Perspectives on Russia & Ukraine Antonio Melo Chief - PowerPoint PPT Presentation

Perspectives on Russia & Ukraine Antonio Melo Chief Operational Officer IGD Conference Global Retailing ’08 New Horizons, Bright Ideas London, May 2008 p. 1

Russian Food Retail Market … … Russian Food Retail Market … is One of the Fastest Growing … is One of the Fastest Growing Consumer Spending Consumer Spending in the World ... in the World ... 7 0 - 6 0 % 0 2 2 3 c . o f h t w o r G • Russian consumer spending is growing steadily USD 578 bln 6 0 - 3 0 % 0 2 0 3 c . f o R USD 437 bln – It increased at a CAGR of 30% from 2003 to G A C 2006, and… USD 201 bln – …grew by another 32% in 2007 over 2006 2003A 2006A 2007A Russian Food Retail Market Evolution Russian Food Retail Market Evolution 7 • The total Russian food retail market is following the 0 - 6 0 % 0 1 2 3 . c f o h t trend w o r G 6 0 - 3 0 % 0 2 8 USD 190 bln 2 c . f – Growing at 28% CAGR between 2003 and o R G A C USD 145 bln 2006 (in value terms) USD 69 bln – and by approximately 31.0% in 2007 over 2006 2003A 2006A 2007A Sources: Business Analytica, Rosstat p. 2

Russian Food Retail Market Russian Food Retail Market … is Very Immature … is Very Immature Modern Formats (1) Evolution & Forecast • Modern retail formats grow much faster than the Hypemarkets total food retail market: Supermarkets – 2003-06 CAGR of 52.1%; Soft Discounters – 2007 growth of 49.4%. 13% Traditional market 12% • But at the end of 2007 modern trade represented 9% only 32.6% (in cities with population of above 6% 20% 10% 8% 100,000 inhabitants), which is extremely low 14% 11% compared to developed markets 2% 6% 55% 67% • Share of modern retail formats is expected to reach 5% 75% 87% 45.7% by 2010 2003 2006 2007 2010F Sources: Business Analytica Euromonitor, Rewe; BCG estimates, 2007; Planet Retail, 2008 p. 3

Russian Food Retail Market… … Russian Food Retail Market … is Very Fragmented is Very Fragmented … Top-10 Historical Growth Rates Top-10 Market Share, 2003 – 2007 TOP-10 growth rate 2003 2007 72% 5% 66% 13% 75% 57% 48% 48% 50% 25% 2003 2004 2005 2006 2007 • At the end of 2007 Top 10 players accounted for only 95% 87% 13% of the market compared to 60 to 80% in the European countries Total market Total market • Historical Top-10 growth rates: USD 69 bln USD 190 bln – 2003-2006 CAGR of 56.3%; 2007 - 48%... Top-10 The rest • …suggest that going forward Top-10 players will be the fastest growing part of the market… • …on the back of decreasing share of non-organized trade, strong organic growth & ongoing market consolidation Sources: X5 Estimates, Business Analytica p. 4

Ukrainian Food Retail Market … … Ukrainian Food Retail Market … Also Offers Significant Growth Potential … Also Offers Significant Growth Potential… … • Second largest country in Central and Eastern Share of Modern Retail Formats in Ukraine Share of Modern Retail Formats in Ukraine Europe in terms of population Hypermarkets Supermarkets • Fast growing consumer spending Soft Discounters Traditional Trade • Fast growing food retail market : 13% – 2003-06 CAGR of 27.2%. 18% – 2007 growth of 15.2%; • Penetration rate of modern retail formats is also still very low (33%) 2% 67% Consumer Spending Ukrainian Food Retail Market Evolution Consumer Spending Ukrainian Food Retail Market Evolution 7 0 - 6 0 % 0 5 2 1 7 . 0 c - f 6 o 0 % 0 h 4 t 2 w 3 . o c G r f o h w t o r 6 G 0 - 3 USD 101 bln 0 % 0 6 2 7 0 2 - . 4 c 0 % f 0 o 6 USD 29 bln 2 R 5 . G c A f o C R USD 25 bln G USD 75 bln A C USD 42 bln USD 14 bln 2004A 2006A 2007A 2003A 2006A 2007A Sources: Planet Retail, Euromonitor International

Russian and Ukrainian Markets … … Russian and Ukrainian Markets … Have Just Entered the Phase of Rapid Growth of Organized Retail … Have Just Entered the Phase of Rapid Growth of Organized Retail Sources: Roland Berger Strategy Consultants p. 6

