Brazil

Crisis Brazil

INTERNAL

Optimize the Cencosud Brazil

operation

Connect with the consumer

Lean company

New capabilities / closing of pending Gaps

1

2

3

EXTERNAL

Market Trends

STRATEGIC/TACTIC RATIONALE

What are we doing?

Global and local trends

• Organic, ethnic, health • Proximity • Ready to eat • Changes in categories • Indulgence

1 Maximize Clusterizacion and value proposition • Develop AB segment and shopping experience • Adjust space and mix of electro in GBarbosa and minimize assortment in Bretas • Fully exploit the cash & carry and discounter segment and knowhow

Crisis driven in behavioral changes

• Value for Money • Restaurant at home • Durable good sales drop • Traffic changes • Changes of payment forms

Develop relationship with

the brand

• Retail excitement • Shopping experience • Social Networks • RSE

2

3

Adjust promotional dynamics, first Price assortment, accelerate private label and club sizes

Maximize branding activities to build the relationship with the Brand

1. Connect with the Consumer

Maximize Clusterizacion and value proposition

Sales acum in june 2016, Hiper > 5000 m2, super > 2500m2

Develop Premium segments

Rationalize assortment, lower operating costs and use C&C

pricing

Migrate to Cash &Carry

Socio-economic Clusterizacion

C&C (10 stores)

CDE

91 stores

BC

78 stores

AB

32 stores 23%

29%

35%

8% others 5%

Weigth Sales

More food oriented, reduce m2 y

increase galleries

Adjust to convenience

mix

Clusterización por tamaño

C&C (10 stores)

Super proximity

91 stores

Super

105 stores

Hiper (5 loc) 6%

48%

33%

8%

others 5%

Weigth Sales

Others: service station, pharmacies, delicatessen and electroshow

Imported

Healthy world

Perishables

Healthy segment - Sales

JAN 2015 JUN 2016

+18%

Cluster AB stores

CD segment stores

Price intex Food weight Sales index SKUs Staff Service level Margem SG&A Doble precio

Bretas Super 100% 80% 100

19.000 120

Medio 23% 20%

-

Bretas CD 96% 95%

120 - 130 11.000

105 Bajo 20% 16%

50% sku / 60% vta

BRETAS CD is a supermarket where we have adjusted mix, changed layout, service level and lowered operating expenses to give to the more price sensitive client a more competitive offer towards the cash & carry segment, while giving a better shopping experience.

CLUB SIZE N° CATEG.

JAN 2015

JUN 2016

JAN 2015

JUN 2016

JAN 2015

JUN 2016

+30% +20% +8%

Prezunic Bretas Gbarbosa

FIRST OPENING PRICE - GB

59

70

JAN 2015 JUN 2016

+44%

Sales

PRIVATE LABEL - SALES/SKU

+145%

JAN 2015 JUN 2016

+64%

SKUs

Sales

SAVE WITH VOLUME SAVE WITH VOLUME SAVE WITH VOLUME

Crisis driven behavioral changes

ICE BAR

FOOD TRUCKS

ROCK IN RIO

CLIENT SERVICE

WINTER FESTIVAL

FACEBOOK FANS

Develop relationship with the brand

Closed 11 stores Migrated formats Sale and return of non core

assets/businesses Adjust sales area in function of

sales Sub-let excess space

SG&A

Reduce Head count, layers and extra hours

Closing and consolidation of offices

Implementation of new technologies to increase productivity

Energy: create savings in MWhr consumption, and enter the free power market

Nationalize regional areas to capture synergies

Margin: Decrease in shrinkage and recover logistics costs

WC

Reduce Stocks Renegotiate payment terms Accelerate confirming Increase interest rare sales

STORES / ASSETS

CAPEX

Reforms, improvements and changes of formats

Strategic IT investments Energy efficiency

2. Lean Company

LOGISTICS EXPENSES RECOVERY

SHRINKAGE

HEADCOUNT PRODUCTIVITY

-6,2%

+20,2%

1,2% 1,5%

+5,1% 33.729 31.778 29.897

-5,9%

2015 2016

2015 2016

2014 2015 2016 2015 2016

Cumulated data of June

ENERGY CONSUMTION– MWhr

-8,01%

10 4 16 27

10 7 20

1 1

96

dez/15 abr/16 mai/16 jun/16 jul/16 ago/16 set/16 jan/17 fev/17 TOTALJUN 2015 JUN 2016

5%

64%

FREE POWER MARKET – MIGRATED STORES / % OVER SALES

Lean Company

Implementation of a new product supply model via SAP Retail for CDs and Stores.

PRICING

CATEGORY MGMT

SUPPLY CHAIN

TEAM UPGRADE

LOYALITY & CRM

3. New capabilities/ closing of gaps

Pricing 2.0

Pricing Restructuring Focus Performance

Customer focused Pricing Adjustments in internal Pricing processes aiming to promote effective action in a client-centered competitive strategy.

Identify cost conditions opportunities and negotiations with suppliers, considering assortment in general.

o Regular prices

Effective action in regular prices definition, with a market focused approach (client).

Structuring and automatization of the price research process in the market.

Competitiveness monitoring tool

Colleting price data through mobile device

Redefinition of the Pricing Structure (National and Banner)

Consolidation of pricing information and market competitiveness and development of a price management tool

Allocation of Pricing resources per commercial sector, creating specialists for monitoring and market reaction.

Ongoing actions

o Market Monitoring

Review of baskets, frequency and price zones in order to optimize and improve local market reactions and margin

o Market Reaction Process

Market Reaction model customized to the value proposition

Availability TO BE

Analytics

Nacional

Dynamic

100%

80%

4

50

5

5

AS IS

Operational

Brand

Manual

X

40%

20%

X

X

1

X

1

1

Main changes

Performance Team

CD Purchasing Team

Maintaining Parameters

Trained Staff

SAP Standard utilization

Automatization in SAP

Management and Control Parameters

SAP Information Systems

Classification by Giro

Profiles Coverage

Forecast models

Replacement model

Team

Te

chno

logy

Pr

oces

s

Supply Chain 2.0 Implementation of a new product supply model via SAP Retail for CDs and Stores.

Consumption recovery during Q4 2016. Electro starts growing as of Q3 2017. CONSUMPTION

Pricing / Supply 2,10 fully implemented in June 2017. CRM starts in June 2017. Omni-channel starts in S2 2018.

NEW CAPABABILITIES

Priority reforms and store improvements. Significant store openings as of S2 2017. Focus on A-AB cluster. Increase weigh of Cash & carry and CD stores.

STORE MIX

Medium term view

Brasil