Metro Presentation

METRO ROMANIA How to improve Promotion?

Why METRO Group?

METRO Group – one of the most important international retailing companies

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 METRO AG 2005

Agenda

International & Local Retail Market Metro Overview Metro Analysis – SWOT & PEST Promotion; improvements Recommendations Conclusions

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Internationalization of Retailing

Retailers are rapidly expanding internationally in order to:

Gain competitive advantage Increase sales & profits Improve overall firm performance Take advantage of cost savings Learning by doing Further enhance home-country operations  METRO AG 2005

World retail evolution

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 METRO AG 2005

Grocery Retail Market Sizes 2007e Top 10 Eastern European Markets

Country

Grocery Retail Market (€bn)

1. Russia

140.53

2. Turkey

50.59

3. Poland

35.93

4. Romania

18.07

5. Czech Republic

11.98

6. Hungary

11.50

7. Ukraine

10.74

8. Bulgaria

6.43

9. Serbia 10. Slovakia Source: IGD Datacentre estimates  METRO AG 2005

Top 10 Global Markets

Country

Grocery Retail Market (US$bn)

1. USA

785.85

2. China

450.14

3. Japan

394.45

4. France

278.33

5. United Kingdom

249.20

6. India

249.11

7. Germany

192.92

8. Russia

188.02

9. Italy

165.64

6.31

10. Spain

130.51

5.07

34. Romania

24.23

Central Europe (CE) - TOP 10 Retailers Retail Banner Sales (EUR mn)e 0

5,000

10,000

10,147 17,537 7,397

Tesco

13,513 5,828

Carrefour

13,146 5,088

Rewe Group

Maxima

11,817 2,726 5,630 3,095 5,582 2,459 5,460 2,579 5,189

CBA

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25,000

20,780

Metro Group

Ahold

20,000

8,243

Schwarz Group

Mercator

15,000

4,007 4,997

2007

2013

Estimated Retail Market Evolution 2007

2013

Traditional channels 72%

Hyperm arkets and Superstores 10.3%

Cas h & Carry 10.9%

Forecourt and Convenience Stores 0.5%

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Traditional Channels 59%

Discount Stores 2.5%

Superm arkets and Neighbourhoo d Stores 3.3%

Hypermarkets and Superstores 21.5%

Cash & Carry 8.6%

Forecourt and Convenience Stores 0.3%

Discount Stores 4.7%

Supermarkets and Neighbourhood Stores 5.2%

Top 10 Retailers 2006 in Romania Retailer

Net Grocery Sales 2006 (€m)

Net Grocery Sales 2005 (€m)

% Change Grocery Sales 2006 v 2005

Grocery Retail Market Share*(%)

No. of Stores

Sales Area (sqm)

Metro*

1,511

1,244

+21.46

0.49%

31

223,000

Rewe*

1,050

780

+34.7

3.57%

65

153,600

Carrefour

451

150

+301

2.68%

7

61,000

Lidl & Schwarz

210

30

+600

1.25%

14

42,000

CBA

202

187

+8.0

1.20%

455

43,100

Cora-Louis Delhaize

185

177

+4.5

1.10%

24

46,000

Artima

78.2

57.5

+36

0.46%

19

15,200

Intermarché

72

40

+80

0. 43%

8

20,000

Tengelmann

71

29

+145

0. 42%

35

43,750

Delhaize

70

58

+21

0.42%

19

17,060

Source: IGD Datacentre. Data is for grocery formats only. Sales are net. Grocery Retail Market Shares excludes cash & carry operations.

 METRO AG 2005

METRO ROMANIA Company Overview Background Pioneered by Dr. Otto Beisheim, first C&C store in Germany in 1964 The Metro C&C Model Self-service wholesaler (C&C) — targeting small business owners rather than individual consumers and households Exporting the C&C Concept Often the first foreign C&C wholesaler to enter the market In 2005, Metro C&C - 43 new wholesale stores, a record for the company Metro C&C initially expanded from Germany to Austria in 1971 In Romania since 1996 1997 - Metro took over Makro  METRO AG 2005

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METRO Romania - Characteristics

Logistic platform (3 temp. zones) of 9,500 sqm Distribution center 1-st company with Bulk Break Cross Docking 2-nd company in Eastern Europe – high tech platform for vegetables & fruits 2007 sales – 5,306,017,000 RON ( ~ 67 Euro/person/year) 17,500 products 852,021 clients

