CHRIS SHORTTPick n Pay / General Manager: IS

SA’s Favourite Loyalty Programme– Bigger, better and on SAP HANA

INTRODUCTION TO PICK N PAY

PROJECTBULLDOG

PROGRESS ON OUR PLAN

Contents

50 years ago Raymond Ackerman bought three small stores

in Cape Town, and began to pursue his dream

A dream to build a new kind of retail business, one which

made the customer the most important person in the

relationship

He had to fight for change – he had to fight high prices and

the entrenched relationships which maintained those prices

That partnership with South African customers enabled Pick

n Pay to become South Africa’s best-loved food retailer

Introduction

4

Introduction to Pick n Pay

Increasingly challenging environment:

customers face high inflation, rising

unemployment, low income growth

Political disruption has made the situation

even more difficult

We are doing everything we can to

support consumers and sustain South

Africa – capital investment and job

creation

In difficult times, we can do no better than

draw on the strong roots which our

Founder laid down for our company 50

years ago

1Consumer

sovereignty

2Business

efficiency

3Doing good is

good business

Our Core Values

Sales-led as well as cost-driven recovery

Eight consecutive periods of profit and

turnover growth

PBT margin up to 2.3%

Well on our way to restoring a

sustainable profit margin

59.3 77.5FY13 FY17

TURNOVER (R BILLIONS)

0.7 Z 1.8 ZFY13 FY17

PBT (R BILLIONS, EXCL. CAPITAL ITEMS)

1.2 Z 2.3 ZFY13 FY17

PBT MARGIN (%, EXCL. CAPITAL ITEMS)

Taking stock after four years

1 BETTER FOR CUSTOMERS

2 A FLEXIBLE AND WINNING ESTATE

3 EFFECTIVE AND EFFICIENT OPERATIONS

4 EVERY PRODUCT, EVERY DAY

5 A WINNING TEAM

6 BOXER – A NATIONAL BRAND

7 REST OF AFRICA – 2ND ENGINE OF GROWTH

Lower everyday prices on key grocery lines Exceptional value through more private label

Next Generation coming to more stores Focus on convenience in new space growth

Leaner operating model across stores Better front-line service

Further DC centralisation Lower cost and better availability in stores

Leaner and fitter head office Focus on training in customer service

Focus on providing best value in the market More stores serving more communities

Maintain progress in Zimbabwe, improve in Zambia Opening in Ghana and Nigeria

What to expect in FY18

Launched over 1 700 new and repackaged

private label products over past 2 years

Private label participation has increased by

3% since FY15 to 18% of turnover in FY17

Private label growth is well ahead of the

market in a number of categories

Convenience range continues to see strong

growth

Improved customer offer, especially through fresh and private label

Opened 150 net new stores in FY17

Estate grew to over 1 500 stores, with more than

750 supermarkets

Continued to accelerate refurbs, with 62 in FY17,

including 28 PnP supermarkets and 16 Boxer

superstores

Next Generation stores now total 106,

accounting for 18% of our South African

supermarket estate

19

40

62

FY15 FY16 FY17

NUMBER OF REFURBS

41

65

Boxer PnP

NUMBER OF NEXT GEN STORES

New space and refurbishments

GREATER PRODUCTIVITY

AT A LOWER COST

RESULTING IN A BETTER CUSTOMER

EXPERIENCE

Improved DC productivity through our integrated warehouse management systems

Improved replenishment and availability through better forecasting and replenishment systems, Wi-Fi in stores and our mobile stock management app

Improved customer frontline experience - first major retailer to launch Tap & Go, with improved bank card processing time for all transactions

Lower operating costs - In-house development of Brand Match system and in-sourced Smart Shopper loyalty engine

INVESTMENT IN TECHNOLOGY IS PAYING OFF

Investment in Technology is improving

productivity and customer experience

ONLINE

Dedicated online warehouse in Western Cape; sales growth of 30%

Second dedicated online warehouse now operational in Gauteng

New mobile-enabled online shopping website launches this year

VALUE-ADDED SERVICES

Double-digit growth in commission income from prepaid electricity,

third party bill payments, ticketing and financial services

R24 billion in cash withdrawals at our tills in FY17. SASSA

beneficiaries receive free cash withdrawal, R7bn withdrawn in FY17

New low-cost money transfer service launched in partnership with the

Commonwealth Bank of Australia. 100 000 customers in first 5 months

100 Next Generation money counters

Online and retail services are genuine engines of growth

6.4

11.0

6.1

CPI Food inflation PnP inflation

FY17 INFLATION %

SA CONSUMER CONFIDENCE

2016

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016

Incomes have lagged inflation, leading to

an increasingly stressed consumer

Economic growth is unlikely to accelerate

for some time

Customers shopping around for lower

prices and best value is the new normal

The new normal: Operating environment in 2017

LOWER PRICES

LOWER COSTS

We will deliver consistently better value for customers, particularly through lower prices

