Strategic Focus Areas 2019/2020 - Corporate Retail Supplier Toolkit May 2019 - Trade Intelligence
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Corporate Retail
Strategic Focus Areas
2019/2020
Supplier Toolkit May 2019
CONTENTS
GROUP STRATEGY
Pg 3
CONSUMERS
Pg 5
RESEARCH REPORT
PRODUCTION
LEAD ANALYST
Maryla Masojada BRAND BUILDING
RETAIL ANALYST
Pg 10
Adrienne Osberg
RESEARCH TEAM NUTRITION FOOD & HEALTH
Carey Leighton Pg 13
CLIENT SERVICES
info@tradeintelligence.co.za
EDITORS VOLUNTARY TRADING
Nick Paul and Katia Benedetti Pg 16
PHOTOGRAPHY CREDIT
Trade Intelligence Trade Photo DIVERSITY AND
Library (unless otherwise stated)
TRANSFORMATION
ENQUIRIES Pg 18
info@tradeintelligence.co.za
+27 (0)31 303 2803
PEOPLE
@TradeTatler
Pg 19
tradeintelligenc
e tradeintel Purpose and Scope of the Report
Planning with The SPAR Group Ltd for the short to medium
www.tradeintelligence.co.za term
This SPAR Supplier Executive Report is published to equip FMCG
Copyright © 2019 Trade Intelligence. All rights
reserved. Copyright subsists in this work. No part of supplier executives and key account managers, with the business
this work may be reproduced in any form or by any
means unless directly quoted as source.
information and perspective required to build relevant, commercially
Any unreferenced reproduction of this work will sound 2020- 2021 strategic and operational plans.
constitute a copyright infringement and render
the doer liable under both civil and criminal law. The report includes trended financial key indicator
performance and store footprint developments,
short to medium-term strategic intentions and a precise SWOT
analysis, published to assist you to identify the opportunities for your
The SPAR Group Ltd is a South African company licensed by SPAR
International and is also referred to as The SPAR Group South Africa. It business and products.
includes BWG Group (SPAR Ireland/South West England) and SPAR
Switzerland and The intention is a report that assists you to grow and
for the purpose of this report is referred to as “The SPAR Group Ltd” or
“SPAR Group” or “the Group”. SPAR Southern Africa refers to The SPAR cement your trading partnership with The SPAR
Group excluding BWG Group and SPAR Switzerland, thereby representing
SPAR results from trade and footprint in South Africa and Southern African Group Ltd.*
stores.
*Report contents are compiled by the (Ti) Trade Intelligence analyst team. Our
methodology aggregates retailer and supplier face-to-face interviews, public
domain data sources, retailer presentations, in-store immersions and financial
report data to provide supplier-relevant perspective and insights. Report contents
are the view of (Ti) Trade Intelligence and are not formally endorsed by The SPAR
Group Ltd.
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 2
GROUP STRATEGY
In 2018, the business carried out a stakeholders – head office, the DCs, independent
comprehensive review of its strategy. retailers and the communities themselves – is regarded
as key.
Over the past five years, SPAR has undergone major
transformation as a business by: The next phase of the Group’s strategic review process is
alignment of the other territories it operates in, as well as of
• Acquiring new businesses in different territories
each trading brand i.e. SPAR supermarket formats, Build it,
• Entering new trading formats, such Pharmacy at SPAR and TOPS at SPAR.
as pharmaceuticals
• Undergoing leadership changes
"Business does have a role to play in
• Shifting in response to evolving markets as a result
of increased industry competition, economic and addressing the big issues in society, and
political challenges, as well as shifting consumer we need to do it by acting and thinking
demands, driven to a large extent by technological
differently. Like co-creating innovative
advances
customer solutions with our retailers, our
This evolution, coupled with changes in the South
African market and trading dynamics, demanded a re-
suppliers, NGOs, government and
examination of the strategy, involving extensive market, other parties."
consumer trend and shopper research, as well as
engagement with retailers, the guilds, employees and Graham O’Connor, The SPAR Group Ltd CEO
suppliers. The outcome is a refinement rather than a
replacement of SPAR’s six strategic focus areas, which
The adjustments of the SPAR Group South Africa
are summarised in the table on the following page. The
strategic focus areas:
strategic focus areas provide the ‘strategy-into-action’
framework to achieve SPAR’s vision, purpose and
2018/2019 2019/2020
values for the short to medium term.
