Organisational Structure

Organisational Structure Organisational Structure Organisational Structure Report

Masscash – Overview • One of four managed operating divisions within the broader Massmart Group • Comprises a Wholesale division with cash & carry food and cosmetics businesses, and a Retail division made up of food outlets targeting lower LSM groups • The Wholesale division includes 68 CBW, Jumbo Cash & Carry and Trident outlets and Shield, while the Retail division comprises a total of 62 outlets falling under the Cambridge Food and Rhino Cash & Carry brands • Masscash trades in South Africa, Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia under the following trading formats: • Wholesale • CBW Cash & Carry and Jumbo Cash & Carry • Trident (Botswana wholesale operation) • Jumbo Shield (voluntary buying organisation), comprising: Build & Save (House and Building suppliers - buying organisation), Saverite (retail), Multisave Supermarket (retail), Multisave Superstore (retail), Powersave Cash & Carry (retail and wholesale), Liquorland & Liquorland Express (liquor retail), Club 10 Tavern (liquor on-consumption outlets) and Big 11 and Super 11 (banner stores) • Retail • Cambridge Food • Rhino Cash & Carry

Masscash – Overview (cont.) • Recent key organisational structure changes • The six months from January to June 2018 saw some significant organisational re-structuring in the Massmart Group. The intention is to achieve alignment across the divisions for efficiencies and a reduction in duplicated costs / operating expenses. The most recent organisational changes have been primarily in the Massdiscounters and Masscash divisions: • Masscash: In February 2018 Massmart announced the restructuring of some of the business functions within Masscash, and the relocation of the head office from Durban to Johannesburg. In addition, the Retail and Wholesale executive teams were combined into a single, smaller executive team under the leadership of Kevin Vyvyan-Day. The intention is to achieve a stronger and more balanced combined executive, allowing the respective management skills of the two business teams to complement one another. “(In February this year) we announced the relocation of the Masscash regional office from the Durban area to Johannesburg and an organisational restructure. This restructure will produce estimated annualised savings of R22 million which will be felt from the second half of this financial year.” Massmart

CBW – Overview • CBW comprises a number of Wholesale Cash & Carry outlets which supply food, liquor, groceries and cosmetics in bulk to independent general dealers, government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas within southern Africa • Outlets sell basic food and groceries, liquor and General Merchandise, with product weighted heavily towards commodities such as maize meal, rice and flour • CBW was formed through the acquisition of 14 CCW stores in 1998 and 22 Browns and Weirs stores in July 2001. The two chains were merged in 2001 into CBW • As at June 2018, CBW and Jumbo together, have a total of 55 wholesale stores operating within South Africa, as well as a further 13 stores distributed across Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zambia • In May 2017 Masscash Wholesale announced a rebranding programme for the CBW C&C and Jumbo C&C stores whereby all stores would be rebranded Jumbo Wholesale. The decision to rebrand was reversed in 2018 although the store relay initiative will continue

Jumbo Cash & Carry (now Jumbo Wholesale) – Overview • Jumbo Wholesale is a low cost, no frills wholesale business providing General Merchandise, Cosmetics and Food products in bulk to a range of independent traders & commercial users throughout Southern Africa • Jumbo Wholesale sells mainly cosmetics, toiletries and hair-care products to individual customers and independent general dealers • The business focuses mainly on the entry level to middle market trader segments falling into LSM 2-6 • Originally a family owned business, 6 Jumbo Cash & Carry stores were purchased in April 2001 by Masscash • As at June 2018, Jumbo Wholesale has 7 stores nationally, distributed across Gauteng, Durban, Cape Town, Bloemfontein, Nelspruit, and Polokwane

Jumbo Shield – Overview • Jumbo Shield is a voluntary buying association that buys products in bulk on behalf of its member base. Jumbo Shield members own wholesale or retail food businesses serving the LSM 2-6 market • Operates across South Africa, Botswana, Namibia and Swaziland • Stores trade under their own identity or under one of the Shield brands • The branded trading identities are: • Saverite (Retail) • Multisave Supermarket (retail sector) • Multisave Superstore (retail sector) • Powersave Cash & Carry (retail and wholesale) • Shield Cash & Carry (wholesale sector) • Liquorland (liquor retail) • Liquorland Express • Jumbo Shield has a store identification programme for its trading brands supported by a store identity package which includes external & internal signage amongst other elements • The group acquired 378 members in 1 March 1992 and as of end 2016 had 506 members (excluding the individual members of 12 independent buying groups). As at June 2018, we have no updated store numbers for Jumbo Shield • In May 2017 Jumbo announced a rebranding programme for Shield whereby the brand would now be known as Jumbo Shield

