in south africa, spar’s approach is to source from local

SPAR - all rights reserved. 2018 | 1

OUR MATERIAL RELATIONSHIPS

SUPPLIERS

WHO THEY ARE

In South Africa, SPAR’s approach is to sourcefrom local suppliers with a strong commitmentto supplier development for our SPAR brands.Our rural hubs are examples of how we enable authentic shared value creation with emerging suppliersover the long term. We provide our suppliers with a growing market for their products, which ensures theirbusinesses are viable and sustainable.

5 000+multinational, small and medium enterprises, and individual trade suppliers

500+multinational and small artisan producers for niche fresh food categories

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Multinational and Swiss manufacturers with a substantial amount of smaller local suppliers

BWG Foods has a wide range of suppliers, with smaller suppliers accommodated through a central billingarrangement which guarantees their payment for direct store deliveries. The Value Centre Cash and Carrynetwork and the BWG Foodservice business are important elements of the total supply network availableto retailers.

In the annual benchmarking survey carried out by The Advantage Group in 2018, suppliers ranked BWGFoods at number two across the trade in terms of overall performance. The survey covers all retailoperators in Ireland and is completed by the top 40 to 50 fast-moving consumer goods (FMCG) suppliers.The supplier group rated BWG Group and its employees as number one across the trade. Suppliers ratedBWG first for building profitable businesses for both parties, and second for implementation of businessplans, including being a good company to do business with. BWG was ranked second within our peer groupfor payment process and resolution of invoice issues.

In Switzerland, our range of relationships allows us to provide a comprehensive offering at retail whilesupporting local industry as a responsible corporate citizen.

HOW WE ENGAGE WITH OUR SUPPLIERSWe have regular interaction through distribution centres and satellite warehouses during deliveriesOur joint business planning sessions target efficiencies in the supply chain, to the benefit ofsuppliers and SPARWe engage through the emerging farmer development programmeWe participate in trade shows: in Switzerland, our annual autumn trade show is used as a platformto share strategy and progress against our action plans with suppliers. BWG Foods organises thelargest trade show event for FMCG suppliers annually in June.

COLLABORATING FOR SHARED VALUESPAR’s operating model in all territories relies on an efficient supply chain and robust relationships withsuppliers to ensure an appealing value proposition for retailers at acceptable wholesale margins. The scaleof our logistics and distribution systems provides suppliers with substantial volumes at reduced operatingcosts. The high volumes handled at our distribution centres ensure a spread of fixed costs that translateinto reduced unit costs.

Joint business planning with our suppliers encourages vertical co-ordination and efficiency, and we haveidentified several cost-reduction opportunities. These include, for example, backhauling and one-wayloads, optimal buying configurations and supply chain mapping. We are increasingly focusing on trade

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marketing with marketing volume and value tracked against a scorecard, which is reviewed at biannualjoint meetings.

Backhauling and one-way loads require collaboration with suppliers to deliver goods to retailers on theirreturn journey from our South African as well as cross-border distribution centres, where possible. Wedeliver goods to retailers near our suppliers, then collect goods from suppliers, and return to thedistribution centre with a full truck. These initiatives reduce the unnecessary labour and fuel costsassociated with empty delivery trucks returning to their point of origin. Optimised supplier fleet utilisationfurthermore results in a reduction in our carbon footprint.

Supply chain mapping uses our cost-to-serve modelling tool and enables us to work with our suppliers tooptimise the most effective route to market. These initiatives result in increased efficiencies and sharedsavings for our suppliers and the group. By stripping unnecessary costs from our supply chain, we arefurther able to pass the cost-saving benefit to our retailers.

Most of our procurement happens at distribution centre level, and certain products are sourced from localsuppliers at store level. This enables sourcing that supports local enterprise. We work with suppliers toencourage sustainable product development and transparent sourcing. Our emerging farmer developmentprogramme assists vertical co-ordination between commercial and community farmers to the benefit ofthe surrounding rural economies.

Buyers typically engage with suppliers on a cycle of every six weeks and monthly with larger suppliers.Purchasing managers engage quarterly and the divisional marketing director at least every six months.

Build it’s supplier base is made up of strategic national and regional suppliers with a healthy balance ofbroad-based black economic empowerment (BBBEE) companies. Suppliers are selected and maintained tomeet the specific and, in some instances, tailor-made requirements of Build it retailers. Dedicatedmarketing employees are responsible for regular engagement with existing and prospective suppliers toensure that the group’s offering to retailers and consumers remains highly competitive.

Within Appleby Westward, a joint business planning process creates a sustainable climate of co-operationwith suppliers. Promotional forecasting and the implementation of agreed plans are key areas that benefitfrom effective collaboration.

In Switzerland, we rolled out a central billing and drop shipment network that enables small to mediumsuppliers to participate in an expanded retail network. Local suppliers, including the local manufacturersfor multinationals, small producers and farmers, constitute the largest part of our supplier base.

We have set up joint business planning sessions with major suppliers, including the largest dairy supplierin Switzerland. Significant cost benefits have already been identified and the sessions will be rolled out tomore suppliers soon.