1. World-class
The primary change is moving from a strategy Replenishment 1. Consumers
with a focus on operations to a strategy system
focussing on consumers; it is about putting the
consumer at the
2. Competitive Pricing 2. Nutr
heart of every business conversation. The ition, Food and
3. Comprehensive Range
adjustment is designed to ensure constant Health
consideration of the outward impact the Group has 4. World-class Brands 3. Brand Building
on the communities
it serves. 5. Best Retailers
4. Voluntary Trading
The rationale? If the business and its teams put the
6. New Business Growth
consumer at the centre of every business conversation,
SPAR will deliver even better on its powerful history of 5. Diversity and
serving communities and serving its members. This Transformatio
might seem a subtle change, but it is an important one. n
6. People
Operational execution and efficiencies remain key,
with 2019/2020 specifically focusing on the retail
and
wholesale aspects of the core South African
supermarket business. Encouraging collaboration
between
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 3
The table below outlines the six strategic focus areas and associated key priorities (strategic objectives) for
the upcoming trading period:
Focus Areas Strategic Objectives
To ‘put consumers at the heart’ of the business by:
• Understanding and segmenting consumers and retailers based on
their needs
01 | Consumers • Reviewing relevance of offering by segment
• Responding to industry trends with innovation and new business
• Refining digitisation in consumer-facing technology
To build SPAR’s brands in hearts and minds through:
• Entrenching the ‘MySPAR’ brand essence
02 | Brand Building
• Growing house brands (private label)
• Relevant consumer engagement
To provide affordable and nutritious food through:
• Driving supply chain optimisation and efficiencies
03 | Nutrition, Food
• Growing fresh as a differentiator
and Health
• Investing in a sustainable and secure agro-food system
• Tapping into the growing health and wellness category
To drive the future voluntary trading model by:
• Embedding solid independent retailer relationships
04 | Voluntary
• Offering relevant trading formats and brands for profitability and growth
Trading
• Focusing on organic growth opportunities
• Updating and executing the standards and rules
To embed diversity and transformation across:
05 | Diversity and • SPAR Group employees
Transformation • Retailers
• Suppliers
To grow and inspire people by:
• Actively driving the desired business culture
06 | People
• Designing and implementing an organisation of the future
• Driving talent management and leadership capabilities
Note: For the purposes of this report, we will only focus on the South African trading context
SPAR is in the process of developing detailed action plans for each strategic focus area, with the appropriate key
performance indicators (KPIs) and phasing. The translation of this into action and effective KPI measurement is
what will ensure success.
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 4
01 | CONSUMERS
Strategic Objective: To ‘put consumers at the heart’ of the business
Putting consumers at the heart of the business sounds like a softer strategic goal, however, to reiterate, it changes
the business conversation. In practice, to deliver the strategic objective for the upcoming period, the business will
be focused on achieving a better understanding and segmentation of consumers and retailers based on their
needs; reviewing the relevance of product offerings by segment; responding to industry trends with innovation and
new business concepts; and improving digitisation of customer-facing technology.
"The consumer sits at the core of our business and is
integral to how we operate both within our internal
structures and our external operations."
Mike Prentice, The SPAR Group Ltd Marketing Executive
Understanding and segmenting consumers
and retailers based on their needs
For a number of years, SPAR has segmented its Achievements and intentions
trading brands into nine clusters, each with its own
• SPAR will continue to broadly utilise the nine cluster
customer demographics, suggested range and pricing matrix – however as part of the refreshed strategy,
profiles. SPAR will be reviewing segmentations to monitor its
Low Middle High
Trading Brand relevance relative to consumer and independent
LSMs LSMs LSMs
and Format retailer needs.
(1 – 5) (5 – 7) (7 – 10)
Such segmentation will continue to be the foundation
KWIKSPAR on which the category management SPAR Insight
Everyday
tool is based. This framework facilitates analytics of
convenience Cluster 1 Cluster 4 Cluster 7 like- for-like store cluster comparisons, benchmarking
(250m² - 600m²)
range optimisation, category planning, etc.
SKUs: 2,500 – 5,000
• SPAR is investigating consumer segmentation beyond
SPAR
Neighbourhood the SAARF LSM model, which is no longer in use
supermarket Cluster 2 Cluster 5 Cluster 8
(600m² –
1,300m²)
SKUs: 4,000 – 10,000
SPAR/SUPERSPAR
One-stop bulk shop
supermarket Cluster 3 Cluster 6 Cluster 9
(>1,300m²)
SKUs: 8,000 – 11,000
The 9 cluster matrix simplistically underpins
the focus on customer segmentation,
facilitating like-for-like store cluster
comparisons
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 5
Reviewing relevance of offering by segment
In a retail landscape where shopper expectations and − SPAR’s “War on Waste” (WOW) campaign
demands are continually changing, every centimetre of continues to be driven from SPAR head
shelf space must be optimised. Putting the consumer at office.
