February 2016
Agenda
Housekeeping
Background
Hawaii Retail
Webco 2016
Moving forward &
extending our talent
2
Housekeeping
3
Housekeeping
Moving forward & extending our talent
4
Housekeeping
Moving forward &
extending our
talent
Background
5
Hawaii Market Dynamics
of goods need to
be shipped over
water
Vast Pacific Ocean
makes Hawaii the
most isolated market
in the world
$
Development limited to 5 %
of 6,400 sq. mi. of land
leading to high land costs
There is success in retailing in Hawaii.
• No. 1 Costco in their chain
• All Hawaii, Walmarts in top 25 nationally
• Longs stores do 7X the volume of a CVS
• Walgreen’s Hawaii stores do 8X a mainland store
Small 1.4M resident population,
augmented by 8.8 M tourist
spending
annually
6
The Challenges of an Isolated Market
1. It typically takes Walmart
three weeks from the time
order is placed to see the
product on the shelf.
2. Premium land cost on a finite
amount of land translates into
high operating costs.
Logistics and high land costs continue to make Hawaii the
most expensive state to do business in.
Milken Institute 2013 cost-of-doing-business index
Rank
1
2
3
4
5
6
State
Hawaii
NEW YORK
Alaska
Massachusetts
Connecticut
California
Total Score
Rank, Wage Cost
Rank, Tax Burden
151.5
130.9
130.8
130.6
127.5
122.9
22
2
12
3
1
5
2
26
4
29
21
12
Rank, Electricity Rank, Industrial Rank, Office
Cost
Rent
Rent
1
8
6
2
5
9
1
4
2
7
14
5
4
1
36
2
11
3
7
The High Cost of Business Impacts CPG Selling in Two Ways
2. PRICING
1. ASSORTMENT
• High rents force retailers
to effectively use space
• Small stores can’t
carry everything
• Devote space to sales
space – small
backrooms
• Ethnic diversity
•
High rents force retailers to
reflect high retails
• National retailers target
mainland acquisition cost
• Consumers forced to shop ads
for low price
• Because of high operating
cost, stores have less
employees
• Hawaii’s high volume
stores, retailers rely on
suppliers for more
service
8
The Economics Behind Retail Sales
TOURISM
CREDIT
JOBS
RETAIL
SALES
CONSUMER
CONFIDENCE
RETAIL
STRATEGIES
PERSONAL
INCOME
9
The Economics Behind Retail Sales
RETAIL
SALES
TOURISM
10
Tourism is Primary Driver of the Local Economy
A total of 8,807,284 visitor arrivals are projected
for 2016, with expenditures of $15.8 billion
Visitors (million)
O'ahu - 4.69
Maui - 2.17
Moloka'I - 0.528
Lana'I - 0.6
Kaua'I - 1.01
Hawai'I Island - 1.3
11
Who’s coming to Hawai’i?
5,383,718 Total US Visitors
12
Who’s coming to Hawaii?
13
Visitor Arrivals Grew 4.1%; Visitor Days Grew 3.5%; Visitor Expenditures
Grew 2.3% - Adjusted for Inflation - Flat
“Pick any deflator – sideways is not flat”
Travel & Tourism Research Association 2/3/2016
14
The Economics Behind Retail Sales
TOURISM
RETAIL
SALES
PERSONAL
INCOME
15
Hawaii Median Family Income vs. Per Capita Income
Real Median Family Income in Hawaii
2015
1 Year
Change
3 Year
Change
US
$65,910
+1.28%
+1.88%
Hawaii
$79,187
-2.99%
+1.34%
16
Hawaii Median Family Income vs. Per Capita Income
Real Median Family Income in Hawaii
2015
1 Year
Change
3 Year
Change
US
$65,910
+1.28%
+1.88%
Hawaii
$79,187
-2.99%
+1.34%
Real Per Capita Income in Hawaii
US
Hawaii
2015
1 Year
Change
3 Year
Change
$28,889
$29,736
+0.85%
-1.08%
+2.75%
+3.28%
17
The Economics Behind Retail Sales
TOURISM
CREDIT
JOBS
RETAIL
SALES
CONSUMER
CONFIDENCE
PERSONAL
INCOME
18
What else is affecting Retail Sales?
