Transforming our Transforming our businessbusinessGraham O’ConnorGroup CEO

The World of SPAR

• Founded in 1932• Netherlands• Adriaan van Well• Objective to put independent

retailers in a position to compete with the

chains

Our Name

DDoorEendrachtigSamenwerken ProfiterenAllenRegelmatig

DDoorEendrachtigSamenwerken ProfiterenAllenRegelmatig

“ All will benefit from united co-operation”

• Founded in 1962

– Colin Michelsen

• Launched in 1963

• 8 Wholesalers & 500 Stores

SPAR South Africa

SPAR Today…

• Stores

SPAR South Africa (Sep 15)

1811

• People 64 500

• Retail sales R76, 5bn

• Customers 60 Million p.m.

Our Brands, our Pride

SPAR Retail Sales

1963 1987 2015

Retail Turnover (R)

0 1.5bn 76.5bn

Stores 500 472 1811

Wholesalers 8 2 1

Cases Despatched

0 20m 219m

50 Years Of Power SPAR GROUP

GUILDS

THE SPAR GROUP LTD

INDEPENDENTRETAILERS

REGIONAL GUILD (6)

NATIONAL GUILD

• SPAR and TOPS in 1 Guild

• BUILD IT has a separate Guild

VISION

To be the first choice brands in the communities we serve.

SPAR STRATEGY

PURPOSE

To provide leadership and access to a full support service to retailers to enable them to run sustainably profitable and professional businesses.

SPAR Values

• PassionPassion

• EntrepreneurshiEntrepreneurshipp

• Family Family

STRATEGIC IMPERATIVES

Deliver excellence in fresh

Supply chain optimisation

Leadership on owning “centre of community”

Retail profitability

New business opportunitiesTransformation

The retail The retail environmentenvironmentRoelf VenterGroup Retail Operations Director & Guild Chairman

STORE NUMBERS AS AT SEPTEMBER 2015

Formats TOTALSUPERSPAR 315SPAR 366KWIKSPAR 132BUILD IT 320TOPS 608Savemor 25Pharmacy 45GRAND TOTAL 1811

BLACK OWNED STORES AS AT SEPTEMBER 2015

Formats TOTALSUPERSPAR 30SPAR 60KWIKSPAR 7BUILD IT 68TOPS 57Savemor 13Pharmacy 12GRAND TOTAL 247

