16th European Foodservice

Summit

(23) 24 & 25 September 2015

Zurich / Switzerland

Russia macro economy indicators – Q2’15 vs. Q2’14

-1.4%

CONSUMER CONFIDENCE

UNEMPLOYMENT

Retail Turnover

REAL DISPOSABLE

INCOME

-4.6% 5.4% -26

GDP

16.2% in May’15

Food inflation 22% in April’15

INFLATION

Source: Rosstat, Central Bank Russia

ROUBLE EXCHANGE RATE

VS. USD

-50%Q2’15 – 65 RUB/USD

vs. 35 in Q2’14

-9.4%volume

2Q 2015 key macro economy factors

Consumer Confidence in Russia in Q1’15

is at the lowest level ever Consumer confidence dropped sharply due to economy slowdown and

unstable currency

Consumer Confidence index

What else happened last year?

• Smoking ban introduced in Russia starting June,

1st 2014. Restaurants faced slowdown in traffic,

lost in revenue, bars and pubs suffered the most

• Import ban on products from US and Europe as

of August 2014 with 1 year duration.

• Food inflation were growing (23% in

March 2015 – cumulated annual)

• Local manufacturers and

distributers started to increase

prices on the same products

• Fish and seafood suffered more

than others: Cheap Japanese

restaurants are at risk

• European products was substituted

by products from Belarus, North

Africa, India, China and South

America

2,4%1,1% 1,6% 1,6% 1,8% 1,7% 1,9%

5,1%

-3,9%

-7,2%-8,7%

-9,8% -9,2%

May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15

Retail sales turnover in Russia

Retail sales turnover in Russia

0,0%-1,0%

-0,3% 0,0% -0,5% -0,6%-1,8%

-0,8%

-4,9%

-7,5% -7,4%

-8,9%-9,0%

May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15

Retail sales turnover of food products

9%11% 9%

8% 7%3%

-1% -2%

2%

1%

2%2%

2%2%

3%

4%

7% 4%

10%

13%12%

10%9%

7%

3%

5%6%

Visits Average check Total SpendQSR

KFC

18% 20% 20%15% 12% 14%

31%40%

24%

-3%

0% 2%

2% 2%3%

5%

9%

5%

15%20% 22%

17%14%

18%

37%

53%

30%

Q2-2013 Q3-2013 Q4-2013 Q1-2014 Q2-2014 Q3-2014 Q4-2014 Q1-2015 YE Mar'15

QSR and KFC quarterly dynamics

KFC was one of the main winners in QSR last year, his growth rates accelerated since Q4’14

Source: The NPD Group/CREST®, 2012 - 2015

234

238 243

260 262 268272

290 291 297303

327 330

133 138 138145

154162 166

178 183193

206

225238

4854

64

79 84 89

107

131143

162 196204 211

100 102 100 102 105 105

105 10396 97 103 103 103

230

261

281 316323

329

348 352335 330 337

315302

Q1'12 Q2'12 Q3'12 Q4'12 Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15

Evolution of the number of restaurants, 8 Russia cities

+13%

+48%

Q1’15 vs YA

+7%

-10%

+30%

BK and KFC show the most extensive development in Q1’15, MCD over-passed declining Subway in Q4’14 showing +13% increase in stores, Sbarro stagnates last year

Top QSR players: # of restaurants, 8 Russia cities

McDonald's 12% 13% 12% 12% 11% 11% 13% 13% 13%

KFC 16% 17% 20% 23% 19% 19% 24% 26% 30%

Burger King 75% 65% 67% 66% 70% 82% 83% 56% 48%

Sbarro 5% 3% 5% 1% -9% -8% -2% 0% 7%

Subway 40% 26% 24% 11% 4% 0% -3% -11% -10%

Top 5 +13% Q1 15 vs Q1 14

Russia - % of visits in OOH and QSR

29,9% 29,0%

4,6% 5,6%

2,6%4,3%

1,8%1,6%2,5%2,4%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

YE Mar'14 YE Mar'15

QSR market shares

In Russia QSR is more concentrated, Top 5 chains has about 45% traffic share in segment and above 20% in Total OOH. All big brands have higher shares in Russia compared to Europe. KFC is #2 chain and has lower gap with MCD traffic here than in EU.

Source: The NPD Group/CREST, 2012 - 2015

YE Mar 2015

Foodservice structure, Russia vs EU

34 3727

39

27 22

14

15

11 14

11

7

2 5

2

5

12

21 12

26

18

3 418

5

RUSSIA GB FRANCE GERMANY

QSR FSR Retail Hotel / Transport Leisure On-Site Vending

Total 2014

Russia has a higher percentage chains and full service is a bigger segment than typical in the west.

