1 UK Independent business reviewSteering committee 2 27th September 2010 Ian Goldsmith Matthew Fearn Mark Player Stuart Smith Stephen Bates Stuart Gent Marco van Kalleveen Fraser Handcock Al Mayne

2 Agenda (indicative timings)Recap and process reminder 10 mins Customer survey: segmentation and insights 90 mins Competitor analysis 30 mins Next steps mins Appendices

3 Context and objectivesContext (recap) Objectives of this work Objectives today UK Independent is of fundamental importance to Brakes The independent business (excl. M&J and WW) has seen flat sales and margin pressure Since 2007 the trading environment has been, and continues to be, challenging We have already launched a sales force effectiveness program This feels like a good time to confirm and refresh our understanding of our independent business Refresh our understanding of the macro market context and outlook Update understanding of our independent business based on Brakes trading data Refresh our customer insight with a consumer survey Create a customer segmentation that enables us to categorise buyers based on similar behaviours and assess their market attractiveness and accessibility for Brakes Review a new customer segmentation based on characteristics and purchase behaviours Share results of customer survey built on new segmentation Look at the competitive environment in the market: what types of competitor do we have; how are they performing; what are their relative economics Pull up and synthesise what we have learned: agree priorities and next steps

4 Objectives (by end September)We have devised a 3 workstream process to examine our independent business Focus today Workstream Objectives (by end September) Key questions Completion so far Market context Refresh understanding of market context and dynamics What is the market size, growth? How to define independent and how to segment? Who is serving the independents currently? What share do we have? Market context: competitive ‘teardown’ Understand in depth the different competitor businesses What customers? What offering, service? Operations? Economics? Trading data analysis Outline Brakes financial performance in independent Explain that performance in context of customer segments How / where do we make money? What is a meaningful segmentation of the customer base? What patterns / trends have emerged? Customer insight Identify customer purchase dynamics Explain patterns in behaviour by segments Who is the key decision maker? What are their key purchase criteria? What levers are available to improve Brakes’ position? A1 A2 B C D

5 Agenda Recap and process reminder 10 minsCustomer survey: segmentation and insights 90 mins Competitor analysis 30 mins Next steps mins Appendices

6 Context and composition of the surveyRoadmap Context and composition of the survey The customer segmentation Customer insight Implications and next steps 6 6 6

7 Context, approach & objectivesThe market is in a period of flux and retrenchment ‘Pubs’ and ‘restaurants’ are in decline The market outlook is uncertain Consumer spend on out-of-home eating is falling Brakes has an exhaustive database enabling thorough transaction data analysis This is predicated on observed outlet characteristics (e.g. pub / 50:50) The sales force effectiveness work is already underway based on a prioritisation of potential sales from an account It is both timely and helpful to refine our understanding of our consumers (actual and potential) A segmentation based on types of business and their attitudes to and needs of suppliers will enhance this insight With the assistance of Freshminds, a questionnaire was drafted to serve two purposes: Enable a statistical segmentation of business types and individuals Further enhance the customer insight available to Brakes across all consumer types and the new segmentation Scope: The initial phase involved 1069 interviews. We covered all regions of the UK (except Northern Ireland) and customers and non-customers These 20-minute interviews were conducted over the phone during a period of two weeks in August 2010 Identify market segments at an organisational and individual level with similar foodservice needs and purchasing attitudes To understand, for the market and for each segment: Buying habits and key criteria Optimal supplier relationship Share of wallet and brand perception for Brakes Competitor performance To identity valuable gaps in the market for Brakes To identify options for better serving specific segments The objective is not: To provide a detailed market map exactly representative of the UK customer space* To outline specific propositions for target segments (at this stage) *Certain areas were oversampled relative to their market size in order to attain a statistically robust number of different sectors. As such, this sample should not be considered exactly representative of the market. 7 7 7

8 At present the existing classification of customer types covers a broad range of businesses and is based mainly on the functional characteristics of the outlet In region different industry types and 85 sub-categories have been used to categorise customers into ‘observed’ groups (including 11 sub-groups in pubs) E.g. ‘Pubs’: Brigade size 4-5 One 6-10 6-10 4-5 One # of covers 76-100 1-25 200+ 76-100 1-25 Spend/meal Under £5 £6-10 Under £5 £21-30 £11-20 Under £5 Spend on frozen £1,000-£1,500 Less than £250 £2,000+ £1,000-£1,500 Less than £250 Less than £250 8

9 Over one third of the sample were non-customersTo compile the survey, 1069 people responsible for food purchasing were interviewed The sample included a statistically significant number of responses from all the main market sectors Over one third of the sample were non-customers The majority of the interviews were taken from region 202* but a sample was taken from all parts of the country Base: 1069 *to enable cross tabulation with Brakes trading data 9 9 9 9

10 The customer segmentationRoadmap Context and composition of the survey The customer segmentation Customer insight Implications and next steps 10 10

11 Introduction to the company segmentationCompanies segments were statistically derived using cluster analysis from three sub-sets of data: Attitudes to suppliers (e.g. product preferences, customer service requirements, ordering and delivery) Characteristics of the establishment (e.g. brigade size, customer spend, service model) Total spend and spend split per category (dry, fish, meat, frozen, fruit and veg) % share of wallet for customers % sample by size % market by value Destination Diners: Typically these are restaurants and hotels with bigger than average brigade sizes, serving food to the table in the evenings. High customer spend per cover and high total monthly spend on food, with above average on fresh categories. 20% 43% 10% Mass Covers: Serve a high volume of low cost meals, typically at lunchtime as self-service or collect-from-the-counter. Buy in bulk with a high average spend per month, particularly dry and frozen products. 11% 20% 24% Food Assemblers: Cheap, often cold, food served mainly at lunchtime. Assemblers have a low monthly spend, heavily biased towards dry goods. 10% 4% 30% Quick and Casual: Buy a much higher than average volume of frozen food and are more likely than others to operate a quick service model. Have a below average spend per customer. 12% 11% 28% Small All-Rounders: Demanding food-oriented customer that values both quality produce and high quality service from suppliers. Customer spend per meal is average but establishments have a low total spend per month on food. 25% 10% 27% Basic Pit-stops: Characterised by their decision-makers, who have extremely low expectations of suppliers. Serve mainly British food to customers at tables during lunch and dinner services. They are not particularly food-oriented, for example they rarely rotate the menu (e.g. no daily specials) 22% 14% 24% 18% Average share of wallet 11 11 11 11