X5 Retail Group… … X5 Retail Group … a Clear Leader in the Russian Food Retail Market … a Clear Leader in the Russian Food Retail Market X5 today.. # Company FY2007 % in # Company FY2007 % in • #1 food retailer in Russia in terms of revenue Sales Top 10 Sales Top 10 • USD 5,320 million of net revenues in 2007 (USD mln (USD mln) ) • Strong international management team 1. X5 5,320 21.4% 868 company-managed stores in Russia and Ukraine (1) • 2. Metro 4,600 18.5% • In addition, 688 stores operated by X5’s franchisees across Russia and in Kazakhstan (1) 3. Magnit 3,677 14.8% Over 609 thousand sq. m. of net selling space (1) • 4. Auchan 3,200 12.9% • Approximately 605 million customer visits in 2007 5. Lenta 1,560 6.3% FY 2007 Retail Revenue Growth FY 2007 Retail Revenue Growth 6. Kopeyka 1,490 6.0% 53% 7. Dixy 1,430 5.8% 47% 42% 33% 8. Seventh 1,275 5.1% Continent 9. Viktoria 1,156 4.7% 10. O’Key 1,115 4.5% X5 Retail Magnit Dixy Seventh Total 24,823 100.0% Group Continent Sources: X5 Retail Group, Business Analytica (1) As at 31 December 2007 p. 7

Strategy Diversified Across Formats… … Strategy Diversified Across Formats …The Largest Multi … The Largest Multi- -Format Food Retailer In Russia Format Food Retailer In Russia X5 ‘07 Sales Break Down by Format Soft Discount Soft Discount Stores Stores 7% Data as of 31 December 2007 X5 Net Retail Sales of • 674 stores USD 5,284 mln • Total net selling space – 357,517 sq. m. • Sales per sq. m. – USD 11,375 • Fresh & perishable products – 46% • Average assortment – 37% 3,500 SKUs 56% Supermarkets Supermarkets Data as of 31 December 2007 Hypermarkets Supermarkets Soft Discounters • 179 stores • Total net selling space – X5 ‘07 Store Area Break Down by Format • Sales per sq. m. – USD 12,959 191,730 sq. m. • Fresh & perishable products – • Average assortment – 41% X5 Net Selling Space of 15,000 SKUs 10% 609,210 sq. m. Hypermarkets Hypermarkets 31% Data as of 31 December 2007 • Average assortment – Compact: 30,000 SKUs • 14 Compact & 1 Full Size Store 59% Full-size: 40,000-60,000 SKUs • Average net selling space – • Sales per sq. m. – USD 8,909 Compact: 4,000 sq. m. • Fresh & perishable products – 40% Full-size: 5,000-10,000 sq. m. Hypermarkets Supermarkets Soft Discounters Sources: X5 Retail Group, Business Analytica (1) in cities with population of above 100,000 inhabitants p. 8

Strategy Diversified Across Geography… … Strategy Diversified Across Geography ...National Presence With Leading Position in Moscow and St. Petersburg ...National Presence With Leading Position in Moscow and St. Pet ersburg 2007 Net Retail Sales by Region 2007 Sales, EOP Store Locations and Selling Space 2007 Net Retail Sales by Region 2007 Sales, EOP Store Locations and Selling Space Region FY07 Net Selling FY07 Net Retail Sales of USD 5,284 million Region FY07 Net Selling No of No of Net Retail Net Retail Space Space Stores Stores Sales ($m) Sales ($m) (‘ ( ‘000 sq. m.) 000 sq. m.) 0.6% 15.3% Moscow 2,934.7 418 299.8 St. Petersburg 1,506.4 263 159.1 Yekaterinburg 68.9 34 12.5 Chelyabinsk 93.0 49 18.6 28.5% Nizhniy Novgorod 223.5 38 31.4 55.5% Samara 133.3 15 19.6 Southern Russia 105.7 9 13.2 (1) Moscow St. Petersburg Other Russian 186.7 37 48.8 Regions Russian Regions Ukraine Ukraine 32.1 5 6.2 Total 5,284.3 868 609.2 Source: X5 Retail Group (1) Includes City of Moscow, Moscow and Yaroslav regions p. 9

Premium Growth Prospects Premium Growth Prospects ...Sales Growth Driven By... ...Sales Growth Driven By... • Improving loyalty • Pricing Initiatives programs • Optimising product Like- -for for- -like Sales like Sales assortment Like • Improving merchandising / store layouts • Strong pipeline of new store openings New Store Openings New Store Openings – Commitment to Moscow & St. Petersburg – Expansion into the European part of Russia & Urals • Selective acquisitions of small chains and franchisee buyouts M&A M&A Strategic – potential acquisition of Karusel (1) • Source: X5 Retail Group (1) Acquisition is subject to satisfactory due diligence p. 10

Like- -for for- -like Sales... like Sales... Like …Driven By… (1) Performance by Format Group 2007 LFL (1) Group 2007 LFL Performance by Format Pricing Initiatives Pricing Initiatives Based on RUR-denominated • Price offers for a group of SKUs during a Basket Traffic gross sales certain period 22% 20% 19% • In/out actions 17% 6% 9% 14% • Packaged offers 11% 13% Rationalizing Assortment Rationalizing Assortment 11% 8% 6% • Increasing share and improving quality of fresh & Soft Super Hyper Total X5 perishable products Discounters markets markets • Non-food • Private label • Increasing self-service, including pre-packaging Improving Loyalty Programs Merchandising & PR Merchandising & PR Improving Loyalty Programs • TV • Loyalty cards • Mass media • Social programs • Billboards • Leaflets (both in-store & direct mailing) (1) LFL retail sales are calculated on a pro-forma basis, i.e. by including acquired Pyaterochka stores for the full year in each of 2006 and 2007 p. 11