Specific Retailer Strategies
Job Growth 1.02%, 15,700 more jobs than
2014 (more Jobs = more money)
Unemployment rate National 5.3%
Unemployment rate Hawaii 3.2%
Construction is driving the increase
Hawaii’s GDP (+2.5%) –
A rise of .5% over 2014
Consumer confidence is up 1.3%
2015 credit card purchases + 12% drive by
supermarket purchases
19
Housekeeping
Moving forward &
extending our
talent
Background
Hawaii Retail
20
ASM Webco Supplies 299 Hawaii Stores
Account
CVS*
Walgreens
ABC Stores
Food Pantry
Amerisource Bergen
McKesson
C & S Wholesale
Foodland
KTA
Walmart
Times Supermarkets
Don Quijote
Kmart
Safeway
Sam's Club
Target
Costco
Total #
Stores
#
Banners
42
16
58
60
N/A
N/A
N/A
40
6
10
23
3
8
22
2
4
6
1
1
4
6
1
1
1
4
1
1
2
1
1
1
1
1
1
*CVS store count excludes Pharmacy (apothecary) stores
Oahu
# Stores by Island
Maui
Hawaii
Kauai
29
9
38
18
5
2
12
18
6
1
5
8
2
1
1
17
5
2
1
2
6
6
2
0
1
3
1
2
1
1
6
15
3
4
14
2
2
4
3
7
1
6
2
1
1
COT
Serviced by
Webco
SBUs
Chain Drug
Chain Drug
Convenience
Convenience, Grocery
Drug Wholesale
Drug Wholesale
Grocery Wholesale
Grocery
Grocery
Mass
Grocery
Mass
Mass
Grocery
Warehouse Club
Mass
Warehouse Club
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
No
No
No
All
All
All
All
All
All
All
All
All
All
All
All
SUN
SUN
-
21
Hawaii Total Retail Market Shares
22
Hawaii CPG Market Shares
Don Quojote
3%
Others
7%
Walgreens
2%
Costco
22%
ABC Stores
4%
Kmart
5%
Target
6%
Walmart
14%
Times Market
7%
Foodland
7%
Safeway
10%
Longs/CVS
13%
23
Increase retail share by opening more stores.
CY 20012
CY - 2015
New store dynamic impacting
distribution
# of
Stores
Retailer
# of
Stores
Inc./Dec.
Number
of Stores
7-Eleven
ABC
Stores
Costco
55
7-Eleven
73
18
53
6
ABC Stores
Costco
57
7
4
1
Daiei
4
Don Quiote
3
-1
$14,000
Foodland
Kmart
KTA
Longs
Drugs
Safeway
Tamura
Target
Times
Market
Walmart
31
8
4
Foodland
Kmart
KTA
32
8
6
1
0
2
$13,000
42
19
1
0
55
22
4
6
13
3
3
6
$11,000
17
9
Longs Drugs
Safeway
Tamura
Target
Times
Market
Walmart
23
10
6
1
6
Walgreens
17
11
144
395
All Others
Totals
132
455
-12
60
Retailer
Walgree
ns
All
Others
Totals
Delivery Dollar Value
$16,000
$15,000
$12,000
$10,000
2012
2013
2014
2015
24
The Economics Behind Retail Sales
TOURISM
CREDIT
JOBS
RETAIL
SALES
CONSUMER
CONFIDENCE
INDIVIDUAL
RETAIL
STRATEGIES
PERSONAL
INCOME
25
Specific Retail Strategies
26
Agenda
Housekeeping
Moving forward &
extending our talent
Background
Hawaii Retail
Webco 2016
27
2016
28
Mission Statement
“We create customized solutions bridging our
manufacturers and customers with
1. exemplary value
2. products
3. and services.