ENSURING SUSTAINABLE SUPPLYWe formalised engagement with our South African house brand suppliers on a range of sustainabilitymatters. We have commenced collecting data on their environmental management systems, specificallyfocusing on energy use, transport, greenhouse gasses, waste and waste water, water use, emissions,pollution prevention and treatment of hazardous substances. This allows us to compare sustainabilityindicators across suppliers, and assess the extent of their gearing for the longevity of their businesses. Ourengagement includes site visits, during which suppliers share information. By using this information, wecan build relationship while increasing awareness of our collective environmental responsibilities.

Our aim is to contribute to efficiency improvements and ensure that our suppliers are sustainable andsecure.

Sustainable supply also relies on developing and attracting new suppliers.

In 2018 we launched the SPAR Natural brand that provides products which are free of synthetic chemicalsand minimally processed. The launch this brand required extensive dealings with suppliers to ensuresustainable, scalable and reliable access to the required product.

An example of a new supplier contracted this year followed the popularity of the Johannesburg freshproduce market, which has evolved into a one-stop destination for retailers, shopkeepers, street traders,restaurateurs and exporters. The market offers a wide variety of fresh fruit and vegetables. We identified asupplier already operating within the market with their own packhouse and a strong relationship withmarket agents and farmers. The new SPAR supplier now secures good quality produce at good prices anddelivers it directly to the South Rand distribution centre.

One of the trade-offs that we manage in the supply chain is where there are long standing relationships atdistribution centres and suppliers are at risk of losing their share of the business when new suppliers areintroduced. Buyers are expected to objectively assess strategic value and benefits in managing theirsupplier portfolio.

OUR COMMITMENT TO ETHICAL SUPPLY CHAIN DEVELOPMENTSPAR continues to engage with non-profit organisations, suppliers and activist groups to plan our approachto dealing with any unethical practices currently being carried out in our supply chain. SPAR understandsthe difficulties in addressing these issues and is committed to actively drive education in the supply chain


towards understanding the need for change. We take these considerations into account when designingenterprise development businesses that become part of our supply chain, thereby ensuring thatdevelopments are based on ethical principles. We address any instances where unethical practices areidentified with a supplier.

A STRONG FOOD SAFETY FOCUSAs a South African retailer and member of the Consumer Goods Council, SPAR has adopted the Global FoodSafety Initiative (GFSI) assessment, which provides a global benchmark for advancing food safety. Thismeans we require all our suppliers to comply with these standards and, eventually, to be GFSI certified, asthis will ensure common standards for the production and trade of food products in the group.

Our role is to support suppliers and enable capacity building. The GFSI global market capacity buildingprogramme is for small or less developed businesses that encounter difficulties in implementing evenbasic levels of food safety (according to the Hazard Analysis and Critical Control Points system (HACCP)) intheir food businesses. This can be due to their size, the nature of their work, and lack of technicalexpertise or economic resources.

The GFSI has a tiered approach to certification, which allows individuals responsible for food safety withinsmall and less developed businesses to develop a systematic action plan that can be implemented overtime. This reassures customers that they are developing effective food safety management programmesthat will reduce food safety risks.

The SPAR house brand food safety requirements are:

Certificate of Acceptability (Department of Health);GFSI food safety audit: basic (low-risk products such as biscuits);GFSI food safety audit: intermediate (high-risk products such as cut vegetables and processedproducts);Global Gap for Farmers (fruit and vegetables);Abattoir certificate (meat);Export Certificate (Department of Agriculture, Forestry and Fisheries); andFSSC 22000, BRC or International Featured Standard certification.

All private label suppliers are audited at intermediate level and we encourage them to apply forcertification (FSSC 22000, BRC, IFS, AIB).

KEY FACTS ABOUT SPAR SUPPLIER CERTIFICATION

ELEMENT TOTAL SUPPLIERSGFSI INTERMEDIATE

(%) CERTIFIED (%)

Freshline Bakery 42 79 21

Freshline Produce 103 15 85

SPAR brands 144 37 63

A new initiative has been launched to monitor and track all regional suppliers to align them with the GFSIGlobal Markets Capacity Building Programme.


Read more about food safety in our stores in the section on our relationship with retailers.

STRATEGIC RISKS RELATING TO SUPPLIERSPolitical instability in SPAR markets may hinder businessDisruption of operations may occur due to labour disputes and/or industrial and mass actionTransformation issues across all areas may impact the business negatively

CREATING A SCALABLE AND SUSTAINABLE FOOD SYSTEM

The concept of having rural farmers supply fresh produce to SPAR distribution centres started as anaspirational idea. In theory, we knew that this would provide employment, grow rural economies,ensure food security and improve nutrition, reduce transport costs for SPAR, shorten lead times, andincrease freshness and shelf life. Even as a concept, there were evident challenges such as financing,infrastructure and skills. Nevertheless, four years later, we have created a sustainable model that canbe rolled out nationally.

According to the current model, each hub consists of a packhouse that works much like a minidistribution centre, to which local farmers bring their produce. The produce is then distributed tostores within a 200 km radius. SPAR committed to funding the capital and operational expenditure, aswell as the associated logistics infrastructure required for the development of the three initialpackhouses.

The success of the model requires the support of a range of stakeholders, including farmers,communities, government, food manufacturers and wholesalers, retailers, financial institutions, andfunders.

The intention for the hubs is to have a 51% BBBEE ownership model.

