PICK N PAY RETAIL DIVISIONAL OVERVIEW

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Garey McGee
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PICK N PAY RETAIL DIVISIONAL OVERVIEW Pick n Pay Retail is the predominant contributor to Group sales and profitability, and for the past few years, the business has invested heavily in establishing

1 PICK N PAY RETAIL DIVISIONAL OVERVIEW Pick n Pay Retail is the predominant contributor to Group sales and profitability, and for the past few years, the business has invested heavily in establishing the platform for its next stage of growth. The conversion of Score stores to Pick n Pay franchise stores, and the opening of the new Pick n Pay Express format has given Pick n Pay a multi-channel presence in the market. This, along with the new Hurlingham flagship and revamped retail stores, the focus on achieving maximum efficiencies at the Longmeadow DC and the conclusion of the SAP conversion, reflect Pick n Pay s goal of achieving a refreshed, revitalised Pick n Pay Retail division. 0Trade Intelligence For additional information / queries: + (0) / info@tradeintelligence.co.za

2 STORE FORMATS AND SHOPPER PROFILE Table Pick n Pay Store Formats and Shopper Profile Format Positioning Target Market Floor Space (m ) Ranging Hypermarkets (Corporate) One-stop shopping with highly competitive pricing 5 0 8,000 to 3,000 care, health and beauty including a dispensary, clothing and a large offering, including houseware, audio visual, travel, sport and DIY Hyper Evolution One-stop shopping with highly competitive pricing 5 0 6,000 to,000 care, health and beauty including a dispensary, clothing and a large offering, including houseware, audio visual, travel, sport and DIY Supermarkets (Corporate) Total convenience and freshness with fresh food as a key USP 4 0,0 to 6,000 care, health and beauty, some clothing, and a replenishment range 5,000 0,000 SKUs Family shopping Largely 6 8 ±,000 Groceries, toiletries, perishables and replenishment 0,000 0,000 SKUs Mini Markets shopping 6 <,000 Groceries, toiletries, perishables and replenishment,000 0,000 SKUs Express shopping, 4/ 4 0 (location dependent) 0 Fresh and convenience lines including a Wild Bean Café Just over,00 SKUs 0Trade Intelligence For additional information / queries: + (0) / info@tradeintelligence.co.za

Fig Pick n Pay Store Numbers by Formats All Countries (excluding Franklins Australia) 0 85 00 60 00-0 8 83 66 9 PnP Hypermarkets PnPSupermarkets PnP Franchise PnP Express PnP Liqour - Corporate PnP

This shift in shopper behaviour has been prevalent across the consumer goods market, and not unique to Pick n Pay.

3 Fig Pick n Pay Store Numbers by Formats All Countries (excluding Franklins Australia) PnP Hypermarkets PnPSupermarkets PnP Franchise PnP Express PnP Liqour - Corporate PnP Liqour - Franchise PnP Pharmacies (including stand-alone) The strategic intention of Pick n Pay, which remains unchanged, is that a store in Sandton will offer the shopper the same Pick n Pay experience as a store in Thembisa it is only the product ranges which are customised to meet the needs of the shopper profile Each of the supermarket, franchise and hypermarket formats saw an increase in the number of monthly transactions, although this was coupled with a decrease in the size of the average basket pur- is chased. This shift in shopper behaviour has been prevalent across the consumer goods market, and not unique to Pick n Pay. Hypermarkets The smaller format hypermarkets cater for the convenience-driven shopper as well as the stock-up shopper. These stores are half the size of a standard hypermarket (,000m gross lettable area with 6,800m trading area compared to the 3,000m Boksburg hyper) Pick n Pay s intention is to improve the attraction of the larger hypermarket format with an increased focus on pharmacy, bulk liquor, improved and clothing ranges, positioning these hypermarkets to compete more effectively with other big-box formats. Supermarkets In its efforts to refresh and modernise the Pick n Pay brand, as well as roll-out the new Pick n Pay brand identity across the store base, Pick n Pay has invested heavily in store refurbishments and revamps over the past few years. Current flagshipss stores are Hurlingham, Constantia Bedfordview and Fourways. Pick n Pay is focused on taking the best and most relevant concepts from flagship stores and applying them to target stores across the Group e.g. Alexandria In October 00, Pick n Pay opened the greatly anticipated new Hurlingham store, a world class store resulting from years of research, introducing a step-change as a new era in Pick n Pay s journey towards achieving the position of most desirable shopping destination Hurlingham boasts an assortment of organic and exotic product ranges, a fish market, cheese room, wine cellar, juice bar and clothing. The store combines elements of a supermarket and a boutique store and it was designed and operates entirely on sustainable and environmentally friendly principles. Staff members were put through an 8-day food course before the store opened, allowing them to provide customers with useful knowledge at the various counters. Fresh flowers are displayed at the entrance of the store and these have done extremely well so far. E-services and a pharmacy are also offered in innovative thinking at retail. It also sig- nals a new age of green retailing as well in 0Trade Intelligence For additional information / queries: + (0) / info@tradeintelligence.co.za 3

