Publication date: June 2019 Next publication: March 2020 SWOT Report

SWOT Strengths Strategy Relationships Growth Operations Offering Independent retailers equipped to customise product offering to retain and attract customers Strategy Strong focus on service departments Refined strategic direction providing clarity to all stakeholders Relationships Growth Masters of the independent retail member relationship Power of independent retailer vested interest Strong collaborative supplier and store community relationships Second largest retailer by turnover (i.e. sales out of till) in South Africa Intimacy and care of independent pharmacists, with established loyal customer base Solid double-digit growth in TOPS (sector leader) Retail Toolkit exclusive to SPAR, with success of Fresh Studio and other in-house apps New store growth i.e. SPAR Express almost doubled Gross profit growth ahead of turnover growth Knowledge sharing with SPAR International Increased operating profits due to expense good expense control SPAR culture Continuous investment through organic (refurbishments) and acquisitive growth (S Buys) Operations Controlled internal inflation in line with intent of positioning SPAR as price competitor Have a dedicated KAM per DC / Inland & Coastal Increased private label participation (Market Leader in SA Bulk of CAPEX invested into expanding and maintaining operations Growth in value-added services (an efficient profit mechanism) Ongoing investment in DC infrastructure and IT Diversified revenue stream: SPAR Ireland, Switzerland and expansion into Sri Lanka Increased local sourcing with roll-out of emerging farmer hubs Growth of pharmacy fuelled by purchase of pharmaceutical wholesaler, S Buys Offering Highly integrated supply chain - stock + availability + distribution Diverse range of relevant trading formats, across the LSM spectrum DC controllers full sight to data Dealing with store owners / decision makers

SWOT Strengths cont. Shopper Marketing Aspirational across LSMs 1 to 10 Building brand equity and loyalty through emotional engagement and excellent understanding of the SPAR shopper Strong customer loyalty and engagement through MySPAR Rewards Loyalty Programme and SPAR TextMe Targeted promotional calendar with focussed shopper engagement mechanisms Theatre of shopping - ongoing store refurbishment and optimization programme SPAR Insights "The potential and magnitude of our purpose will be established as the true north for our business. I am confident because it is in our DNA, it's what we do.” Mike Prentice, The SPAR Group Ltd Marketing Executive

SWOT Weaknesses Growth Operations Shopper Marketing Independent retailers buying out the system Dilution of independent retailer focus due to multi-owned stores High cost of entry Operations Inconsistent implementation of strategy / operational execution across non-catman stores Supply chain constraints, especially during promotional periods Resource hungry account for suppliers to service effectively DC pricing model (Member loyalty) DC pricing undermined by wholesalers (e.g. target in Makro targeting SPAR independent retailers) Erosion of supply chain dominance How much longer can SPAR absorb poor performing stores? Shopper Marketing Catman and buyers not aligned Shopper price perception Digital platforms are fragmented

SWOT Supplier Opportunities Growth Operations Understand SPAR trading formats - ensure best product (value and size) offered in right store format Work with SPAR to grow the basket – exclusive value pack offerings to drive volume and price perception Investigate products that complement and further drive fresh, deli (HMR) and bakery Explore private label supply opportunities Consider store volume based incentives, to drive loyalty to the SPAR DCs Explore opportunity for fortified products for lower LSM consumers Still possible to influence orders with store owners / managers Opportunity to tap into convenience offering at KWIKSPAR Operations Engage with all three touch-points – head office, DC and store – understand the points of influence and maximise cross-functional relationships to make a difference Identify areas of vertical co-ordination to encourage cost-reduction in the supply chain e.g. optimal buying configurations, drop shipment, backhauling and one-way loads, and supply chain mapping inter alia Maintain robust relationships through joint business planning initiatives Investigate how your business can integrate with the Cloud application that SPAR has introduced If listing NPD is proving difficult, try piloting in a few stores Get involved in SPAR regional trade shows

SWOT Supplier Opportunities cont. Category Management Keep abreast of category management developments and participate in SPAR SCOPS initiatives Subscribe to and use SPAR Insights tool for category and cluster planning Support #SKUs Must Fall Campaign driving “ War on Waste” initiative Suggest cross-category promotions and implement Monitor in-store pricing compliance Shopper Marketing Share shopper insights with SPAR catman Understand the different marketing requirements by region and by cluster Understand shopper segmentation across SPAR clusters and trading brands, and respond accordingly Collaborate to innovate on price Explore participation in themed promotions i.e. SPAR ‘Win a Car’, Birthday and Green Tag Sale promotions Participate in supplier collaborative campaigns Align promotions with targeted promotional calendar Determine the innovation pipeline for focus categories (personal care, baby and health & wellness) Explore participation in the MySPAR Rewards loyalty programme, and media platforms such as SPARMe APP and SPAR TextMe Look for opportunities to cross merchandise or cross Look for social media opportunities to connect and resonate with your targeted shopper Share insights and expertise in nutrition to help educate independent retailers and shoppers

SWOT Supplier Threats Growth Execution Brand equity and growth of SPAR private label and imports ‘#SKUs must fall’ campaign Over invest in the channel – head office, DC and stores Execution Retailer non-compliance with negotiated co-op and category activities High cost to serve due to number of touch points and autonomy of each DC Adopting a ‘one-size-fits-all’ approach to ranging Category Management Generic planograms results in KVI lines being squashed Category health check automating systems no longer share of shelf based on fair share, but rather looking at profitability per square cm (like Walmart) Shopper Marketing Increased representation of private label in broadsheets, social media and TV adverts

Maryla Masojada | Lead Analyst Adrienne Osberg | Retail Analyst