… and will exceed expectations by creating a
culture that embraces the strengths of our
employees while enriching our community.”
29
Integrity:
We express integrity by allowing these core values to drive our
behaviors in a transparent manner. We exercise good judgment,
honesty and fairness with the highest ethical standards.
Leadership:
We continuously learn, develop, and improve ourselves, striving
to be masters in our field. Through our actions we inspire and
empower others to do the same.
Professionalism:
We engage our employees and customers with a respectful
communication style and integrity that exemplifies the behaviors
of an industry leader.
Accountability:
We are problem solvers, not blamers. When issues arise, we step
up, collect data and seek solutions. We honor our commitments,
take responsibility for our actions, and learn from our mistakes.
Change Readiness:
We approach challenge and change by being adaptive and open
while proactively meeting the evolving needs of our company
and our partnerships. It starts with me.
Innovation:
We value being the best at what we do. We encourage new ideas,
progressive action, and new technologies that support our
commitment to excellence.
30
Market
Evolution
Customer
Needs
Improving
Efficiencies
adaptability
innovating
solutions
setting new
standards
New
Webco
Customer
Management
Sales Force
Development
31
Cultivating our Partnerships for Excellence
MANUFACTURER
•
•
•
•
•
Mastery of the Marketplace
Champions of your Brand
Operational Excellence
Dependable & Accountable
Indispensable Partnership
RETAILER
•
•
•
•
•
Objective Alignment
Superior Service/ Reliability
Valued products
Seamless Execution
Indispensable Partnership
EMPLOYEES
•
•
•
•
•
Valued & Appreciated
Challenged for Innovation
Dependable & Accountable
Supported & Equipped
Indispensable Partnership
32
Retailer Changes 2015 Has Made Staying
Ahead Difficult
1. We continue to battle Private Label
2. POG implementation cutting in Private
Label
3. New Buyer changes continue
4. Low store inventory has hurt OOS
5. Running ads w/o displays has affected
ROI
1. Foodland management changes – Stacey
Omori replaces Joe Detro
2. Buyers now buying for all Banners with
different formats
3. Focus on parameter selling
Projecting
2016
Times Dollar Sales & Unit sales are up
• Attempting to get lowest acquisition cost Buying from 5 sources
Continued to reduce backroom inventory by 5
day a week delivery
• Meeting Bentonville shelf pack requirements
• Merchandiser test increased sales but cost is
not sustainable
33
Here is our strategy for 2016
34
We have a strategy to make 2016 a very good year!!
35
Strategy for Webco 2016
Longs/CVS
Walmart
Foodland
Times
Walgreens
• Implement a Key Ad Item vs TPR Strategy
• Align a Brand Health & Beauty focus with CVS corporate focus
• CVS/Longs Food focus on multiple packs and/or sizes
• Local office wants a local focus on the CVS “ExtraCare” program
• Need better execution of PDQ’s in Hawaii
• Need Mfg. help to execute corporate PDQ’s in Hawaii
• Focus on in-stock is critical!
• Key to increased sales is maintaining secondary displays
• Align with Foodland new management direction with quarterly
“top – top” meetings
• Use Foodland sales data to increase center store sales
• Focus on Times ability to move product
• Capitalize on Times ability to execute programs by presenting
business opportunities
•
•
•
•
“Slowest store does 8X more than mainland store”
Assist local office in implementing WERCS
Walgreens is delaying new store openings
The “Flagship” store traffic very slow
36
Appendix
37
CVS / Longs Hawaii
CVS/Longs Market Strategy
CVS/Longs Hawaii offers customers the products and services they need to stay on their path to better health. In addition to their
pharmacies, their stores feature on-trend beauty departments, photo labs and general merchandise. The store footprint in Hawaii is larger
then the average store size on the mainland. Another main traffic driver is their Sunday advertising and Extra Care Rewards program.
