Our value creation contribution
SPAR creates value on a global scale through our voluntary trading model and convenient delivery of fresh food and groceries to stores located where people live.
The group creates significant value for our independent retailers, who benefit from the economies of scale gained by our buying efficiencies, and the cost savings through operational efficiency and a wide scope of products offered and distributed through our distribution centres.
Our business model relies on relationships in all aspects of value creation. We explain our material relationships here, as these provide input into our business activities and help us mitigate the risks, including wastage and resource depletion, associated with distribution and wholesale businesses.
Retailers further benefit from the value created by the merchandising expertise, support services and benchmarking offered by SPAR, which enable them to offer a range of products at competitive prices. Voluntary trading further equips retailers with the ability to customise their product and service offering to be responsive to their local, niche consumer segment’s needs and expectations. This unlocks value for retailers and consumers.
We strive to manage our use of resources and the six capitals of value creation through environmentally and socially sustainable business practices. Read more about these commitments and our progress against targets in the operational reports.
Our sustainability pledge is to create authentic shared value, though the following outcomes:
Our commitment to creating authentic shared value is inherently linked to our values and our support of the 17 SDGs in the following ways:
Inputs required to create value
We source products according to the requirements of our retailers who, in turn, shape their offering according to each store format and their consumer community needs. These products are sourced locally or imported, and consist of fresh and packaged foods, beverages, groceries, building materials, and pharmaceuticals. These products rely on natural resources, and are then converted, processed, packaged and transported to our distribution centres. We rely in manufactured capital in the form of factories, plants, and road infrastructure for these business inputs. Once products enter our distribution centres, they are handled according to SPAR’s inventory, quality control and order processes – which are further essential manufactured capital resources.
Our range of SPAR branded products are developed and packaged for SPAR according to our specific requirements. These products rely on our intellectual capital in addition to the manufactured capital offered by the suppliers selected to produce these.
Other products are branded by their producers and sold under third-party brands in our stores. We follow a stringent supplier selection process to ensure the quality, safety, and secure supply of products – a capability that requires intellectual capital.
Social and relationship capital enable us to form partnerships that endeavour to change manufacturing, packaging and consumption behaviour related to the use of plastics, other packaging and water. Initiatives related to our new carbon reduction framework use intellectual capital in defining indicators, measuring performance, and developing action plans to minimise our detrimental effect on natural capital.
The people working in our distribution centres handle, sort and move inventory according to orders and deliveries. They constitute the human capital required to run the operational side of the business. Their activities are supported by employees dedicated to the financial, marketing, retailer services, information technology and human resources aspects of the business.
Our fleet of trucks – and those in our network of suppliers – form a pool of manufactured capital which is applied to optimised delivery through drop shipments, shared loads, and backhauling, thereby minimising our natural capital impact.
We depend on financial capital in almost all business activities as we require funds to procure goods and services, to pay salaries, to develop new products, to invest in facilities, equipment and to executive repairs. Financial capital is used to make acquisitions, expand out footprint and deliver long-term growth.
SPAR’ interaction with the six capitals
|Capital of value creation||Capital input required to execute our business activities||Capital increased, decreased or transformed through our business activities||Find more information and examples of value created through the capitals|
|Financial capital||We use this capital to procure goods and services, to pay salaries and tax, to develop new products, to invest in facilities or operations, equipment and repairs, and to pay our funders and shareholders. We also provide financial capital to our retailers as credit facilities and to assist with store acquisitions or refurbishments.||Changes in the availability and quality of the capital is evident from increased turnover, margins and operating profit. Financial capital is at risk through remuneration increases and wage negotiations, store closures, provisions and penalties. Positive impacts are delivered through efficiencies and cost savings.|
|Manufactured capital||We use this capital to establish, maintain and operate distribution centres (with cooling facilities, recycling and reclamation plants), warehouses, trucks, forklifts, road and port infrastructures.||We measure our impact through increased distribution centre space, trucks and volumes handled, stores opened, refurbished or closed. New markets, routes and product offerings impact manufactured capital. We reduce our reliance on this capital through efficiency, optimisation and consolidation efforts.||Operational reports|
We use this capital to develop the SPAR strategy, SPAR brand, the guild structure, promotions and marketing campaigns, pricing strategies, ‘learning journeys’ and retailer conferences. It informs our values and culture, board and governance structures, category management capability and joint business planning with suppliers.
