Strategic Focus Areas report Publication date: December 2018 Next publication: August 2019 Strategic Focus Areas report

Strategic Imperatives Strategic Focus Areas Masscash Retail Strategic Focus Areas Masscash Retail, consisting of Cambridge Food and Rhino Cash & Carry, brings a wide range of food products, with an emphasis on fresh service departments, to the LSM 2 – 6 consumer. Masscash Retail is the consolidation of a number of independent retail hybrid stores acquired by Massmart, beginning with Cambridge Food in 2008. Cambridge Food is located in densely populated urban areas and at busy transport hubs. Rhino Cash & Carries are located in outlying areas, largely rural, in KwaZulu-Natal and the Eastern Cape. Masscash Retail has five key focus areas for 2019: Masscash Retail 2018/19 Focus Areas (Strategy in Transition) Focus Areas Strategic Imperatives Organisational Re-design for Alignment and Efficiency   Optimise the combined leaner management team and associated support structures Bed down format strategy Focus on inter-group collaboration including IT infrastructure, procurement and supply chain projects, thereby improving operational efficiencies Expand the Footprint Expand the Retail footprint within South Africa via the new store roll-out plan and consider conversion of some Rhino stores to Cambridge Drive Retail Profitability Increase Retail profitability of mature stores and improve trading densities in new stores Maintain Momentum of Fresh Food Enhance fresh food assortment and strengthen the fresh operating model (process and quality) Continued Customer Engagement Know and engage with customers to build Cambridge Food and Rhino C&C brand equity Cambridge Food “Save money. Live better.”

Organisational Re-design For Alignment And Efficiency Strategic Focus Areas Organisational Re-design For Alignment And Efficiency Optimise combined leaner management team and associated support structures   In February 2018 Massmart announced the restructuring of some of the business functions within Masscash, and the relocation of the head office from Durban to Johannesburg. In addition, the Retail and Wholesale executive teams were combined into a single, smaller executive team under the leadership of Kevin Vyvyan-Day. The intention is to achieve a stronger and more balanced combined executive, allowing the respective management skills of the two business teams to complement one another. Bed down format strategy Masscash is focused on designing the optimal store portfolio, incorporating the best on offer from its current range of formats.   This includes reviewing the composition of the Group's current store portfolio and considering, inter alia, the conversion of some Rhino stores to Cambridge Optimised ranging and assortment is a focus   Inter-group collaboration including IT infrastructure and supply chain projects, to improve operational efficiencies Within the context of the organisational redesign of the total Masscash business, margin through efficiencies and the improvement of supply chain and IT capabilities continue to be a key Masscash Retail focus for 2018 and 2019. IT Massmart has stated its intention to roll-out SAP across all regions within the Masscash Retail division  Supply Chain The Retail division currently operates through DCs in Gauteng, KwaZulu-Natal and the Free State. Cambridge continues to focus on driving volumes through DC facilities to achieve the DC efficiencies required Going forward, the intention is for Masscash to utilise Massmart scale across primary (ex-factory gate to DC), secondary (DC to store) and, in time, tertiary (DC/store to customer) distribution channels, and includes optimal employment of Massmart Logistics Services (MLS)

Strategic Focus Areas Expand the Footprint Retail Profitability Not only is the strategic intent for Masscash Retail to grow its store footprint, but also to review the composition of the division’s current store portfolio and consider, inter alia, the conversion of some Rhino stores to Cambridge.  For the total Masscash division, one Retail store and one Wholesale store were opened in South Africa to June 2018, resulting in a net trading space increase of +2.9% to 388,070m² from December 2017; this after space reductions for two years (2016: - 4.3% | 2015: -7.0%). Growth is in line with the intent to expand the Retail footprint During 2017, Masscash completed the first conversion of a Rhino to a Cambridge Food store, achieving a sales increase of 49% in the first two months versus the prior year Masscash is expected to open 19 Retail stores between July 2018 and December 2020 (+14.9% increase in trading space from 388,070m² to 445,802m²) Alongside rapid store footprint expansion comes optimisation of the leaner management team and associated support structures Retail Profitability Driving sales growth in older, mature stores, while increasing store footprint and improving overall Retail profitability by maximising the trading densities achieved in new stores remains a focus for Masscash Retail. Masscash Retail continues its focus on driving sales and operating margin, while effectively managing expenses to drive profitability. For the total Masscash business, growth in expenses for HY2018 at only +0.4% (on a comparable basis, expense declined -2.0%) Collaboration across and within Massmart divisions continues to be a focus. This should assist with improving profitability, with focus across IT, supply chain, real estate, merchandise and private label, inter alia

Continued Customer Engagement Strategic Focus Areas Grow Fresh Food Cambridge Food remains committed to its fresh food strategy by improving process and quality, as well as being ‘Champions of Fresh’. The intention is to achieve this through a value-for-money fresh proposition using its Grade-A butchery, bakery and fresh fruit and veg in store, as well as ready-to-eat and home-meal replacement solutions. Thanks to its location close to key commuter routes, Cambridge is able to take advantage of increased demand for hot ready- to-eat meals for breakfast, lunch and dinner In support of enhancing its fresh food assortment, the Marketside brand has been rolled-out across fresh produce, bakery and butchery, serviced by The Fruitspot Cambridge’s ‘save money, live better’ position is in line with Massmart + Walmart Cambridge reinforces its ‘South Africa’s freshest food chain’ positioning through its shopper communication vehicles, with fresh and ready-to-eat meal solutions a primary focus in its messaging to lower-income shoppers Continued Customer Engagement To better understand its customer, Cambridge Food makes use of transactional data Cambridge customers remain focused on price as a key driver and Cambridge Food enjoys a strong price perception amongst its customers. The focus on highly-competitive pricing will continue, however it will be balanced with the key driver of improving Retail profitability

Continued Customer Engagement (cont) Strategic Focus Areas Continued Customer Engagement (cont) Promotions that resonate with Cambridge Food will be focused on: Driving footfall Increasing sales Creating shopper excitement Promoting brand awareness – in line with the Cambridge Food slogan of ‘Save money. Live better’ The reduction in stand-alone Rhino promotional activity since mid-2018, coupled with the increasing evidence of Rhino branding on Cambridge Foods advertising, provides supportive evidence of the Masscash intention to convert Rhino stores to Cambridge, and potentially merge the two brands going forward The catchy and vibey ‘Gumba’ price campaigns (Gumba refers to items of extraordinary large magnitude) continue to focus on value and price, personifying Mr Gumba who is “dedicated to saving people money so they can live better”, offering “Gumba savings” and not just ordinary savings Cambridge Food has approximately 250,000 Facebook likes, and is effectively using the platform to engage with its shopper base, from communication of promotions to researching shopper preferences. SMS is another platform which is used by Cambridge Food to communicate price deals and special offers to its shopper base Cambridge Foods is focused on not only saving customers money through price and value, but also saving customers time By increasing its value-added services offering, Cambridge Foods is adding to convenience for its customers Cambridge offers an Instant Money (IM) offering whereby customers can send money between Cambridge stores, to Rhino Cash & Carry stores and selected SPAR stores for R9.95

Maryla Masojada | Lead Analyst Kate Shirley | New Channels Analyst