Whether this be waste due to
the heart of the conversation means carrying the right
inefficiencies or waste due to incorrect
product on the shelf, at the right price, whilst carefully products on shelf
balancing the basket margin to achieve profitability. (‘#SKUs Must Fall’ initiative), SPAR is
applying an 80:20 principle for waging war on
Achievements and intentions wasted profit. Areas of particular focus for the
• SPAR’s voluntary trading model is designed to period are over-ranged categories, overstocks,
assist independent retailers with optimal ranging, out of stocks, slow-moving lines, reducing
returns, and other lost profit opportunities from
store layout and merchandising of competitively-
DC to store.
priced product lines, catering specifically to the A continual refresh of the shopper experience
community each store serves and introduction of relevant innovative ranging
• Category management remains a key focus for is critical to the relevance of the offer
SPAR in order to deliver a relevant, effectively − Three focus categories continue to be
segmented range offering. Regional operations earmarked in 2019/2020 as core drivers of
managers remain focused on educating and organic growth, namely personal care, baby, and
encouraging independent retailers to apply health & wellness
category management principles to their shelf / − Ongoing category projects include:
range management, tapping into data analytics o ‘On the Go’ till points – Category
from the SPAR Insight tool to do so management principles applied to till
− Suppliers are encouraged to share category point ranging to optimise retailer
insights prior to the annual SPAR Category profitability
Optimisation Plan (SCOPs) forum, to equip o ‘On the Go’ kiosk – Impulse products
regional operations managers with the tools displayed within a dedicated area, catering
to achieve independent retailers buy-in to “pop-in” convenience needs
"There is a deliberate increase in category management support to stores, with immediate
benefits in terms of maintaining range, flow and forward share."
Graham O’Connor, The SPAR Group Ltd
CEO
Personal care, baby and health and wellness Optimal ranging, store layout and merchandising,
categories remain focus areas in 2019/2020 caters to the community each store serves
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 6
• A key driver of relevance of product to both • Various pricing mechanics and promotional
consumer and independent retailer is the price of campaigns are being applied by SPAR to deliver
that product on shelf. For SPAR, managing its objective of positive consumer price
competitive price perceptions has been an perception as well as to achieve actual
ongoing strategic focus competitive pricing on the retailer’s shop shelf.
− SPAR remains focused on delivering effective Examples include:
competitor price benchmarking, using Business − The SPAR “Green Tag Sale”
Monitor International (BMI) monthly pricing
reports to ensure SPAR remains within the − Multi-buy specials
industry price benchmark on a surveyed basket − 1 or 3-day “Price Shock” and 3-day “Price Alert”
of goods specials
− A price perception study conducted by Nielsen − The ‘win free shopping’ campaign
in 2018 indicated that 66.1% of consumers Note: For more information on price mechanics refer to the
view SPAR as competitively priced (2017: ‘SPAR Marketing at Retail’ Trade Profile report
56.3%), while 33.9% of consumers still view • Service departments (produce, bakery, butchery,
SPAR as more expensive (2017: 43.7%). The deli/home-meal replacement (HMR)) are high
steady improvement is an indication that priority in terms of benchmark pricing against other
price perceptions are changing for the good supermarket retailers. These departments drive
footfall and return on investment for independent
SPAR Price Perception Study 2018 retailers. SPAR is focused on the relevance of service
department offerings to meet consumer demand for
66.1
fresh, and healthy and convenient products relevant to
56.3 56.3 56.6 their income bracket
• SPAR broadsheets remain a significant tool in in
43.7 43.4 43.7 driving consumer awareness of competitive pricing
in SPAR’s service departments, with the promise of
33.9
“Enjoy the best in fresh for less”
• SPAR ensures offerings are economically and
culturally relevant to store clusters, with high LSM
stores offering premium meal solutions for busy
families, whilst lower LSM stores offer value meals
tailored to local tastes
Competitive/Cheaper More
• Through a focus on innovation, quality and price
Expensive
and now representing 24% of total SPAR grocery
2007 2008 2017 2018 sales, SPAR private label continues to play a pivotal
SOURCE: Nielsen: +2,500 demographically represented households in South role in communicating SPAR’s value message with
Africa
the promise of “as good as the best for less”. TV
commercials and broadsheets showcase the product
range with its clear message – “Value we’re proud to
"Competitive price perception remains an put our name to”
ongoing battle for SPAR, but there is no Note: For more information on SPAR private label, refer to section 2
Brand Building and the ‘SPAR Private Label’ Trade Profile report
doubt that we are making huge strides, more
than two-thirds of people are now viewing
our pricing in a positive light."
Mike Prentice, The SPAR Group Ltd Marketing Executive
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 7
Responding to industry trends with innovation
and new business
Change is the new ‘normal’, with evolving shopping • SPAR is pioneering the roll-out of large ‘quick-trip’
preferences and disruptive technology marking the stores in mixed-use developments or urban
future of retail. SPAR understands that knowing and villages. The roll-out of these stores is consistent
responding to these trends is essential to maintain a with the broader strategy of offering the best
competitive edge, hence the focus on continuous products at great value, curated to meet the needs
innovation and new business concepts. and preferences of the communities it serves
• Pargo, a smart logistics company, partnered with
Achievements and intentions
selected SPAR stores and other retailers (Lewis,
• SPAR regards the continual refresh of the shopper Beares Best Home and Electric stores) in a move to
experience and introduction of relevant, innovative establish the largest parcel drop-off and pick-up
ranging as critical to the relevance of the offer. point network in South Africa. The intention is to
In many categories SPAR has led the way in how enable retailers to offer an affordable and
formal retailers introduced great category shopping convenient solution for last-mile delivery
experiences across focus categories – from distribution
personal care and pet care to magazines.
