Joint Business Plan

NESTLE and TESCO in Poland

Janusz Selwa TESCO Polska (Poland)

Michal Rubaszko NESTLE Polska (Poland)
 TESCO Globally

TESCO operates currently in

countries.
 TESCO in Poland

TESCO is a third player

on Polish retail market
and first HM chain in
Poland.

Current
format
structure
HYPERMARKETS DDS 1K + SAVIA
Area 4 12 k m2 2 - 3 k m2 1 k m2
No. of sku 50.000 12.000 3.500
No. of outlets 53 41 232
 NESTLE in Poland

Culinary

Confectionery

Beverages

Pet Food Lody

Infant Nutrition FoodServices

Cereals

Waters
What is
Joint Business Planning...?
 What is Joint Business Planning?

It all started with the UK

5 years ago, Nestl in the UK had a

negative growth rate with Tesco, at a time
when Tesco was increasing its share of
the UK Grocery market. Issues included:

A fragmented Nestl approach to the

Tesco business
No endorsement by Senior Management to
the plans
No issue escalation process
 What is Joint Business Planning?

INTERVENTION
JBP4 +6.5%

JBP 3=JBP2 + focus

on key categories
+8.9%

JBP 2 = JBP1 + Key

Business Unit Initiatives +9.8%
Sales network
TOP Management Driven
Fragmented JBP 1 It worked +8.9%
Approach
Request to
form Teams Easy to Attack Understood what was Flexibility on How
Difficult to do Business Really,Really we Delivered
Important
1998 - Tesco Shared What was
attempted to mirror DEATH Listen, Important to Us
Wal-Mart Suppliers SPIRAL Acknowledge,
Explore and
Management Model
Respond

2001/2 2002/3 2003/4 2004/5 2005/6 2006/7

 What is Joint Business Planning?

Annual Negotiations Trade Terms Activity Plan

Traditional negotiations

Sharing objectives Jointly Aligned Negotiate JBP incl. TT

Shopper Based Plan the gaps
JBP process
 What is Joint Business Planning?

Fundamental changes made..

Greater listening and understanding on both sides

Increased trust
Increased transparency and visibility of business
Shared more and aligned plans together
Joint ownership responsibility / mutual goals
 What is Joint Business Planning?

Each Category Produces and Agrees a Business Plan

When Does
it Need to be
Plan Program Overall KPI Target YTD Achieved What Needs To Be Done By Who Done By Q1 Q2 Q3 Q4 Next Steps
I Can Get What I Want 150m in 3 years 33m category Petcare step change 3 year growth plan 2006/9
growth (2006
YTD)

45% market share within WIP First for innovation: 2006/7

2006 2007 2008 2009

12wks of launch - Format plan for ALL NPD, NPD highlighted as a % in

CUSTOMER
JBP, Prioritised NPD based on Size of Prize
Drive 1m incremental Sales Test v -Drive On-Shelf Availability through better in-store 2006/7
sales at RSV Control support, using "Always Available"
B:+1.5%
P:+1.2%
Provide category Provide best-in-class category insight for every Tesco 2006/7
expertise to support format:
every range review for -Extras-Superstores-Metro-Express-Dot.Com

Shopping Trip
every Tesco format

Sales Turnover (Mio) 116.5 240 310 400

Earn Lifetime Loyalty Jointly agreed 12 month Tesco & Nestle to agree a plan for "Helping you be 2006/7
healthier plan worth healthier everyday" with significant focus on selected
TBCm RSV categories
We Try To Get It Right First Time 100% 75% No Invoicing Queries - All invoices processed 2006/7
accurately and paid on time
100% WIP New products setup on system within 12wks of launch 2006/7

We Deliver Consistently Every Day 98.5% YTD Range: Winning the Treble: Promotions, NPI, Petcare growth 2006/7
92.5% - 97.6% Jointly agree best-in-class processes for the above

OPERATIONS
%Growth +68% +106% +30% +30% Focus on Colloborative Planning:
1] Reduce Failed To Arrive (FTAs) (less than 1%)
2] Seasonality
2006/7

3] Base Sales
We Make Our Jobs Easier to Do Roll-out across all Nestle Vendor Managed Inventory (VMI) 2007/8
categories
95% of range in c.85% Investigate and implement innovative RRP and MU 2006/7
RRP/MUs solutions where it makes people's jobs easier

TescoProfits (Mio) 10.60 29 35 74

We Always Save Time and Money Phased roll-out across all Efficient Checking - To enable faster vehicle turnaround 2006/7
Nestl categories at Tesco Depots
Better, Simpler, Cheaper
TBC TBC TBC

COMMUNITY
Be Responsible, Fair and Honest

The Way We Work Together

TBC TBC TBC

%Growth +44% +174% +21% +111%

Be a Good Neighbour

xxxm, +xx.x% Drive categories' sales through good Joint Business 2006/7
Plans

FINANCE
Grow Sales
Build a Joint Business Plan for every Format
xxxm, +xx% Drive categories' profit and margin through good Joint 2006/7
xx%, +x.x%pts Business Plans