They have a Hawaii Buying team on the island of Oahu focused on local sourcing and Ad Planning. 2015 YE Sales to CVS/Longs Hawaii
$60M.
Headquarters
Store Locations
Typical Shopper
Store Count
Market Share
Woonsocket, Rhode
Island
Oahu (40), Kauai (3),
Maui (6), Big Island (11)
Pharmacy
Ad Driven – the most
read section is Advertiser
is Longs Ads
42 Stores and 18
Pharmacy only
locations.
13%
CVS/Longs Growth | Expansion Plans
Ala Moana and Kihei store are currently finishing remodel now.
There are currently no remodel for regular stores at this time, only
small pharmacy stores for 2016.
Margins
OTC:
HBC:
Food:
GM:
Cost of Entry
NA
Menu Costs
NA
Hot Buttons
Customer traffic driven with Sunday Ads, Pharmacy, Cosmetics
and Food offerings. High priority is on having all departments set
to planogram. Customer focus is on clean floor shopping
experience.
Confidential: This information is based on what we
know. For selected use only.
38
WALMART HAWAII
Walmart Hawaii Market Strategy
All PDQ’s, Pallet displays and the like now need to be approved by corporate before the HI Buying Office can commit to a
purchase. There are strict specifications to ensure uniformity and clean floor policy throughout the stores. RENOVATIONS: Kunia
#2314 – starts 4/4 to June; Hilo #2473 – starts 6/13 to August. Renovations take approximately 8-10 weeks. Continued
expansion of Food Categories.
Store
Locations
Headquarters
Hawaii Buying Office in
Mililani, HI
Oahu (6), Maui (1), Kauai
(1), Island of Hawaii (2)
Typical Shopper
Store Count
Budget-conscious
10
Hawaii Buying Office
Director of HI Merchandising, Dave Johnson
4 Buyers; assistant buyers (2); buyers assistants (7); modular
specialists (3); hardlines replenishment manager;
transportation manager
Hot Buttons
Key to increased sales: Secure secondary displays; adding
one display in one store has the potential to increase sales
from 8%-71%; in-stock at shelf level crucial; implement CStock policies to maintain minimum store stock.
Market Share
14%
Margins
EDLP
Cost of Entry
None; Funds applied
to cost of
goods
Menu Costs
Rollbacks – 10%
below regular cost
Confidential: This information is based on what we
know. For selected use only.
Source: Webco Sales report 12/31/14; Retail Link; Hawaii Buying Office; WM Corp. Initiative Memo; Walmart Website
39
FOODLAND
Foodland Market Strategy
Foodland is an EDLP operator with weekly “HOT” promotions. Their primary distributor is C&S Hawaii and/or direct containers to their local warehouse
(SFOC). All the buying decisions are made at the Foodland HQ, located in Honolulu, Hawaii. The average Foodland store is between 25,000 – 30,000
square feet with the traditional GM/HBC and Grocery in center of store. The New and remodeled stores feature a coffee, bean & tea shop along with an in
house bank partner. The rewards program is called Maika’I (means, GOOD!). Philosophy – “Treat our customers well and they will come back.”
Headquarters
Store Locations
Typical Shopper
Store Count
Market Share
Honolulu, Hawaii
Hawaii (Oahu, Maui,
Kauai, & Hawaii island)
Mid-Upscale City and
Suburbs
32
7%
Foodland Growth | Expansion Plans
In the past three years, Foodland has opened 3 New stores on the
neighbor islands (Maui – 2/Hawaii – 1). In 2016, Foodland will
open it’s largest store (47,395 square foot - Flagship) in the Ala
Moana Shopping Center.
Hot Buttons
Margins
Grocery: 30%-55%
Frozen: 28%-40%
Dairy: 28%-45%
Meat:
HBC: 25%-60%
GM: 25%-60%
Cost of Entry
Negotiable
Menu Costs
NA
1st to Market! & Bundle Promotions!!!