• Ticketpro, a leading ticketing innovator, has
• The most recent response to a primary partnered exclusively with SPAR in rolling out
consumer trend from SPAR has been in the shopper kiosks in the Payzone area of selected
area of health and wellness SPAR stores nationally. The service, launched in
− SPAR Natural, a ‘health and wellness’ concept July 2018, offers streamlined event ticketing,
designed to address growing consumer commuter bus ticket sales and other value-adds.
demand for supermarkets and local This provides SPAR
convenience stores to meet their health and with a strong counter to the Shoprite Money
wellness needs, was rolled out to selected Market Computicket offering
SPAR stores nationally in June 2018. The
concept has proven successful with feedback
from independent retailers being “extremely
positive” and customers expressing
“enthusiasm”. SPAR intends to expand the
product range as well as continue with further
store roll-outs in 2019/2020
"SPAR Natural has given us the opportunity
to create a new category, give the customers
what they want and support many small
South African entrepreneurs to bring their
health products into the supermarket retail
area from within a sea of multi-national
suppliers."
Riccardo Afeltra, owner SPAR Athol in Johannesburg
Tapping into the growing health and wellness
category by rolling out the SPAR Natural
concept
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 8
Refining digitisation in consumer-facing
technology
"That's just the kind of company we are. At
Consumer-facing digital technology is an aspect driving
a strategic level, we choose to embrace the
digital transformation in grocery retail today. SPAR has
tapped into integrated web-based and mobile platforms cloud sooner rather than later so that we
that focus on a consumer-centric approach to ensure will stay ahead of the curve - ahead of our
competitive advantage e.g. geolocation
competition."
Achievements and intentions
Greg Hay, The SPAR Group Ltd Technology and
• In 2018, First National Bank (FNB) announced a Operations Executive
partnership allowing customers to use eWallet@till
when purchasing goods or withdrawing cash at
+1,300 SPAR stores in South Africa
"The partnership complements our long-term
digital strategy to expand access to financial
services. Our customers are increasingly
making cardless withdrawals at our ATMs
and we see this becoming a common trend
where mobile technology is preferred instead
of the physical cards."
Sandi Madikiza, Head of FNB Mass Market
Segment:
Consumer Core
Banking
• The SPAR Rewards programme continues to gain
momentum with its refreshed electronic product
coupons, utilising mobile functionality through the
SPARMe app and Text Me SMS notifications.
SPAR uses the platform to communicate
promotional messages and provide instant
gratification of reward redemption at the till
Strong customer loyalty and engagement through
MySPAR Rewards Loyalty Programme, SPARMe Extending financial inclusion through digitally-
app and SPAR TextMe based financial services platforms
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 9
02 | BRAND BUILDING
Strategic Objective: To build SPAR’s brands in hearts and minds
Authenticity is key in building brand emotional engagement. To win consumers’ hearts and minds, SPAR will
continue to drive its revised purpose of “inspiring people to do and be more”. The intention is to work to achieve
this by entrenching the ‘MySPAR’ brand essence – building a strong emotional connection with consumers;
growing private label (house brands) as a point of differentiation; and strengthening brand equity through relevant
customer engagement. SPAR’s mission is to be ‘loved and respected as a brand’, resulting in an enjoyable
association for all stakeholders.
"While price, quality, range and freshness are always
going to be important, the difference for millions of
South Africans who shop in our stores every day is the
connection they feel with their local SPAR."
Mike Prentice, The SPAR Group Ltd Marketing Executive
Entrenching the ‘MySPAR’ brand essence
SPAR will continue to create a personal Achievements and intentions
connection with shoppers, a long-standing • Launched in October 2010, “MySPAR” remains
differentiator. the underpinning message to SPAR brand
campaigns into 2019
• The message continues to provide a medium
for customers to interact with the brand
• SPAR will continue to strive to achieve its vision of
being the “first-choice brand” that appeals to all
South Africans, regardless of their ethnic group,
gender, age or spending power, through both
SPAR and its independent retailers continuing to
embrace their role as a “centre of community”
SPAR Brand | “The Evolution”
− Independent retailers are encouraged to support
1995 and sponsor community initiatives, to raise
brand awareness and to foster the culture of
passion, family values and entrepreneurship
within the communities they serve
− SPAR has an established CSI programme,
There’s a friendly SPAR wherever you are. integrated into its daily operations from DCs
to stores
2000
2010
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 10Growing house brands
SPAR house brands (private label) are among the pre-
eminent private label products on the South African
market, and are regarded by SPAR as key to offering
differentiation and margin to its independent retailers,
and a comprehensive range of quality products at
great value to shoppers.