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P.E.S.T Analysis Political Foreign investment is encouraged; in practice, retailers face a number of challenges. Foreign companies are allowed to own land and buildings Laws encouraging the foreign investment Flat tax of 16% Difficulties with deductibles and VAT reimbursement

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P.E.S.T. Analysis Economic Installing an outlet: Capex €15m-€25m. Real estate prices in Romania (especially in Bucharest) - skyrocketed The number of hypermarkets and superstores – still very low. Investments planned over the next 5 years by Carrefour, Auchan, Metro (Real), Kaufland and Spar - impact the Romanian retail landscape. Local retailers - expansion (Artima) Increase of inflation & exchange rates Estimated economic growth  METRO AG 2005

P.E.S.T. Analysis Social Decreasing population growth rate Aging population Working career attitude Lack of highly trained/skilled personnel In terms of opening hours, there are no fixed regulations 15% of customers still shopped in traditional stores for basic groceries (ACNielsen data) Since EU membership - foreign investment boom and sharp reduction in small shops and street vendors.  METRO AG 2005

P.E.S.T. Analysis Technological

IT technology available High quality/innovative equipments available HACCP – good safety quality assurance regulation accord to EU

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S.W.O.T Analysis

Strengths - Weaknesses

Strenghts

Weaknesses

Local and international good image

Distribution-delay of deliveries

First entry – 10 years ago

High personnel flow

Dinamic expansion

Different purchasing terms

Import increase

Cost increase

Productivity increase

Decreased no of clients

Fidelity programms

Decrease of some suppliers‘ production capacity

Top quality suppliers

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S.W.O.T Analysis

Opportunities - Threats

Threats Opportunities

Agressive competition of new entries

Increase of retail market and

Market segmentation among other competitors

population consumption Geographical position and locations allover the country (23 sites)

Decrease of traditional suppliers‘ production

Increase of IT quality

Decrease of number of clients due to new entries

(data base, surveillance systems, etc)

Exchange fluctuation – inflation Price increase 17

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Promotional activity expansion Why?

How?

Aggressive competition

Advertising

Crowded markets

Sales promotion

Consumers’ saturation with

Public relation

promotional excess

Trademark

Trademark

Promotional Events

Short terms results

Sales force

Demanding distribution

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Influence of promotion on product life cycle

Products in decline – decrease the sales

Products at maturity – momentary sales increase

Products in growing phase – increase the sales

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Promotional Strategies Direct demand stimulation – immediate sales – for traditional products

Creation of favorable purchasing climate – needs time for future sales (conferences, symposia, adverts for public, etc)

Sales stimulation – for seasonal products ( Easter, Christmas, etc)

Selective promotion for a market segment ( for specialists, IT, technical products) 20

Extensive promotion – for several markets (diversified promotion)  METRO AG 2005

Metro - Promotional Strategies

1. Focused strategy on generic competition using differentiation ( specific segment or geographic markets)

3. Leader price strategy - price reduction for big amounts and fidelity discounts

3. Functional promotional strategy – create the demand through a sustained advert and promotional sales

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Metro Top High Quality Suppliers

Procter&Gamble, Nestle, Henkel, Reckitt Benkisser, Tonelli, British American Tobacco, Danone, Aldis, Campofrio, Cris-Tim, Delta, Tnuva, Hochland, Scandia, Mats Romania, Lemarco, Arpis, Dr. Oetker, Prodlacta, Titan, Defne, Jacobs, Kraft Foods, European Drinks, Pepsi, Bauducco, Irina Shrotter, Siltex, Romana, L’Oreal, Londa, Daewoo, Sony, Canon, LG, Kodak, Bosch, Whirlpool, Electrolux etc.

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Promotional Activities - Tactics

Client oriented – specific group of clients Better negotiation startegies with suppliers Better prices Adverts on sales ‘ place Promotion of own products (ARO, Metro Quality, etc)

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Communication channels Metro Post Website Direct letters to clients Indoor Outdoor (ex. “Metro – The partner of professionals”) Magazines Telemarketing SMS Clients as consultants

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Factors influencing promotion Promotion is the most expensive component of marketing strategy

Promotion should be done according to: » Company objectives » Clients purchasing habits » Advertising pannel » Finacial resources

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How to improve promotion? Telemarketing (40 new clients/day) Direct truck sales promotion Easter/Christmas present packages Exhibitions and fares participations Customer Panel Metro Post Catalogue improved Gift certificates Matro bags for free

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Shaping the future of Metro retailing today

Thank you!

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 METRO AG 2005