GROUP AT A GLANCE

OUR VISION IS TO BE THE FIRST-CHOICE BRANDS IN THE COMMUNITIES WE SERVE.

‘The group is headquartered SPAR is a warehousing and distribution SPAR’s operations comprise 2 033 SPAR, business listed on the Johannesburg Build it, SaveMor, Pharmacy at SPAR and in Durban, South , Stock Exchange (JSE) in the Food and TOPS at SPAR stores in Southern Africa. Drug Retailers sector. The group is The Irish operations comprise 1 340 and has been operating headquartered in Durban, , SPAR, , XL and stores, and and has been operating in Southern Africa 22 wholesale Value Centre Cash and Carry in Southern Africa for for over five decades. With the acquisition branches in and South West England. over five decades.’ of SPAR Switzerland in 2016, the group has SPAR Switzerland supplies a wide expanded its business portfolio into a third range of food and beverage products major geography that is complementary to consumers through 301 company- to our operations in Ireland and South owned and independent retailer stores, West England. trading under the SPAR and TopCC brands. In South Africa, we operate six distribution centres and one Build it distribution centre, which supply and service 2 033 independently owned SPAR stores locally, and five countries on the African continent. Goods are distributed to the stores by a fleet of trucks and trailers owned by the group.

6 IN SOUTH AFRICA, WE OPERATE SIX DISTRIBUTION CENTRES AND ONE BUILD IT DISTRIBUTION CENTRE, WHICH SUPPLY AND SERVICE 2 033 INDEPENDENTLY OWNED SPAR STORES LOCALLY, AND FIVE COUNTRIES ON THE AFRICAN CONTINENT.

THE SPAR GROUP LTD INTEGRATED REPORT 2016 7 GROUP AT A GLANCE (CONTINUED)

Distribution centres

GEOGRAPHICAL FOOTPRINT

OUR DISTRIBUTION CENTRES ARE AN ESSENTIAL COMPONENT OF OUR BUSINESS MODEL.

South Rand

2 61 000 m

60.5 million cases despatched per annum

North Rand 29 581 m2 North Rand Lowveld 37.8 million cases despatched per annum South Rand Swaziland

KwaZulu-Natal

2 62 712 m KwaZulu-Natal Lesotho 52.3 million cases despatched per annum Imports warehouse SOUTH AFRICA

Western Cape

2 40 405 m Western Cape Eastern Cape

34 million cases despatched per annum

Eastern Cape 22 685 m2

29.1 million cases despatched per annum

Lowveld 21 416 m2

12.5 million cases despatched per annum STORES IN SOUTH AFRICA

Imports warehouse (Build it) 10 000 m2

1.7 million cases despatched per annum

8 BWG Group 24 000 m2

21.8 million cases despatched per annum

Appleby Westward Group Ltd BWG Group IRELAND 9 613 m2

10 million cases despatched per annum

Appleby Westward Group Ltd

SWITZERLAND St. Gallen St. Gallen 20 400 m2

29.6 million cases despatched per annum

STORES IN IRELAND STORES IN SWITZERLAND

THE SPAR GROUP LTD INTEGRATED REPORT 2016 9 GROUP AT A GLANCE (CONTINUED)

OUR PURPOSE IS TO PROVIDE EXPERT LEADERSHIP AND SUPPORT TO RETAILERS TO ENABLE THEM TO RUN SUSTAINABLY PROFITABLE AND PROFESSIONAL BUSINESSES.

OUR VALUES AND CULTURE SPAR’s values underpin all that we do. We are committed to showing passion, living our family values, and encouraging entrepreneurship in our leadership and through our relationships with our independent retailers. In 2015, our values were formally integrated into our strategic framework to ensure they form the foundation of our decision-making. Our values form an integral part of our performance management process.

• Unrelenting commitment to our customers (consumers and retailers), suppliers, brand, job and colleagues PASSION • Displaying authentic, positive energy and attitude • Enthusiasm • Wanting to do what you currently do and enjoying it in the process

• Creating a sense of belonging to the SPAR family, particularly with our people and our retailers • Supporting and embracing every person’s contribution FAMILY VALUES • Personalising work and business relationships • Working together for the greater good of the group – putting personal agendas aside and demonstrating true teamwork

• Creativity and innovation • Problem-solving, taking ownership and responsibility for outcomes ENTREPRENEURSHIP • Visionary leadership and the ability to take calculated risks • Long-term focus vs short-term gain

