Presentation from Retail’s BIG Show, January 15-17, 2017. NIKKI BAIRD, Industry Analyst, RSR Research GRAEME MCVIE, VP and GM, Precima CHUCK SAMPLE, VP, Insight and Analytics, US Foods, Inc.

1. Retail’sBIGShow2017|#nrf17Retail’sBIGShow2017|#nrf17
Delivering on the Promise of Customer-
Centricity and Personalization
CHUCK SAMPLE, VP, Insight and Analytics, US Foods, Inc.
GRAEME MCVIE, VP and GM, Precima
NIKKI BAIRD, Industry Analyst, RSR Research

2. Retail’sBIGShow2017|#nrf17Retail’sBIGShow2017|#nrf17
Delivering on the Promise
of Customer-Centricity and
Personalization

3. Delivering on the Promise of Customer-Centricity
and Personalization
NRF Exhibitor Insights – January 16th, 2017

4. Today’s presenters
Graeme McVie
VP & GM
Precima
gmcvie@precima.com
4
CONFIDENTIAL
Chuck Sample
VP, Insights and Analytics
US Foods
Chuck.Sample@usfoods.com
Need a photo of Nikki
Nikki Baird
Managing Partner
RSR Research
nbaird@rsrresearch.com

5. Today’s discussion topics
Do retailers need to be customer-centric and
personalized?
How did US Foods successfully deliver on the
promise of customer-centricity and
personalization?
Where is retail heading with customer-centricity
and personalization, how will retailers get there
and how fast will they arrive?
Retail Research
Case Study
Panel Discussion
01
02
03
5
CONFIDENTIAL

6. Do retailers even need to be
customer-centric and
personalized?
01
6
CONFIDENTIAL

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Retailers Can’t Win On Price Forever:
Is Personalization The Answer?
Nikki Baird
Managing Partner, RSR Research
January 16, 2017

8. www.rsrresearch.com © 2016 Retail Systems Research. All Rights Reserved.
8
The Big Issues In Pricing Today
• Since 2012, RSR has expressed concerns over retailers’ over-promotion and race
to the bottom on price
• Even as late as Holiday 2015, retailers expressed belief that these practices were
effective
• But post-Holiday 2015, that perspective changed – drastically.
• Bottom line: the finish line to the race to the bottom is not a finish line, it’s a cliff.
• So how did we get here? And how do we get out of it?

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9
Pricing Strategies Are Not Effective
47%
32%
40%
45%
29%
23%
27%
40%
Driving top line results Driving bottom line
results
Driving revenue from
our best customer
segments
Building loyalty with
our customers
How Effective Are Your Pricing Strategies In The Following Situations
("Very Effective")?
2015 2016

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10
Not Meeting Our Objectives
5%
36%
29%
28%
46%
39%
30%
38%
49%
23%
27%
28%
33%
33%
34%
34%
43%
46%
Price is not our primary driver
To create a strong price perception in the market
To stave off competitive pressures
To create excitement for our brand
To convey our value proposition
To drive demand
To build market share
To improve merchandise sell-through
To maximize gross margin
Top Three Objectives Of Your Company Pricing Strategy
2016 2015

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11
Business Challenges Overview
• While the business challenges of pricing remain relatively unchanged, there is a new smell of
fear among retail respondents
• Retailers report having significantly increased the number of promotions they execute
• They report starting earlier and earlier for the holiday promotion cycle
• And they report taking bigger and bigger mass discounts
• Winners in particular seem to sense the need for change
50%Increased price
sensitivity of consumers
48%Increased pricing
aggressiveness of
competitors
45%Increased impact of price
transparency &
comparative shopping

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12
Breaking The Chain...
How To Wean Consumers Off Promotions

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13
Personalization’s Surge
23%
32%
24%
35%
28%
17%
36%
29%
44%
33%
18%
28%
28%
29%
30%
31%
31%
32%
35%
37%
Provide a more seamless cross-channel experience
Create a better value proposition for our customers
Gain margin advantage through dynamic pricing
Create a more price competitive image for our customers
Increase market share for key categories or products
Provide more localized/personalized offerings to customers
Create more profitable promotions
Better matching of demand and product supply
Improve margins
Improve top-line sales
Top Three Opportunities For Pricing To Contribute To Your Companies Business
Strategy
2016 2015

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14
Personalized Prices – How To Get There?
22%
50%
6%
11%
6%
22%
38%
41%
45%
45%
52%
52%
We are collecting data from new channels and using them
to make better pricing decisions.
It will become important to deliver personalized prices to
shoppers in the next three years.
My company currently targets our promotions at an
appropriate level of granularity.
We have effective policies in place to manage different
prices and promotions across channels and touch points.
We have processes in place to manage promotional
planning across organizations within our company
We have the ability to quickly respond to competitors'
price changes.
Percent of Respondents Who Agree
Retail Winners Laggards