Total Margin 9.1% 12.1% +15.1% +18.5%

Maximise Profit

An agreed Induction Plan Develop a Joint Induction Plan for all Nestle-Tesco TBC
used by both parties employees (including Helping Hands / TWIST)

PEOPLE
Tesco to share with Provide visibility of Tesco's priorities through the 2006/7
Developing the Best People Nestle all relevant Customer Plans
customer plans

Service Level 91% 95% 95% 95%

Rated as Top 3 supplier Best-in-Class Application of TescoLink 2006/7
on use of TescoLink by
Tesco

TARGETS BUSINESS PLAN REVIEW BRAG

A simple document sets out the annual business against all parts of the
Tesco steering wheel and a set of agreed joint targets
Reviewed every period between Account Manager and Buyer using the Blue,
Red Amber Green traffic light process
 What is Joint Business Planning?

We share our ambition for categories and brands

based on shopper and consumer insight
We build a plan that addresses key consumer/
shopper needs and Tesco/Nestl opportunities
We commercialise the plan to work for Nestl
and Tesco using all levers e.g. innovation,
distribution, price, promotion, display, front/back
marginto sell more product to more shoppers
We set this plan against the Tesco Steering
Wheel and the ELH Shopping Trip
We build a month by month execution plan
We review regularly and course correct to get
achieve goals
 What is Joint Business Planning?
3. Write the Business Plan & Agree Jointly
0. Identify Point of Departure

1. Share plans, ambitions & insights 4. Execute the Plan

Category Plan Shopper Customer

icl. 3-year Insight Strategy
vision (Nestl) (Nestl/Tesco) (Tesco)

2. Identify the mutual opportunities

5. Review & Course Correct
 What is Joint Business Planning?

PLAN DO

When Does
it Need to be
Plan Program Overall KPI Target YTD Achieved What Needs To Be Done By Who Done By Q1 Q2 Q3 Q4 Next Steps
I Can Get What I Want 150m in 3 years 33m category Petcare step change 3 year growth plan 2006/9
growth (2006
YTD)

45% market share within WIP First for innovation: 2006/7

12wks of launch - Format plan for ALL NPD, NPD highlighted as a % in

CUSTOMER
JBP, Prioritised NPD based on Size of Prize
Drive 1m incremental Sales Test v -Drive On-Shelf Availability through better in-store 2006/7
sales at RSV Control support, using "Always Available"
B:+1.5%
P:+1.2%
Provide category Provide best-in-class category insight for every Tesco 2006/7

Course Correct REVIEW

expertise to support format:
every range review for -Extras-Superstores-Metro-Express-Dot.Com

Shopping Trip
every Tesco format
Earn Lifetime Loyalty Jointly agreed 12 month Tesco & Nestle to agree a plan for "Helping you be 2006/7
healthier plan worth healthier everyday" with significant focus on selected
TBCm RSV categories
We Try To Get It Right First Time 100% 75% No Invoicing Queries - All invoices processed 2006/7
accurately and paid on time
100% WIP New products setup on system within 12wks of launch 2006/7

We Deliver Consistently Every Day 98.5% YTD Range: Winning the Treble: Promotions, NPI, Petcare growth 2006/7
92.5% - 97.6% Jointly agree best-in-class processes for the above

OPERATIONS
Focus on Colloborative Planning: 2006/7
1] Reduce Failed To Arrive (FTAs) (less than 1%)
2] Seasonality
3] Base Sales
We Make Our Jobs Easier to Do Roll-out across all Nestle Vendor Managed Inventory (VMI) 2007/8
categories
95% of range in c.85% Investigate and implement innovative RRP and MU 2006/7
RRP/MUs solutions where it makes people's jobs easier
We Always Save Time and Money Phased roll-out across all Efficient Checking - To enable faster vehicle turnaround 2006/7
Nestl categories at Tesco Depots
Better, Simpler, Cheaper
TBC TBC TBC

COMMUNITY
Be Responsible, Fair and Honest

The Way We Work Together

TBC TBC TBC
Be a Good Neighbour

xxxm, +xx.x% Drive categories' sales through good Joint Business 2006/7
Plans

FINANCE
Grow Sales
Build a Joint Business Plan for every Format
xxxm, +xx% Drive categories' profit and margin through good Joint 2006/7
xx%, +x.x%pts Business Plans
M aximise Profit

An agreed Induction Plan Develop a Joint Induction Plan for all Nestle-Tesco TBC
used by both parties employees (including Helping Hands / TWIST)

PEOPLE
Tesco to share with Provide visibility of Tesco's priorities through the 2006/7
Developing the Best People Nestle all relevant Customer Plans
customer plans
Rated as Top 3 supplier Best-in-Class Application of TescoLink 2006/7
on use of TescoLink by
Tesco

Ensuring the plan stays on course and adapting to changing

circumstances is a fundamental part of the process
Steps we took in Poland...
 Preparations on NESTLE side

SALES LOGISTICS

MARKETING FINANCE
 Opening for each other

Top to Top meeting Business Leders Meeting

TESCO Conference in
Meeting held In October 2007
November 2007
- to share business vision;
- to show our strategy to
- to discuss strategies;
TESCO employees (around
- to improve relations.
200 managers);
Wisa March 2008 Joint Business Plan Workshop

Both sides were entirely commited

to deliver the Joint Business Plan.