10 UNDERSTANDING The model relies on the quality of the The voluntary trading model allows our VOLUNTARY TRADING relationship between the independent retailers to access our various brands and wholesaler (SPAR) and our retailers, to support structures, but also affords them One of SPAR’s key differentiators is the sustain a mutually beneficial co-operative the freedom to stock their stores from any system of voluntary trading, which is at trading arrangement. Therefore, the group’s supplier of their choosing. This ensures the core of our business. The concept of performance relies on its ability to attract and that each SPAR store has its own voluntary trading is almost a century old retain retailers’ business by using our trading personality and unique offering. and is based on co-operation between the power to offer competitively priced products However, as a wholesaler and distributor of independent wholesaler (SPAR) and its and superior warehousing and distribution products, our primary source of income is retailers, to the mutual benefit of both. capabilities. We have developed world-class the sale of goods to these independently run SPAR is therefore not a franchise business, operations to support our retailers in stores. Their profitability is essential to the nor do we operate chain stores. We are running their businesses, as illustrated below. essentially a wholesaler and distributor of group’s overall sustainability, particularly in goods and services to our independently tough economic conditions. We therefore owned SPAR retail stores. place significant emphasis on supporting retailers to earn their business and loyalty.

WHAT WE WHAT RETAILERS OFFER RETAILERS GAIN FROM THE MODEL

Listed company INDEPENDENT THE SPAR GROUP LTD VOLUNTARY RETAILERS TRADING MODEL • Guild custodianship • SPAR brands • Superior warehousing and distribution • Freedom to source local products capability • Support from SPAR, including planning • Single delivery source and purchasing and procurement convenience • World-class retail operations services • Competitive pricing • World-class distribution

THE SPAR GROUP LTD INTEGRATED REPORT 2016 11 GROUP AT A GLANCE (CONTINUED)

UNDERSTANDING THE The SPAR Guild of Southern Africa pays In South Africa, the SPAR guild operates in GUILDS a membership fee to SPAR International. six geographical areas, each with its own The Chief Executive Officer (CEO) of BWG regional guild comprising retailers and The group holds the licence to trade under was the President of SPAR International distribution centre representatives from the SPAR brand in South Africa. The group’s in 2015. This role was taken over by the area. The Build it guild similarly has six licence was granted in 1963 by the global our group CEO in 2016. Through this regional guilds in its six operating areas, owner of the brand, SPAR International, relationship, the group benefits from comprising retailers and retailers from which is based in the , where knowledge sharing and exposure to its national distribution centre. SPAR originated. BWG was also licensed international leading practice. to trade under the SPAR brand in Ireland The SPAR guild currently has in 1963. SPAR Switzerland was licensed The various guilds in South Africa represent 890 members (2015: 885 members), to trade under the SPAR brand in 1989. a key stakeholder group that contributes while the Build it guild has 348 members SPAR South Africa is the second largest significantly to the sustainability of SPAR’s (2015: 320 members). The Swiss guild membership country, SPAR Ireland the business model. Their purpose is to serve as operate differently to the Southern African 10th largest, and SPAR Switzerland custodians of the brand and to grant guilds and therefore a straight membership the 14th largest. membership. comparison with Southern Africa is not possible.

THE SPAR GUILD OF RETAIL SPAR RETAIL SOUTHERN AFRICA MEMBERS STORES

IRELAND Six regional guilds (including TOPS at SPAR, Pharmacy NETHERLANDS at SPAR and SWITZERLAND SaveMor)

DISTRIBUTION CENTRES

Distribution centre SPAR THE SPAR representatives INTERNATIONAL GROUP LTD

(licence granted in 1963 by SPAR International)

THE BUILD IT GUILD RETAIL BUILD IT OF SOUTHERN MEMBERS RETAIL STORES AFRICA

Six regional guilds

SOUTH AFRICA

12 STRATEGY AT A GLANCE of the business. Detailed plans were and performance management, as then developed, and specific key envisaged by King III. To support this, The SPAR strategy articulates the key performance metrics relative to the the group underwent an enterprise and imperatives and enablers required to deliver desired outcomes were identified to enable risk management (ERM) process in 2015. on the group’s outcomes and vision of being the group to measure our performance The ERM framework was revisited and the ‘First-choice brands in the communities against our strategy. Furthermore, the updated during the year. we serve’. A broad, executive-level board believes that there is an inextricable plan was developed in 2014 to support link between strategy, risk, sustainability the implementation of the strategy in the various functional and operational areas

VALUES: SUSTAINABLE STAKEHOLDER SYSTEM RETURNS PASSION FAMILY VALUES ENTREPRENEURSHIP (society, environment)

VISION: FIRST-CHOICE BRANDS IN THE COMMUNITIES WE SERVE.