Strong start in March with permanently lower prices on key fresh lines, relaunched Smart Shopper with instant personal discounts; and fewer, deeper promotions

More to come in following months

We are enabling this better value by reducing our costs and becoming more productive

Better productivity and lower cost provides more headroom to invest in customers

Aligning stores and offices to new operating models

We are now accelerating our progress

SA’s favourite loyalty programme – now

more personal, with more instant rewards

Weekly personalised discounts, tailored

specifically to each individual Smart

Shopper – 3 million unique coupon

combinations via email each week

Powered by a system which processes

600 million transactions involving 6 billion

products across 11 million customers – to

identify what you are most likely to buy

next

Updated Smart Shopper to give more value in tough times

15

Project Bulldog

Savings were to be had in both IS and the SmartShopper team of between 15m & 20m p.a.

Improved efficiencies could be gained e.g. call centre agents access to data

Better customer journeys were needed when interacting with the SmartShopper program e.g.

voucher redemptions and mobile usage

We have a POPI compliance imperative e.g. discretionary points management process

We wanted to reduce risk in terms of data ownership and systems reliance

We wanted improved responsiveness for support related matters

Upskill PnP colleagues in IS and SmartShopper

Based on the Operating Context outlined above,

we decided to run the project, because:-

The project has 3 major tasks:-

Insource the Points and Campaign management engine into SAP CRM on HANA;

Insource Programme management into SmartShopper team;

Insource more basic analytics and customer segmentation into SmartShopper team;

The challenge before us was to ensure the following principles:-

No customer is offered less than they had before we made the change in systems;

Provide flexibility to run multiple, real time loyalty dimensions with agile and quick deployment.

What we decided to do

Project name: Project Bulldog

Project scope Management: SAP CRM Loyalty & Campaign Module

Process coverage: Loyalty Membership, Loyalty Management,

Loyalty Partner Management, Campaign Management

Partner(s): UCS Solutions

Rollout scope: South Africa

Implementation method: SAP ASAP combined with the PnP methodology

(Waterfall and Agile mix)

How we put the project together

Project duration: 16 Months

Go-live date(s): 18 August 2016

# of users implemented: 51 users + 12 million customers through integrated self

service options (Instore Kiosk, Mobile App, Web, CIC)

Additional users planned: Growth of 4 million active customers over next 4 years

Estimated project effort: 4527 mandays

The project in numbers

The way we thought about the scope of the project

2015 2016

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

Design

Sign off

Other

System

SPD

CRM

Config

Integration

Testing

UAT

Production

Support &

Stabili-

sation

Des

ign

CRM SPD

signoffB

uil

d

De

sig

n

Wo

rksh

op

Retail

Spec & Build & Unit Test

SAP perf dev

Loyalty

Go Live

IAT

Sign off

CRM

Spec & Build & Unit Test

UAT

Sign off

Para

llel

Run

Finance Spec & Build & Unit Test

Earn Performance Dev - SAP

Implementation

Strategy

Lo

ya

lty &

MK

T/A

na

lyti

cs

Start recruitment process

Induction and training for

new recruits

Build

Complete

Prep for

Go Live

Change Management

Notice

to

5One

Critical Notice to incumbent

3rd party – end Nov

CLL

switch-off

The High Level Integrated Project Plan

Not Possible

8

7

Unlikely

6

5

Possible

4

3

Certain

2

1

1 2 3 4 5 6 7 8

Requirements well

understood

Requirements

stabilising

Requirements not

finalised

Requirements

unknown or unstable

BW

Reporting

Stream Status

Earn Strategic Dev

Standard SAP Loyalty Engine will not meet PnP

requirements. Alternative solution proposed to SAP which

SAP have committed to include in standard solution.

However this would cause a 4 month delay. Investigating

alternatives.

BW Reporting

BW architecture agreed late.

High level planning and architectural design initiated. BW

stream lead started.

Dependency on BW HANA upgrade a concern.

Parallel Run & PilotDetailed design for parallel run & pilot required. On hold until

CRM build is well underway.

VBS

Design (SPD) complete. Dev scheduled for delivery (Dev

estimate required to confirm).

Requirement to pilot 1 store being unpacked.

Finance

Finance solution requires BW development in POSDM to

complete solution. BW resources need to focus on this

delivery.

POSDM

Design (SPD) advanced but not completed due to conflicting

priorities.

POSDM development scheduled for early 2016.

Dependent on POSDM HANA go live.

RetailNeed to clarify overall retail priorities to ensure development

can be completed on time.

