Transforming our business

1. Transforming our business Graham O’Connor Group CEO

2. The World of SPAR • Founded in 1932 • Netherlands • Adriaan van Well • Objective to put independent retailers in • a position to compete with the chains

3. Our Name Door Eendrachtig Samenwerken Profiteren Allen Regelmatig “ All will benefit from united co-operation”

4. SPAR South Africa • Founded in 1962 • – Colin Michelsen • Launched in 1963 • 8 Wholesalers • & 500 Stores

5. People 64 500 R76, 5bn • Retail sales SPAR Today… SPAR South Africa (Sep 15) • Stores 1811 60 Million p.m. • Customers

6. Our Brands, our Pride

7. SPAR Retail Sales

8. 50 Years Of Power SPAR GROUP

9. BUILD IT has a separate Guild GUILDS THE SPAR GROUP LTD INDEPENDENT RETAILERS REGIONAL GUILD (6) NATIONAL GUILD • SPAR and TOPS in 1 Guild

10. SPAR STRATEGY VISION To be the first choice brands in the communities we serve. PURPOSE To provide leadership and access to a full support service to retailers to enable them to run sustainably profitable and professional businesses.

11. SPAR Values • Passion • Entrepreneurship • Family

12. STRATEGIC IMPERATIVES Deliver excellence in fresh Supply chain optimisation Leadership on owning “centre of community” Retail profitability New business opportunities Transformation

13. The retail environment Roelf Venter Group Retail Operations Director & Guild Chairman

14. STORE NUMBERS AS AT SEPTEMBER 2015

15. BLACK OWNED STORES AS AT SEPTEMBER 2015

16. Our Enterprise Development Initiatives Kevin O’Brien Risk, Sustainability and Corporate Governance Executive

17. STANDARD FMCG SUPPLY CHAIN RETAIL STORES RETAILER DISTRIBUTION CENTRE CUSTOMER SUPPLIER

18. SPAR GROUP SUPPLY CHAIN SPAR RETAIL STORE SPAR DISTRIBUTION CENTRE CUSTOMER SUPPLIER SUPPLIER SUPPLIER SUPPLIER

19. SIDWELL

20. CASAMOLA

21. SPAR GROUP SUPPLY CHAIN SPAR RETAIL STORE SPAR DISTRIBUTION CENTRE CUSTOMER SUPPLIER R56 Billion pa SUPPLIER SUPPLIER SUPPLIER

22. 40% * AT RETAIL SELLING PRICING

23. 60% * AT RETAIL SELLING PRICING

24. SPAR GROUP SUPPLY CHAIN SPAR RETAIL STORE SPAR DISTRIBUTION CENTRE CUSTOMER SUPPLIER R56 Billion pa R6.5 Billion pa SUPPLIER SUPPLIER SUPPLIER SPAR BRAND

25. ACTION POINTS FOR BLACK SUPPLIERS OF SPAR BRANDS • NO LISTING FEES • FAVOURABLE PAYMENT TERMS (7days vs 30days) • EFFECTIVE ROUTE TO MARKET • FREE SALES AND MERCHANDISING TEAMS • FREE ADVERTISING SLOTS • REASONABLE GUARANTEE OF OFFTAKE • (PROVIDED QUALITY AND PRICE CRITERIA CAN BE MET)

26. SPAR GROUP SUPPLY CHAIN SPAR RETAIL STORE SPAR DISTRIBUTION CENTRE CUSTOMER SUPPLIER R56 Billion pa R6.5 Billion pa SUPPLIER SUPPLIER SUPPLIER SPAR BRAND R14 Billion pa

27. Rural Hubs

28. The context Delivering excellence in Fresh is key to setting SPAR up for the next 50 years • 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 PeetSnyman have been doing • Real benefits • Enabling a food system that can provide affordable and nutritious food for rural communities • Development of an inclusive agricultural system

29. Sustainable Local Sourcing Consolidate Supply / Demand Access to Local Markets Rural Hub Model AVAILABILITY ACCESS USE Geographic area up to 200km radius Rural HubFresh Assembly Point (FAP) Farmer1 Farmer Nutrition Farmer FAP shared ownership (to include both producers and retailers) Farmer • Safe, fresh, nutritious food • Packhouse facilities • Quality control • Pricing benefits • Shorter delivery period Informal & Government led schemes • Dedicated technical assistance and agricultural know-how, financial loans and access to inputs for famers. Excess Produce 1 Registered smallholder farmers currently trading within loose value chains Main Stream (national markets) SPAR DC (incl. Freshline) e.g. Tiger Brands & Unilever Market off-take Food and nutrition security:

30. 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 2015 2016 - 2017

31. Mopani Hub • 27 SPAR stores within 200km radius of Ofcolaco (near Tzaneen) Broader focus • Initial focus area: 10-15 farmers 10 stores • Broader focus: 30-40 farmers 27 stores Initial focus area

32. Business model FAP Capital Expenditure R22.4m FAP Operational Expenditure R15.0m SPAR people time and travel R6.2m SPAR SA Contribution R43.6m 1. Capex and opex 8. Demand from local retail and regional DC’s Rural HubFresh Assembly Point (FAP) Financial Services Provider e.g. FNB, Nedbank 2. Input Finance SPV FAP shared ownership DUTCH GOVERNMENT 3. INPUT FUNDING 7. HARVEST YIELD Farmer Funding $ Farmer Technical Support Provider Business Support Provider 10. PROFIT PAYMENTS 9. RECOVER EXPENSES 6. TRAINING & TECHNICAL SERVICES TechnoServe or Lima 4. PURCHASE INPUTS INPUT & DELIVERY AGREEMENT 5. DELIVERY AGREEMENT Seed | Fertilizer | Herbicides | Insecticides etc

33. 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

34. Conclusion • Questions • THANK YOU