The Coles Turnaroundand

“what our customers say about lamb”Allister Watson

General Manager Meat, Deli, DairyJune 2012

We are all facing a subdued retail environment

-5%

0%

5%

10%

15%

70%

75%

80%

85%

90%

95%

1995 1997 1999 2001 2003 2005 2007 2009 2011

Household Consumption (LHS) Household Saving (RHS)

Australian Household Consumption & Saving(per cent of household disposable income)

0

50

100

150

200

250

300

350

0100200300400500600700800900

1995 1997 1999 2001 2003 2005 2007 2009 2011 Assets (Housing + Financial) Net wealth Debt (RHS)

Australian Household Wealth(per cent of household disposable income)

11

Lowest food inflation on record

Consumer sentiment at GFC levelsHousehold wealth – a lost decade

20-year high saving rate – no signs of abatement

Source: RBA

Source: RBA

Source: Westpac & University of Melbourne

Source: ABS

Renewed, Clean, Easy to Shop Stores

Value

Better Buying

Fresh and Only at Coles

Working Smarter Stores

Working Smarter

Support Centre

Customer Led Supply

Chain

Marketing / Brand

Re-build

Deliver Great Service with Great People

Right Stores, Right Place

10 Strategies will deliver the circles of success

Regaining trust through value

Next phase

of value

Multi-saves

Saving Coles’

customers $800m+ p.a.

Fewer, deeper promotions, driving volume

Building trust through transparency & fairness

Stronger customer trust built on consistently lower prices in staples

Savings you choose driving

basket size

Great value fresh food, every day

Value meal solutions

Reinventing value delivery… again

Coles

Improved category managementFresh & Only

at Coles

BakeryFresh Produce Meat/Dairy/Deli Grocery

Su

pp

ly

Ba

se

Pro

du

ct

/

Va

lue

In-s

tore

de

live

ry

• End-to-end drive to improve quality, value & innovation in core food categories

• Collaborative partnerships with Australian suppliers

– Developing products exclusive to Coles

• Product innovation

‒ Better ranging to come for local & ethnic communities

‒ Ethical sourcing for changing customer demands

• Improving in-store delivery

– Planned traineeships in bakery & meat

– All Team Members to be trained to Coles improved standards

Collaborative partnerships

Product innovation

Improving in-store delivery

Compelling, engaging & unique• Compelling, engaging &

unique Brand Platforms– Intent on building the most

famous Brand in Australia

– Connecting with Australian families

– Consistent Brand Platforms famous for delivering Quality, Value & Community

• Consistency in Message– Fewer & bigger campaigns

– Reinforcing ‘Quality food costs less at Coles’

– Cut-through & brand linkage consistently above industry norm

Industry average / norm.

71%81%

81%

xx%

63%72%73%

92%87%

70%

Before After

Community

Value

Quality

Coles are committed to the lamb industry

What are customers looking for in our Lamb offer?• Lamb purchase penetration peaks with Senior Couples, lowest

with Young Transitionals: need to invigorate category with younger consumers

• Price-buying stronger in Supermarkets, quality seeking in butchers; supermarkets are more of a destination for Cutlets (quality important but can be expensive)

• Buyers of Lamb Leg Roast more likely to buy other cuts as well; therefore roast experience may effect broader portfolio

• Chops the most varied in terms of price-quality expectations, usage occasions etc

What are customers looking for in our Lamb offer?

• Quality

• Convenience

• Range

• Managing the impact of higher prices

10

Importance:Fresh Lamb Cuts

Top 10 important(Rating 1 to 5)

(n=102)

Rank vs. all

categories

1 QUALITY: freshness 36th

2 QUALITY: consistent 9th

3 QUALITY: great quality 29th

4 PRICE: great prices 113th

5 PRICE: good specials 53rd

6 CONVENIENCE: size of packs & products

27th

7 CHOICE: range of products for all needs

92nd

8 PREMIUM: able to get best XXX in retailer

65th

9 DISPLAY: easily find what I want 101st

10 SUSTAINABILITY: trust it to be safe 45th

Q25. Still thinking about shopping for xxx in (retailer) compared to all other products you usually buy in supermarkets, how important is each statement to you when shopping for xxx in (retailer)?

Source: Shopper Tracker, 2011

Quality of Lamb is the most important factor to customers.

•Quality attributes ranking as the top 3 importance factors to customers.

•In particular the consistency of lamb, where customers are looking for it more in Lamb than any other Meat category.

•Along with Beef, Lamb is a hero for Quality within the meat case.

Important factors in Fresh Lamb Cuts

What are customers looking for in our Lamb offer?

CONVENIENCE

•Australian customers are desperate for help in deciding what to eat and how to cook it - have limited knowledge of how to get beyond the basics, with nearly a 1/3 looking for more information on how to cook to help their meal planning & cooking

•The ongoing success of the mini roast, is tapping into consumers propensity for convenient, easy meal solutions.

What are customers looking for in our Lamb offer?

RANGE

•A Premium range is an opportunity in most cuts

•Endorsement and Source region are the most opportune platforms to drive premium but not top of mind at present.

BUILDING THE PREMIUM/QUALITY PORTFOLIO

Overall lamb purchase hierarchy

Total Sample N=900, * See Appendix

Higher for Roast*

Higher for Other Cuts*

What are customers looking for in our Lamb offer?

MANAGING THE IMPACT OF HIGHER PRICES

• Shoppers preference for ‘Saving me money’ rates higher than quality and on a par with Chicken, impacting Lamb by its higher prices in recent times.

The type of value relates more to individual circumstance than occasion.

• Bundling (price, size, weight, quality) is a key consumer need when it comes to lamb purchase - Bundling expectations vary significantly by lamb cut and the portfolio should reflect this.

Our ongoing priority is to provide simplicity for our customers

• Best instore availability in Australia

• Give better value to our customers

• Simplified, lower cost supply chains

• More choice and innovation, less duplication