The emerging farmer development programme is SPAR’s flagship corporate citizenship initiative,aiming to establish sustainable, commercial rural food hubs. Two hubs are already in operation:

The Mopani hub was established in June 2016 in Ofcolaco, Mopani, Limpopo. The packhouse wasopened in August 2017. Hub farmers supply the packhouse with produce and are building up abasket of goods to sell to retailers. It had a turnover of R10.1 million for 2018 and is set to reachbreakeven in year four. Funding was provided by the Dutch government and SPAR – the latter atno interest with 90% of the loaned funds paid back. Capital was invested in tractors, ploughingequipment, delivery vehicles, fridges, packhouse equipment, etc. The SPAR distribution centre inthe Lowveld provides financial management support.The Ikhwezi hub in Mpumalanga opened on 1 October 2017.


KEY FACTS:

TRAINING AND TECHNICAL SUPPORT FOR A SUSTAINABLE HUBA non-profit organisation provides technical services and lends comprehensive, on-the-ground supportto the smallholder farmers. Moreover, a commercial farmer mentor was appointed, thereby providinga critical link between the rural and commercial supply chains.

All hub farmers were trained in the following modules:

EconomicsLand preparationPlantingLegal

Pest and diseaseFertilization


IrrigationHarvesting

All of the farmers will receive localg.a.p. training as a stepping stone to achieving GLOBALG.A.P.certification – an internationally recognised standard for good agricultural practice (G.A.P.) and farmproduction that ensures safe and sustainable agriculture. All Ikhwezi hub farmers are receivingtraining including localg.a.p.

NUTRITION AND FOOD SECURITY FOR A SUSTAINABLE HUBOne of the aims of the emerging farmer development programme is to increase food security –particularly in the lower-income groups – by improving access to diverse, fresh and nutritiousproduce. Comprehensive nutrition diversity research was commissioned by SPAR to identify baselinenutrition intake in rural areas.

Based on the research, a nutritional campaign was developed according to five levers of change:

Make it understoodMake it easyMake it desirableMake it rewardingMake it a habit

The nutritional campaign aims to increase awareness and provide education by using a variety ofchannels – from newspapers to radio, and point-of-sale material. By providing consumers in targetedareas with messages, tips, and opportunities to learn about the benefits associated with certain fruitand vegetables, the campaign supports health and wellbeing in communities while driving demand forthe rural hub produce.

OPPORTUNITIES TO EXPAND OUR CONCEPT SUSTAINABLYIn the past year, we launched the SPAR RASET alignment project: a collaboration with the KwaZulu-Natal Provincial Government to build an effective and secure agro food system for the province. Theaim of the project is to ensure meaningful participation by previously disadvantaged farmers in thefood value chain, and improve the distribution of fresh produce in KwaZulu-Natal. Potential sites wereidentified and discussions are underway with donors and financial institutions to generate funding foradditional hubs and to create a fund for entrepreneurial development.

By taking a holistic approach to food system development and working with a network of partners theSPAR rural hub concept is gaining traction and creating a multiplier effect to the benefit of allstakeholders. We are creating a new future together.


EMPLOYEES

WHO THEY ARE

SPAR is built on strong relationships between allstakeholders, which hinge on our employeesand their ability to forge, maintain and servethese relationships.We therefore aim to develop leaders and employees who deliver excellent service within the parameters ofa lean business model that directs decision-making at the right levels.

HOW WE ENGAGE WITH OUR EMPLOYEESIn South Africa, each distribution centre has a fully fledged human resources (HR) department tosupport business operations in all matters related to our employees. We interact with the team inIreland in terms of sharing ideas on strategic HR matters and use existing synergies to learn from


each other. Interactions with the team in Switzerland were mainly on business processes andgeneral information sharing.From a group perspective, we have functional forums that review progress according to focus areasand agree on group projects.We support career and skills development through the SPAR Academy of Learning.Engagements include various committees established at the South African distribution centres,including health and safety, shop stewards and values committees, as well as an employeewellness clinic at each South African distribution centre.

CREATING A WORK CULTURE BASED ON VALUESMotivated employees are crucial to SPAR’s future. We pride ourselves in being a business built on solidrelationships that align behaviour to our values and foster meaningful workplace interaction.

Living our values is an integral part of advancing SPAR’s organisational culture. We keep the values top ofmind by creating awareness and recognising employees who are actively living the values. The associatedbehaviour is integrated into HR processes, such as, employee on-boarding, training interventions andrecruitment.

We have a Values Committee, the members of which we train to ensure they become catalysts for drivingvalues-based behaviour. An example is the training offered to shop stewards: this includes the dutiesassociated with their roles, understanding our values and culture, and the importance of maintaining apositive culture.

The SPAR values are integrated into our leadership capabilities and form part of managementdevelopment and performance management.

SPAR is committed to maintaining an organisational culture that respects human rights principles aimed atpromoting and protecting human rights. This includes the Universal Declaration of Human Rights and theInternational Labour Organisation’s Declaration on Fundamental Principles and Rights at Work.

