S PA R S A
SPAR SA
Reach for the
SPARs
PRODUCTION: Emily Ayson
SPAR is a globally recognised brand with 12,000 stores in over 40 countries. Underpinned by the key values of providing fresh, quality, local goods, it has been a stalwart presence for millions of customers since the 1960s. Yet, in data revealed by Chief Executive Graham O’Connor and Chief Financial Officer Mark Godfrey at the SPAR Results Presentation in September 2017, sales performance across South Africa has been disappointing. However, there is a silver lining, as figures also show that in Switzerland and Ireland, business is beginning to boom.
//
Graham O’Connor recently had to reveal some bittersweet news about the current performance of SPAR. Unfortunately for the South African division, there has been a slowdown in sales with year growth sitting at just over 4%. Operating profit was at R2.6 billion which is only a 0.2% increase on last year’s figures. O’Connor stated that ‘these results reflect the weak state of consumer buying power and confidence, which has been exacerbated by retrenchments, political
uncertainty and climatic challenges in South Africa’. He also noted how intense competition within the retail marketplace is also having a negative effect on bringing customers through SPAR’s doors. Yet, he continued to note that ‘despite these challenges, the group is encouraged by the strong performances from our business in Ireland and the early positive signs of the turnaround in Switzerland’. For the entire company, income streams from foreign capital equated to 32.4%
turnover and 22.4% operating profit, with deflation abroad considered as a key factor for such significant results. SPAR has only been a fixture in Switzerland since 2016, but the company currently operates 300 retail stores and 11 cash and carry sites, with a further 44,000m² of property dedicated to warehousing. Statistics presented by Godfrey show that turnover was 94.7% higher than this time last year (in CHF terms), at R10.4 billion. Swiss operating profit was at R69 million. Furthermore, these figures demonstrated a complete
www.enterprise-africa.net / 3
INDUSTRY FOCUS: FOOD & DRINK
// THESE RESULTS REFLECT THE WEAK STATE OF CONSUMER BUYING POWER AND CONFIDENCE, WHICH HAS BEEN EXACERBATED BY RETRENCHMENTS, POLITICAL UNCERTAINTY AND CLIMATIC CHALLENGES IN SOUTH AFRICA // reversal of the half year loss SPAR Switzerland was operating at, which has been attributed to efforts in increasing product range and value for money. Their leading ‘WOW’ advertising scheme was developed to draw attention to SPAR’s competitive pricing on quality everyday groceries, which is of particular significance considering that the country ranks among the most expensive locations in the world to live. The longer established Irish faction of SPAR consists of 1330 retail premises and warehousing space of 34,560m². It has done notably well this year as Godfrey showed, with an annual turnover of R20.5 billion which translates into an almost 11% increase
4 / www.enterprise-africa.net
on figures for last year. Furthermore, Ireland closed the end of September with an incredible operating profit of R508.2 billion. Contributions to such numbers can partially be ascribed to SPAR Ireland’s recognition of growing social trends and consumer demands, in particular the desire to live a healthier lifestyle. It rolled out an extensive selection of low fat, high protein and gluten free foodstuffs that have been developed in conjunction with leading dieticians. This range has been very well received by customers. Celebrity endorsements for this ‘Better Choices’ campaign may also have had a positive effect on encouraging customer spending, with
well-known Irish celebrities such as soccer star Seamus Coleman and model Claudine Keane lending their images to the cause. In addition to increased sales here, the wines and spirits section was also highly profitable, with business up by 17.8% on last year. However, although such significant growth in the foreign marketplace is extremely positive, it should not completely detract from the fact that there has been some progress for the South African chapter of SPAR. O’Connor stated that despite expectations that the economy and political climate were to remain volatile, SPAR is still committed following through on schemes to improve stores and win back customer faith: ‘These initiatives include ongoing, significant investments in the group’s distribution network, competitive pricing and ensuring a comprehensive product range’. The existing South African network includes 2138 stores and warehousing space of 295,500m². Already this year, 259 stores have been given overhauls
SPAR SA
and the Western Cape and North Rand perishable facilities have been expanded, at a cost of R66.4 million and R34.5 million respectively. There has also been a growing focus on adapting to the technological shift from conventional advertising to digital platforms to generate footfall into stores. Such initiatives include the My SPAR Rewards scheme which allows customers to receive discount coupons on their smart devices and the Text Me service sends automated SMS messages detailing store promotions. Registrations for these schemes skyrocketed by 92% in February, with numbers increasing throughout the year. Furthermore, SPAR introduced another 235 products to its collection of competitively priced store-brand groceries, meaning that there are now over 1200 goods in the range. Sales of
these specific items were up 9.7% to R8 billion, making the total range worth an estimated R10.2 billion. SPAR has also been looking to integrate new revenue streams into its operations with new business schemes, including its own official money transfer service. Similarly, the acquisition of S. Buy wholesalers means that the company will have a dedicated pharmacy division that will supply retail customers, private patients and professional medical establishments. SPAR also recently completed a transaction for a 47.87% shareholding in SPAR Zambia, which was originally put up for sale in 2016 by parent conglomerate Innscor. Similarly, there are plans to add Sri Lanka as the 43rd country of operation, with the first store expected to open in 2018. Statistics presented by O’Connor also revealed that across the board,
customer perceptions about the competitive pricing of SPAR is undeniably positive. Yet it just goes to show that regardless of good reputation and range, businesses are always at the mercy of political, economic and social conditions. For SPAR South Africa, negotiating through such an uncertain trading environment has not been easy, but nor has it deterred optimism for future growth. Indeed, key plans are in place to renew and improve consumer interest, encouraging customers to reach for the SPARs once more.
SPAR SA 031 719 1900 www.spar.co.za
For any queries please contact our Customer Care Line: 087 940 5100 or visit www.grainfieldchickens.co.za
www.enterprise-africa.net / 5
AFRICA
THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
Published by CMB Multimedia Chris Bolderstone – General Manager E. chris@cmb-multimedia.com Sackville Place, 44-48 Magdalen Street, Norwich, NR3 1JU T. +44 (0) 20 8123 7859 E. info@cmb-multimedia.com www.cmb-multimedia.com
Issue No.65
www.enterprise-africa.net
ALEXANDER FORBES
CMB Multimedia does not accept responsibility for omissions or errors. The points of view expressed in articles by attributing writers and/ or in advertisements included in this magazine do not necessarily represent those of the publisher. Any resemblance to real persons, living or dead is purely coincidental. Whilst every effort is made to ensure the accuracy of the information contained within this magazine, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrievable system or transmitted in any form or by any means without the prior written consent of the publisher. © CMB Multimedia Ltd 2017
Journey of a
Lifetime
Exclusive interview with CEO Andrew Darfoor ALSO IN THIS ISSUE:
Buffalo Coal / Nautic Africa / Grindrod / SAOTA
AS FEAT UR ED IN
ENTERPRISE AFRICA
DECEMBER 2017