Private Label Report Purpose of the Report Publication date: December 2018 Next publication: November 2019 Purpose of the Report To clarify the role of private label in Checkers Private Label Report

Private Label What is Private Label? Private Brand House Brand Dealer-Own-Brand Confined Label Exclusive Brand Private Label What is Private Label? There is often confusion around the difference between private label, private brand, house brand, dealer-own-brand, confined label, and exclusive brand. These terms are often used interchangeably and sometimes incorrectly. As such, please refer to the below definitions for clarity, the term private label encompasses both. For the purpose of this report, focus remains purely on private brand Private brand, House brand and Dealer Own brand: A brand of product(s) that is exclusively manufactured by a contract or third-party manufacturer for a retailer, according to retailer specifications, and sold under a retailer’s brand name. Private brand is often tiered according to ‘good, better, best’ brand positioning, however these tiers are defined differently across retailers i.e. some might refer to premium / national brand equivalent / value or fit for purpose Globally, certain retailers (i.e. Lidl) are moving towards vertical integration with their private brand products (i.e. owning the factories which private brands are manufactured in) Confined Label, Exclusive Brand: A brand of product(s) owned by a manufacturer or producer but exclusive rights are given to a retailer to be the sole distributor of the product to the market Let’s take you on a journey down the shopping aisles of Checkers, showcasing their most prominent private brand products

Private Label Role in Checkers Strategy Financials and/or Contribution A means to provide relevant and better value products for its shoppers Checkers Private Brand, Housebrand, strives for price leadership on shelf without compromising on quality, while supporting the Groups ‘low price promise’ positioning Housebrand offers a guaranteed ‘refund or replace’ promise Strategy To continue to innovate, develop and extend the range offering (both for key commodity price points and upmarket products), while delivering better margins for the Group The focus is not only on key commodity price points, but also on upmarket products aligned to the Group focus of targeting LSM8-10 To provide the opportunity to deleverage power from multi-national suppliers Financials and/or Contribution Shoprite’s private label categories have reportedly outgrown store growth threefold, with SA contribution increasing from 14.6% in FY2017 to 16.2% in FY2018, showing a profitable increase of +R300m (SA Retail sector share 21.1% - Source: Nielsen) 20 of its private brands now worth +R100m Development and launch of a new umbrella private label brand called Simple Truth, consisting of more than 150 products aimed at consumers seeking healthier and/or more environmentally friendly products, from gluten free to vegan to organic “Continued improvement in our private label offering enabled us to bring better value to customers, reflected in private label participation of turnover increasing a further percentage point with a profitable increase of more than R300m.” Pieter Engelbrecht, Shoprite Group CEO

Private Label What are the Private Brands in Checkers? Private brand is often tiered according to ‘good, better, best’ brand positioning, defined differently across retailers The tiered approach enables the retailer to control the price perception of its products Private brands Shopper Profile LSM 8 – 10 Strategic Brand Positioning Good (Value) ‘We’ve cut the prices, not the quality!’ An economy brand offering shoppers a guaranteed quality product, at an affordable price Price Positioning Price fighting brand - to keep brand leader’s pricing in check Cheapest on shelf in high volume, low margin categories, communicating a price advantage which reinforces the ‘low price promise’ positioning of the Shoprite Group SKUs Participates in basic commodity categories, as well as receiving prominent position across a spectrum of household and food categories

Private Label Strategic Brand Positioning | Good (Value) Housebrand aims to be the cheapest product on shelf without compromising on quality – ‘We’ve cut the prices, not the quality’ It is commonly merchandised at eye-level in close proximity to the brand leader

Private Label R9.99 Price Positioning | Good (Value) vs. Market Leader Housebrand strives for price leadership on shelf without compromising on quality, while supporting the Groups ‘low price promise’ positioning Good (Value) Market leader A large investment has been made to establish the Checkers housebrand as a guaranteed quality product at an affordable price, receiving prominent position throughout the store and strong focus on leaflets. Checkers also carries an extensive range of exclusive brands visible throughout the store. The following only focus on the Checkers private brand. Note: pricing as at 18.12.18 R9.99

What media platforms are used to communicate Checkers Private Brand Private Label What media platforms are used to communicate Checkers Private Brand Print Website Checkers private brand enjoys prominence in stand alone private label leaflets, as well as within national and regional broadsheets In the ‘specials’ section private brand promotional products feature within electronic broadsheets, or can be looked for using the ‘search’ button Social Media Facebook and Twitter showcasing Checkers private brand

Private Label What’s going on in-store? Housebrand has significant presence in-store (POS) and on shelf (a variety of products across basic commodities, as well as receiving prominent position across a spectrum of household and food categories) Merchandised next to the brand leader

Maryla Masojada | Lead Analyst Adrienne Osberg | Retail Analyst