12 Destination Diners Sample sector average (by number)Overview: Destination Diners focus on serving quality food out of large well-staffed kitchens. The high proportion of raw food purchased suggests that they cook from scratch. Typically these are restaurants and hotels with bigger than average brigade sizes, serving food to the table in the evenings. High customer spend per cover and high total monthly spend on food, with above average on fresh categories Segment Average Busiest mealtime: For 58% dinner is the busiest mealtime (average = 38%). Average kitchen brigade size: 7.1 (average = 4.4) Main Suppliers: 39% name their main supplier as being “local” (average = 25%) Average number of suppliers: 9.4 (average = 5.8) Billing: 74% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average : 10%, (Overall average: 18%) Supplier preferences: initial observations Product: Destination Diners value quality and depth of offering, in particular locally sourced and unique ingredients. Promotions appeal less to this segment and, since they appear to achieve breadth through a range of suppliers, they don’t require a single supplier to provide everything. Delivery: More likely than average to want fixed time windows and delivery each day of the week. Customer service: High maintenance customers that expect a faultless field sales service and rapid complaint resolution. Ordering: Expect to be able to order late, but much less interest in online. 12 12 12

13 Mass Covers Sample sector average (by number)Overview: Mass Covers are all about high volume, low cost meals. Meals are typically provided at lunchtime as self-service or collect-from-the-counter. The establishments have a high average spend per month – and purchase a higher than average proportion of dry and frozen products. Segment Average Busiest mealtime: For 73% lunch is the busiest mealtime (average = 54%). Average kitchen brigade size: 8.5 (average = 4.4) Main Suppliers: 69% name their main supplier as being “national” (average = 54%) Average number of suppliers: 6.7 (average = 5.8) Billing: 70% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average: 24%, (Overall average: 18%) Supplier preferences: initial observations Product: Expectations of breadth and depth of product from suppliers are around average. Mass Covers do, however, state that promotions are important and show an above-average preference for local products. Delivery: All food arriving on a single delivery is an important offering from suppliers for this segment. Customer service: Mass Covers place a higher importance than average on having a constructive relationship with their field sales representative. 13 13 13 13

14 Food Assemblers Sample sector average (by number)Overview: Food Assemblers have the second smallest brigades of all segments with a low monthly spend that is heavily skewed towards dry goods. Cheap food is served, mainly at lunchtime, with a higher than average proposition of establishments offering collect from counter or self-service. These locations are often about cold, ready to eat meals or snacks. They are refuel options, not destinations in which to linger. Segment Average Busiest mealtime: For 58% lunch is the busiest mealtime (average = 54%), for 14% breakfast is (average = 8%) Average kitchen brigade size: 3.1 (average = 4.4) Main Suppliers: 72% name their main supplier as being “national” (average = 54%) Average number of suppliers: 6.7(average = 5.8) Billing: 55% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average: 30%, (Overall average: 18%) Supplier preferences: initial observations Product: Food Assemblers care more about breadth than depth of options but show little preference for local or unique products. Delivery: Beyond a slight preference for a single truck delivery, food assemblers don’t have high delivery expectations. Customer service and ordering: An ability to handle complaints is more important than a constructive relationship with field sales. 14 14 14 14

15 Quick and Casual Sample sector average (by number)Overview: Quick and Casual outlets buy a much higher than average volume of frozen food. Not only are they are more likely than others to operate a quick service model, characterised by condiments out of sachets, disposable cutlery and takeaway options, they are more likely than average to buy pre-prepared meals. These establishments serve fewer covers at a lower cost than the overall average. Segment Average Busiest mealtime: For 64% lunch is the busiest mealtime (average = 54%), Average kitchen brigade size: 2.8 (average = 4.4) Main Suppliers: 66% name their main supplier as being “national” average = 54%) Average number of suppliers: 4.3 (average = 5.8) Billing: 34% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average: 28%, (Overall average: 18%) Supplier preferences: initial observations Product: Quick and easy caterers like promotions and value breadth of range over depth of special ingredients. Delivery, customer service and ordering: Expectations of delivery, customer service and ordering are not out of the ordinary compared with other segments. 15 15 15 15

16 Small All-Rounders Sample sector average (by number)Overview: Small All-Rounders serve hot meals to tables at lunchtime, but tend to service fewer covers than average at their busiest mealtime. Customer spend per meal is only just below average but establishments have a low total spend per month on food. The mix of food spend is in line with the overall blend. This segment is most strongly characterised by their food-loving decision makers, who have very high expectations of both quality produce and high quality service from suppliers. Segment Average Busiest mealtime: For 52% lunch is the busiest mealtime (average = 54%). Average kitchen brigade size: 2.9 (average = 4.4) Main Suppliers: 53% name their main supplier as being “national” (average = 54%) Average number of suppliers: 4.6 (average = 5.8) Billing: 45% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average: 27%, (Overall average: 18%) Supplier preferences: initial observations Product: Small All-Rounders value both product quality and breadth of range and expect to get both from a single supplier. They show a stronger preference than average for promotions, potentially as a result of the lower customer spend. Delivery: More likely than average to want fixed time windows and delivery each day of the week. Customer service: A high maintenance segment that expects a faultless field sales service and rapid complaint resolution. Ordering: They are likely to be the earliest adopter of online ordering, with some positive preference, and would be more likely than average to draw on advice at the point of ordering. 16 16 16 16

17 Basic Pit-stops Sample sector average (by number)Overview: Basic Pit-stop outlets are not dissimilar to Small All-Rounders - they also serve a below-average number of covers to customers at tables during lunch services. They serve mainly British food but are not particularly food-oriented, for example they rarely rotate the menu (e.g. no daily specials). They are strongly characterised by the universally low expectations of suppliers of their decision makers and are unlikely to switch from their predominantly local suppliers in the next year. Segment Average Busiest mealtime: For 55% lunch is the busiest mealtime (average = 54%), Average kitchen brigade size: 2.8 (average = 4.4) Main Suppliers: 31% name their main supplier as being “local” (average = 25%) Average number of suppliers: 4.9 (average = 5.8) Billing: 41% buy more than half their food supplies on credit (average = 52%). Current Brakes sector type by number Overall Average Establishment average monthly spend Average percentage spend per category Average covers served at busiest mealtime Average customer spend on food at busiest mealtime Brakes share of customer wallet: (% of total customer spend that is spent with Brakes) Segment average: 24%, (Overall average: 18%) Supplier preferences: initial observations Basic pit-stops demonstrate significantly lower expectations of suppliers than other segments and, potentially as a result, are unlikely to switch suppliers within the next year. Offering local products and single truck deliveries are rated as slightly more important than other possible offerings, but no preferences occur above average. 17 17 17 17

18 Share of segment by valueThese attitude-based segments provide a different lens on the Independent business… Share of segment by value 18

19 …real examples show both external differences and commonalities in terms of business type e.g. ‘Destination Diners’ Destination diners, which are characterised by high average spend for customer, large brigade size and tend towards fine dining, are made up mainly of restaurants, hotels and pubs, but also travel and leisure outlets (such as members clubs) and business establishments (such as museum restaurants) Old industry sectors Restaurants Hotels Pubs Leisure QSR Other New segmentation: Destination Diners City restaurant Out of town hotel Country pub Golf club Upscale cafe