Achievements and intentions
• 1 in 4 products sold in SPAR stores are now private
label (SPAR house brands)
• SPAR has +3,500 private label SKUs including +1,800
SPAR branded products, built on a guarantee of “as
good as the best for less”, and a clear message of
House brands are key to offering differentiation
“value we’re proud to put our name to”
and margin to independent retailers and great
• In 2018, SPAR combined all private label products* value to shoppers
into one stable, delivering a turnover of R13.5bn, and
contributing 24% to total SPAR grocery sales
• SPAR private label (house brand) sales increased to
R10.7bn, achieving +4.3% growth YOY
• SPAR branded product sales increased +5.8% to
R8.5bn
• Strong performance has been attributed to a
sustainable innovation funnel and an aggressive
promotional calendar, supporting above and below-
the-line campaigns
• SPAR has a long-term target to grow private label to
25% of total sales
Note:* Private label products include: Spar branded products, Freshline, Tender &
Tasty, Savemor, Chikka Chicken, Bean Tree, McCoy Pies, Smart Chef.
For more information on SPAR private label, refer to the ‘SPAR Private Label’
Trade Profile report A sustainable innovation funnel spans
across categories
1 in 4 products are now private label
Copyright © 2019 Trade Intelligence Trade Intelligence | The
TradeSPAR Group Ltd Strategic Focus | May 2019 11
IntelligeRelevant consumer engagement
SPAR continues to focus on building brand equity • Supplier collaborative campaigns tailored to
through relevant engagement with key specific shopper profiles (store segments) are
stakeholders, including consumers, independent welcomed by SPAR, when designed to provide a
retailers, and partnering FMCG suppliers. winning combination of incentivising independent
retailers and exciting shoppers with great prizes
Achievements and intentions e.g. the recent Simba ‘Miami Braai Competition’.
• SPAR strives to provide shoppers with an enjoyable The strategy is three-fold: driving shopping
shopping experience, rewarding loyalty with patterns, increasing footfall, and increasing in-
engaging and innovative shopper marketing store sales volumes
campaigns. Most campaigns are driven through the • Value-added services: Pay-zone and ‘On the Go’
MySPAR Rewards loyalty programme, with instant Kiosks continue as a focus to drive footfall, offering
gratification at the till point. Examples of successful a variety of time-saving services such as money
national campaigns run in 2018, which will be transfers, prepaid electricity, ticket sales for bus
continued into 2019/2020 are: and
− MySPAR Rewards Super Saturday special events, pension and social grant pay-outs,
etc.
− SPAR ‘Win a Car’
• Complementary brands such as TOPS at SPAR,
− Free or ‘percentage off’ shopping linked
SPAR Express and Pharmacy at SPAR complement
to seasonal events
the SPAR brand, offering consumers a
• SPAR makes fair use of social media channels comprehensive shopping solution across trading
(mostly Facebook and YouTube), although some formats and categories
other supermarket retailers are showing greater "Our 55th birthday celebration is all about
activity. The business is aware that online consumer
connectivity can provide invaluable data on
the customer and giving back, as well as
awareness and engagement levels of content, and creating a positive interaction with the
an opportunity to listen to the voice of the consumer
SPAR brand."
in an unrestricted environment
Mike Prentice, The SPAR Group Ltd Marketing Executive
Loyalty is rewarded with engaging and An efficient profit mechanism through growth
innovative shopper marketing campaigns in value-added services
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 1203 | NUTRITION, FOOD & HEALTH
Strategic Objective: To provide affordable and nutritious food
In the context of trading in South Africa, SPAR (amongst other retailers) is committed to embracing the food security
challenge with key role players. SPAR has indicated its intention in a very real and clear way in the articulation of
its strategy i.e. to provide affordable, nutritious food to its shoppers. SPAR intends to achieve this through five key
projects, which fall under the ‘My SPAR, Our Tomorrow’ banner. The initiative taps directly into the priorities of saving
costs by achieving better supply chain efficiencies (getting the product to its independent retailers, and thus to the
consumer, at a lower cost, thereby facilitating selling it cheaper); growing fresh as a differentiator; investing in a
sustainable and secure agro-food system; and tapping into the growing health and wellness category.
Driving supply chain optimisation and efficiencies
• Expansion plans to establish a DC in the West Rand
World-class replenishment and efficient distribution
and to extend facilities in the Eastern Cape have
logistics remains one of the key cornerstones to SPAR’s been placed on hold, subject to improved demand
success. SPAR will continue to invest in achieving better and rising economic confidence
and better world-class and benchmarked supply chain
and replenishment systems that are pivotal to running a • DC enhancements include the Inland consolidation
project which has experienced delays due to
lean organisation. The underlying motivator is its
systems integration challenges. However, the
strategy to bring affordable, nutritious food to its
project is still
shoppers.
