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

Private Label What is Private Label? | 2018 Private Brand House Brand Dealer-Own-Brand Confined Label Exclusive Brand Private Label What is Private Label? | 2018 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 NEED TO KNOW MORE 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 Usave, showcasing their most prominent private brand products

Private Label Role in Usave Strategy of private label A means to provide relevant and better value products for its shoppers A sizeable portion of Shoprite Private Brand, Ritebrand, together with U Brand (launched Nov 2017), is stocked on shelf Ritebrand, strives for price leadership on shelf without compromising on quality, while supporting the Groups ‘low price promise’ positioning Ritebrand offers a guaranteed ‘refund or replace’ promise U Brand plays a similar role as Ritebrand, and will replace this offering in all Usave stores (normal and container) USP(unique selling point) is the enhanced visual packaging (competing with brand leaders), while delivering on price, quality and value Strategy of private label To continue to innovate, develop and extend the range offering (both for key commodity price points and upmarket products), while delivering better margins for the Group Targeting over 300 products with a simple proposition of comparable quality to the national brand leader, at a reduced price To provide the opportunity to deleverage power from multi-national suppliers Financials or Contribution of private label in Shoprite Group Shoprite’s private label categories have reportedly outgrown store growth threefold, with SA contribution increasing from 14.6% in FY2017 to 16.2% in FY2018, showing a profitable increase of +R300m (SA Retail sector share 21.1% - Source: Nielsen) 20 of its private brands now worth +R100m Usave is the Shoprite Group’s youngest supermarket chain and focuses on the needs of lower income customers. Usave has a simple philosophy: “When we save, Usave”. The brand removes the cost of packaging and regular store frills and trimmings out of the value chain and passes this saving on to the customer. “Where good food costs less . . . Everyday!” “No one is cheaper! Based on an independent audit of 100 of SA’s Favourite Products” *CHEAPEST ON 100 OF SOUTH AFRICA’S FAVOURITE PRODUCTS. REPRESENTATION OF AN INDEPENDENT AUDIT COMPARING AVERAGE PRICES OF 100 PRODUCTS OVER A 3 MONTH PERIOD This gives customers the price advantage associated with bulk buying, without the need to buy in bulk. Usave is an ideal vehicle for the Shoprite Group’s expansion plans into Africa and it also allows for greater penetration into underserved areas of the market within South Africa.   While most Usave stores follow a smaller format, some larger Usave super stores have been successfully opened in selected locations. These stores stock a broader range of products, along with a bakery and butchery. Money Market counters also provide much-needed access to a number of financial services such as money transfers, utility payments and bus ticket purchases. U$ave is their no-frills discounter brand with 348 stores that carry their own dedicated private label range of products alongside brand leaders.

What are the Private Brands in Usave? Private Label What are the Private Brands in Usave? Private brand is often tiered according to ‘good, better, best’ brand positioning, defined differently across retailers The tiered approach enables the retailer to control the price perception of its products Private brands Ritebrand U Brand Shopper Profile LSM 4 – 7 LSM 1 – 5 Strategic Brand Positioning Good (Value) Just like the best for less’ Ritebrand makes R10 go further - consistent quality at the lowest possible price No-frills range, with enhanced visual packaging Positioned against national branded products, with comparable quality Price Positioning Price fighting brand Cheapest on shelf in high volume, low margin categories, communicating a price advantage which reinforces the ‘low price promise’ positioning of Shoprite Just savings – delivering on consistent pricing and value SKUs Participates in basic commodity items across grocery, non-food and perishable categories Participates in basic grocery, perishables and personal care categories, at this stage

Strategic Brand Positioning | Good (Value) Private Label Strategic Brand Positioning | Good (Value) Ritebrand and U Brand aim to be the cheapest product on shelf without compromising on quality Ritebrand and U Brand lowest prices on shelf, reflecting Shoprite’s low price positioning

Price Positioning | Good (Value) vs. Market Leader Private Label Price Positioning | Good (Value) vs. Market Leader Ritebrand and U Brand strive for price leadership on shelf without compromising on quality, while supporting the Groups ‘low price promise’ positioning Good (Value) Market leader Note: pricing as at 13.12.18 R9.99

What media platforms are used to communicate Usave Private Brand Private Label What media platforms are used to communicate Usave Private Brand Print Website U Brand is advertised in broadsheets found in both local newspapers e.g. Isolezwe, and in-store In the ‘specials’ section private brand promotional products feature within electronic broadsheets Direct Mail Usave broadsheets are placed in consumers mail boxes, as a ‘Knock and Drop’ (Private brand featuring)

What’s going on in-store? Private Label What’s going on in-store? Ritebrand and U Brand have significant presence in-store (POS) and on shelf (limited products across categories) Merchandised next to the brand leader Private brand and two national brands carried Branding & pricing clear and prominent Wire baskets holding product in place Packaging with enhanced visual appeal Dumpbins in strategic places

Maryla Masojada | Lead Analyst Adrienne Osberg | Retail Analyst