World-class Competitive Comprehensive World-class Best New business replenishment pricing range brands retailers growth system

As a wholesaler and Creating a competitive To remain competitive, The strength of our The system of We seek to expand distributor of goods, price perception is it is essential that we brand is key to our voluntary trading our organisation our first priority essential to attracting deliver excellence in ability to attract means that we are through organic is supply chain new customers to our Fresh, increase the independent retailers only as strong as our and growth

OUTCOMES optimisation to stores and maintaining range of our products and draw customers retailers, necessitating opportunities. ensure we run a their business in the and the sales of our to their stores. our provision of expert lean organisation. long term. house brands, and retail leadership keep abreast of and support. current market trends.

Excellence in Fresh New Supply chain optimisation Retail relationships, leadership and support business opportunities Competitive pricing Centre of community

IMPERATIVES Transformation

Retailer profitability

• Collaborative relationships • Effective systems (DC and retail) • Social and environmental commitment • Lean organisation • Motivated and competent people • Skills to run profitable retail stores

PURPOSE:

ENABLERS TO PROVIDE EXPERT LEADERSHIP AND SUPPORT TO RETAILERS TO ENABLE THEM TO RUN SUSTAINABLY PROFITABLE AND PROFESSIONAL BUSINESSES.

More information about our business model, strategy, key performance metrics and risk management approach is provided on pages 36 to 47 and 102.

THE SPAR GROUP LTD INTEGRATED REPORT 2016 13 GROUP AT A GLANCE (CONTINUED)

STRATEGIC DEVELOPMENTS profitability. Financial mentoring, assistance GOING FORWARD: INTEGRATING and access to loan facilities are also critical SPAR SWITZERLAND INTO THE The material developments in our strategy in enabling retailers to improve their GROUP STRATEGY are summarised below. retail offering. SPAR Switzerland has a significantly smaller FOREGROUNDING OF market share than the South African and Read more in ‘Our relationship with GROUP VALUES Irish operations, with different market retailers’ on page 40. Embedding passion, family values and conditions. We will therefore work with entrepreneurship as the primary criteria SPAR Switzerland to develop a unique for our decision-making is fundamental growth strategy, as well as price and value to the way we do business. We encourage EMPHASIS ON TRANSFORMATION methodologies that appeal to local and reward behaviour that exemplifies consumers. The push for sustainable and Building a diverse talent base that reflects these values. profitable independent retailers remains the South African population is critical in a critical strategic focus in all our operations. adding depth to our organisation and We will support this by identifying synergies Read more in ‘Our values’ on strengthening our social licence to operate. across our operations to enhance our page 10. We have increased resources to improve our brand and product offering. employment equity status and have various initiatives in place to establish greater representation in our supply chain. To Read more in ‘Operational overview’ RETAILER PROFITABILITY AS this end, we have included transformation from page 48. THE CRITICAL DRIVER OF FUTURE targets in the incentive structures of our

FINANCIAL GROWTH distribution management. We continue to focus on increasing the number of black The development of promotional campaigns, retailers in South Africa. boosting customer service through skills training and guiding vulnerable stores to identify opportunities for store Read more in ‘Social sustainability in improvements will enhance retailer Southern Africa’ on page 59.

14 ORGANISATIONAL STRUCTURE

DISTRIBUTION CENTRES See page 56

NEW BUSINESS Geographical expansion into Africa and internationally, forecourt retailing and other business opportunities

GROUP SERVICES Finance, human resources, logistics, IT, retail operations and merchandise

BUILD IT See page 58

PROPERTIES Distribution centres and leases

THE GROUP SPAR LTD SPAR SA SPAR licence and trademark holder (100% ownership)

THE BWG GROUP SPAR Ireland and South West (80% ownership) England operations

SPAR SWITZERLAND SPAR Switzerland operations (60% ownership)

OWNERSHIP PROFILE SPAR has a broad range of beneficial shareholders. No single shareholder owns more than 16% of the total shares and, at 30 September 2016, 49% of SPAR shares were held by offshore investors.

2% Government of Singapore Investment Corporation 2% 3% iShares 2% 1% Allan Gray 3% 2% Coronation Fund Managers 3% 2016 2015 3% Vanguard 3% 7% Oppenheimer Funds 6% 16% Government Employees Pension Fund 18% 66% Other 61%

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