BEING A TOP EMPLOYERSPAR was certified as one of the Top Employers in South Africa in 2018. This is the 5th year we werecompared with top organisations worldwide, and certified based on an independent audit.

https://investor-relations.spar.co.za/ir2018/who-we-are/our-values-and-culture/


Crucial to the Top Employers certification procedure is a stringent research process – the Top EmployersInstitute’s international HR Best Practices Survey – to assess participants against the standards set toachieve the certification. To further reinforce the validity of the process, all answers were independentlyaudited, meaning this research verified our outstanding employee conditions among a select group ofcertified Top Employers.

SPAR earned the certification as a Top Employer because our employee offerings across all measuredcriteria surpassed the minimum requirement.

We recognise the importance of positioning SPAR as an employer of choice in an unpredictable businessenvironment where we must compete for scarce skills.

Our employment offering has expanded significantly over the past few years, following the acquisition ofseveral international operations. Throughout the group, employees have career options in differentgeographies.

During the 2018 financial year, 16 316 days (2017: 13 411 days) were spent on employee training in SouthAfrica. Courses cover a wide spectrum – from enhancing operational proficiency at floor level, todeveloping programmes to grow management. In total, R22.9 million was spent on training (2017:R25.3 million), which reached 7 204 employees across the group’s operations. Read more about ouremployee development here.

INDUSTRIAL COLLABORATION FOR VALUESPAR upholds our employees’ rights to freedom of association and collective bargaining. In South Africa,we have a record of strong relations with our workforce and the trade union, the South African CommercialCatering and Allied Workers Union (SACCAWU). We are committed to maintaining positive relationshipswith unions at the relevant distribution centres and to agree on acceptable terms of employment ofunionised members.

Three of our South African distribution centres, namely KwaZulu-Natal, North Rand and South Rand, areunionised and have recognition agreements in place with SACCAWU. Each of these distribution centresengages in wage negotiations according to a cyclical programme, and these negotiations are conducteddirectly between senior management and union representatives. The other five distribution centres,namely Western Cape, Eastern Cape, Lowveld, S Buys and Build it, are not unionised.

A two-year wage deal was signed last year, with the next round of wage negotiations in 2019.

It is important for SPAR to have an industrial relations climate conducive to providing excellent service toour retailers. Any disruptions in the supply chain due to industrial action result in out-of-stock situationswhich directly impacts all financial indicators, as well as our relationships and reputation. Such disruptionsfurther carry potential risks related to the safety of our people and assets.

We build good relationships with our employees and unions and, if disputes occur, we deal with them assoon as possible. We have green area meetings where departmental objectives are discussed and if anyissues are raised, we ensure that they are addressed as soon as possible.

In addition, we have management and shop stewards’ meetings, workers’ councils and various forums toensure communication is effective in the workplace.

We invest in the development of our shop stewards as well as sharing information with them. We involvethe union officials as stakeholders to ensure we educate them about our business. We pride ourselves in

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paying above-average salaries in our industry. We provide a minimum of eight weeks’ notice prior to theimplementation of any significant operational change that could substantively affect employees or theirelected representatives as we believe in being transparent in our dealings and involving those affected infinding a solution.

No material industrial relations incidents occurred in the 2018 financial year.

SUPPORTING EMPLOYEE WELLNESSSPAR provides employees with a wellness service through clinics at each distribution centre. These fullyfledged clinics are operated by an occupational health practitioner. A doctor visits weekly to attend tomatters of employee wellness. We invested R4.6 million (2017: R4.3 million) in this service during the 2018financial year. The service is provided free of charge to all on-site employees, with support focused onhealth and wellness, and liquor and substance abuse. In terms of wellness, we partnered with abiokineticist, who developed an exercise programme offered to employees twice a week at head office, tobuild strength, and aid body conditioning and stress release.

HIV/Aids continues to be an area of focus and includes peer education to avoid discrimination in the caseof someone living with HIV/Aids. SPAR has an HIV/Aids policy and management framework in place. HIV-positive employees have access to voluntary counselling and support. SPAR runs HIV/Aids awarenesscampaigns, accompanied by regular training facilitated by dedicated peer counsellors, to addressworkplace challenges relating to HIV/Aids. All employees have access to an annual voluntary medicalexamination.

Although our retailers’ employees are a secondary level stakeholder, we provide retailers with HR support,training and information.

STRATEGIC RISKS RELATING TO EMPLOYEESDisruption of operations may occur due to labour disputes and/or industrial actionPoor data quality and analysis capabilities may prevent effective business intelligenceLack of transformation across all areas may impact the business negatively

Read about how we mitigate these risk in the strategy and business model section.

https://investor-relations.spar.co.za/ir2018/our-strategy-and-business-model/


RETAILERS

WHO THEY ARE

SPAR retailers are independent entrepreneurswho choose to own their businesses andmanage these under our internationallyrecognised brand.Each SPAR store has its own regional personality, offering consumers products that are unique to theirlocal store and requirements. Our retailers take full advantage of the benefits of the voluntary tradingmodel by sourcing specific goods from local traders, while using SPAR’s buying expertise.

BWG Foods has a company-owned retail estate operated by a network of franchisees: there are 104company-owned stores operated by 71 retailers. There are a further nine company-owned and company-operated stores which are in transition to new operators. It is not BWG Foods’ policy to operate individualcompany-owned stores on a long-term basis.

Within the wider independently operated SPAR and EUROSPAR estates, there are several retailers whooperate more than one site, and in some cases also operate different formats.

