10 Nov 2011 Big five fight for food market share
The battle for the biggest slice of South Africa’s R220-billion food retail market is hotting up, with the Shoprite Group and Massmart in front and Pick n Pay, Woolies Food and Spar on the periphery. This analysis from the Mail & Guardian….
AS MASSMART chief executive Grant Pattison, with his global partner Walmart providing the main ammunition, fired the first salvo by publicly declaring a price war, Shoprite Group chief executive Whitey Basson launched a crafty expansion plan that will likely advance his group way beyond his rival’s reach.
In July, Massmart-Walmart launched a 10-week price-cut promotion, which it claimed saved South Africans more than R50-million. The two million food and 230 000 general merchandise items sold during the promotion were all produced in South Africa, it said.
In October, it extended those discounted prices to December 4, an overt charm offensive to woo the cost-conscious consumer — a tactic, now a trademark, Walmart has successfully used globally.
In South Africa, Basson, who confidently disclosed his group’s healthy state of affairs in the interim results this week, is perceived as the brand ambassador of cheap products. For the first quarter ended September 2011, the group increased its total turnover by 10.8%, a real growth of 7% in spite of overall weak economic demand. Its core business, Supermarkets RSA, also grew turnover by 10.8% with internal food inflation averaging 4%.
Basson did not appear to be a man under threat, clear in his message that Shoprite would continue to grab market share from its rivals. “Our confidence is supported by the increase in basket size ahead of internal inflation and the positive growth in customer numbers,” he said this week.
The South African food retail market is highly concentrated, with five main players accounting for about 60%. Analysts estimate Shoprite owns about 36% of the formal market and is growing, followed closely by Pick n Pay and Spar, each with 28%. Woolworths Food has about an 8% share, which is growing, Walmart’s Cambridge Foods probably has no more than 2%.
The expansion story will dictate who will lead the charge. Though Walmart faced the most bruising legal battle of any foreign company to gain entry into South Africa, the winner of the supermarket war will be the one with the most stores.
Drilling down to the numbers, it is almost a no-contest. Basson will roll out 74 new supermarket stores during the next eight months to June 2012, entrenching his group’s dominance in the formal market…..