SHOPRITE
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SHOPRITE
South Africa’s
Supermarket of Choice
PRODUCTION: Timothy Reeder
Ever since the first Shoprite store opened its doors to the South African public in 1979, the group has retained a clear vision which has seen it grow into a R141 billion turnover business, the largest supermarket retailer on the African continent with a staff complement of almost 144,000.
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Its commitment to new acquisitions and innovative expansion strategies means that it is difficult to isolate any particular year in Shoprite’s history as its most pivotal, but along the way there have been numerous milestones which have been central in establishing itself to this extent. 1990, for instance, saw Shoprite open in Windhoek, Namibia, which in turn triggered the start of its aggressive expansion across the African continent. The following year then brought the acquisition of the national Checkers chain of supermarkets which operated 169 stores, along with its 16,500 staff members for an outlay of R55 million. As a result, Shoprite increased its footprint overnight almost fourfold to 241 outlets, and saw its personnel grow to almost 22,600.
The turn of another decade again proved significant for the group, opening as it did its first supermarkets in in Uganda in the form of the Shoprite Clock Tower in Kampala in November 2000. This was bolstered by the opening of a first store in Zimbabwe, in Bulawayo Centre, and in August 2001 the group started operations in Malawi when it opened a Shoprite store in Lilongwe. Also in this year came the, in hindsight important, decision to split and market the Shoprite and Checkers brands separately, with Checkers repositioned to compete within the middle-to-higher income market. This approach sees it offer a range of specialty products on top of what might be considered the norm, including extra-matured steakhouse classic steaks, free-range certified natural lamb, wines from over 80 of South Africa’s leading estates and over 400
award-winning cheeses. As it stands today, Shoprite is the largest supermarket retailer on the African continent, with 35 million people across a footprint of more than 2,689 outlets benefitting from its lowest price promise every day. With the weight of its history and growth behind it, the 2010s have been more a tale of cementing its dominance for Shoprite, where it has been perennially named in the Deloitte’s Global Powers of Retailing survey as the largest retailer in Africa and consistently among the biggest 100 in the world. As at June 2016 some 76% of South Africa’s total adult population, equating to more than 29 million customers, shops at one of the group’s supermarket brands. During the financial year too, the group notched up for the first time a record one billion transactions in a single year, and reported turnover of more
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INDUSTRY FOCUS: RETAIL
// IT MUST BE AN ABSOLUTE NIGHTMARE TO COMPETE WITH SHOPRITE BECAUSE IT IS SO POWERFUL // than R130 billion. To achieve this statistic it had to be equal to the task of serving a staggering 86 customers per second, a feat only possible for a group with the network of stores and wealth of skilled personnel in Shoprite’s armoury. The results of the 19th Annual Sunday Times Top Brands Awards brought Shoprite’s most recent recognition, spelling yet further glory for the group as it took top spot for the fourth successive year in the grocery stores field, followed by its perennial competitors Pick n Pay and Spar. The survey is conducted by Kantar TNS on behalf of the Sunday Times, and continues to be widely considered the leading barometer of consumer feeling towards brands. The 2017 edition polled 3500 individuals, aged 18 years and older in both metropolitan and non-metropolitan areas of South Africa to
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establish a comprehensive ranking of leading brands across 32 Consumer categories. Also significant was Shoprite’s placing, in the face of stiff and long-established competition, in third as consumers’ overall favourite brand in South Africa for 2017, behind only KFC and Samsung. It should come as no surprise, given the consumer confidence in and loyalty towards the group, that Shoprite was able to deliver industry-leading results for the 2017 financial year in defiance of what have been universally recognised as tough market conditions. Serving those in excess of 35 million individual customers on the African continent helped the group to gain marketshare and grow trading profit by 11.6% to R8 billion.
Sales growth of 7.8% for the six months to December 2017 in its South African supermarkets, against an internal inflation decline to 0.4%, underlined the resilience of the business in the face of the country’s diminished economic prospects. In the corresponding six months, sales had grown by 7.4% through the reduction of basic commodity prices, while Shoprite reported that group turnover was 6.3% higher for the six months to December. In a somewhat unexpected turn, the furniture division was among its star performers with increased sales of 10.8%, while other operating segments, mainly driven by the OK franchise division’s performance, saw a growth of 6.7%. “This is pleasing, given low internal price inflation and in line with the group’s South Africa supermarket performance,” the group commented. “Shoprite is really taking market share from competitors. It must be an absolute nightmare to compete with Shoprite because it is so powerful,” added Cassie Treurnicht, portfolio manager at Gryphon Asset Management.
SHOPRITE
// OUR JOB IS TO IMPRESS CUSTOMERS SO THAT THEY COME BACK AGAIN AND GIVE US A BETTER SHARE OF THEIR WALLETS // Shoprite also holds a competitive advantage over other retailers in the form of its slick logistic and distribution operations, not only in South Africa but across the whole continent, which gives it the ability to source merchandise from suppliers at competitive rates, control costs and get additional profitability to reduce prices. Ron Klipin, a portfolio manager at Cratos Wealth, also picked out the recent decline in the price of soft commodities including maize and wheat as important in contributing to lower food prices. “The internal inflation rate could also be the result of Shoprite buying market share by reducing prices due to their massive buying power,” said Klipin. “I would suspect that we are seeing consumers buying products at lower prices. People tend to buy down due to lack of disposable income.” Shoprite now finds itself in the enviable position of being able to take risks moving forward, and go against the expected grain in its strategy. With households having less and less to spend, the decision to push upmarket may be viewed as unusual, but the rationale stacks up. While the lowerincome families that have long been its core customers are forced to cut back, the spending of the wealthier class remains unaffected by the downturn. Shoprite CEO Pieter Engelbrecht told Reuters that affluent areas and customers were where he saw growth in the maturing South African market. “A lot of those (wealthier) customers, two million of them, actually frequent our stores already, but not exclusively,” he said in an interview. “Our job is to get a better share of their wallets
when they are in our stores and then impress them so that they come back again.” As part of the drive to expand its range, Engelbrecht added that Shoprite had upgraded its food technology and development facilities and been thorough in its hiring of food developers and technologists. With all of this talk of luxury provisions and higher earners, it might be easy to forget the needs of the many poorer inhabitants of every community in which the group operates. Not the case for Shoprite, of course, which has implemented a robust programme to address the food security challenges faced by many people across the African continent on a daily basis, and works to provide sustainable solutions to address short, medium and long-term food scarcity needs.
To this end, surplus food from all stores is made available to hundreds of verified non-profit organisations collectively, feeding thousands of hungry people daily. Additionally, its Mobile Soup Kitchen programme has been serving vulnerable communities on a daily basis for a decade, and has already dished up 29 million warm meals and counting. It switches focus now to working with identified beneficiary organisations to establish longerterm solutions, such as sustainable food gardens, to alleviate hunger in communities and to generate much-needed income for vulnerable individuals and organisations in need.
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AFRICA
THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
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February 2018
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