set to centralise +5,500 slow-moving SKUs into
The growth in case volumes through the DCs reflected one warehouse serving North Rand, South Rand
below is significant in light of supplier community and Lowveld DCs. The intention is to free up space
concerns regarding SPAR independent retailers ‘buying for
out the system’. SPAR independent retailers on average new lines as well as reduce stock levels for
purchase 78% of their lines from SPAR DCs, the efficiencies
balance (appropriately for the local relevance of • Supply chain efficiency projects (running in
retailers) are purchased independently. parallel to the Inland consolidation project) are
Achievements and intentions improvements in the cold chain environment with
• Case volume performance through SPAR DCs technology and design driven temperature-
over the last five years increased +8.6%, with all controlled zones. SPAR
South African DCs showing a positive volume is actively engaging in joint business planning
growth with suppliers, focusing on logistics efficiencies
• In the last financial year double-digit increases • On the sustainability front, initiatives such as the
were achieved by North Rand, Eastern Cape and #RethinkTheBag campaign, reverse vending
Imports (Build it) machines and a strategic collaboration with Tetra
Pak to find more holistic solutions to the plastic
challenge, continue as a focus
DC Cases per Annum
% Contr. Five- No. of
DC FY2014 FY2018 to Total Year Stores
Cases Growth Service
% d
Total cases (‘000) 215,4 234,0 100% 8.6% 2,612
South Rand 56,4 61,0 26.1% 8.2% 531
North Rand 37,2 40,8 17.4% 9.7% 388
KwaZulu-Natal 49,9 51,1 21.8% 2.4% 443
Western Cape 29,8 34,9 14.9% 17.1% 403
World-class replenishment
Eastern Cape 29,2 31,6 13.5% 8.2% 294
and efficient distribution
Lowveld 11,3 12,3 5.3% 8.8% 177 logistics are pivotal in
running a lean organisation
Imports (Build it) 1,6 2,3 1.0% 43.8% 376
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 13Growing fresh as a differentiator Investing in a sustainable and secure
agro-food system
"SPAR creates value on a global scale through
An important element of SPAR’s mission to provide
our voluntary trading model and convenient affordable and nutritious fresh produce to South
delivery of fresh food and groceries to stores African consumers, is investing in and adopting a
located where people live."
holistic approach to sustainable food system
development.
Achievements and intentions
Graham O’Connor, The SPAR Group Ltd
CEO • SPAR is driving a model of localised sourcing of
The global trend towards fresh produce, convenient ‘food
fresh produce by improving its fresh supply chain in
to go’, and consumers making healthier food choices
rural areas, including emerging smallholder farmers in
is accelerating, and retailers with well-established fresh
developing sustainable food hubs. The benefits
departments will continue to use these offerings as to SPAR of this inclusive agricultural system lie in
differentiators for growth across the whole store, driving community connectivity, reduced transport costs,
foot traffic, basket size, margin and profitable sales. improved lead times, and increased freshness and
shelf-life
Achievements and intentions
• SPAR continues to support the flagship emerging
• SPAR continues to focus on improving and
farmer development programme which assists vertical
enhancing its cornerstone service departments,
co-ordination between commercial and community
across
farmers. The benefits to the rural economy is the
fresh produce, bakery, butchery, deli/home-meal
contribution to job creation and food security, as well as
replacement (HMR). The aim is to generate ±30%
providing the community with the fundamental basics of
of stores’ turnover from the sales of fresh
good, affordable nutrition
• In-store improvements are a key focus area for
• Two SPAR food hubs (mini DCs) are currently in
quality and presentation, as well as increasing the
operation, one located in Ofcolaco in the Mopani
area dedicated to the fresh offering in many
District of Limpopo and the other in Nkomazi in the
stores. KWIKSPARs in particular are dependent
Ehlanzeni District of Mpumalanga. A third hub will be
on fresh as a profitability driver, requiring the
established at potential sites in KwaZulu-Natal or the
dedication
Eastern Cape
of approximately 50% of trading area to
service counters to be profitable • SPAR has made a sustainability pledge to create
shared value through the following outcomes:
• The continued focus on the ‘Freshline’ house brand
has resulted in a product offering of 350+ fresh − Contribution to societal change
produce lines and 300+ bakery lines, in 800+ stores − Contribution to responsible
nationally. The ‘Thank Goodness it’s Freshline’ living
campaign has reportedly worked well for SPAR in − Opportunity creation
terms of achieving strong brand awareness, aiming
− Resource stewardship
to make SPAR a destination of choice
• Chikka Chicken, now in 236 stores, has been
earmarked for growth in 2019/2020 – a recent
"In an environment where many
survey by BMI revealed that it is the 11th biggest
fast food brand in South Africa out of 20 households are food insecure and some
• The SPAR Fresh studio application continues as face malnutrition, rural food hubs are a
an effective tool for independent retailers, sustainable business model that can deliver
designed to provide the ‘how to’ of running world-
class service and fresh departments, achieving affordable, nutritious food."
consistency and quality James Lonsdale, The SPAR Group Ltd National Fresh
Produce Manager
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 14Tapping into the growing health and wellness
category
On the other end of the food security scale, SPAR
Natural was launched, establishing a dedicated area
in-store for health and wellness. The concept displays
natural and health-related products, catering to those
shoppers who have a growing interest in a nutritious and
healthy lifestyle.