Confidential: This information is based on what we
know. For selected use only.
40
TIMES SUPERMARKETS
Times Market Strategy
Times Super Market is an EDLP operator of 8,000+ items. UG is their preferred supplier. No club card required to save on everyday specials! PAQ is the
parent company of Times Super Market. The Times HQ and buying office is located in Honolulu, HI. and their warehouse is located in Waipahu, HI. Times
promotes and supports local farms /produce and made in Hawaii products. All the stores are between 20,000 to 35,000 square feet.
Headquarters
Store Locations
Typical Shopper
Store Count
Market Share
Honolulu, HI
Oahu, Maui and Kauai
Middle Income, Senior
community
23
7%
Times Growth | Expansion Plans
No news on expansions to date!
Hot Buttons
Full – service seafood bar , deli, and pharmacy (12 stores) and
expanded ethnics food sections…
Margins
Grocery: 20%-40%
Frozen: 35%
Dairy: 35%
Meat: %
HBC: 22%-47%
GM: 25%-50%
Cost of Entry
Negotiable
Menu Costs
NA
Confidential: This information is based on what we
know. For selected use only.
41
KTA SUPER STORES
KTA Market Strategy
KTA is a 6 store neighborhood market that sells from A through Z. HQ & warehouse located in Hilo, Hawaii. Their prices are very competitive with the
national and local competition. Next year, the KTA chain will be celebrating their 100 year anniversary! KTA has it’s own “private label” brand’s called
Mountain Apple & 1916 (In honor of the founders). The Mountain Apple brand has 240 locally grown and produced products, while the 1916 brand has
close to 60 products today! Founder’s philosophy is a commitment to humbly serve the people of our community!
Headquarters
Store Locations
Typical Shopper
Store Count
Market Share
Hilo, Hawaii
Hawaii Island
Middle income
6
3%
KTA Growth | Expansion Plans
None at this time!
Hot Buttons
Mountain Apple Brands (Made and packaged in Hawaii); On
going community partnerships.
Margins
Grocery: 25%-40%
Frozen: 25%-45%
Dairy: 28%-38%
Meat:
HBC:
28%-47%
GM:
28%-47%
Cost of Entry
None!
Menu Costs
NA
Confidential: This information is based on what we
know. For selected use only.
42
DON QUIJOTE (USA)
Don Quijote (USA) Market Strategy
Catering to customers from all demographics, Don Quijote focuses on three pillars: Convenience, Discount, and Amusement. They seek to provide
customers with an exciting shopping experience comprised of floor to ceiling shelves filled with merchandise at a competitive price. Utilizing POP signs
calling out the best sellers or new items, they seek to drive growth. Don Quijote stores have a high sales composition of foods, and its emphasis on
fresh foods is one of the factors of its success.
Headquarters
Store Locations
Typical Shopper
Store Count
Honolulu, HI
Oahu,Hawaii
Ranges from single,
urban youth to family
households
3
Don Quijote USA Growth | Expansion Plans
Parent company Don Qujiote Holdings Co., Ltd. based in Tokyo,
Japan recently acquired Marukai Corporation in September
2013, which includes 2 locations in Hawaii and 9 in California.
They currently continue to operate as separate entities.
Margins
HBC: 35-55%
GM: 35-60%
Market Share
3%
Cost of Entry
Menu Costs
NA
Hot Buttons
Utilizes “Entertainment” factor when merchandising to create a
treasure hunt feel.
Confidential: This information is based on what we
know. For selected use only.
Source: Nielsen, 52 Wks Ending 12/31/14; Spectra; Company website; ASM WinCo Team; F&D Reports – Strategic Sales Insights, 12/11/13
43
WALGREENS
Walgreens Market Strategy
Walgreen’s vision & market strategy is to be the first choice in health & daily living for everyone in America & beyond. Walgreen’s are in two dynamic
industries, retail & health care – that are converging as consumers become more involved in shopping for their health care solutions at the retail level.
