Strategy and materiality

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STRATEGIC FOCUS ASSOCIATED RISKS KEY PERFORMANCE INDICATORS 2014 HIGHLIGHTS AND CHALLENGES
web World-class replenishment
As a wholesaler and distributor of goods, our first priority is supply chain optimisation. Fundamental to this goal is ensuring we run a lean organisation, which necessitates close collaboration with our retailers and suppliers
Ageing information systems
Fresh supply chain logistics issues leading to poor retail delivery of Fresh
Long-term external infrastructure failure
Long-term sustainability of Fresh supply
Data quality and analysis capabilities
Cost reduction
Improved “in stock”
Reduction in stockholding
Fuel, energy and labour cost-saving
Successful implementation of phase 1 of our information systems modernisation through the conversion to a SAP platform
Ongoing investment in our distribution centre facilities and more efficient vehicles to improve productivity through technological integration under the guidance of industrial engineers
Joint business planning with our major suppliers is gaining traction, with plans and targets being set to address logistics issues and improve efficiency
Produce initiatives
web Competitive pricing
Creating a competitive price perception is essential to attracting new customers to our stores and maintaining their business in the long term. This strategic focus is facilitated through group buying reviews, commodity trading and our revised promotions strategy
Inaccurate consumer price perceptions
Inefficiencies in supply chain logistics resulting in uncompetitive landed cost to retailers
Financial management challenges
New and existing competition taking market share
Match competitor prices
Survey consumers
We know from ongoing surveys that our bigger stores are competitive and have been driving our recent retail performance
We are reviewing advertising and promotion strategies to better communicate our price position to the consumer
web Comprehensive range
SPAR operates within a highly competitive fresh food and groceries industry. Delivering excellence in Fresh, increasing the range of our products and sales of our house brands, as well as ensuring our organisation operates as efficiently as possible are therefore essential to keep abreast of current market trends in range offerings and remain competitive
Ability to forecast and manage demand requirements
Service department sales ratio and gross profit improvement
Improved ratio of house brand sales
House brand packaging cost and footprint reduction
Retail: a focus on skills training, implementation of technology to support production planning, recipe costing and food safety
Distribution centres: extending our range and quality and cold chain management improvements
Performance of private labels – growth of +14% in 2014
web World-class brand
Key to our ability to attract independent retailers and to draw customers to their stores is our brand. We grow awareness and foster positive sentiment around our brand by strengthening community leadership, sponsorships, advertising and social media
Lack of dedicated focus on own brands/private label
Improved consumer feedback
We are identifying and actively supporting successful community initiatives, and will continue driving this group strength through more retail stores
web Best retailers
We are only as strong as our retailers, therefore we provide expert retail leadership and support through our service, incentives and training programmes
Disruption of operations due to labour disputes and/or industrial action
Ability of financial model to deliver retailer profitability
Health and safety challenges
Level of leadership and support to retailers
Loss of retailers to competitors
Security issues leading to significant losses
Improved retail performance
We are providing a formal, tailored service package to our retailers to ensure we meet their specific needs with a particular focus on financial monitoring and store cluster comparison
Strong retail performance in 2014 with like-for-like growth of 7.8% reported in the current year
web New business growth
We seek to grow our organisation through organic, real growth opportunities and an emphasis on diversification
Ability to leverage competencies and develop new business opportunities/concepts
Ability to successfully develop new business in Africa
Ability to attract new retailers
Ability to develop new sites
Appropriateness of model for development and integration of African expansion into DC structure
New store openings
Opened: 19 new SPAR stores, 51 new TOPS at SPAR stores, 18 new Build it stores and 10 new Pharmacy at SPAR stores
We have identified a number of future growth drivers that are being investigated. Our African expansion is deliberate. We supply SPAR stores in Botswana, Namibia, Swaziland and Zambia and have a 35% share in SPAR Zimbabwe
The purchase of BWG
web Stakeholder returns
We seek to create stakeholder returns through an emphasis on efficiencies such as lean organisational practices, refining our future financial model, effective systems and motivated, competent people
Poor relationship with supplier and retailers
Inappropriate business model
Poor employee relations
Profit after tax improvement
Dividend
Staff surveys
Staff retention
Profit growth (after tax) of +13.3%
Dividend growth of +11.3%
We continue to meet with our ever increasing number of major suppliers (10 in 2014) to jointly address efficiencies and opportunities to add value for our customers
Customer service survey with our retailers and internal survey with our employees are done annually and results are communicated
web Sustainable systems
Through socially and environmentally sustainable business practices we seek to ensure the long-term viability of our organisation
Climate change
Ability to reduce carbon footprint
Sustainability of fresh supply
Non-compliance with legislation and regulations
BBBEE level 3 (target)
Carbon footprint improvement
Achieved a BBBEE level 7 score
Carbon footprint reduction is ongoing–baseline reset for 2014
No non-compliance matters reported

DETERMINING MATERIALITY

SPAR defines a material issue as a matter that has a direct or indirect impact on the group’s ability to create, preserve or erode economic, environmental and social value for itself and its stakeholders. These matters are determined by considering their effect on the organisation’s strategy, governance, performance or prospects. In reviewing our material matters, we considered the following sources of information:

Stakeholder concerns
Strategy
The board agenda
Management reports
Risk register
The external context
Media reports, including social media
Investor feedback

An externally facilitated materiality workshop was held with key management to determine the material issues for 2014. These matters were then ranked according to potential impact and likelihood. Similar issues were clustered together to identify the following list. The list below contains the top 16 issues that were ranked as such during the workshop and where those issues are addressed in our report:

MATERIAL RELATIONSHIP    
Associated material issue    
     
SUPPLIER– SPAR
Fresh product line
Food quality and safety
Food security and agriculture
Climate change impact on the supply chain
 
SPAR– EMPLOYEES (INTRA-ORGANISATIONAL INTERACTIONS)
Rising fuel costs
Sustainability of the business model
Leadership
BBBEE and transformation
Attracting suitable employees
     
SPAR– INDEPENDENT RETAILERS (VOLUNTARY TRADING RELATIONSHIP)
Retailer profitability (attract and retain)
Entering African markets
Union activism at distribution centres
 
SPAR– INDEPENDENT RETAILERS (CONSUMER)
Reputation/ brand risk and strength
Retailer relationships – SPAR and community
Increasing competition
Compliance with legislation and required disclosure