20 In addition, we know from the demographic profiling questions that we will encounter different types of customer in some of our segments Analysing the individuals within each segment reveals some facts about the decision makers in each type of business, below. However, the simple data points do not reveal the best sales tactics for each type of individual. To understand this it is necessary to undertake a second segmentation that looks specifically at individuals within the surveyed population, overleaf. Gender split Experience Qualifications

21 % share of wallet for customersTherefore, we have also undertaken a statistical segmentation of the individuals we see in the market place which can supplement the company segmentation Principle: In a B2B context, a supplementary segmentation of the decision-maker is particularly valid since the buying decision is determined both by the organisation needs of the business and by the personal preferences and habits of the individual Individual segments were statistically derived using cluster analysis from four sub-sets of data: Attitudes to suppliers (as for the company segmentation) Cooking qualifications Professional attitude (e.g. Attitude toward cooking, attitude toward customers) Number of responsibilities % share of wallet for customers Description % sample by size % sample by value 38% 40% 27% 17% 11% 8% 16% 20% 18% Beta Chefs – Passionate but less qualified: Enjoy cooking creatively, customer interaction and growing the business. This group generally mirror the average, but have particularly high expectations of suppliers. Non Foodies: Non-foodies generally hold no cooking qualifications, don’t enjoy cooking and do not want to spend more time in the kitchen. They are discontented with their career and are least likely to stay in the industry. Alpha Chefs – Experienced and busy: Enjoy all aspects of the business, from cooking to business development to customer interaction. They are likely to be qualified and have the highest number of responsibilities of any segment. Single-minded foodies: The hallmark this segment is their love of the kitchen and of cooking creatively. They care much less about whether the meals are healthy and in contrast to other segments, do not enjoy customer interaction. People Pleasers: Love interacting with customers and enjoy serving healthy meals more than any other segment. But their hearts lie outside the kitchen: given the choice they are less likely to want to spend more time there. 4% 19% 29% 21 21 21 21

22 Single-minded foodiesOverview The hallmark of this segment is their love of the kitchen and cooking creatively. They care much less about whether the meals are healthy. Whilst they do enjoy thinking about how to grow the business – and may be working towards an industry accolade. In stark contract to other segments, they don’t enjoy customer interaction. They are predominantly male and have a greater proportion of years olds compared with the average. Attitude Which of those roles takes up the most time for you? Qualifications Supplier preferences This segment is highly qualified and clearly focused mainly on food quality. Product: Product preferences focus more on depth than breadth, with passionate chefs stating that providing unique and local ingredients is important. Delivery, customer service and ordering: Delivery preferences are more standard, although they would be more likely than average to favour suppliers that provide opportunities for later ordering. 22

23 A Alpha Chefs – Experienced and busy OverviewEnjoy interacting with all aspects of the business, from cooking to business development to customer service. They are likely to be qualified chefs and whilst most of their time is spend in the kitchen they have the greatest number of responsibilities of any segment. More than average would spend more time in the kitchen if they could and they are more likely than average to be male. A Attitude Which of those roles takes up the most time for you? Qualifications Supplier preferences These individuals tend to have been in the industry for the longest of any segment (80% >15 years) and, perhaps as a result, are likely to have good idea of what they want from a supplier. They are also more likely to be the sole decision maker when it comes to ordering food supplies. Products: Multi-taskers state that the supply of local ingredients is important, but, beyond this, they don’t value breadth and depth more than the average. Delivery, customer service and ordering: They expect ease and note good complaint handling and single truck deliveries as more important than average. 23

24 B Beta Chefs – Passionate but less qualified OverviewLess qualified cooks that love cooking creatively, career professionals who also enjoy customer interaction and growing the business. As individuals that appear to enjoy all aspects of the catering profession, they also expect to remain in the industry for at least another 5 years. Healthy meals are important. B Attitude Which of those roles takes up the most time for you? Qualifications Supplier preferences This segment has very high supplier expectations. Their ‘whole business’ approach to their cooking career is played out by them caring as much about the breadth and depth of food supplied as they do about delivery and customer service. Products: Career professionals expect breadth and depth, showing a preference for suppliers that can provide local and unique ingredients. Delivery: They expect a single truck delivery at a fixed time, every day of the week. Customer service and ordering: The process should be straightforward and flexible and the segment shows a preference for late ordering. Career professionals are also likely to be earlier adopters of online ordering. 24

25 People pleasers OverviewPeople pleasers love interacting with customers and rate serving healthy meals more than any other segment. Their hearts lie outside the kitchen: they are less likely than average to enjoy cooking creatively and much less likely to want to spend more time in the kitchen if they could. Attitude Which of those roles takes up the most time for you? Qualifications Supplier preferences This segment, which enjoys serving customers, perhaps unsurprisingly has very high expectations of suppliers. It is predominantly female and also has the largest number of older individuals. Products: People pleasers are still very interested in the products provided by a supplier, naming breadth, depth, local and unique ingredients as more important than average. Delivery: People pleasers are slightly less concerned about the specifics of delivery, although do favour all products arriving on a single truck. Customer service and ordering: Customer service and complaint handling is critical and this segment would favour suppliers that offer late ordering. 25

26 Non-foodies Overview Non-foodies generally hold no cooking qualifications, don’t enjoy cooking and would not want to spend more time in the kitchen. Whilst managing the business is a particular area of focus for this segment, they show a broad discontent with their careers and don’t enjoy it. Some favour enjoy customer interaction but most are unlikely to be in the industry in five years. Attitude Which of those roles takes up the most time for you? Qualifications Supplier preferences Non-foodies have low expectations of suppliers across the board. They are, however, more price sensitive than other segments. The low expectations may make the non-foodies easier to retain. They tend to use fewer suppliers than other segments and are one of the less likely segments to switch suppliers within the next year. 26

27 Overlaying the individual types on the organisational segments helps to reveal the types of people we are most likely to encounter in each segment of the market Despite organisational similarities, note different individual profiles in Small All-rounders and Basic Pit Stops Number of customers More qualified, more demanding Less qualified, less demanding 27

28 Roadmap Context and composition of the surveyThe customer segmentation Customer insight Implications and next steps 28 28

29 Characteristics of the business Characteristics of the buyerOur analysis of the new segmentation has been based on 5 key questions Characteristics of the business Characteristics of the buyer 1. Who is the customer? Spend by value Spend by mix of temperature 2. What do they buy? Product and value Customer service Delivery Ordering 3. What do they want from their supplier? What do they like / dislike? What would make them switch? How likely are they to switch? 4. Which supplier do they use now? Are they aware of Brakes? What are their brand perceptions? How does this compare vs. others? 5. What are perceptions of Brakes (and WW + M&J)? Therefore where are the ‘sweet-spots’ by segment which would get the most traction with customers?