MACE and Londis share a similar profile of ownership: most independent retailers trading under thesebanners operate one store. MACE has over 20 retailers who operate two stores or more. There is also asupply contract in place with Maxol, which operates more than 70 forecourt sites.

In the Appleby Westward business, most independent retailers own one store with a minority owningbetween two to five stores.

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SPAR retailers in Switzerland are predominantly smaller individual store operators.

HOW WE ENGAGE WITH OUR RETAILERSRetailers have regular interactions with regional and distribution centre management andoperations teamsOur retail operations teams in South Africa make regular store visits and do monthly performancemonitoring through tailored service packages (TSPs)South African, Irish and Swiss retailers are invited to the annual SPAR retail conventionRetailers are members of the regional and national guilds with representatives who attend regularmeetings to give input on marketing, pricing and strategyWe invite retailers on ‘Look and Learn’ trips, locally and abroad

COLLABORATING FOR SHARED VALUEThe success of the voluntary trading model hinges on maintaining a robust working relationship betweendistribution centres and retailers. For SPAR, the quality of this relationship is dependent on our ability toequip our retailers to run a sustainably successful and professional business. Under the current economicconditions, and in the face of rising inflationary cost pressures and increased competition, maintaining thisrelationship remains our top priority.

The SPAR support team provides retailers with consultation and assistance in all areas of retail operations,including merchandising, promotions and advertising programmes, financial controls, employee andindustrial relations, new store development, and refurbishments to existing stores.

We recently increased our support through financial benchmarking and the development of TSPs thatrespond to the unique challenges of individual stores. This is particularly important in South Africa, wherecustomer demographics, spending power and the surrounding infrastructure vary greatly across regions.

All retailers have access to an online database with various store and product specifications, and bestpractice manuals. This includes guidance on recipes and pricing to achieve consistency and quality in freshproduce and the growing home-meal replacement segment. This is supported by the SPAR Academy ofLearning, that provides access to a variety of e-learning programmes shaped in response to retailers’needs. These programmes range from short-term guidance on how to solve day-to-day issues in-store, tolonger-term programmes that build HR and supervisory capability. The guilds further provide retailers withmarketing support and access to SPAR’s development fund to invest in refurbishments.

We remain committed to growing our retailer base, while supporting our existing retailers. We have aparticular focus on attracting black entrepreneurs in South Africa. All new retailers receive support andguidance from the group as well as the guild in assisting them to overcome challenges associated with theinitial set-up phase.

We also support our retailers in their engagement with their communities. SPAR retailers invest in a broadvariety of community-based programmes.

Within BWG Group engagement with retailers is primarily carried out by the field-based sales team withsupport from additional functions such as the merchandising and development teams. Regional meetingsencourage communication and information sharing, with most retailers seeking support to combatincreasing costs being experienced in their respective businesses.



In Switzerland, the introduction of trade shows, members’ meetings, a new marketing committee, travelincentives and a revised co-operative and inclusive structure for our guild has allowed a lot moreopportunity for engaging with retailers. We have consequently experienced a shift in culture towards whatis familiar in South Africa.

We restructured our retail operations function to provide dedicated support for the various channels,including a dedicated store designer for new and refurbished stores. Ongoing financial and operationalsupport is provided for stores in distress. Our biggest area of focus over the past year has been retailprofitability.

RETAIL TRAINING INITIATIVES IN SOUTH AFRICA

Jumpstart We collaborate with Mr Price Group to help address youth unemployment andprovide invaluable retail work experience through the Jumpstart programme.It links unemployed youth with entry-level skills to job opportunities in retailand its supply chain. This creates a pool of candidates from which retailers canrecruit.SPAR will increase its investment to more than R10 million over the next fewyears. 1 391 candidates were trained during the year and 584 were placed injobs.

Good Food Fundi This is a skills programme in the areas of baking, fresh produce, home-mealreplacements, and butchery.

Retail managementprogramme

Our distance learning course improves skills of managers and assistantmanagers with credit-bearing modules. Since 2011, more than 600 delegateshave completed this course.

Management inductionprogramme

This programme assists new retailers to understand how SPAR operates. Since2002, 1 544 delegates have completed the course.

Fresh programme This programme helps to effectively manage wastage and shrinkage, identifyways of improving profits, implement and understand legislative health andsafety standards and maintain the SPAR standards for a fresh department.

GRV training We developed an in-house goods receiving voucher (GRV) training programmeaimed at our employees’ children who are unemployed to provide them with ascarce retail skill.

IT systems This is online training provided to retailers and teaches them how to managetheir information systems.

E-learning We reached 553 stores this year, with more than 350 000 topics conductedand 57 217 employees trained.

These training initiatives – e-learning, in particular – address the needs of retailers who require access toaffordable training without employees having to travel extensively to attend sessions. Retail employeescan complete training at times convenient to them and that do not disrupt operations.

Each distribution centre employs a training manager to roll out training interventions for retail. In someinstances, this includes the physical delivery of training programmes, or finding alternate providers.


SHARED FOOD SAFETY FOCUS AT RETAIL LEVELSouth African retailers rely on SPAR’s supplier management and audits to ensure food safety compliancefor the products provided by the distribution centres. Where retailers elect to source their own productsfrom smaller suppliers, they take responsibility for food safety. Since this poses a risk to SPAR and retailersalike, we work with retailers and hold them accountable to ensure that the appropriate controls are inplace and documented. We also assist small suppliers to improve and align with programmes such as GFSI.