We measure our impact through increased sales of house brands, our delivery on strategic outcomes (through the ethics risk assessment), our ability to improve integration between functions, and collaboration between distribution centres and countries. Intellectual capital informs our audit programmes and certifications achieved, as well as the effectiveness of our enterprise risk management rollout.
|Human capital||We use the skills, capabilities and passion of employees, our management teams and board to execute business activities and form relationships.||We measure our impact through the increase/decrease in total employees, our training spend and access to increased skills. The quality of human capital input is informed by our health and safety measures, the number of injuries sustained, visits to our clinics, and employee turnover.||Our material relationships|
|Social and relationship capital||We use our ability to create and sustain material relationships with key stakeholders (suppliers, retailers, employees, consumers and communities) to create an environment in which to perform our business activities, to partner for further value creation and to ensure a sustainable food network.||
We measure our impact through awards, sales volumes, retailers lost, customer satisfaction and market share, CSI contributions, food safety incidents and GUEST programme successes.One of the key measures of success is the sustainability of the emerging farmer hubs.
|Natural capital||We use this capital as input of the products we distribute and sell, our properties and the water and energy we use in our operations (including electricity, diesel, fuel and gas).||We mainly decrease this capital through the manufacturing, distribution and consumption of goods. We mitigate this through reclamation and recycling, solar power, reducing the use of plastic, and through the targets set by our carbon reduction framework.||Operational reports|
Creating value through our business activities
Our business activities are similar to other companies managing wholesale and distribution businesses. What differentiates SPAR is the dynamics of the voluntary trading model, which extends our scope in terms of retail support and marketing activities. Our business activities ensure that we fulfil our purpose.
Our business activities are interdependent in the three main territories in which we operate. As a system, these business activities collectively ensure good supply chain management which streamlines processes and result in resource savings.
Read more about these activities and outputs in the operational reports. Our business activities are summarised below, with the emphasis on our South African operations:
> 5 000
suppliers and service providers
> 1 300
We buy goods from suppliers and sell them to retailers at a margin.
Our bulk procurement creates economies of scale. Fixed costs are spread over vast volumes, thereby reducing cost per unit.
Joint business planning with key suppliers targets supply chain efficiencies, including the responsible use of resources.
Our support of local suppliers benefits small businesses, for example through the rural hubs.
286 935 m2
total floor area
39 676 m2
satellite warehouse space
4 296 811
cases despatched per week
We operate warehouses across our distribution centres and satellite facilities, and across various temperature disciplines.
We apply advanced technology to optimise the complex process of storing vast quantities of goods for delivery.
Goods are received from suppliers and unpacked into pick slots.Retailers’ orders are processed electronically and sorted for transportation.
in South Africa
in South Africa
cases despatched groupwide
Increasing fuel prices emphasise the importance of route management systems, truck specifications, turnaround times and driver efficiency.
There is a dual strategic drive to increase our bottom line and decrease our carbon footprint.
We are increasing the use of biodiesel as fuel, which we collect from South African retailers and which we recycle.Our joint business planning streamlines processes, including backhauling and packing techniques.
RETAILER SUPPORT AND MARKETING
independent retail owned stores in South Africa
We share the benefits inherent in the voluntary trading model with retailers.
We encourage entrepreneurial flair, within SPAR guidelines, to ensure consistency.
We provide a range of retail support services:
- Store refurbishment and design assistance
- Merchandising best practice
- Public relations assistance
- The SPAR development fund for retailers
Our strategic outcomes and trade-offs
We identified three main outcomes as part of the strategy development process. These outcomes consider impacts that are internal or external to SPAR and its material stakeholders throughout the value chain.
The outcomes are also subject to deliberate trade-offs where the interests of one stakeholder are weighed against another over a given period. The voluntary trading model, for example, allows retailers to procure products from alternative suppliers or to compare supplier prices against those offered by the SPAR distribution centres. For SPAR there is then a trade-off in margin to be weighed against the risk to the brand associated with products not necessarily subject to the same safety and compliance requirements as those offered by SPAR. Reputational risk is often carried to a greater extent by SPAR than by an individual store owner. The need for consistency in terms of the SPAR brand and stores vs the free choice of an independent owner remains a core conflict to be managed in the value creation process.