30 Over half of our potential customer base operate kitchens with three people or less but most of the value is in the larger kitchens run by Destination Diners and Mass Covers How big is your kitchen brigade (during your main service)? Average size of brigade (kitchen staff) Brigade size distribution Base: 1069 30

31 The market is predominantly lunch focused with cThe market is predominantly lunch focused with c.80 covers at the busiest meal time, however there are significant variations to this, especially in the larger operations What is your busiest mealtime? How many customers do you serve at your busiest mealtime? Average number of covers served at busiest mealtime Busiest mealtime distribution Base: 1069 31

32 The majority of establishments primarily serve food bought to the table; biggest divergence can be seen in Destination Diners and Mass Covers In which of the following ways do you serve your meals? (Multiple options) Base: 1069 (MC)

33 Within the sample there was a very strong skew to British food among all customer segments: this needs to be tested against the incidence of non-British focused outlets in the market How would you describe the cuisine that you serve? Base: 1069 How would you describe the cuisine that you serve? Base: 1069 33

34 Spend by mix of temperature2. What do they buy? Characteristics of the business Characteristics of the buyer 1. Who is the customer? Spend by value Spend by mix of temperature 2. What do they buy? Product and value Customer service Delivery Ordering 3. What do they want from their supplier? What do they like / dislike? What would make them switch? How likely are they to switch? 4. Which supplier do they use now? Are they aware of Brakes? What are their brand perceptions? How does this compare vs. others? 5. What are perceptions of Brakes (and WW + M&J)?

35 On a spend / value basis, the sample is broadly representative of the market (based on comparison with Horizons market data); some discrepancy in chilled Preliminary analysis suggests sample is representative of the market based on blend of industry types sampled Directionally, implied temperature blend of sample is in line with market, though overweight in chilled categories vs. ambient * * * * Market value was calculated using 2009 market spend data * * Market Value is for Independent & Corporate establishments 35 35

36 Brakes’ share of wallet is heavily weighted to the frozen and ambient categoriesCUSTOMERS ONLY 36

37 By segment Brakes clearly has a lower share of wallet in Destination DinersCUSTOMERS ONLY 37

38 Extrapolating from the survey shows that Brakes has some clear pockets of underexposure in the market, particularly in the large Destination Diners segment CUSTOMERS ONLY Legend: Brakes SOW <5% 5-10% 10-20% 20-30% 30-40% 40-50% 50%+ Market £ value 38

39 Food assemblers – dry heavy Quick and casual - frozen heavyGiven the high share of certain temperatures in the total spend of some segments, the analysis of Brakes customers suggests a potentially narrower x-sell opportunity ILLUSTRATIVE Food assemblers – dry heavy Quick and casual - frozen heavy Total annual spend (£K), 2009 Bar width = number of customers by percentage of frozen spend Bar width = number of customers by percentage of frozen spend Brakes average frozen spend: 24% Survey average frozen spend: 20% = genuine areas of x-sell shortfall Brakes average frozen spend: 41% Survey average frozen spend: 64% Note: Analysis includes ~490 outlets in region 202 who were interviewed during customer survey process 39

40 3. What do they want from their supplier?Characteristics of the business Characteristics of the buyer 1. Who is the customer? Spend by value Spend by mix of temperature 2. What do they buy? Product and value Customer service Delivery Ordering 3. What do they want from their supplier? What do they like / dislike? What would make them switch? How likely are they to switch? 4. Which supplier do they use now? Are they aware of Brakes? What are their brand perceptions? How does this compare vs. others? 5. What are perceptions of Brakes (and WW + M&J)?

41 Good customer relationships and error and complaint handling are the most attractive qualities in a supplier Delivery and customer service are the areas in which expectations are highest. Respondents consistently state that errors – in delivery or general complaints – must be rapidly resolved High credit levels and online ordering are not currently rated as highly desirable characteristics of suppliers How important is it to you that when dealing with a supplier they… (Overall average scores, responses rated from 1 – 10, charts show % scoring 9 or 10) Base: 1069 41

42 For delivery, rapid error response is the key supplier attribute; variation in response by segment suggests that there are nuanced needs by segments How important is it to you that when dealing with a supplier they…(Rated from 1 – 10, charts show % scoring 9 or 10) Have the ability to rapidly respond to a delivery error Deliver everything I ordered on a single truck Offer a fixed time window for delivery Offer delivery each day of the week Failsafe delivery crucial; daily delivery more relevant than fixed window In particular they want to know precisely when the delivery is arriving Less concerned about delivery frequency due to small size of outlet Moderate preference for single truck delivery Segments polarised by high / low sensitivity to supplier performance 42 42

43 Field representatives play a key role in supplier decision makingHow important is it to you that when dealing with a supplier… (Rated from 1 – 10, charts show % scoring 9 or 10) There is a good relationship with my field sales representative There is a representative who effectively deals with any complaints I have They offer a high credit level Strong sensitivity to interpersonal service Relatively few differences in service model / standard outside DD and SAR segments Section of market with strong need for good customer relationships 43

44 A good choice and a local supply are the key product offerings from a supplierHow important is it to you that when dealing with a supplier they…(Rated from 1 – 10, charts show % scoring 9 or 10) Allow me to source local products Give a good choice of options when I'm looking for a specific type of food Offer regular promotions on key ingredients or products Allow me to find and purchase unique and special ingredients Allow me to purchase most of the different food types I need from a single supplier Want local and unique products but don’t need promotions or a single source They want optionality within and across ranges and are sensitive to promotions Likely commodity buyers with simple needs They want core commodities and good value through promotions Segments polarised by high / low sensitivity to supplier performance 44

45 Online ordering is not seen an important feature to offer relative to other ordering initiativesHow important is it to you that when dealing with a supplier they…. (Rated from 1 – 10, charts show % scoring 9 or 10) Offer ordering up until midnight for next day delivery Offer access to specialist advice at the point of ordering Offer ordering online Late night ordering is important option A knowledgeable point of contact seen as useful Food assemblers want a simple , uncomplicated routine Few variations, though late night offering appeals to half of the population Segments polarised by high / low sensitivity to supplier performance 45

46 4. Which supplier do they use now?Characteristics of the business Characteristics of the buyer 1. Who is the customer? Spend by value Spend by mix of temperature 2. What do they buy? Product and value Customer service Delivery Ordering 3. What do they want from their supplier? What do they like / dislike? What would make them switch? How likely are they to switch? 4. Which supplier do they use now? Are they aware of Brakes? What are their brand perceptions? How does this compare vs. others? 5. What are perceptions of Brakes (and WW + M&J)?