The operations in Ireland and Switzerland rely largely on government inspectors who enforce food safetyregulations, enhanced by an internal SPAR audit programme.

We have a dedicated team of quality controllers in Switzerland and are regularly audited bothindependently and by government inspectors to ensure we achieve the highest standards of quality andcold chain.

FOOD SAFETY AUDITSFood safety audits at distribution centres and stores are conducted through a service provider, SAI Global(QPRO). The distribution centres’ audit is aligned with the requirements for storage and distribution of foodproduct, inclusive of good manufacturing practices. Distribution centres are subject to bi-annual audits.Store audits are aligned to the relevant and recently updated regulations. Store audits are conductedquarterly.

SAI Global assists SPAR with microbiological sampling and testing at stores and distribution centres. Thistypically includes one food sample, two hand swabs and two surface swabs. We test for bacteria such asListeria Monocytogenes, Staphylococcus Aureus, E. coli, Bacillus cereus, Salmonella and Coliforms.

Following an audit, the retailer or distribution centre managing director receives a report and the microanalysis of the findings of the audit. The score rating varies depending on the risk to the business andbusinesses are scored according to critical non-conformance, major non-conformance, and partialconformance. This assists the stores to prioritise corrective action.

SAI Global supports our business in offering basic food safety training for food handlers. It also acts as acertification body for the GFSI programme.

THE GUEST PROGRAMME EVOLVESTo assist our retailers in continuously improving their customer service levels, we launched a GUEST


programme in 2017 around the following key themes:

The programme aims to treat customers as personal guests. It was launched with a manual, point-of-salematerial, e-learning modules, and a monitoring element that will include video feedback per store.

The rollout of the GUEST programme included induction sessions, videos, and awareness initiatives. TheGUEST champions are responsible for implementing and driving the GUEST programme in their stores.

PROGRESS WITH RETAILER TRANSFORMATIONSPAR remains committed to fast track black enterprise development amongst its brands. Successful blackretail entrepreneurs contribute to empowerment, job creation and are role models for young peopleseeking to start businesses. With funding being one of the main barriers to entry, SPAR launched a rangeof initiatives to support development.

During the 2018 financial year, SPAR placed 47 new BBBEE operators in SPAR stores in addition to itsexisting 292 BBBEE operators.

We are currently working on initiatives focused on:

Recruitment and identification of prospective black retailers from within our ranks at thedistribution centres and from various other sectors of the population, including graduates andunemployed peoplePlacing recruits on the appropriate training programmes and in relevant partnerships until they areequipped to run their own businesses sustainablyWorking with prospective funders from areas such as the Jobs Fund, the Labour ActivationProgramme through the Department of Labour and SETAsJoint ventures and mentorships with existing retailers to assist in developing new operators will beexplored

STRATEGIC RISKS RELATING TO RETAILERSPoor individual retailer performance may negatively impact the groupNew and existing competition may take market shareLoss of retailers and retail stores to competitorsPoor adherence to and implementation of group initiatives by retailersDisruption of operations may occur due to labour disputes and/or industrial and mass actionPoor data quality and analysis capabilities may prevent effective business intelligence




CONSUMERS

WHO THEY ARE

Due to our geographical spread and range ofstore formats, we service the full spectrum ofincome groups in all territories.We strive to provide consumers with an enjoyable and memorable shopping experience through a serviceand product offering that includes more than 1 000 exclusive SPAR house brand products. These productsdeliver premium quality at competitive prices.

BWG serves a wide range of consumers across the Republic of Ireland. They span all age profiles anddemographics. We serve an average of over 1 million consumers every day across our community-basedstores.

SPAR consumers in Switzerland consist of middle- to upper-income earners that are ethnically diverse – theimmigrant population makes up 25% of the total Swiss population. Our stores vary in location from ruralvillages to suburban and central business districts, commuter nodes and forecourt operations each with anoffering customised to their relevant market.

HOW WE ENGAGE WITH OUR CONSUMERSWe invite consumers to interact with us through marketing and promotional campaignsWe do ad hoc customer perception surveysIn South Africa, we have an in-house customer care lineOur owner-managed store model facilitates direct daily interaction with consumersWe engage through social media channels, including through Text Me and our SPAR Rewardsprogrammes

CREATING AUTHENTIC SHARED VALUE FOR CONSUMERSQuality and convenience is critical in growing and maintaining our market share, while ensuring that SPARis perceived as offering customers value. In South Africa, we remain within the industry price benchmarkon the surveyed basket. We also work with our retailers to offer consumers a comfortable and rewardingshopping experience focused on cleanliness, convenience, and employee friendliness.

The income spectrum of clients exposes the group to a wide range of trading patterns. Generally, higher-income consumers opt for convenience items and fresh produce. This includes ready-to-eat products,home-meal replacement items, and daily, top-up shopping. Conversely, lower-income consumers are more


likely to do a monthly shop, with an emphasis on commodity and bulk products. The ability to stock theappropriate product mix to cater for unique customer profiles at store level is a key strength of thevoluntary trading model. This enables retailers to customise their service offering, thereby unlocking valuefor consumers.