Saverite – Overview • Saverite is a chain of independently owned franchise supermarkets which incorporate the buying power of Jumbo to deliver competitive prices and premium quality • Saverite was born out of the need for Jumbo to compete more effectively with the corporate chains in the LSM 1-5 market through the creation of a guaranteed purchasing/supply channel. “We saw the gap for independently owned supermarkets which could still have the buying power of a larger group to ensure competitive prices and premium quality”. Gary Bellars, Saverite Operations Executive • The first Saverite opened in mid-2009 in the Eastern Cape and store reach took a jump in 2010 with the purchase of 14 Score stores. After experiencing difficult trading in almost all these stores, Jumbo have since sold or closed most of the original Score stores • As at June 2018, the Saverite franchise base comprises 124 outlets

Trident – Overview • Trident Cash & Carry is a general wholesale operation based in Botswana which wholesales food, liquor, groceries and cosmetics in bulk to independent general dealers, Government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas within southern Africa • In addition, Trident has an extremely strong distribution capability – for example Gaborone Cash & Carry delivers as much as 50% of its sales to its customers • Trident commenced operations in November 1993 and today is part of a group of Cash & Carry outlets with 5 branches located in various parts of Botswana (Trident Maun, Eureka in Phikwe, Eureka in Gaborone and Eureka in Mahalapye) as well as within South Africa • Trident’s 6 stores were acquired by Masscash in 2003 • As at end 2017, the Group operated four outlets in Maun, Phikwe, Mahalapye and Gabarone

Liquorland / Liquorland Express – Overview • Begun in the early 2000’s as a banner offering and has since grown into a franchise brand with over 650 stores across South Africa (May 2017) • The Liquorland Group offers traders the benefits of an established brand. This includes advertising, preferential pricing and regular promotions • All Liquorland stores are structured as a franchise • Club 10 – Overview • Club 10 is a franchise, on-site tavern offering distributed across South Africa • Club 10 began life as a banner group and has since grown into a national brand, with 205 Club 10 Taverns across South Africa as at June 2018 • Club 10 offers the benefits of an established brand, including advertising, preferential pricing and regular promotions. It is known to the consumer for its active on-site event activity and entertainment

Masscash Wholesale Mission Statement: “Through enabling the success of our stakeholders, we ensure our own success. In order to achieve this: • We customise the independent Retailer’s offering to their customer by providing tailored ranges, efficient logistical solutions and personalised management attention • We give our suppliers broad reach in a big market through our logistical excellence • We enable our employees to find fulfilment in a values-based culture, and • Through all of the above we improve the lives of our communities.” Masscash

Masscash Wholesale • Values • Masscash people will always: • Exhibit a culture of trust and mutual respect between all stakeholders (shareholders, staff, suppliers, customers) • Treat our Customer as the key to our success • Strive for Excellence in all we do • Act with Integrity

CBW / CCW • Mission • The CBW mission is to ensure that all stores apply the philosophy of: • Supplying the right range of products at competitive prices to low and middle-income customers • Keeping costs down by employing a no-frills cash & carry warehouse format • Coupled with basic distribution centers that supply the private label products and general merchandise ranges

Jumbo Shield • Mission: • “Our focus is on promoting the independent entrepreneur” • The Jumbo Shield Buying Group’s mission is to: • Elevate members’ trading performances to the extent that they form an indispensable part of their distributive channels by providing value to their customers

Saverite • Customer Mission: • The Saverite Mission is to offer to its customers: • Value without compromising on quality • Exceptional service • Market related pricing • A decent range • Good distribution • Better than average communication

Saverite • Franchisee Mission: • The Saverite franchise structure mission is to offer to its member base: • Independence • Maintenance of own decision-making power • Strong national store brand with consistent marketing support • The option to buy direct from suppliers, on account, or buy bulk • Deliveries from a Masscash local DC (wholesaler) • Consolidated supplier orders from the local DC (wholesaler) reducing congestion in your receiving area • Improved in-stocks without pushing up stock levels, thereby increasing cash flow in your store • Highly competitive deals based on the buying power of Masscash • Integrated computer systems • Store development advice and support • Professional support for your service areas • Category management advice • Regular promos, point-of-sale and leaflets • A private label programme • Preferential banking rates from a leading retail bank