47 Average No. Of suppliersAll establishment types use multiple suppliers, local suppliers are most popular at both the high and low end of the market Overall over half of the sample classified their main supplier as “national”. Destination Diners have a greater propensity to use a local supplier as their main supplier. Basic pit-stops also show a higher than average propensity to use local suppliers. Which of the following best describes your main supplier? Average No. Of suppliers 5.8 9.4 6.7 6.7 4.3 4.6 Basic 4.9

48 The industry appears to be sticky with very few customer expressing an inclination to change suppliers How likely are you to switch your main supplier over the next year?

49 This may well be explained by the fact that most customers appear more than happy with their suppliers – typically 30-40% of respondents would not ask for any improvement If your supplier could improve one thing other than price, what would it be? Brakes 3663 Bookers Woodwards M&J Other Supplier

50 When customers have switched from Brakes, price is the most frequently quoted explanationChange of circumstances refers to decision-makers who moved from one organisation to another. Other explanations were often idiosyncratic including not having products for fish and chips shops. Six non-customers did mention that Brakes had been poor at following up with them, despite stated interest Have you used Brakes in the last 12 months? I’ve used them but no longer use them I’ve considered them but not used them I’ve never used or considered them What is the main reason you left Brakes ? (Customers asked to select one response from a list or to give an alternative explanation) Base = 208 50 50

51 Number of accounts, region 202Overlay on own trading data suggests we have been churning most in the areas of greatest share of wallet but are holding in more valuable segments – clearly market driven also ILLUSTRATIVE -3% -5% -5% Number of accounts, region 202 -15% -16% -15% -11% Note: Analysis includes ~490 outlets in region 202 who were interviewed during customer survey process Total survey avg. 51

52 % sales by temperature, loyal customersOn an absolute sales basis this has been most pronounced in Destination Diners segment; margin decline has also followed overall trend except in Mass Covers ILLUSTRATIVE % sales by temperature, loyal customers Note: Analysis includes ~490 outlets in region 202 who were interviewed during customer survey process

53 5. What are brand perceptions of Brakes?Characteristics of the business Characteristics of the buyer 1. Who is the customer? Spend by value Spend by mix of temperature 2. What do they buy? Product and value Customer service Delivery Ordering 3. What do they want from their supplier? What do they like / dislike? What would make them switch? How likely are they to switch? 4. Which supplier do they use now? Are they aware of Brakes? What are their brand perceptions? How does this compare vs. others? 5. What are perceptions of Brakes (and WW + M&J)?

54 Brakes were rated higher on customer service factors than product factorsCUSTOMERS ONLY Please indicate whether you feel the following words/statements apply to Brakes or not: (Those that thought the statements did apply) Base: 1069 54

55 Brand perception is high on logistics criteria: non-customers are less positive of Brakes than customers (though their views followed the same trend) Please indicate whether you feel the following words/statements apply to Brakes or not: (Chart shows proportion of respondents that thought the statement did apply) Base: 925: 688 customers and 237 non-customers. 22 customers and 101 non-customers did not know enough about Brakes to comment 55 55

56 Among the market segments, Destination Diners are least positive about Brakes on both a customer and non-customer level Average agreement with positive brand statements about Brakes by segment* Overall average = 72% Customer average = 75% Non-customer average = 62% Base: 925: 688 customers and 237 non-customers *Averages exclude negative statements (‘bureaucratic’ and ‘boring’) 56 56

57 Dedicated to their customersBrakes scores highly on their Reliability & Helpfulness; Food Assemblers and Small All-Rounders particularly positive Please indicate whether you feel the following words/statements apply to Brakes or not: (% that thought the statements did apply) Reliable Helpful Responsive Dedicated to their customers Bureaucratic 57 57

58 Almost two thirds of respondents considered Brakes to be “Good Value” but key Destination Diners category less likely to see Brakes as ‘fresh’ or as ‘food experts’ Please indicate whether you feel the following words/statements apply to Brakes or not: (% that thought the statements did apply) Good value Fresh Food expert 58

59 Over half of respondents consider Brakes to be InnovativePlease indicate whether you feel the following words/statements apply to Brakes or not: (% that thought the statements did apply) Innovative Boring 59

60 Implications and next stepsRoadmap Context and composition of the survey The customer segmentation Customer insight Implications and next steps 60 60

61 Four main vectors for market share growth seem to exist based on current Brakes penetration and size of addressable market Aim to harvest cross-sell from strong base in frozen/dry 3 Legend: Brakes SOW 4 <5% 5-10% 10-20% 20-30% 30-40% 40-50% 50%+ Identity a proposition that works for DD 2 Develop a frozen proposition / approach that works for Q&C 1 Acquire more customers and gain SOW (esp. ambient) in large and Brakes-positive MC segment 61

62 Proximity to current core 3. Food assemblers and basic pit-stopsThese options will need to take different approaches to growth and present unique challenges and questions for the business Growth vector Share of market Brakes SOW Growth model Open questions Proximity to current core Customer acquisition SOW growth 1. Mass covers 20% 18% Why do they need / use so many suppliers? Where are they buying the rest of their dry and frozen from? Why shouldn’t Brakes capture a much bigger proportion of their share here? What are their needs in Fresh and how could Brakes deliver and market a proposition to meet it? Should we target these customers at any price and then grow into them and cross sell? High 2. Quick and casual 11% 21% These are uncomplicated, heavy purchasers of frozen: what is the impediment to better penetration in frozen? In what way are their needs different from other small segments? How could we create and market a simple proposition to meet their needs, especially in frozen? 3. Food assemblers and basic pit-stops ~28% What is the fresh need in these outlets and what proposition would work for them? What other suppliers are they using and why? How could we further consolidate their dry spend with us? To what extent should we pursue customers in this space? Med 4. Destination diners 43% 9% To what extent is this a non-core / adjacent market? Can we design and deliver a proposition that would engage this segment of the market? What would that look like? What is the impact of the Brakes brand perception on this group and what would it take to change it? What implications would this have for our operating and sales model? Low?