We further strive to offer consumers value through our South African SPAR Rewards programme.Participating consumers benefit from electronic product coupons that are sent to their mobile phones tohelp them save money. Steady growth in card activation, store participation and Text Me messagesconfirm the success of the programme. The launch of TOPS Rewards further expanded the programme.

Money market counters and kiosks are part of the South African customer experience, whereas BWGGroup continues the rollout of ATM facilities at its stores. These provide another reason for consumers toenter the store and two additional opportunities (sending money and receiving money) for SPAR to build along-term relationship with the consumer.

In South Africa, SPAR has an in-house customer care line that addresses complaints and queries. Thisnumber is provided on all SPAR branded products. All queries relating to non-SPAR branded products aredirected to the relevant suppliers.

Marketing campaigns focused on promoting family values and a balanced lifestyle – important inmaintaining the group’s positive engagements with consumers.

The business continually adapts to meet the changing needs of consumers in Ireland. Our campaigns overthe past year focused on delivering strong value in a competitive environment. We also promote a widerange of healthy options through programmes such as our SPAR Better Choices programme.

Since the launch of the SPAR Friends loyalty card in Switzerland this year we have registered more than123 000 card holders.

OUR COMMITMENT TO PRODUCT RESPONSIBILITY ANDNUTRITIONSPAR’s commitment to food safety and nutrition provides consumers with quality assurance and aims topromote healthy living. We deliver on our promise to provide consumers with high-quality, traceableproducts through strict adherence to product and packaging specifications. This includes providinginformation on sourcing and ingredients.

To ensure our products meet the highest health and safety standards, we contract with an externallaboratory that conducts random monthly testing across our entire product range. This ensures that ourproducts meet a strict set of composition specifications. These specifications are in line with best practiceand comply with all relevant legislation. This includes meeting government’s proposed reductions in sugarand salt concentration.

SPAR developed a nutritional strategy to support its commitment to house brand innovation and to raiseawareness about healthy nutrition for consumers. The following are the core principles of the strategy:

Providing enough information to enable consumers to make informed choicesLeveraging our house brands and our suppliers’ brands to deliver on our strategyEnsuring compliance with legislationCollaborating with government, where possible, to deliver nutritious food to the lower end of themarket



We are committed to promoting the responsible consumption of liquor. SPAR is a member of aware.org, aregistered non-profit, public benefit organisation. Further initiatives in terms of nutrition is the introductionof water at checkout counters, leaflets in stores and options to reduce the sugar and fat content inproducts. Our future focus will be on the reformulation of products and the development of new productsin our range, particularly in meal solutions.

STRATEGIC RISKS RELATING TO CONSUMERSMacro-economic factors may cause a decline in businessDisruption of operations may occur due to labour disputes and/or industrial and mass action




COMMUNITIES

WHO THEY ARE

Our stores are owner-managed by individualswho engage with their local communities in theareas surrounding the stores and distributioncentres.

HOW WE ENGAGE WITH COMMUNITIESEach SPAR store aims to be at the centre of the community by offering an end-to-end productrangePhilanthropic activities at retailer level to grow brand loyalty and play a positive roleInvestment in community development initiatives at group level, including sponsorships

CREATING AUTHENTIC SHARED VALUE FOR COMMUNITIESSPAR stores play a key role in the community as the local supplier of household goods. Other brandofferings, such as TOPS at SPAR and Pharmacy at SPAR, further ensure that a local neighbourhood SPARcan become a convenient, one-stop shopping destination. Build it stores provide rural and urbancommunities with a one-stop home building solution.

The voluntary trading model enables retailers to support local enterprise development and, in so doing,add value by growing the local economy. Retailers and their employees are also often from the localcommunity, which strengthens personal ties with their target market.

SPAR is founded on entrepreneurship, family values and passion. To foster this culture and position theSPAR brand as a force for good in society, the group encourages retailers to be the centre of theircommunity by supporting philanthropic and sponsorship initiatives at store level.

There is a symbiotic relationship between SPAR’s continued growth and the sustainability of thecommunities that support our stores. Our formal corporate social investment (CSI) policy ensures allocatedfunds support meaningful, sustainable projects, locally and nationally. During the year, SPAR investedR17.7 million (2017: R13.9 million) in CSI initiatives and R26.1 million (2017: R19.3 million) in varioussponsorship projects.



INVESTING IN OUR COMMUNITIESSPAR has an established community investment programme, implemented according to the group’s CSIpolicy. This policy guides community engagement on a national, distribution centre and community levelto ensure we move beyond donation-making to partnering with communities to contribute towardssustainable projects.

We believe in the power of education, and skills transfer and personal development are incorporated in ourchosen community engagement initiatives. Our involvement in sports and sport-related initiatives is anarea where we can promote SPAR as a brand associated with health and well-being, personaldevelopment, and community wellness.

In South Africa, on a national level, SPAR’s community projects address prevalent issues with a far-reaching impact. Many stores across South Africa are involved in projects, ranging from anti-drugcampaigns to soup kitchens and sponsorships – all in collaboration with networks of stakeholders. On adistribution and community level, projects respond to the specific needs of local communities to createmeaningful change.