Meeting participants from:

- Marketing
- Sales
- CCSD
- Logistics
 Action Plan set for the rest of 2008

04 05 06 07 08 09 10 11 12

CAT-MAN
nowe
Zupy jak Buliony Zupy Pomys Majonez nowy Akcja
Wellness Pomysy
u mamy z noem Standard na... + gratis majonez wita
na...

CROSS - MERCH

Range Review

Kubek 3w1 Espiro NESCAFE Urodziny Festiwal Akcja

Wellness
w 1K (20+4) (tailor) Collection TESCO Kawy wita

CROSS - MERCH

CAT-MAN
Princessa Princessa,
Princessa Festiwal Akcja
Wellness akcja dla KitKat,
on-pack Sodyczy wita
TESCO AERO

CROSS - MERCH
 Joint Business Plan and Scorecard

All the prepared plans were

wrote down and put into a
scorecard. Next step is to
track if they are properly
executed.

Execution of Joint Business

Plan has to bring
measurable benefits in area
of sales and profits.
 Joint Logistics Innitiative

Parameters controlled:

Central Level Local Level

shelf fill rate shelf capacity

sales factor stock in outlets

promotional order promo order proposal

OOS in TESCO (NESTLE products)

6,00% OOS reduction

5,00%
4,00%
3,00%
by 43%
2,00%
1,00%
0,00%
7 8 9 10 11 12 13 14 15 16 17 19 20 21 22
OOS 5,60% 5,40% 5,70% 5,17% 5,10% 4,27% 3,95% 5,09% 5,41% 4,55% 4,93% 3,19% 3,60% 3,90% 4,20%
 Develop People in JBP way
Tesco Nestle Purina workshop held in St.Louis helped to support
plan for category development via stakeholders of both partners

WE MANAGED TO INVOLVE
ALSO HUNGARIAN TEAM

AFTER VISIT IN LEARNING CENTRE WE GOT STRONG PLAN FOR FURTHER GROWTH:
- all stakeholders from Tesco and Purina are involved
- we got strong commitment from Tesco to take part in 1bln Euro market opportunity in Poland to be
presented at Tesco board
- agreed shelf remerchandising from horizontal to vertical blocking
- agreed repositioning of snacks in category exploring potential of impuls segment
- branded gondola-
gondola-end test in 3-
3-4 locations (Q4.2008)
- special pet event with local media engagement 3 top locations (10.08)
- cooperation on Tesco web site
- detailed challenging plan covers 32 points in total.....
 Joint Category Management

Instant
Categories Countlines Culinary
Coffee

Date of change 02.2008 05.2008 06.2008

Implementation
 Donuts Promo

Total number of stands - 951

12 stands in each HM
5 stands in each DDS
1 stand in each 1K

No. of outlets: 296

Gdynia
Gdynia Rafa
Pozna Opieskiego Rafa Radomski
Maciek
Radomski
Jezierski
Krakw Kapelanka Tomek Tokarski
 Donuts Promo

Donuts in TESCO
2000

1800

1600

1400

1200

1000

800

600
Increase +41%
400

200
395.000 pc.
0
W1 W2 W3 W4 W5 W6

Donuts 2007 900 1026 1000 1200 1300 1026

Donuts 2008 1000 1176 1200 1900 1700 1176

Sprzeda NCL 200g w sztukach w Hipermarketach

Sprzeda N.Gold 200g w sztukach w Hipermarketach
18000
4000
16000
3500
14000
3000
12000
2500
10000
2000
8000
1500
6000

4000
Increase 40%
1000
Increase 106%
2000 500

0
W1 W2 W3 W4
12.500 pc.
W5 W6
0
4.580 pc.
W1 W2 W3 W4 W5 W6
NCL - 2007 6275 7564 7383 6943 13596 11115 NESCAFE Gold - 2007 1026 1222 1132 1081 1494 1723
NCL - 2008 10829 10910 8104 13445 16464 14259 1176 1078 1151 2381 2793 3709
NESCAFE Gold - 2008
 Sales results for 2008

I - VIII 2008 I - VIII 2007

35 000 PLN

30 000 PLN
+31% + 29%
25 000 PLN
+23% +21%
+43%
20 000 PLN +40%
15 000 PLN +27%
10 000 PLN +31% -2% +4%
5 000 PLN

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 7 principles that support JBP

1 The consumer / Shopper is King

2 We set SMART goals

3 Clear on the what (i.e KPIs) BUT FLEXIBLE on the How

4 Senior Management endorsement and visible support

A process, not an event PLAN, DO, REVIEW

5

Focus on the 90% we agree and work through the 10% we dont
6

7 Whats right mindset v. Whos right

Efficient Distribution and Transportation