63 Whilst it is possible to identify avenues for growth within market segments the whole industry is – for now – still characterised by some ‘natural laws’ The most important purchase criteria are characterised by a ‘fear of failure’ The top issues for the customer are focussed on successful delivery and responsive customer service, not on the product itself. The most important criteria for customers are: Rapid response to delivery error Good relationship with field sales rep Effective complaint resolution There are generally high levels of satisfaction with existing suppliers When asked what their main supplier could improve, 30-40% claim that their main supplier couldn’t improve anything There is accordingly a very low inclination to switch from existing main suppliers Over 75% of respondents said they were unlikely to switch suppliers in the next 12 months (48% were very unlikely) while only 4% were very likely to change their main supplier (9% likely) Given price was most often cited as reason for switching, we infer that most players in the market meet the high expectations on delivery and customer service There appears to be little appetite for innovation in the market Given sensitivity to delivery failure, desire to experiment with online or try new products from a new supplier is low Customers use multiple food-service suppliers: there is little evidence of a ‘one-stop-shop’ approach The average customer uses ~6 suppliers Accordingly they achieve range breadth (and to some extent depth) by using multiple providers How rigorous are we in tracking delivery accuracy and reliability? What KPIs? Is there a mechanism to attract customers based on a delivery ‘pledge’? How close to our detractors are we? How often and in what functions do we engage directly with our customers? What levers are there (or can we find) other than price to attract and/or retain customers? Main supplier status? How do we balance high churn and low inclination to switch? Does the market really know what it wants? How can we persuade them that there is something over and above ‘hygiene factors’? What is the perceived benefit of having multiple suppliers (and vice versa)? How aware are customers of sub-brands and does that change their perception?

64 Thoughts on proposition options Outstanding questionsSummary of potential opportunities 1/3 For discussion Destination Diners Mass Covers Brakes share of wallet 10% 24% Market value 43% 20% Typical individuals Likely to be well-trained and passionate about cooking Likely to be more qualified and as focused on customer interaction and business development as the kitchen Hot buttons Strong and attentive relationship management with regular deliveries Deep product range and a reputation as a specialist Locally sourced ingredients High quality fresh produce Price-conscious Promotion savvy Efficient delivery in terms of frequency and regularity Point of sale expertise and advice Thoughts on proposition options ‘Connoisseur” membership and relationship management: best-in-class knowledgeable account managers who can offer first refusal on local products Spin-off specialist brands trading in fresh produce, meat and fish Create reputational change by emphasising locality of the offering in terms of provenance and freshness Offering bulk-buy discounts and pre-packaged ‘baskets’ Leverage frozen and dry strengths to drive up penetration Offering menu development and nutritional assistance as a platform for cross-selling Real time delivery tracking Outstanding questions How could they be prised away from local suppliers? What are specific attributes of the fresh proposition that they are most sensitive about? Where are the highest margins in this group? What type of proportions will most appeal? What will it take to dislodge the incumbent? 64

65 Thoughts on proposition options Outstanding questionsSummary of potential opportunities 2/3 For discussion Small All-Rounders Basic Pit-stops Brakes share of wallet 27% 24% Market value 10% 14% Typical individuals Likely to be passionate about cooking but also working front of house and managing the business Likely to be less qualified and as focused on customer interaction and business development as the kitchen Hot buttons Very demanding with high expectations across the board Strong emphasis on product range, locality and uniqueness – they are food-led Everything from the same supplier Low expectations of suppliers in all areas Not interested in product quality or particularly in cooking Thoughts on proposition options Branding that makes them feel as if they are receiving a premium service Marketing messages that emphasise quality assurance in delivery Emphasise ease, efficiency and value Outstanding questions Which part of this group has the potential to grow and therefore become more valuable? Given their generally high demands, what would be the tipping factor to a new supplier? Given low expectations and low likelihood of switching, what would cause them to even consider new suppliers? Is it worth targeting this kind of consumer? 65

66 Thoughts on proposition options Outstanding questionsSummary of potential opportunities 3/3 For discussion Food Assemblers Quick and Casual Brakes share of wallet 30% 28% Market value 4% 11% Typical individuals Likely to find all types of individual, though skewed to less well qualified non-foodies and beta-chefs Likely to find all types of individual, though skewed to less well qualified non-foodies and beta-chefs Hot buttons Spend focused on dry Everything delivered on a single truck Spend focused on frozen Promotions Everything delivered on a single truck Specialist advice Thoughts on proposition options Dry-focused promotions Convenience-led delivery offering, emphasising fewer, larger deliveries Non-food bundles, given that food buyers tend to manage the business Frozen-focused promotions to grow small penetration Using specialist advice as means of cross-sell Convenience-led delivery offering, emphasising fewer, larger deliveries Non-food bundles, given that food buyers tend to manage the business Outstanding questions Should Food Assemblers and Quick and Casual be targeted as one segment, with varied emphasis on frozen and dry? How can cross-sell from their core spend be encouraged? 66

67 Potential next steps Enhancing the segmentationExtending the segmentation Embedding the segmentation Practically, there are two short term options for enhancing the segmentation: Quantitative market mapping Qualitative segment development Market mapping Would allow Brakes to understand market share for each segment and temperature Would enable prioritisation of certain segments and temperature for targeting Would not give any further insight into levers and potential propositions for each segment Allows Brakes to ‘put a face’ to each of the segments and explore / prioritise areas of ambiguity or particular interest Provides a platform to test specific value drivers or propositions and ensure they were well received in practice Would not give a measure of segment value In order to extrapolate the segmentation (once finalised) we are developing a short series of ‘golden questions’ The responses to these questions will enable us to allocate customers and potential customers to the appropriate segment(s) Existing customers: Brakes is uniquely positioned to accurately apply the segmentation to the entire customer base using the telesales team A short series of questions at the end of the order would allow allocation of accounts in a short space of time Potential customers: An even shorter (and slightly less robust) series of questions could be supplied to the sales team to ask / observe of potential customers during a call Again, the responses should enable us to confidently segment all targets and approach them appropriately Once the principles and objectives are aligned, a thorough process is required to embed the segmentation within the organisation Some thoughts on tools and techniques to proceed: Short term Distribution of one pagers to sales force Participation in focus groups Share videos / compilations of interviews Run specific but limited pilot studies Long term Scope any future customer strategy work using the segmentation vocabulary Define targets and success in the context of segment-specific goals Use the segments and broader customer insight analysis to inform proposition development Use both the company and individual segmentations to enhance sales tactics in the field Create bespoke marketing materials and strategies for segment(s)

68 Individual segmentation Using the questions in practiceGolden Questions can be used to categorise companies and individuals into segments with ~70% accuracy. It can be done in a couple of minutes. The following Golden Questions can be used to categorise companies and individuals into segments with ~70% accuracy: Company segmentation Individual segmentation Using the questions in practice How many customers do you serve at your busiest meal time? Please give a score from 1 to 10 to indicate how important it is that you are able to purchase most of the different food types you need from a single supplier (1 means it's not at all important and 10 means it's absolutely essential) What proportion of your total spend on food is on frozen food? What proportion of your total spend on food is on dry food? Within the context of doing your current job, to what extent do you agree or disagree with the following statements (1 means agree completely and 5 means disagree completely) I love cooking creatively at work I love interacting with customers I love serving healthy meals I am currently working towards maintaining or acquiring an industry accolade such as a rosette or Michelin star I plan to still be working in the food industry in five years time Please give a score from 1 to 10 to indicate how important the following statements are to you when you are dealing with a supplier (1 means it's not at all important and 10 means it's absolutely essential) The ability to purchase most of the different food types I need from a single supplier The ability to find and purchase unique and special ingredients Delivery each day of the week An interactive excel spreadsheet automatically applies respondents’ answers to regression formulae for each segment to determine the value, and therefore the segment: 68

69 Agenda Recap and process reminder 10 minsCustomer survey: segmentation and insights 90 mins Competitor analysis 30 mins Next steps mins Appendices

70 Competitor refresh: objectivesIdentify and characterise the different competitor ‘types’ that we face in the market Describe their typical service and value propositions Understand their penetration in terms of share and number of competitors Understand competitive dynamics Who are the winners / losers in the market How we explain or interpret this share change Compare and contrast competitive economics with Brakes (gross margin and EBITDA) How do different types of competitor make money? What is the range of performance in each sector? Where is Brakes advantaged / disadvantaged?