Achievements and intentions
• SPAR Natural is currently available in six regions and
30 stores nationwide
• Three in-store formats are available for independent
Cornerstone service departments generate ±
retailers i.e. a small limited execution, a medium 30% of store turnover
format execution within an aisle, and a larger store-
within-a-store format
• Expansion of the SPAR Natural product range and
further store roll-out is planned in 2019/2020
• According to SPAR independent retailers, SPAR
Natural has had a significant impact on sales and
performance
"Health and wellness has become an
everyday occurrence in South Africa, with a
growing number of people trying to educate
themselves on how to eat and live healthier
lives."
Riccardo Afeltra, owner SPAR Athol, Gauteng SPAR is investing and adopting a holistic
approach to sustainable food system
development
A dedicated in-store area focusing on health
and wellness
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 1504 | VOLUNTARY TRADING
Strategic Objective: To drive the future voluntary trading model
The foundations of SPAR’s business are based on the core competencies of managing voluntary trading groups,
providing independent retailers with distribution and logistics services, strong marketing and operational
management, with the advantage of stocking goods from independent local suppliers. SPAR’s intention is to define
and refine the model for future success.
Embedding solid independent retailer Offering relevant trading brands and formats
relationships SPAR continues to improve the relevance of its trading
The success of the SPAR voluntary trading model relies brands and formats in response to market trends in
on the quality of relationships between SPAR head office, order to provide independent retailers with a sustainable
DCs and independent retailers. The Group’s performance competitive advantage and to ensure the relevance of
relies on the ability to attract and retain independent the voluntary trading model today and into the future.
retailers as members, by providing proficient, effective
trading expertise to its member base, as well as solid Achievements and intentions
leadership and support. The quality of the relationships • SUPERSPAR and SPAR remain focus trading brands
between the DCs and SPAR independent retailers is an
• KWIKSPAR is experiencing growing competition from
area of ongoing investment, providing the retailers with
petrol-forecourt convenience formats. Higher pricing
distribution and logistics services, strong marketing and
means that shoppers no longer see KWIKSPAR as
operational management support.
the ‘first choice’ for month-end shopping, a challenge
Achievements and intentions that has been identified and is being addressed
• Monthly performance monitoring through tailored • SPAR SaveMor – SaveMor was rebranded in 2018 to
service packages (TSPs) assists with unique SPAR SaveMor
challenges that arise within individual stores − Stores require lower capital investment, with
focus on active cost management
• Stores are benchmarked against cluster
performance and underperforming stores are − New store growth was muted in 2018
offered tailored support to assist with turnaround. − 170 stores refurbished in 2018
Support is offered and reviewed in the following
− The intention is to provide an attractive entry
areas: point for new black independent retailers
− Independent retailer compliance, profitability • SPAR Mini – A pilot store opened in 2017 in the
and sales Lowveld area, with +4 stores now in operation. The
− Protection of store footprint intention is to form small extension stores (serviced
by a nearby appointed retail store) bringing a limited
• The Group took ownership of 7 corporate stores
fresh food offering to underserviced areas
in 2018, and disposed of 4 stores. Currently
SPAR manages +15 corporate stores
• SPAR targets a +78% loyalty by independent
retailers to the voluntary trading model. This
means 78% of stock must be purchased by
members through the DCs. Achieving this requires
DC teams to focus hard on looking after the
independent retailers
Relevance of trading brands to provide
sustainable competitive advantage
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 16• Pharmacy at SPAR – With 101+ pharmacy outlets now in Updating and executing the standards and
operation, the intention is to drive increased purchases rules
through pharmacy wholesaler, S Buys, and to attract more
independent pharmacies to the trading brand. This is a The power of the SPAR brand and how it resonates
unique service to South Africa, with the potential to be with and is trusted by customers is a primary driver of
rolled out to other SPAR territories success for SPAR and its independent retailers. As such,
a key focus area for SPAR is to ensure that independent
− North Rand DC has the highest concentration of
Pharmacy at SPAR stores and a dedicated focus on retailers buy-in to the standards and rules, adhering to
developing black independent retailers in this trading this structure of success.
brand
Achievements and intentions
• Build it – Underwent a total brand refresh in 2018, with
• SPAR will remain focused on ensuring store
the launch of two new store formats (Build it PLUS and
standard consistency is maintained with regards
DIY, allowing retailers to tailor their offering in terms of
“look and feel” of stores, but not disregarding
store size, categories and services)
uniqueness.
− First retail convention held in 2018 The intention is to review and re-negotiate the
− Loyalty card pilot completed in 2018, with roll-out rules of the game e.g. asking questions such as,
in 2019 ‘should the pricing policy or promotional
− The broader roll-out of the TrenDIY format programme be compulsory?’
has been discontinued, but existing stores
• The SPAR GUEST Customer Care Programme
will be retained as they remain successful in
(GREET-UNIFORM-ENGAGE-SELL-THANK YOU)
specific locations
will continue. Its focus is to encourage store owners
Focusing on organic growth opportunities (or vested store managers) to get back onto the
shop floor, landing the message that this is what
SPAR South Africa maintains a selective approach to
makes their stores unique and the SPAR brand
new store development, and is dependent on whether
competitive. The GUEST programme will continue
investments are cost-saving or retail-sales driven. The
to assist SPAR members to upskill staff for
primary driver of growth will come from SPAR’s
continual improvement in customer service
existing formats and stores, sweating existing store
assets
and performance through its convenience offering,
differentiation through refurbishments, shopper relevant
in-store execution, range expansion in fresh, and
relevant marketing and consumer promotions.
