Private Label Report Purpose of the Report Publication date: December 2018 Next publication: June 2019 Purpose of the Report To clarify the role of private label in Makro Private Label Report

Private Label What is Private Label? Private Brand House Brand Dealer-Own-Brand Confined Label Exclusive Brand Private Label What is Private Label? There is often confusion around the difference between private label, private brand, house brand, dealer-own-brand, confined label, and exclusive brand. These terms are often used interchangeably and sometimes incorrectly. As such, please refer to the below definitions for clarity, the term private label encompasses both. For the purpose of this report, focus remains purely on private brand Private brand, House brand and Dealer Own brand: A brand of product(s) that is exclusively manufactured by a contract or third-party manufacturer for a retailer, according to retailer specifications, and sold under a retailer’s brand name. Private brand is often tiered according to ‘good, better, best’ brand positioning, however these tiers are defined differently across retailers i.e. some might refer to premium / national brand equivalent / value or fit for purpose Globally, certain retailers (i.e. Lidl) are moving towards vertical integration with their private brand products (i.e. owning the factories which private brands are manufactured in) Confined Label, Exclusive Brand: A brand of product(s) owned by a manufacturer or producer but exclusive rights are given to a retailer to be the sole distributor of the product to the market Let’s take you on a journey down the shopping aisles of Makro, showcasing their most prominent private brand products Page 2

Private Label Role of private label in Makro Strategy Private label brand excellence remains a key focus for Massmart Makro are committed to keeping the customer at the centre of its private label decisions Makro intends to keep private label true to its positioning of ‘more for less’, ‘big on quality, big on value’, inter alia, and ultimately, saving customers money so they can live better and trade more profitably Strategy To invest in new product development and innovation, focusing on KVI lines, to drive sales growth and category leadership To collaborate seasonal deals to secure reduced cost prices and increased volumes To focus on ensuring all private label suppliers implement and comply to the Global Food Safety Initiative (GFSI) standards i.e. responsible private label sourcing To focus on developing private label packaging that is readily recyclable and resource efficient – conduct regular packaging audits To expand the skills and experience our private label team Financials and/or Contribution At Group level, private label contributes 9.2% (2017: 9.0%) to total sales (FY2018 Analyst Presentation) Food Private label brands – 73 brands in portfolio (2017: 15), with sales penetration of 5.6% (2017: 5.9%) “Private label underpins a retailer’s tactical position. We have some great brands that continue to do well for us.” Guy Hayward Massmart CEO Page 3

Private Label What are the Private Brands in Makro? Private brands First Value M Brand Aro Shopper Profile LSM 2 - 8 LSM 6 - 10 Strategic Brand Positioning Good (Value) Reliable, no-frills budget basics Strong commodity focus for commercial customer, usually promoted in case lots Better (Standard) Flagship private label brand Designed to improve overall retail customer penetration Reliable, no-frills budget items Offering commercial customers a strong value alternative Price Positioning Price Fighter Value for money SKUs Participates in all basic commodity categories across groceries / household Fresh Butchery, Eggs Frozen ready meals, veg and seafood Groceries e.g. UHT milk, tinned food, spices, sauces, snacks incl. Biltong Household products Personal care products, Baby products Larger pack sizes for catering & foodservice industry Products available cross catering, stationery, paper/filing, household, spreads/condiments, meals/canned goods, snacks/sweets/biscuits Page 4

Private Label What are the Walmart Shared Private Brands in Makro? Marketside Equate Ol’Roy Shopper Profile LSM 6 - 10 Strategic Brand Positioning Better (Standard) Highly competitive portfolio bringing a wider variety of products that are affordable and innovative A means to easy range extension and aggressive new product development Price Positioning Value for money Range Fresh produce Bakery Butchery (concessionary model under Massfresh) Health & Beauty (body care and bath toiletries) Pet Treats Dry Dog Food Dog Accessories Page 5

Walmart Shared Private Brands: Private Label Strategic Brand Positioning | Good (Value) and Better (Standard) Private Brands: M Brand - Better (Standard) Aro,,First Value - Good (Value) Makro offers a wide private label product range and pricing mix, servicing a broad customer base across the LSM spectrum Walmart Shared Private Brands: Marketside, Equate, Ol’Roy – Better (Standard) Page 6

Private Label Price Positioning | Good (Value) vs. Market Leader Makro intends to keep private brands true to the Makro positioning of more for less, big on quality, big on value, inter alia, and ultimately, saving customers money so they can live better and trade more profitably Good (Value) Market leader A large investment has been made to establish the Checkers housebrand as a guaranteed quality product at an affordable price, receiving prominent position throughout the store and strong focus on leaflets. Checkers also carries an extensive range of exclusive brands visible throughout the store. The following only focus on the Checkers private brand. R10.95 Note: pricing as at 02.12.18 Page 7

Private Label Social Media What media platforms are used to communicate Makro Private Brands Print Website Makro private brand enjoys prominence in national and regional broadsheets Private brands feature within digital broadsheets, or can be looked for using the ‘search’ button m Brand seasoning Ol’Roy Social Media Facebook and Twitter showcasing Makro private brand Page 8

Private Label What’s going on in-store? Makro private label has significant presence on shelf, across categories ‘Fast fact’ signage advertises the presence of ‘HOUSE BRANDS IN DA HOUSE’, in new generation Makro stores Makro – Riversands JHB Page 9

What’s going on in-store? Private Label What’s going on in-store? Great presence on shelf – Makro private brand, Aro, surrounds a competitor on shelf The m Brand is featured to the right of the number one branded product in the category When all Makro private brands are on shelf, they are brand blocked to create impact Page 10

Maryla Masojada | Lead Analyst Adrienne Osberg | Retail Analyst