71 Logistics propositionOverview of independent competitive landscape: 6 competitor types DRAFT Share (est.) # players Examples Logistics proposition Product proposition 8% 4+ Tesco; Asda Ocado Farmer’s markets etc. Easy access and long opening hours make retail convenient for top up/ emergency/ core items, where stock can be chosen for quality / shelf life Improving online ordering with timed delivery slot (Ocado business section) Limited by pack size and image (chefs vs retail food) - but fine for ingredients Farmers / markets enable local centre of plate items to be called out on menu 4% ‘000s Russ Kellet (Leeds) Clients typically can call mobile number of owner /driver and order 24/7 Will usually deliver daily, even same day Limited geographical reach within certain focused areas Owner/operator/driver owned. Limited range, often bought from other wholesalers Will stop off at retail/C&C to add items 23% 5+ Booker Makro CostCo Declining C-store market, so focusing more on caterers (eg Makro ‘Love the pub’) Improving delivery offer and online purchasing Good range in catering pack sizes / brands; easy access (172 Bookers) Sell large pack cigarettes and alcohol which drives footfall Very strong on promotions and noise, so that once there, likely to impulse buy 24% 34+ Reynolds (Produce) Ritters Courivaud (Deli) H&B (Cheese) Russell Hume (Meat) Specialist sales and telesales can offer compelling product advice and add value Typically evening cut off/answer machine D1 for D2 where local stock holding Specialists in a key category (produce; meat; deli) with deep and wide range, extended with associated products. Often can bespoke-cut product to order 15% 95+ Pioneer (North) Thomas Ridley (East) Holdsworth (West/East) Hopwells (West/East) Typically 1-6 depots many of which are locally stocked with late night ordering D1 for D2 delivery, with good degree of local flexibility and high level of customer care Often family owned offering a generalist range of products across all temps, often manufacturer brand driven. Often part of buying/marketing groups with own label offer (eg Country Range) 25% Brakes 3663 DBC JJs Central telesales call clients daily. Order D1 for D2, to c.17h Usually deliver 2-3x / week from hub & spoke system Reliable; peace of mind; consistent, stable stock Standard range across all categories/temperatures; own brand and manufacturer 100%=£4.7bn Note: Best Estimates

72 Brakes and 3663 operate at higher margins than the rest of the marketBrakes and 3663 operate at higher margins than the rest of the market. Specialists also able to generate higher gross margins DRAFT Country Choice and Delice gain higher margins due to their full value added offering (PoS materials etc)

73 Relative sales & EBITDA by competitor typeDRAFT Brakes Independent and Country Choice are well ahead of the market at an EBITDA level Specialists generally perform ahead of general market operators at a gross margin and EBITDA level as they can leverage their product knowledge and offer unique credentials to customers to drive price. If specialists can be acquired and integrated to allow them to benefit from the buying and distribution advantages Brakes holds whilst maintaining their speciality credentials they may make attractive acquisition targets. Note: Brakes data is based on broad allocation and is indicative only

74 Relative sales & gross margin by named competitorDRAFT Brakes compares very well to its peers. However, margins are much lower amongst other regional competitors – with the gap accentuated in current climate where competitors are cutting margins further to retain business almost at any cost Note: Brakes total includes impact of acquisitions, Corporate and Independent are like for like

75 Relative sales & EBITDA margin by named competitorDRAFT Brakes Independent operates at significantly higher margins than the rest of the market, with some lower cost operators such as JJs and MJ Baker growing more rapidly over the last three years Note: Brakes division EBITDA based on high level allocation Turnover of companies no longer trading: King £40m 3g £20m Windrush £20m West County Fine Foods £12m

76 Notional P&L comparison of select competitor representing typesDRAFT Comparative P&Ls by competitor type Commentary Brakes Independent generated 38% gross profit in 2009 Brakes and 3663 Independent divisions are broadly comparable with Brakes gaining some buying advantage from the larger scale and lower distribution costs, offset slightly by central costs (although this could simply be due to allocation issues) JJs competes heavily on price, running some promotions at or near cost price which is reflected in its gross margin being lower although it has a lean cost base (distribution and other costs should be considered together as its stated distribution cost of 3% may be due to accounting allocation) MJ baker is growing strongly and its single depot would appear to allow it to operate with lower operating costs as a proportion of revenue Fresh Direct and H&B also maintain lower distribution and “other costs” due to smaller size and a focus on one speciality area Booker and cash and carrys in general operate on much slimmer gross margins although the majority of costs are counted above the line Notes: Brakes distribution and other costs have been allocated on a top down basis for the purposes of comparison.; 3663 figures have been adjusted to remove its logistics division

77 Actual P&L comparison by select competitor representing typesDRAFT National:3663 National:JJs Regional- MJ Baker Regional- KFF Actual P&L Brakes KPIs on KFF’s rev base implies we could achieve +£4m of GM, c.12% of rev - our better buying KFF does not report its distrib cost, but we would only expect to improve KFF’s EBITDA margin from 7% to c.11% by bringing it onto our cost structure, implying its costs are c.8% of rev lower than ours Historically KFF has had a single depot and a tight focus on cost allowing them to keep o/h lower, but they have recently expanded and the additional capacity may have generated a step change in cost although no recent data is available Applying Brakes KPIs to JJs rev base implies Brakes could achieve an additional £13m of GM, c.10% of revenue JJs claims a much lower distrib cost of c3% of Sales. But this is a result of accounting allocation rather than true cost with remainder of distrib cost included within “Other Costs” Overall Brakes metrics would imply additional EBITDA of £8m (6% of sales) implying JJs distrib and o/h cost is c.£5m lower than Brakes cost structure would imply Aligning to Brakes GM would not be achievable without significant sales loses as JJs heavily promote items at close to cost price to drive t/o – eg recent Diet Coke promotion at Brakes ‘glass floor’ cost Applying Brakes KPIs to MJ Baker revenue base implies Brakes could achieve an additional £0.7m of Gross Margin, c.4% of revenue MJ Baker does not report its distribution cost, however Brakes would only expect to improve its EBITDA margin from 12% to c.15% by bringing the business onto the Brakes cost structure This implies MJ Baker costs are roughly in line with Brakes and they are simply selling at a lower gross margin to compete in the market Applying Brakes KPIs to 3663’s revenue base would imply Brakes could achieve an additional £60m of Gross Margin, c.3.5% of revenue Brakes distribution cost and central overheads would be slightly higher, implying an overall EBITDA margin improvement of c.2% if the 3663 business were brought into the Brakes cost structure Comment