Our Enterprise Development InitiativesOur Enterprise Development Initiatives

Kevin O’BrienRisk, Sustainability and Corporate Governance Executive

STANDARD FMCG SUPPLY CHAINSTANDARD FMCG SUPPLY CHAIN

SUPPLIERRETAILER

DISTRIBUTIONCENTRE

RETAIL STORES CUSTOMER

SPAR GROUP SUPPLY CHAINSPAR GROUP SUPPLY CHAIN

SUPPLIERSPAR

DISTRIBUTIONCENTRE

SPARRETAIL STORE

CUSTOMER

SUPPLIERSUPPLIERSUPPLIER

SIDWELL

CASAMOLA

SPAR GROUP SUPPLY CHAINSPAR GROUP SUPPLY CHAIN

SUPPLIERSPAR

DISTRIBUTIONCENTRE

SPARRETAIL STORE

CUSTOMER

SUPPLIERSUPPLIERSUPPLIER

R56 Billion pa

1 TIGER R 3 762 208 253

2 COCA COLA R 3 214 208 534

3 UNILEVER R 3 134 351 247

4 PIONEER FOODS R 2 095 361 044

5 NESTLE S A R 1 842 839 308

6 BRITISH AMERICAN TOBACCO R 1 763 416 370

7 WOODLANDS DAIRY R 1 736 759 079

8 DISTELL R 1 669 551 181

9 BRANDHOUSE R 1 594 922 722

10 BLUE LABEL DISTRIBUTION R 1 563 876 691

R 22 377 494 428

* AT RETAIL SELLING PRICING

40%

10 MONTEAGLE AFRICA R 1 517 463 486

11 SOUTH AFRICAN BREWERIES R 1 475 051 105

12 FRESHLINE R 1 466 751 885

13 CLOVER R 1 429 921 510

14 MONDELEZ R 896 430 722

15 SIMBA R 886 605 364

16 PARMALAT R 816 347 788

17 SNACKWORKS R 790 807 149

19 SOVEREIGN R 720 722 372

20 WILLOWTON GROUP R 684 925 612

R 32377595810

* AT RETAIL SELLING PRICING

60%

SPAR GROUP SUPPLY CHAINSPAR GROUP SUPPLY CHAIN

SUPPLIERSPAR

DISTRIBUTIONCENTRE

SPARRETAIL STORE

CUSTOMER

SUPPLIERSUPPLIER

SUPPLIER

R56 Billion pa

R6.5 Billion paSPAR BRAND

1. NO LISTING FEES2. FAVOURABLE PAYMENT TERMS (7days vs 30days)3. EFFECTIVE ROUTE TO MARKET4. FREE SALES AND MERCHANDISING TEAMS5. FREE ADVERTISING SLOTS6. REASONABLE GUARANTEE OF OFFTAKE (PROVIDED QUALITY AND PRICE CRITERIA CAN BE MET)

ACTION POINTS FOR BLACK SUPPLIERS OF SPAR BRANDS

SPAR GROUP SUPPLY CHAINSPAR GROUP SUPPLY CHAIN

SUPPLIERSPAR

DISTRIBUTION

CENTRE

SPARRETAIL STORE

CUSTOMER

SUPPLIERSUPPLIER

SUPPLIER

R56 Billion pa

R6.5 Billion paSPAR BRAND

R14 Billion pa

Rural Hubs

The context

• Opportunity to improve fresh particularly in rural areas• Develop and drive a model of more localised sourcing of bulk

produce• Enables inclusion of emerging farmers• Reduces transport costs, improves lead times, increases freshness

and shelf-life• Scale out what retailers like Peet Snyman have been doing

Delivering excellence in Fresh is key to setting SPAR up for the next 50 years

Real benefits

•Enabling a food system that can provide affordable and nutritious food for rural communities

•Development of an inclusive agricultural system

Nutrition

FAP shared ownership (to include both producers and retailers)

Rural HubFresh Assembly Point (FAP)

Geographic area up to 200km radius

Rural Hub Model

1 Registered smallholder farmers currently trading

within loose value chains

Safe, fresh, nutritious food Packhouse facilities Quality control Pricing benefits Shorter delivery period

Dedicated technical assistance and agricultural know-how, financial loans and

access to inputs for famers.

Market off-take

Exce

ss P

rodu

ce

Main Stream (national markets)

e.g. Tiger Brands & Unilever

Informal & Government led schemes

Farmer1

Farmer

Farmer

Farmer

SPAR DC (incl. Freshline)

AVAILABILITY ACCESS USEFood and nutrition security:

2015

2016 - 2017

Selection of 3 Rural Hubs• Locate Rural Hubs in areas of

• High numbers of emerging farmers requiring market access and development support

• High agricultural potential• High rural poverty• Many SPAR stores

Mopani Hub• 27 SPAR stores within 200km radius of Ofcolaco

(near Tzaneen)

Initial focus area

Broader focus

• Initial focus area: 10-15 farmers

10 stores• Broader focus:

30-40 farmers

27 stores

Farmer

Farmer

SPVFAP shared ownership

Rural HubFresh Assembly Point (FAP)

2. Input Finance

8. Demand from local retail and

regional DC’s

3. INPUTFUNDING

INPUT & DELIVERY AGREEMENT

6. TRAINING & TECHNICAL SERVICES

Seed | Fertilizer | Herbicides | Insecticides etc

4. PURCHASE

INPUTS

5. DELIVERY

AGREEMENT

9. RECOVER EXPENSES

10. PROFIT PAYMENTS

7. HARVEST YIELD

Business model

$

DUTCH GOVERNMENT

Financial Services Provider

e.g. FNB, Nedbank

Business Support Provider

TechnoServe or Lima

Funding

Technical Support Provider

1. Capex and opex

Technical Assistance R14.5m

Consulting and travel R4.3m

M&E R0.5m

Dutch Government Subsidy R19.3m

FAP Capital Expenditure R22.4m

FAP Operational Expenditure R15.0m

SPAR people time and travel R6.2m

SPAR SA Contribution R43.6mMopani Hub R10m3 Hubs R30m

Jobs Fund R21m

The FAP business structure

• Business structure must recognise the importance of fostering loyalty by offering stakeholders equity in the FAP

• Each FAP forms a private company• Shareholding split between SPAR, farmers and retailers• SPAR provides capital and operational expenditure to establish FAP• SPAR controls operations of FAP through majority shareholding until FAP

becomes financially self-sustaining• Majority shareholding transfers to farmers and retailers once FAP financially

sustainable

It is critically important to SPAR that the Hub is a financially viable business entity that will over time be owned and managed by the local community

Conclusion

• Questions

• THANK YOU