Page 83 - New Employee Onboarding

Section I: 2015 Cost Management Target Calculation

Each year, the cost management target is established for each Concept Co-op based on prior
years’ performance. Specifically, the median rolling two-year average performance is used
as the target for the current year. This methodology was selected and approved by the Board
for the following reasons:

 It eliminates single year market anomalies
 It smooths out the effect of measuring annual fixed price contracts to an active
market
 The target automatically adjusts up/down based on actual performance
 It does a better job of incenting the correct behaviors in the purchasing managers’
day to day responsibilities

The market basket performance compared to the MPPI is calculated each year since the
inception of the Co-op. The resulting annual performance variances are averaged for each
rolling two-year period. The median rolling two-year figure is used as the target for the
upcoming fiscal year. The Apple Co-op target for 2015 was set at 2.25% based on this
methodology. See the below table for more details on the cost performance target:

Summary: Apple Cost Management Target Calculation
Market Basket Spend (change from prior year)
2010 2011 2012 2013 2014 (Jan-Dec) 3 year average (2011 - 2013)
Market Basket PPI Market Basket PPI Market Basket PPI Market Basket PPI Market Basket PPI Market Basket PPI
Category/Product fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav) fav/(unfav)
Bakery 3.9% -0.4% -0.5% -13.2% 1.2% -4.1% 3.0% 0.0% -0.3% 2.4% 1.2% -5.8%
Beef -1.4% -10.1% -2.8% -12.7% -11.6% -8.7% -1.4% -0.2% -4.6% -18.1% -5.2% -7.2%
Chemical -0.7% -1.5% -1.2% -1.5% -2.3% -1.5% -1.1% -1.5% -0.8% -0.5% -1.5% -1.5%
Dairy -0.6% -7.6% -6.7% -12.3% 1.1% -0.2% -2.6% -3.3% -8.8% -12.3% -2.8% -5.2%
Dressings, Sauces, Soups 0.7% 3.1% 0.5% -0.6% -0.8% -3.8% 0.3% -0.5% -2.0% -0.3% 0.0% -1.6%
Grocery 1.9% -9.3% -0.2% 3.7% -6.7% -6.0% -3.2% -6.0% -2.7% 2.4% -3.4% -2.8%
Oils 17.1% -3.5% -33.7% -28.9% -0.3% 2.3% 7.9% 6.1% 11.7% 7.3% -8.7% -6.8%
Paper & Packaging 0.0% -1.8% -2.5% -6.2% 2.5% -1.3% 3.0% -1.2% -1.4% 0.3% 1.0% -2.9%
Pork -5.8% -17.0% 1.1% -12.6% -0.1% 2.7% -9.6% -4.2% 0.7% -15.6% -2.9% -4.7%
Poultry 6.1% -0.9% -0.1% 3.7% -4.1% -16.1% -6.5% -3.7% -2.9% -3.7% -3.5% -5.3%
Produce -2.3% 0.4% -19.7% -22.9% 5.3% 29.2% -3.5% -50.2% -2.4% 0.4% -6.0% -14.6%
Seafood 1.3% -18.7% -10.1% -15.4% -9.5% 0.5% 0.8% -19.9% -21.1% -13.9% -6.3% -11.6%
Total Market Basket 1.3% -5.1% -3.7% -7.8% -4.5% -4.1% -2.4% -5.2% -4.1% -6.7% -3.5% -5.7%
Difference 6.5% 4.1% -0.4% 2.8% 2.6% 2.1%
Rolling Two Year Average 5.26% 1.82% 1.18% 2.68%
Median Rolling Two Year Average 2.25%

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