Walgreen’s is well positioned to play a greater role in these emerging models & plans to expand its role beyond the pharmacy market to the much larger
$2.6 trillion dollar health care market.
Headquarters
Store Locations
Typical Shopper
Store Count
Market Share
Honolulu, HI
Oahu, Maui, Hawaii
Island
Middle Aged Adult to
Elderly, including
Balance Rewards Loyalty
Program
16
2%
Walgreens Growth | Expansion Plans
Walgreen’s operates over 8,200 drugstores in all 50 states.
Walgreen’s has a total of 17 stores in Hawaii. The new Flagship
store in Honolulu is struggling to compete with Walmart.
Margins
Cost of Entry
Menu Costs
NA
Hot Buttons
The launch of the Balance( R) Rewards loyalty program, with 74
million members, makes Balance Rewards one of the most
successful launches of a customer loyalty program in the history
of retail.
Confidential: This information is based on what we
know. For selected use only.
Source: Nielsen, 52 Wks Ending 12/31/14; Spectra; Company website; ASM WinCo Team; F&D Reports – Strategic Sales Insights, 12/11/13
44
C&S HAWAII
C&S HAWAII Market Strategy
C&S Hawaii is part of the C&S Wholesale Grocers, the largest wholesale grocery supply chain company in the United States. They strive to
deliver cost savings, service, and value to their customers. Being the largest locally operating wholesale grocery company, they offer
services to large chain accounts and small independents alike.
Headquarters
Store Locations
Corporate HQ
Keene, NH
Hawaii DC n Kapolei, with
Sales and Merchandising
Dept
Supplies accounts on
all islands in the State
of Hawaii
Typical Shopper
C&S Growth | Expansion Plans
Purchased Hansen Distribution to expand coverage into Food
Service and C&G locations. Continually looking to secure more
accounts to offer their services
Hot Buttons
Annual March & August Buying Shows
Marketing Minutes
10% Performance Allowance program
Store Count
Market Share
200+ Hawaii stores
supplied
Margins
Cost of Entry
Cost plus invoicing,
with accounts having
their own “service
fee” % added on
Manufacturers that
have a Crossroads
Agreement in place
have their own fees.
Otherwise, standard
fee is $1500/item
C&S
Accounts
Foodland
Don Quijote
Times Mkt-some
Independents
Kmart
7-11
CVS-some
Kamaaina
Confidential: This information is based on what we know. For selected use only.
45
UNIFIED GROCERS
Unified Grocers Market Strategy
Unified Grocers Portland and Seattle are part of Unified’s family of independent retail grocers. UG is the largest retailer-owned wholesale grocery
cooperative in the Western U.S. Growth has been flat to declining for the past two years. Volume has been impacted by channel shifting and the slowdown
in the economy. Unified runs a high-low strategy. They work with consolidated groups of retailers (UPAC group, Price Impact, etc.) in an effort to operate
with better cost of goods and support. They work with unique store formats to facilitate their specific needs.
Headquarters
Store Locations
Typical Shopper
Store Count
Corp. HQ – Commerce, CA
California, Oregon,
Washington, Hawaii
Older Working Asian
OR – 99
WA – 119
Hawaii - 35
UG Growth | Expansion Plans
No expansion plans have been made public. Unified announced
consolidation plans to one NW buying house and point of contact
in Seattle effective May 1, 2013.
Hot Buttons
Margins
Grocery: 25-30%
Frozen: 30-40%
Dairy: 10-20%
Meat: 35%
HBC/GM: 35-40%
Cost of Entry
N/A
Market Share
Hawaii
Retailers
Times Supermarket
(28)
KTA (6)
Ocean View Mkt
MerPro
Regional MerPro
Expo
Winter Fair (regional shows)
Confidential: This information is based on what we
know. For selected use only.
46