4 store. Thyme on Nicol, an attached restaurant offers breakfasts, lunches and sushi while vida e caffé provides customers with their daily coffee fix 3. Franchise Supermarkets With the conversion of approximately 55 of the 36 Score stores to Pick n Pay franchise stores completed in 00, franchise (excluding hypermarkets) now contributes just under % of Pick n Pay s turnover. Despite lower earnings for Pick n Pay from franchise stores, the flipside is that franchise stores are easier to open, they provide Pick n Pay with greater reach into areas where it is not profitable to open a corporate store, they require less back-up and support, and owner-management focus drives improved bottom lines. Pick n Pay remains fully supportive of its franchise structure Approximately 0% of Score conversions are now profitable Raymond Ackerman spoke up on the recent Woolworths plan to buy back its franchises by saying that franchising is an absolutely magic formula as it encourages new entrants into South Africa s retail market and is also a way in which to foster black economic empowerment. Commenting in October 00, Badminton said that franchises have been very, very good for Pick n Pay Going forward Pick n Pay will feel the benefit of the reduction in expenses arising from cost of conversions and the -strong team that manage the process In order to expand its franchise arm of the business, a key aspect of Pick n Pay s move into Africa, the business will in some cases sign master franchise contracts with companies who will then control and oversee the opening of franchise stores within an area. This has been successfully implemented in both Namibia and Mozambique for example a. Express Stores Pick n Pay and leading petroleum company BP combined forces in 008 with a pilot programme to further capitalise on growth in the convenience sector. BP acts as landlord and as fuel wholesaler, with Pick n Pay as the franchisee. There are currently eight Pick n Pay Express stores The new format has been well received and is in line with Pick n Pay s future convenience strategy After a period of no development during management structure changes at BP, Pick n Pay Express will now focus on the roll-out of a further Express stores over the next two years b. Pharmacy Pick n Pay has 8 in-store pharmacies and one stand-alone pharmacy. Initially launched in only Pick n Pay hypermarkets, Pick n Pay pharmacies are now being rolled out to Pick n Pay supermarkets to offer a one-stop service offering to shoppers, although further growth has been constrained due to a shortage of pharmacists In 009 Pick n Pay pharmacies were selected as a strategic partner for pharmaceutical and primary healthcare facilities to the 00,000 members of Reality, Sanlam Group s lifestyle programme. When Reality members use Pick n Pay pharmacies, they will enjoy primary care services at reduced rates 0Trade Intelligence For additional information / queries: + (0) / info@tradeintelligence.co.za 4

STORE GEOGRAPHIC SPREAD Table Pick n Pay Store Geographic Spread in South Africa February 0 Total Stores Eastern Gauteng / Free State KwaZulu- Natal Northern Western Pick n Pay Hypermarkets 0 4 Pick

and TI Research NOTES: Minor discrepancies in regional store numbers may exist due to snapshot timing.. Franchise here includes Family, Daily and Mini.

Pick n Pay Hypermarkets Pick n Pay Franchise (Family, Mini, Daily) Pick n Pay Supermarkets Pick n Pay Express NOTES: Minor discrepancies in regional store numbers may exist due to snapshot timing.

5 STORE GEOGRAPHIC SPREAD Table Pick n Pay Store Geographic Spread in South Africa February 0 Total Stores Eastern Gauteng / Free State KwaZulu- Natal Northern Western Pick n Pay Hypermarkets 0 4 Pick n Pay Supermarkets Pick n Pay Franchise Pick n Pay Express 8 Pick n Pay Liquor Corporate Pick n Pay Liquor Franchise Pick n Pay Pharmacies 9 SOURCE: Pick n Pay and TI Research NOTES: Minor discrepancies in regional store numbers may exist due to snapshot timing.. Franchise here includes Family, Daily and Mini. Includes one stand-alone pharmacy 5 Fig Pick n Pay Store Geographic Spread in South Africa February Eastern 55 Gauteng 4 5 KwaZulu-Natal 4 Northern Region Western Pick n Pay Hypermarkets Pick n Pay Franchise (Family, Mini, Daily) Pick n Pay Supermarkets Pick n Pay Express NOTES: Minor discrepancies in regional store numbers may exist due to snapshot timing. Table Pick n Pay Store Geographic Spread outside South Africa February 0 Total Stores Botswana Namibia Swaziland Lesotho Pick n Pay Franchise Pick n Pay Corporate Pick n Pay Liquor SOURCE: Pick n Pay NOTES: While every attempt is made to ensure the accuracy of store numbers, minor discrepancies may exist. Zambia Most of Pick n Pay s expansion into Africa has consisted of moving into neighbouring countries. The busi- it has ness has not yet made a move in East, Central or West Africa although, as mentioned previously, expressed plans to do so. 0Trade Intelligence For additional information / queries: + (0) / info@tradeintelligence.co.za 5

PICK N PAY RETAIL BUYING STRUCTURE / NEW PRODUCT LISTING PROCEDURE

PICK N PAY RETAIL BUYING STRUCTURE / NEW PRODUCT LISTING PROCEDURE In years gone by, an important contributor to the success of Pick n Pay was the high degree of decentralised decision making (facilitating