The Defense Commissary Agency

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The Defense Commissary Agency
Sales
Mr. Delbert Myrick
Director of Operations DeCA East
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The Military Shopper
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Demographics
Commissary Exchange Shopper
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Who is the Military Shopper?

• HHLD Income 40K
• Female Head Age 55
• Younger Bustling Families
• Empty Nest Couples
• Senior Couples
• Not in Work Force
• African American
• Asian
• Non-Caucasian

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The Heavy Shopper Impact!
of
Buying
Purchase
Purchase
Outlet
Annual 2006
Shoppers
Rate
Frequency
Size
Loyalty
Average Shopper
100
1,291.7
20.8
62.24
17.4
HEAVY Shopper
33
3,191.2
48.0
66.52
35.2
Light Shopper
67
342.7
7.2
47.89
5.2

• Heavy Military Shoppers Top 33 of Total
• Spend nearly 9X more than light shopper
• Purchase in Military outlets nearly every week
• Drive purchase size for channel at nearly 67 per
  trip.
• Heavy Military Shoppers Fiercely Loyal
• 7X that of the light consumer double the average
• More likely to purchase in commissary than
  competition

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Military Shoppers Spend Less of Wallet in Channel
of All Outlet Loyalty - Mid-Year 2006
Pt Chg vs MY 05
-0.7 -0.6 -0.1 -1.4 0.3 0.1 0.3 -0.3 2.3
Driven by the On-line Channel
Source ACNielsen Homescan
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Military Shoppers Spend Less of Food Beverage
Wallet in Channel
of All Outlet Loyalty - Mid-Year 2006
Pt Chg vs MY 05
-1.2 -1.4 -0.1 -0.1 0.7 0.3 0.2 -0.1 1.7
Source ACNielsen Homescan
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Roughly 40 of Military Shop Military Monthly
for Food, HBC or GM - drives lower share of wallet
Source ACNielsen Homescan
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More Military Households Shop Supers
Source ACNielsen Homescan Total US
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Military Shopper Frequency Also Declining
Everywhere
Only Convenience/Gas Trips per Shopper Maintained
Source ACNielsen Homescan
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Military Households Stock Up More - Make Less
Trips
Source ACNielsen Homescan
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Grocery Loyalty Driven by Convenience Trips
Total USACNielsen Homescan Shopper Missions,
52wk end 7/2/05
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Military Shoppers Decrease Buying Rate _at_ Most
Other Grocers
Source ACNielsen Homescan
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Marketing the Benefit "Inside and Out"
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Marketing the Benefit "Inside and Out"
DeCA provides benefit to diverse Patron Base
Activity Duty Officer Enlisted Guard/Reserve Retiree Single Married Families

• Patrons come from varied social and economic
  backgrounds
• Some are willing to pay a little more for quality
• Some live payday to payday, looking for the best
  price
• Some are just looking for the best value
• All are looking to the Commissary Benefit to
  meet their needs

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2006 Food Stamp WIC Redemption

• Food Stamp WIC
• Region Value Value
• DeCA East 16,360,013 6,845,557
• DeCA West 9,865,423 15,363,330
• DeCA Europe NA 6,657,761
• Totals 23,225,436 28,866,648

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2006 Coupon Redemption

• Region Quantity Value
• DeCA East 68,362,260 50,243,402
• DeCA West 54,751,283 40,410,609
• DeCA Europe 4,516,892 3,090,083
• Totals 127,630,435 93,744,094

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Commissary Sales - Total DeCA thru May 2007
FY 2006 Vs. FY 2007
1.7
3.4
5.9
1.9
-0.8
-2.1
2.1
2.5
FY 2006 FY 2007 FY07 Project
3611
3676
Cumulative YTD Sales
1.8
65
FY 2007 YTD Sales Target 3676 0 0.0
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Commissary Sales DeCA East thru May 2007
FY 2006 Vs. FY 2007
2.5
7.5
4.4
3.4
0.8
-2.2
3.4
3.1
FY 2006 FY 2007 FY07 Project
1677
1725
Cumulative YTD Sales
2.9
48
FY 2007 YTD Sales Target 1728 -3
-0.2
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DeCA Customer Transactions Thru May
FY 2006 Vs. FY 2007
Transactions
-1.0
-1.2
0.9
-1.3
-0.4
-3.3
-0.5
Millions
-1.4
Cumulative Transactions
61.528
60.896
-0.446 -1.0

Sales Per Transaction
Year Oct Nov Dec Jan
Feb Mar Apr May
Jun Jul Aug Sep YTD
FY 06 58.28 59.22 61.15 58.06
58.93 58.01 58.71 57.04 58.05
57.60 57.74 60.03 58.96 FY 07
58.57 60.57 62.83 59.57 61.26
60.71 59.48 59.87 60.37

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DeCA East Customer Transactions
FY 2006 Vs. FY 2007
Transactions
2.2
0.1
-0.9
1.2
1.1
1.3
-4.1
-1.5
Millions
Cumulative Transactions
-0.014 -0.1
26.214
26.200