Jumbo Wholesale • Mission • The Jumbo Wholesale mission is to: • Be the preferred wholesaler to the independent and commercial user in Southern Africa, who services low to middle-income consumers for personal care, basic foods, commercial and household products • This to be achieved by providing a suitable range of products at competitive prices, using flexible regional trading, stock availability and efficient service, thereby ensuring customer loyalty

Masscash – Divisonal CEO Kevin Vyvyan-Day (B.Com., B.Acc., CA(SA)) After qualifying as a Chartered Accountant in 1989, Kevin consulted at both the Strategy Group (Deloitte) and Gemini Consulting. He joined UPD as Group Operations and Systems Director in 1995 and became Group Chief Executive Officer in 1996. Kevin joined Massmart as Divisional Chief Executive responsible for Makro and as a member of the Massmart Executive Committee in 2005. In September 2012, Kevin was appointed Divisional Chief Executive responsible for Cambridge Food. After the consolidation of Masscash Wholesale and Retail into one trading operation in early 2018, Kevin Vyvyan-Day took on the position of Divisional CEO of Masscash as a whole. Kevin Vyvyan-Day CEO Masscash

CBW - Management Structure • Historically, CBW and CCW stores were structured in terms of a 49% (manager):51% (CCW) equity (Although all Brown & Weirs store managers at the time did not have equity) • On absorption into Massmart in 2001, all manager equity was acquired by the Group - Masscash now wholly owns all stores, managers are incentivised entirely on a profit sharing basis (this structure further applies to Brown & Weirs as well as Jumbo Cash & Carry stores). Profit sharing operates on a regional basis • The majority of store managers remained part of the group, although some did leave following the restructuring • A distinguishing element of the business is that managers, now well incentivised through profit share, and wholly responsible for achieving margin in their stores, are highly performance-driven. Each store manager is further responsible for stock holdings and regional procurement decisions

Jumbo Wholesale – Management Structure • Jumbo Wholesale (previously Cash & Carry) was originally a family owned business that was purchased by Massmart in 2001 • Massmart ownership allows Jumbo advantages in terms of sourcing and buying power which result in quality products at competitive prices passing onto the customer base • As with Brown & Weirs and CBW/CCW stores, all manager equity was acquired by Masscash and managers are incentivised entirely on a profit sharing basis • Each store manager is responsible for achieving margin in their store, together with managing stock holding and taking regional procurement decisions • In terms of reporting structure, together with CBW, Jumbo forms part of the wholesale division and reports through to the Masscash Head Office in Johannesburg

Jumbo Shield – Divisional Structure • Jumbo Shield is a voluntary buying association and buys product in bulk on behalf of its member base • All members are independently owned and owner-managed • Jumbo Shield offers wholesale customers with more formal operations the ability to trade under national retail trading brands such as Powersave and Multisave • A store identification programme is offered to trading brands, supported by a store identity package. This package includes store signage as well as other marketing initiatives • Stores trade under their own identity or under one of the Shield branded trading identities: • Multisave Supermarket (retail) • Multisave Superstore (retail) • Powersave Cash & Carry (retail and wholesale) • Shield Cash & Carry (wholesale) • Build & Save (house and hardware retail) • The Shield Group also includes a liquor and pharmacy offering • Retail brand membership is based on a minimum turnover level – the same applies to the payment of rebates • Members pay a listing fee to join Shield, but no monthly royalty or franchise fee • Credit: • Shield members offer credit to their customer base (traders) – allowing Shield to “trade him (the trader) through” the tough times often encountered in independent retail • Achieved through a trading payment plan: • Follows the Masscash supportive ethos (the more successful the trader is, the better the Group performs) • Masscash has the “muscle” to support these traders financially that non-corporate buying groups often do not

Jumbo Shield – Divisional Structure cont. • Conversion to CBW: • Jumbo Shield members have the opportunity to be absorbed into the Masscash business (Shield is often considered the CBW “nursery” ground) • Inclusion dependent on the perceived value to Masscash (geographic location/turnover, etc.) or that member operating as a perceived threat to Masscash (taking business away) • 10-12 Shield members over the past 6/7 years have been converted to CBW stores

