulgaria, Bosnia & Herzegovina and Montenegro 29/11/2011 23 What to expect going

12 What have we done so far Pricing strategy in line with New Game Plan PRICING A clear pricing strategy will change price reality as well as help improve price perception p - Defining our pricing strategy in each country - Started to measure price position in each country - Completed customer perception studies Reduced prices on hundreds of items in Serbia (October 2011) Reduced prices on items in Bulgaria (November 2011) «Prices are melting» Started to introduce the first 365 products in Serbia, Bulgaria, Bosnia & Herzegovina and Montenegro 29/11/ What to expect going forward? Confidence in the future Strong track record in Southeastern Europe with Alfa Beta and Mega Image Southeastern Europe is a region of growth The acquisition of Delta Maxi was a strategic move for our Group This gives us confidence for the future 29/11/

13 What to expect going forward? Maxi - financial performance 2011 Beyond REVENUES Contributed EUR 171 million in Q3 revenues (2 months) Expected to contribute EUR million to Delhaize Group revenues in 2011 (from August 1 to December 31) Expected to contribute EUR 1.3 billion to Delhaize Group revenues in 2012 Increase comparable store sales growth through sales building initiatives Store network growth OPERATING PROFIT Improve inventory shrink Price investments, starting in Q in Serbia Procurement synergies Supply chain initiatives Operating margin to gradually increase to 4% within 3 years 29/11/ What to expect going forward? Southeastern Europe plans Strong network expansion in Romania leading to double digit revenue growth Increased comparable store sales growth and network expansion at Maxi Further expansion of the store network in Greece In line with our New Game Plan, strong growth is expected from our newer operations 29/11/

14 Conclusion Southeastern Europe is an important engine for growth for Delhaize Group Strong brands can thrive in a difficult environment Key priorities are brand building, price competitiveness, network renewal and expansion through organic growth First priority is to align Delhaize Maxi with the framework of the New Game Plan 29/11/

Prepared for: IGD 2014

Prepared for: IGD 2014 Prepared for: What is this presentation s aim and what is covered? What is the aim of the presentation? This presentation is to provide an overview of the largest European retail alliances in 04, their