75

5845

26

25

4255

74

RUSSIA GB France GERMANY

Chains Independents

24

7

5

2

2

0

-1

-1

-3

-3

-5

-8

-30

7%

3%

8%

5%

2%

0%

-3%

-2%

-2%

-8%

-3%

-2%

-8%

QS Burger

Retail

Vending

Transport

QS Pizza/Italian

Coffee shop

QS Etnho/Asian

QS Bakery Sandwich

QS Russian/Beer/Ice Cream

Leisure

QS Self-service/Free flow

On-site Canteens

FSR (Casual Dining)

Last year Russia OOH visits were driven by QS Burger (due to significant # of openings in 2014 ) and Retail while FSR and Canteens suffered the most from recession.

Incremental visits, in mioYE Mar’15 vs YA

Traffic % Change by Channel – YE Mar’15 vs YA

12

% changevs YA

Market share (% visits)100% OOH, YE Mar’15

18%

11%

3%

2%

5%

4%

2%

4%

6%

2%

7%

20%

16%

8%

5%

7%

++

1%

-11%

-14%

-5%

-11%

--

-11%

-5%

--

YE Mar’15

Source: The NPD Group/CREST®, Russia 8 cities, 2012 - 2015

Q1’15change vs

YA

“++” or “—” indicate trends more than +/-15%

-1%

3%

-10%

IEO

Chains

Independents

75%

25%

Total OOH TrafficYE Mar’15

Chains vs independent concepts, Traffic change

Visits change, YE Mar’15 vs YA, %

Independents see decline while Chains eek out growth

2 057 Mio visits

Visits change, Q1’2015 vs YA, %

-5%

-1%

-17%

YE Mar’15

and Q1’2015

Source: The NPD Group/CREST®, 2012 - 2015

0

500

1000

1500

2000

2500

3000

0 2 4 6 8

10

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

61

63

65

67

69

71

73

75

77

79

81

83

85

87

89

91

93

95

97

99

2012

2017

2022

Population of Russian Federation, thousands peopleState Statistics Committee (2012 fact and forecasts by 2022)

Age

2012/2017/2022 = ths. people within age groupSource: Demographic Forecast by National Bureau of Statistics of

Russian Federation, 2010

Rosstat forecasts the declining number of 15-24 y.o., and growth of those aged 25-34 in the next 5, those aged 35-44 in the next 10 yearsTotal TA (15-59) is forecasted to decrease by -4% to 2017, and by -7% to 2022 year

ths.

Pe

op

le (

with

in a

ge

gro

up

)

14263 62 81

158

959876 878

0

200

400

600

800

1000

1200

Russia GB France Germany

Population mln

FS per capita spendings,

€ annually

Long-term potential is still huge for Russian

4,7*€ 5,5 € 5,5 € 6,2 €

X € Foodservice average check, €

*1 € = 51 RUR

(average for 2014)

Total 2014

Source: The NPD Group/CREST®, 2014 for EU, Rosstat data for Russia spends and population w/o Crimea

Eastern Europe

CEE Top Trends 1) Transparency – our open kitchen. Clear brand identity with the strong executional elements reinforces uniqueness of brand.

2) Delivery – changes in the way how delivery is done today (aggregators – "digital food court", digital - mobile, delivery services).

3) Authenticity – (qsr - back to roots), but also all slow food places – fromproducts portfolio thru sourcing, photography, design).

• Fresh/local/real/healthy trends

• Delivery, very fast conversion of users to on-line

Other subjects of potential interest to that audience:

• Rise of Convenience (gas stations, KFC Go, seasonal,

outdoor, food trucks, etc.)

• UK-Poland connection (labor, design, concepts, etc.)

• Role & importance of value

Real food beats menu board. Pre-prepared food

turns into advantage.

Food exposition drives impulsive

buying better than menu boards.

Standing in the line, customers are

tempted by look, smell and

communication of freshness.

Food is abundantly exposed, communicated as freshly prepared

and well-lit.

Even if the taste is average, food

tempts by stylish exposition.

Leaders: cafes& bakeries; surprisingly

well-petrol stations (Orlen and BP).

Everything is fresh.

In underground passages food needs to

prove it’s safety and freshness.

Every single place communicates

„freshly prepared”. It’s hygienic factor,

not point of difference.

Branded places gain thanks to higher

credibility, especially in shabby

environment.

Underground: bright, well-enlighted

food spots have advantage over dark

design places.

Simplicity & naturalnessAround 30% of consumers resign visiting catering outlets because they perceive meals offered in

catering outlets as less tastier and healthier than those prepared in homes (GfK2014)

Fewer & simpler ingredients Urban Garden concept

Street/express formats

developmentSimplification of

premium brandsPremiumization of street

food & gas stations

Trend started by supermarkets.

Express shops opened on gas stations

McDonald’s CE – expansion strategy

Central Europe – new openings

Central Europe - total portfolio

Coffee Competition –

summary

Central Europe - total portfolio

Central Europe - expansion

pace in H1 2015

New brands coming to Poland

Food truck boom Events & festivals: Wroclaw StrEAT

Seasonal food track spots: Street Slow Food in Kraków Kazimierz Food Port in Warsaw Powiśle

New websites: www.foodtruckportal.plwww.myfoodtruck.pl

New Apps: TruckMe