Sales Per Transaction
Year Oct Nov Dec
Jan Feb Mar Apr May
Jun Jul Aug Sep
YTD FY 06 64.12 64.81 66.73
62.89 63.90 62.97 63.99 62.35
63.28 62.79 62.67 65.39 63.98
FY 07 63.92 66.19 68.31 64.18
66.92 66.31 65.26 65.59
65.84

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FY 2007 YTD Promotion Recap

• Promotional support continues to outpace
  supermarkets
• DeCAs temporary price reduction (TPR) dollar
  fair share index up to 139
• Promotional Category results (unit lift
  percentages)
• 102 Managers Special
• 84 Power Buys
• 67 Primaries
• Overall lift percentages outstanding
• Unit Lift 49.9
• Dollar Lift 27.0
• Aggregate dollar results from program impressive
  
• Sales 100.6M - Average Per SKU Sales
  12.6K
• Savings 18.0M - Average Per SKU Savings
  2.3K

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Promotional Period Results

• Periods 1 thru 9 Overall
• Dollar Sales Up 13.4
• Dollar Savings Up 12.5
• FY 07 Projection
• Dollar Sales 263.4M (13.1)
• Dollar Savings 53.3M (12.4)

Based on Promotional Period Contributions to
Total
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DeCA's Top 15 Sales Days of the 21st Century
Rank Date Net Sales Event
1 1/31/2004 26,032,612.39 Super Bowl
2 2/3/2007 26,029,117.16 Super Bowl
3 11/18/2006 25,255,742.11 Thanksgiving
4 2/2/2002 24,835,463.69 Super Bowl
5 11/19/2005 23,802,452.46 Thanksgiving
6 11/17/2001 23,765,390.19 Thanksgiving
7 2/4/2006 23,571,575.01 Super Bowl
8 3/3/2001 23,308,730.41 Pay Day
9 7/1/2005 23,169,866.86 July 4th
10 12/30/2005 23,125,008.98 New Year's Eve
11 9/2/2006 23,100,835.32 Labor Day
12 12/2/2006 22,896,133.19 Pay Day
13 11/20/2004 22,860,682.25 Thanksgiving
14 9/30/2006 22,638,613.41 Pay Day
15 2/3/2001 22,616,317.60 Pay Day
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September Case Lot Sale
Event Year DeCA Worldwide Cases DeCA Worldwide Dollars
2005 1,599,283 11,666,779
2006 1,828,631 12,558,388
Percentage Change 14.3 7.6
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May 07 Case Lot Sale
Region Cases DeCA Worldwide Dollars
Europe 61,046 775,105.39
Eastern 1,042,826 7,084,161.29
Western 721,793 4,632,153.33
Total 1,826,665 1.6
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Club Pack Sale History
Event Year Units Percent Change Dollars Percent Change
2003(S) 1,072,866 N/A 5,391,897 N/A
2004(S) 1,936,651 80.5 9,986,974 85.2
2005(S) 2,886,471 49.0 14,064,224 40.8
2006(S) 4,195,379 45.3 23,116,284 64.4
2005(W) 1,568,386 N/A 8,342,999 N/A
2006(W) 2,053,793 30.9 12,151,444 45.6
2007(W) 2,354,648 14.6 18,326,513 50.8
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The Producers
Perimeter Departments YTD

• All perishables dollars up 45M
• Sales trends leading the DeCA way
• Produce 7.1
• Bakery 5.0
• Chill 2.4
• Freeze 2.5
• Seafood 30.6
• Meat trend still down, but improved 67 to -.6

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The Producers
East Perimeter Departments YTD

• East Region pushes Agency results
• East share of DeCA perishable gain 61
• All perishables dollars up 27.5M
• East department trends outpace Agency
• Produce 7.7
• Bakery 5.2
• Chill 3.0
• Freeze 3.6
• Seafood 36.4
• Meat 0.1

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Category Review Reset Results

• Continue to monitor categories reset _at_ Ft Lee
  Commissary
• New planograms installed within first week
• Sales impact evaluated for subsequent 24 week
  period
• Dollar increases dramatic compared to same period
  PY
• Overall change in dollars for categories involved
  7.4
• 60 day set implementation policy could build
  sales quickly
• As more set results quantified, sales estimate to
  be developed

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Merchandising Matters
Partnering Energizes the Bunny

• Moderate battery growth during FY 06 dollars up
  4.2
• New planogram proposed installed
• Cleaner merchandising profile
• Aligned with observed consumer behavior
• Blends sales performance data with purchase
  motivators
• First 12 week assessment dollars up 11.1

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Capturing Market Opportunity

• Evaluate fit between new products and our
  consumer
• Benchmark new product concepts versus historical
  new product successes and failures
• Identify opportunities to bring in new products
  that will truly differentiate our stores

New Product Selection

• Identify opportunities for DeCA specific
  marketing strategies
• Support with store signage clearly highlighting
  new product availability cross- merchandise with
  other high-purchase products ensure our displays
  and sampling align with retail launch