Saverite - Franchise Structure • Saverite is a fully functional retail franchise format typically structured in clusters around the particular CBW or Jumbo Wholesale store from which they are serviced • Joining Fees • R17,500 • Includes a new member assessment to identify additional service departments or store development opportunities that include re-branding and signage + investment into branded staff and management uniforms • Royalties • Monthly 1% Royalty Fees charged on purchases made from two ordering channels – through the call centre for supplier direct delivery or consolidated orders from the local Masscash Wholesaler • Royalty fee not paid on Turnover or on purchases made outside of the two buying channels • Rebates • Split rebate offering on the 2 available ordering routes: • For certain suppliers rebate % negotiated on every order placed – rebates tailored to each supplier to ensure that each Saverite store is both competitive and profitable • Direct from wholesaler – Saverite member receives a straight rebate % on every order placed, regardless of the supplier (excl. tobacco and sugar purchases) • Rebates paid annually and depend on a set minimum purchase hurdle • Profit allocation: • 81% Franchisee:19% Masscash • A simple structure which avoids auditing on the part of Masscash • ‘Influenced rather than controlled’ (Have to have service departments, tiled floors, right light, and certain turnover)

Saverite - Benefits of franchise membership

Banner Structure - Big 11 & Super 11 • Big 11 and Super 11 • Structure: • A fluid/loose banner arrangement between the banner member & the Masscash C&C/Jumbo Wholesale store • No centralised Masscash Wholesale management – each store is owner-managed • No membership card is in effect, however the banner member is given a buying card for purchases made on a certain day – registered on the system for that date • Promotional pricing specific to banner members is allocated by the till system on payment • Positioning: store positioning is not consistent across all stores – the brand is driven very much from a store/store manager’s perspective in terms of range and look & feel • Accounts: • Banner members may have accounts with the Masscash wholesaler from which it draws its stock/promotions, but not necessarily • Accounts are driven & finalised at Head Office level based on a credit assessment • Promotional deals: • Monthly banner meetings as well as personalised visits from the C&C store manager drive the relationship between C&C and banner - used for decision-making on promotional deals • Promotional deals to the banner member are entirely C&C driven dependent on the specific needs of the banner member • Range: • Product range purchased from C&C stores not prescribed – may also purchase stock from other wholesalers, • Big 11 outlets have a minimum purchase level of R10 000 out of the C&C and Super 11 – R55 000 • Where a purchase is made from the C&C, the specific deal price will apply

Maryla Masojada | Head AnalystKate Shirley | Retail Analyst Maryla Masojada | Head AnalystKate Shirley | Retail Analyst Kate Shirley | Retail Analyst – New Channels Maryla Masojada | Lead Analyst Kate Shirley | Retail Analyst – New Channels Maryla Masojada |Head Research Kate Shirley | Retail Analyst – New Channels Maryla Masojada |Head Research Tel: +27 (0) 31 303 2803 Fax: +27 (0) 31 303 4560 info@tradeintelligence.co.za Tel: +27 (0) 31 303 2803 Fax: +27 (0) 31 303 4560 info@tradeintelligence.co.za tel +27 31 303 2803 fax +27 31 303 4560 info@tradeintelligence.co.za Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence Disclaimer These materials and the information contained herein are collated by TI* referencing a wide range of public domain data sources, face-to-face interviews, retailer presentations and financial reports, and are intended to provide general information about the South African consumer goods trading environment and selected retailers, and are not intended as an exhaustive treatment of such subjects. Whilst every effort has been made to ensure that the information published in this work is accurate, your use of these and the information contained herein is at your own risk. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business, and TI makes no express or implied representations or warranties regarding the accuracy of the information herein. TI will not be liable for any special, indirect, incidental, consequential, or punitive damages or any other damages whatsoever, whether in an action of contract, statute, tort (including, without limitation, negligence), or otherwise, relating to the use of these materials and the information contained herein. TI expressly disclaims all implied warranties, including, without limitation, warranties of merchantability, title, fitness for a particular purpose, non-infringement, compatibility, security, and accuracy. * TI refers to The Retail Workshop (Pty) Ltd trading as Trade Intelligence

Organisational Structure