Achievements and intentions
• The Group maintained a strong focus on
organic growth of existing independent retailers
to drive profitability
• Total retail space grew +3.8% (2017: +1.7%)
attributed by SPAR to the addition of a number of
larger new stores. Pharmacy at SPAR delivered
organic growth of +17.2%, a reflection of the
potential in of health and wellness focused formats
and categories
A customer care initiative ensuring the
consumer is treated as a guest at all times
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 1705 | DIVERSITY AND TRANSFORMATION
Strategic Objective: To embed diversity and transformation
Achieving greater transformation remains a major aspect of this business strategy. SPAR has recently updated
its transformation plan based on the new BBBEE codes, and is committed to building a talent base that reflects
the diversity of the South African population.
Skills
Development Enterprise
Management 24.95 & Supplier
Control Development
9.16 20.43
Ownership Socio-Economic
17.00 Development
5.00
Total
Score
76.54
B-BBEE Contributor Level 6
Achievements and intentions (as at September 2018)
• 72% of target achieved for participation of black
people at board level, with increased black female
at overall management level
• Number of black independent retailers has
increased from 292 to 339
• R70m invested in skills development of black "The board is committed to transformation
employees and non-employees in 2018 beyond legislative compliance. Through
(+7.6% increase in investment verses 2017)
its oversight role, the Social and Ethics
• R7m was invested in training programs
Committee encourages efforts to create
specifically for black people living with disabilities
social and environmental transformation."
• R155m was invested in Enterprise and Supplier
Development initiatives in 2018. This investment Graham O’Connor, The SPAR Group Ltd CEO
has yielded some positive results such as:
− Increased awareness of the SPAR brand
− Introduction of black new entrants into the
SPAR supply chain
− Promoted agricultural activity in identified
rural areas
− Strengthened operational stability and
sustainability of black-owned retail
stores
• 100% target achieved for the investment
in Socio-Economic Development
initiatives
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 1806 | PEOPLE
Strategic Objective: To grow and inspire people
SPAR recognises that attracting and retaining competent employees is critical to delivering excellent service within
the parameters of a sustainable and lean organisation. Focus is to grow and inspire its people ensuring an
environment
of motivated employees and a succession pipeline of expertise and leadership. The intention is to achieve this by
actively driving the business culture; designing and implementing an organisation of the future; and investing in
talent management and leadership capabilities.
Actively driving a desired business culture Designing and implementing an organisation
Focusing on the power of the SPAR culture is a key
of the future
enabler of the refreshed SPAR strategy. SPAR is As a business in transition through acquisitions, new
committed to maintaining an organisational culture that and revamped trading brands, and succession
respects human rights principles aimed at promoting pipeline and leadership changes, the SPAR
and protecting such rights. organisation is in the process of reviewing what its
optimal organisational structure looks like in order to
Achievements and intentions
streamline operations for
• In 2018, SPAR was certified as one of the Top growth into the future. This entails ensuring that the
Employers in South Africa for the fifth year. SPAR right people are in the right seats and aligning the
was compared with top organisations worldwide, and structure across the regions.
certified based on an independent audit
Achievements and intentions
• Three of the South African DCs (KwaZulu-Natal,
North Rand and South Rand) are unionised and • The next phase of the Group’s strategic review
have recognition agreements in place with process is alignment of the other territories it
SACCAWU. operates in, as well as of each trading brand i.e.
The other five DCs (Western Cape, Eastern SPAR supermarket formats, Build it, Pharmacy at
Cape, Lowveld, S Buys and Build it) are not SPAR and TOPS at SPAR
Driving talent management and leadership
unionised
capabilities
• A two-year wage deal was signed in 2018, with the
next happening in 2020 Succession planning remains a priority to take
the business forward.
• Free wellness service: R4.6m invested in 2018
(2017: R4.3m) Achievements and intentions
• In 2018, succession planning was (and remains) a
key focus area for the board, as the average age
was 58
• Mike Hankinson, Phinda Madi and Marang
Mashologu retire in accordance with the company’s
memorandum of incorporation (MOI). Being eligible,
Mike Hankinson and Marang Mashologu have
offered themselves for re-election. Phinda Madi
declined re-election and retires as a director of the
company at the 2019 annual general meeting (AGM)
• The average tenure of the board is 11 years
"SPAR's ability to attract diverse, qualified
employees further reflects the strength of our
brand as an employer of choice."
SPAR is certified as one of the Top Employers
in South Africa for the fifth year running Graham O’Connor, The SPAR Group Ltd CEO
Copyright © 2019 Trade Intelligence Trade Intelligence | The SPAR Group Ltd Strategic Focus | May 2019 19Disclaimer
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