Marketing Merchandising

• Monitor current and projected sales by store
  class and impact on market basket sales, patron
  savings
• Monitor impact on total category sales

Measure Monitor
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Produce

• New produce distribution system
• Resulted in improved sales, quality, and pricing
• Minor concerns being worked expeditiously
• Decreased order-ship time
• Improved merchandising support
• Resulting in more frequent shopping trips to store

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Closer to Home
Zones 21/23/24/25 Produce Sales On Track

• Produce contribution grows to 8.5 of total
• Produce growth over twice that of overall zone
  growth
• Overall growth 1.7
• Produce growth 4.4

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Meat

• New, improved specifications
• Resulted in increased yield
• Reduced labor
• Minimal impact on price
• Sales increasing

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Swell Allowance Program

• Pilot test successfully completed (Oct-Dec 06)
• Five participants
• Kelloggs, JJ, Nestle, Nabisco, Callard Bowser
• Seventeen vendors currently participating
• Additional vendors in negotiation
• Program enhancements under review

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Reinventing the Candy Aisle

• Premium chocolate section
• Dark chocolates
• New item introductions
• Health well being
• Antioxidants
• Organics

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The Many Facets of Nutrition
1) Convenient Nutrition
2) Kids Nutrition
3) Functional Nutrition
4) Nutrition for Beauty
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Healthier options reach new heights
2006 Food Beverage New Product Offering
Health Wellness Benefits vs Historical Trend
Added Nutrients (eg. Vitamins, Soy,
Calcium) Reduced Calorie High Fiber/Whole
Grain Reduced Fat Natural/Organic Zero Trans
Fat Diet Aid Increased Energy/Protein
Sources IRI InfoScan Reviews, New Products
Launched February 2005 January 2006
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Trends to Watch
1) Customization
2) Health Wellness
3) Eco-Friendly Products Packaging
4) Premium Positioning
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Partnership at Work

• Thanks for the San Diego Experience
• Six Commissary Council Committees
• Broad/comprehensive cooperation
• COOP Ads
• Coupon Outreach
• Systems Applications
• Category Review Refinements
• Promo Support Across Departments
• Vendor Stocking
• Promotional Response
• Market Insights

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March Ad 80,000 Circ.
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May/June Ad 220,000 Circulation
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Meat Produce Ads

• Intent is to billboard perishable departments
• Use in DeCA circulars/post newspaper inserts
• Parallels retailer norms
• Capitalize on customers menu driven psychology
• Build sales synergy incremental volume across
  total promotion package

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What We Plan for 2007

• Internet business
• Develop/implement third party module execute
  delivery
• Expanding Assortment
• Emphasize growth categories
• Allocation of space within the store to align
  with emerging segments
• Focus assortment changes on emerging segments
• Correct under allocation within the store

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What We Plan for 2007

• Evaluate product mix frequently
• Specify new item performance objectives up front
• DeCA specific marketing for new items
• Create focused view of future market conditions
• Collective effort with industry retail insights
• Predict most likely mix of goods/services
  demanded by future consumers
• Evaluate space allocation based on future demand
  versus past performance
• Establish objectives refine plans on the move as
  conditions/insights warrant

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Front End Merchandising

• CARTS roll out to impact current rack placements
• Created a front end buyer position Mr. Joel
  Small
• Opportunity to increase sales with improved front
  end merchandising
• Snacks create growth
• Consumable - 98 of Households buy snacks
• Expandable 55 unplanned, 80 eaten within 30
  minutes of purchase

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What We Plan For 2007

• Working with Impulse Marketing The Source
• Identifying optimal spacing and fixtures
• How to merchandise at self check outs
• Implement assortment that mirrors what the
  consumer is looking for at check out

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Promotions 2007

• Treasure hunt with club packs build shopping
  fun
• Match your mix to patron faces
• Use as lever to enhance trade support throughout
  store
• Expansion of display-ready pallets
• Big buck opportunity _at_ minimal labor cost
• Send visuals details in advance electronically
• Streamlining promotional package size
• Reducing listing of line item extensions
• Reducing number of secondary items
• Extending promotional support throughout K codes
  

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Promotions 2007

• Improve promotional flexibility
• Take advantage of consumer advertising associated
  with new item launches
• Take advantage of close out specials
• Include perimeter departments in all promotional
  packages

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How to Grow Sales

• Be aggressive use the glass is half full
  approach
• Meat truckloads / seafood roadshows
• Farmers markets / plant truckloads
• Complement with special contractor sales efforts
• Use all authorized media/methods to get the word
  out
• Be ready for perishable ads in base newspapers
• Cross-merchandise build a total store plan
  execute
• Organics are growing rapidly

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How to Grow Sales
And Create Excitement!

• Dont forget the perimeter
• Focus on impulse items
• Case Lot Sales
• Club pack program has become annual program
• Focus on hot deals as well as seasonal
• Support vendor stocking on payday weekends

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