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15
Watch Out For...
33%
39%
44%
22%
33%
22%
15%
19%
31%
38%
42%
46%
Lack of coordination with marketing
Our channel organizational structure makes it
difficult to coordinate pricing strategies
Not enough IT resources available
The possibility of negative customer reaction to
changes in our pricing strategy
Resistance to change from merchandising
Lack of clean price, competitor, and purchase data
Top Three Organizational Inhibitors: Selected Performance Differences
Retail Winners Laggards

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16
Operational Challenges Reflect Strategic Barriers
14%
45%
27%
23%
45%
41%
45%
27%
32%
17%
23%
23%
30%
30%
33%
47%
47%
50%
Keeping up with promotional deals made between buyers and
manufacturers
Minimizing markdown spend
Making sure that stores change prices accurately and timely
Coordinating with marketing on promotions and offers
Managing promotions across channels
Measuring the impact of executed pricing decisions
Maintaining visibility into promotional profitability
Forecasting the impact of potential pricing decisions
Keeping up with competitors' prices
Operational Challenges Around Setting Prices
Retail Winners Laggards

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17
What The Future Holds
11%
12%
14%
15%
16%
16%
16%
16%
17%
18%
18%
21%
24%
11%
11%
15%
13%
14%
10%
10%
11%
14%
11%
12%
13%
7%
10%
11%
11%
15%
12%
11%
10%
11%
12%
11%
7%
9%
12%
Rules-based pricing engine
Integrated end-to-end price lifecycle management
Promotions optimization
Product movement data warehouse
Inventory management – availability as a price driver
Digital channel price management tools
Markdown optimization
Promotions planning, forecasting, management
Markdown planning, forecasting, management
Digital channel promotions/offers management tools
Regular price planning, forecasting, management
Regular price optimization
Competitive price intelligence
Planned Technology Investments
Deployed, looking for change Evaluating / Budgeted Planned, no budget

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18
Some Hard Questions
• Can you win a race to the bottom on price? (Answer: Unless you’re Walmart, no)
• Is it easy or hard for a competitor to track personalized prices? (Answer: hard)
• Do you have the ability to plan & optimize personalized prices?
• Do you have the ability to execute & track personalized prices?
• Can you take personalized prices to BOTH digital channels AND stores?
• Can you maintain a personalized price strategy if you over-buy? (Answer: no)

19. How did US Foods successfully
deliver on the promise of customer-
centricity and personalization?
02
19
CONFIDENTIAL

20. Powered by
CookBook Vision

21. • 2nd largest foodservice distribution company in the U.S.
• 300K customers; 120K independent & regional operators
• $26+ billion in revenue
• ~60 distribution centers solely in the U.S.
• 23K+ employees, 3K+ sales people
• Post-recession IR growth estimated at 4%
• Margin pressured industry
• Went public last year: USFD
21
Who is US Foods?

22. 22
CookBook is the Engine Behind our
Customer-Centric Vision
We put the customer at the center of everything we do
CookBook powers customer-centric,
actionable insights through prescriptive analytics
These insights allow us to deepen customer
relationships and provide the most relevant solutions to
help grow their business.

23. 23
No two of our customers are quite the same:
commitment to 100% personalization
Customer-item level insights are continually updated to
account for recent changes in customer behavior
Three+ years of past behavior used to determine
purchasing, promotion and pricing patterns
CookBook is the Engine Behind our
Customer-Centric Vision

24. 24
CookBook Realized
My Kitchen
CookBook
for
CatMans
Sales
Planning
Powered
by
CookBook
CookBook
for
Vendors
• Customer-centric category roles
• Predictive assortment through
demand transfer
•Unique price recos maximizing sales & profits
•1-to-1 tailored content driving
Customer Lifetime Value
• Insight Syndication
• True Joint Business Planning
• Prioritize customers and align
resources
• Prioritize opportunities by
customer
CookBook has evolved to further power capabilities across Merchandising & Sales
Pricing
Powered
by
CookBook

25. 25
USF Strategy Pyramid
WIN
Food Leadership
DIFFERENTIATE
Easy Customer Experience
COMPETE
Flawless Fundamentals
FOUNDATIONAL
GREAT
FOOD SELLERS
INSPIRING
CONTENT/PROG
EASIEST TRANSACT
ACROSS CHANNELS
MOST VALUED
BUSINESS SOLUTIONS
DELIVER PERFECT
ORDERS
LEADING FOOD
SAFETY
RIGHT PRODUCT, RIGHT
PRICE
OPTIMIZED COST TO
SERVE
PEOPLE
INFRASTRUCTURE
PROCESSES
ANALYTICS
Local and
sustainable
Great
brands
Innovative
products
best everyday cop
and produce