Our main focus areas are:

feeding schemes, food production through income-generating projects, and educationalprogrammes aimed at minimising the impact of poverty on communities;educating communities on health issues such as nutrition, cancer, and the impact of HIV/Aids; andtraining unemployed youth and supporting community transformation initiatives that play a role incombating crime.

Community engagement is fully integrated into the daily operations of SPAR – at our corporate offices,distribution centres and warehouses. The table below contain a few examples of the kind of projects whereSPAR retailers and distribution centres are involved, listed according to our focus areas:


Food security andnutrition – eat smarter,live stronger

• In addition to the commercial benefits generated by the emerging farmerhubs, the Mopani rural hub assists in providing food security. Read more in thecase study on the emerging farmer development programme.• The SPAR Western Cape distribution centre partnered with Root to Grow toplant vegetable gardens in communities. School children plant vegetableseeds as part of their curriculum which covers planting, healthy eatingchoices, self-sufficiency, responsibility and recycling. They can run their ownfarmers’ market with the surplus produce or sell the produce to their localSPAR store.• The South Rand distribution centre supported the Sparrow FET CollegeProject through the sponsorship and stipends for 10 learners participating inthe Professional Cookery Learnership.• The My Spaza My SPAR initiative at the Lowveld distribution centre teachesyoung children about healthy food choices, how to use money and be anentrepreneur.

Health and wellbeing –supporting healthy living

• The SPAR Western Cape distribution centre participated in the AnnualCancervive Ride to educate communities and employees on the importance ofearly cancer detection and treatment.• In 2018 a HIV/Aids campaign at the Western Cape distribution centreincluded workshops to raise awareness and promote testing.• The SPAR distribution centres at North and South Rand were title sponsors tothe Whispers of The Orient event with Igazi Foundation as the beneficiary,focusing on the treatment of blood cancers.• Build it supported the upgrade of the Tswelopele Primary School toiletfacilities.

Crime prevention –empoweringcommunities

• A Victim Friendly Support Room Initiative was launched by the SPARdistribution centre in the Western Cape in conjunction with Business AgainstCrime. The partnership pledges to combat domestic violence, sexual offences,and other crime-related events.• Trauma counselling is provided for retail store employees if they areexposed to a crime incident.• 58 learnerships and internships were implemented at the North Randdistribution centre to provide work exposure and build skills that can be usedin the future to secure employment.


BETTER WAYS FOR BETTER LEARNING

The Unilever/SPAR partnership with the Department of Basic Education aims to deliver a behaviouralchanging hygiene and sanitation programme to over 15 000 primary schools in South Africa, focusingon grade 1 learners. Hygiene packs were delivered by distribution centres to SPAR stores for onwardcollection by school headmasters.

Achievements to date are:

2018 2017Stores 2 448 10Schools 5 439 542Children 457 982 32 496WAKE UP AND TALK ABOUT CANCERSPAR contributes to the Vuka Khuluma (wake up and talk) campaign run by the Childhood CancerFoundation of South Africa (CHOC). The campaign highlights the prevalence of cancer among childrenwhile increasing diagnoses of childhood cancer and driving access to available care and treatment.

Through its national store footprint, SPAR can reach communities even in rural and peri-rural areas.The opportunity to participate in Vuka Khuluma was extended to all SUPERSPAR, SPAR, KWIKSPAR,SaveMor, Build it and Pharmacy at SPAR stores in KwaZulu-Natal. Stores volunteer an in-storerepresentative to be trained by CHOC on the early warning signs of childhood cancer. These storesthen serve as Vuka Khuluma touchpoints to which the community may turn for guidance andassistance.

INVESTING IN OUR COMMUNITIES IN IRELAND ANDSWITZERLANDBWG Group supports a wide range of community projects through our retail brands, consisting of acombination of fundraising and awareness campaigns. Our current charity partnerships are:

SPAR: Cystic Fibrosis IrelandEUROSPAR: Irish Heart Foundation’s Mobile Health Unit/Defibrillator at Every EUROSPARProgrammeLondis: Pieta House, providing therapeutic support for people who are in suicidal distress andthose who engage in self-harmMACE: Downs Syndrome IrelandXL: Simon Community, working with homeless people

Our selection of partnerships is based on social causes that resonate with our retailers, storeemployees, consumers, and the communities in which our stores operate. Retailers vote for theirpreferred charity every two years. Since 2013 we have raised more than €1.5 million to support arange of very worthy charity causes through our retail brands.


The effectiveness of the charity programmes is measured through brand awareness and shopperresearch. We set fundraising targets for each programme and benefit from positive press coverage.

In Appleby Westward, charity fundraising demonstrates social responsibility while engaging in positiveactivity.

At SPAR Switzerland our marketing byline is “Being the good neighbour” and most of the projectsconducted this year were aimed at enhancing this position. Employees, retailers and consumersparticipated in initiatives that included:

Kids Flight day in association with Swiss Cancer AssociationLadies run/walk series sponsored in several towns and citiesSwiss Handball sponsorshipGood Neighbours day

STRATEGIC RISKS RELATING TO COMMUNITIESPolitical instability in SPAR markets may hinder businessThe inability to develop new sites may stunt growthDisruption of operations may occur due to labour disputes and/or industrial and mass actionTransformation issues across all areas may impact the business negatively



in south africa, spar’s approach is to source from local

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