POSDM

Finance

Kiosk

(Bytes)

Mobile

OLS

VBS

Earn

Strategic

Dev

Redeem

Retail

Membership

Campaigns

Loyalty

Management

Earn

Shopper

Centre

Data

Migration

Parallel

Run &

Pilot

Project Risk Assessment

Kiosk banners

Corporate website banners

Online Shopping banners

Mobi app pop up message

E-mail shots

SMS shots

Social Media responses for

queries/complaints only

N/A

Kiosk attract loop

Internal email to all staff

Store Manager comms

Franchise comms

GM’s comms

Buying comms

CIC comms

IVR for CIC line

IVR for IT HelpDesk

Campus Pilot comms

Partner/3rd party comms

A4 landscape kiosk posters

Kiosk header boards

A Frame posters

How we communicated to all members

of the project and the business

E-mailSubject Line:

SmartShopper off line

16 – 18 Aug

SMS

Smart Shopper,

systems upgrade

16-18 Aug. The

Kiosk, Online

Shop, Mobile App

& Call Centre will

be affected.

View more

http://bit.ly/2a0rZfg

SMS STOP to opt

out

Example of communications used

Issues could be logged by

the following channels:

Customer, Store, CIC,

Marketing & Trade Desk

0800 11 22 88

0860 30 30 30

These are then logged at

the Help Desk

help@pnp.co.za

Help Desk logs issue on

INFRA and email sent out

to relevant Resolver group:

SAP CRM

SAP POSDM

Decision Support - SAP

BW

SAPFin IS Sup

SAP RETAIL_IS Support

JAVA Team

SMART SHOPPER –

PROMOTIONS

STORE KIOSK & POS

VAS 2ND LEVEL

Currently the SAP CRM

Resolver Group receives

INFRA call (and email) and

wording (Smart shopper) in

call directs this to the

Bulldog team via

SAPCRMSmartShopper@

pnp.co.za) which is

managed by Taryn.

If Resolver Group cannot

fix the call these calls will

be forwarded (via INFRA)

to Functional Consultant

3 Fixed INFRA licenses

have been received

Automated reports out of

INFRA are run twice daily

for team meetings at

09h00 & 15h00 daily to

discuss calls

Each Resolver Group to

make use of the REF field

in INFRA and for all

Bulldog related calls to

insert the word

“BULLDOG”

This will be used for

reporting purposes

How we thought about Post-Live support

28

Progress on our Plan

Areas where our project was particularly innovative or successful

First in the world to implement real time processing for central earning & redemption of loyalty points.

Collaborated with SAP product owners and SAP Loyalty development team to enable central processing

within acceptable response times (<100 ms per basket, 200 baskets per second)

Voucher and loyalty rules applied in real-time to a retail orientated transaction model (understands the concept

of a basket)

Although the design included extensive customisations, we used SAP architect and SAP development team to

verify the approach

Dependency on SAP Development timelines was mitigated by developing proposed approach in house. The

coding was shared with SAP Dev team who worked with PnP team to ensure solutions were closely aligned.

Standard changes were retrofitted during test phases through application of OSS notes from the SAP Dev

team

Use of pilot store as internal soft go-live prior to release to general public

Targeted communications used to inform users and customers of changes being implemented

Highlights of what we did

Standard SAP Loyalty not suited to real time processing and not

designed to recognize the shopping basket

Mitigating actions: Engaged SAP products owners to establish if

requirement addressed at other sites; designed custom solution based

on SAP design; continued to develop custom solution in parallel with

SAP development

Project required replacement of existing system in a highly integrated

environment

Mitigating actions: Extended design phase that included designs from

all impacted systems, design forum meetings scheduled weekly

throughout project to ensure issues addressed through development &

test phases

Project had to take into account changes to existing system over

extended period of project

Mitigating actions: Worked with business to ensure changes to

existing system minimized; change control procedure ensured only

critical changes made; project governance structures used to contain

scope & defer non critical changes

Key challenges faced

Rapid Time to Value and TCI/TCO

Project scope, timeline & target dates were managed closely together with the UCS partner. UCS

assumed joint risk by agreeing to a fixed price commercial basis – ensuring software to services

ratios stayed within expected range

Savings in Infrastructure costs realised through migration to HANA-based architecture with

appropriate Data Archiving in place

Integrated strengths of traditional waterfall methodology with concepts from Agile to demonstrate

progress and verify design alignment with business users

Proactive use of Steering Committee drive decisions regarding time, scope & budget

TCO has been positively impacted by >15% reduction in costs of loyalty programme

Key lessons learnt

Collaborate and align with SAP to ensure custom solutions can be retrofitted into standard

once OSS notes released

Establish a “design authority” to own and resolve integration issues

Strong leadership from Business and IT sponsors to ensure scope contained & pilot

implementation managed

Business & IT closely aligned around a clear business case so that they are engaged to deliver

the same results

Open and transparent communication between team members and all stakeholders that

ensured that there were no misunderstandings and that there was consistent management of

expectations of all parties

Strong business led steering committee had a firm hand on keeping project focussed the

original objectives

THANK YOU