26. 26
CookBook will
be embedded in
every business
function

27. 27
CookBook creates more value across all stages of
the customer lifecycle
Current Customer
Lost CustomerProspect
Prospect
Prioritization
Prospect Pricing
Acquisition
Campaign
Prospect Product
Recos
Pricing Onboarding
Price Stabilization
Loyalty Campaigns Category Pen Campaigns
Predict Churn
Retention
Campaign
Win Back Campaign
Win Back
Loss
Acquisition
CUSTOMERVALUE
Steady State
Onboarding

28. 28
Insights & Analytics Operating Model
Business Questions
I&A
PMO
RequestsAssets
US Foods
Customers & Sales
Organization
FoodGeniusPMO
Answers/Solutions
* Partners with Marketing for Primary Research; Also
supports Food Genius data transformation requirements
CookBook
Project
Mgmt
Strategy
Solution
Alignment
Change
Mgmt
Central
Business
Services
PIM VIMCIM
Data
Gov
Food Genius
(App Development, Food
Taxonomy, Menu Stewarding,
Market Data)
BI
Gov
Data Strategy
(Customer, Product, Vendor)
IT partners across multiple I&A Teams to
support I&A requirements
SC,
Replen &
Logistics
Analytics
Corporate
Forecasts
BI
Integration
Merch &
Sales
Analytics
HR,
Finance,
& Rev Mgt
Analytics
IT
Predictive analytics, Segmentation
BI & Analytics Team
Functional Business
Units
(Supported
by
CookBook
Steering
Committee
& Operating
Committees)
Decision
Sciences*

29. 29
Working
Level
Program
Leadership
Executive
Leadership
Business
Leadership
• Program level escalation
and decision-making
team
• Enterprise level
escalation for major
business decisions
• Workstream/project/initiat
ive-level activities and
decisions
• Cross-program level
escalation and decision-
making team
Consolidation/Escalation
StrategicDirection/Prioritization/Decisions
Workstream
Teams
Workstream
Teams
CookBook
Steering
Committee
Workstream
Teams
ICE
Enterprise Air
Traffic Control
EI&A PMO
Workstream
Teams
Workstream
Teams
CookBook
Operating
Committees
Data
Governance
BI
Governance
BI Center of
Excellence
Insights & Analytics Governance Structure

30. The analytics IT roadmap can be a cluttered one:
Continuously invest in the future
30
1. Cloud-based technology
(AWS, Snowflake, Spark)
2. Open source languages (R,
Python)
3. Machine learning for limited-
structured data
4. Self-serve BI and data
visualization
5. Business-led data governance
Big Data Landscape 2017

31. Lessons learned…
1 Have a business model to draw from
Have multiple executive stakeholder accountability2
Commit to a true partnership: Analytics & IT3
Brand your work: make it approachable4
Involve the business actively5
Don’t let perfection become the enemy of good6
Invest in change management7
Be efficient in your design8
31

32. Where is retail heading with customer-
centricity and personalization, how
will retailers get there and how fast
will they arrive?
03
32
CONFIDENTIAL

33. Takeaways
Leading retailers are investing heavily in it
Shoppers want it & demand for it is increasing
Personalization
and customer-
centricity matter
33
CONFIDENTIAL
01
Invest in capabilities and people
Commit and deploy across the organization
It’s possible to
deliver on the
promise
02
Starts with exec. support & org. commitment
Requires change management
Needs scalable data and analytical platform
It has to be
executed right03

34. Precima helps our clients to satisfy the needs of customers
better than the competition to win in the marketplace
Understand customer needs
on a granular, timely & frequent basis
Consistently execute
actions that best satisfy customer needs
1
2
34
CONFIDENTIAL

35. Upcoming…
• See Chuck and Nikki at the Precima booth (#3777)
after this presentation
• RSR Pricing Report: Life Becomes Unmanageable:
• https://www.precima.com/research-insights/ whitepapers/pricing-
2016-life-becomes-unmanageable-1
• Precima Primary Market Research on Shoppers:
• Pricing: What do shoppers really want?
• Promotions: How important is personalization?
• FMI Midwinter: January 28-31, 2017
• Precima Sponsored White Paper with POI
• Personalized Offers: The Cure for Tired, Ineffective Trade Promos
35
CONFIDENTIAL
For more information, visit www.precima.com
Eataly (Wine Tasting Room)
Tonight 6-8pm
please join us
for Hors d'Oeuvres and
drinks at New York's
famous Eataly, the
largest Italian
marketplace in the
world!
MONDAY
January 16
2017
Networking
Reception
6:00 pm - 8:00 pm
Eataly New York
Flatiron
200 5th Avenue
New York, NY 10010

36. Delivering on the Promise of Customer-Centricity
and Personalization
NRF Exhibitor Insights – January 16th, 2017