78 Actual P&L comparison by select competitor representing typesDRAFT Specialist – FreshDirect Specialist – H&B Cash & Carry - Booker Actual P&L Pauleys (Brakes produce business) achieves 41% independent margin and 30% corporate The assumed revenue split implies that Brakes would generate c £31m of Gross margin versus their £24m (an increase of 7.8% of sales). Their overhead costs are slightly higher than ours as a proportion of revenue meaning overlal we would expect to be able to save £7.7m or 9% of revenue if we brought Fresh direct onto our cost structure. Cash and Carry operators generally operate at significantly lower Gross and EBITDA margin, with minima distribution costs. Booker do not disclose distribution costs either trunking or from the limited service provided by Booker direct The comparison P&L assumes full distribution costs are incurred by brakes and then implies an additional 7% of EBITDA, excluding distribution would imply a c22%of additional margin. From a detailed analysis of SKUs Brakes expected to be able to improve gross margin by c £0.5m from buying gains The sales mix analysis suggests a total gross margin improvement of c£5m This would be expected to improve EBITDA by £3.5m as H&B generally have lower sales costs of £1.6m versus the predicted £2m from applying Brakes metrics; and a lower distribution cost of 10% versus Brakes blended 15% Comment

79 Illustration of JJs at Brakes based buying costDRAFT Assuming JJs could improve their buying by 3% to Brakes levels they would still be selling products c 15% cheaper Price GAP of 15% based on JJ gross margin adjusted for assumed Brakes buying advantage of 3%

80 Competitor-type growth est.Amongst core competitor set, Specialists have been getting strongest DRAFT Competitor-type growth est. Drivers of growth Increasing outlet penetration by Multiples, coupled with very competitive pricing and promotions Improvements in, and increasing familiarisation of, online ordering offering timed delivery window Inhibited by pack sizing and brand image Consumer demand for ‘local’ and focus on food miles driving local markets /farms 100%=£4.7bn Only really exists where caterers let down by other supplier’s propositions, generally being squeezed Lack of stable supply and sometimes lack of adherence to rules (eg temperature) usually means remain very local / restricted geography or top up only. Difficult to break out Looking to Caterers as traditional Independent Convenience market declining under pressure from expanding retail Multiples; and as independent tobacco trade declines (smoking ban) Aggressive promotions and catering focused activity (Booker price checker vs Brakes; Makro ‘Love the Pub’ campaign; in-store advice (meet the butcher) and bespoke cutting (meat; fish) Strong online offerings and delivery options 4% Have carved out niche and using specialism, range, advice/expertise and delivery to keep generalists (national or regional) out of mainstay of category(s) The importance of these categories to caterers, especially centre of plate (meat; produce; fish), means many caterers want to be seen using specialist 6% After adjusting for c£100m of sales from competitors who have exited the market the regional share had declined by c5% Degree of squeeze by depot density of nationals, category expertise of specialist and access of retail/cash&carry Mixed picture with some strong regionals - often single depot or bigger regionals – growing, whilst other, often over expanded mid-sized regionals without the scale, under pressure Offer local knowledge, flexibility and relationship across a standardised range (5%) Overall Brakes Independent have grown c 1%, 3663 c 0.7% and JJs c8% CAGR 07-09 Solid, reliable generalists with very good coverage but on standard terms Degree of inter-changeability between nationals where growth in one coming at expense of other nationals Scale helping grow at expense of weaker regionals; and as add category specialisms, at expense of other specialists Where proposition is right (price/range/delivery service) should be able to take from White Van Man/ cash & carry and retail; where not, can be selectively picked off 1-2% Brakes share* 12% *including Browns and Freshfayre Note: Best Estimates

81 Agenda Recap and process reminder 10 minsCustomer survey: segmentation and insights 90 mins Competitor analysis 30 mins Next steps mins Appendices

82 Next steps Agree segmentation process: focus on accurate market map exercise (Leeds refresh based on new segmentation) or further refine qualitatively? Or both? Align on next steps with broader independent piece Individual items for follow up Themes to further explore Projects to scope Confirm participants, scope and dates for subsequent meeting(s) Other

83 Agenda Recap and process reminder 10 minsCustomer survey: segmentation and insights 90 mins Competitor analysis 30 mins Next steps mins Appendices

84 The variation in temperatures purchased by each segment is largely corroborated by examining the spend data in brakes own trading history ILLUSTRATIVE Brakes not capturing the chilled spend in which this segment over-indexes Generally representative of segment spend, slightly more frozen Higher propensity to dry purchase clearly shown Feels like Brakes should be getting higher frozen spend here given 64% spend in survey Brakes not capturing higher fresh component, otherwise mix is similar Brakes missing the higher fresh component, otherwise mix is close to segment % sales by temperature Note: Analysis includes ~490 outlets in region 202 who were interviewed during customer survey process 84

85 Respondents predominantly using Brakes are also unlikely to switch in the near futureHow likely are you to switch your main supplier over the next year? – Brakes Base = 317

86 A quarter of those that have considered but not used Brakes have not done so because they remain happy with their existing supplier I’ve used them but no longer use them I’ve considered them but not used them I’ve never used or considered them What is the main reason you do not use Brakes? (Customers asked to select one response from a list or to give an alternative explanation) Base = 61

87 Similarly, those that have never considered Brakes have not done so because they are happy with their existing supplier I’ve used them but no longer use them I’ve considered them but not used them I’ve never used or considered them Why have you not considered Brakes? (Customers asked to select one response from a list or to give an alternative explanation) Base = 90

88 What do they want from their suppliers? ProductsHow important is it to you that when dealing with a supplier they… (Rated from 1 – 10, charts show % scoring 9 or 10) Allow me to source local products Give a good choice of options when I'm looking for a specific type of food Offer regular promotions on key ingredients or products Allow me to find and purchase unique and special ingredients Allow me to purchase most of the different food types I need from a single supplier 88

89 What do they want from their suppliers? OrderingHow important is it to you that when dealing with a supplier they…. (Rated from 1 – 10, charts show % scoring 9 or 10) Offer ordering up until midnight for next day delivery Offer access to specialist advice at the point of ordering Offer ordering online 89