Shoprite’s African expansion – enjoying firstmover advantage
Shoprite CEO Whitey Basson can never be accused of not thinking big. He did it successfully in SA and is determined to replicate Shoprite’s success in the rest of Africa. “I see huge greenfields growth opportunity in Africa,” says Basson.
Adding weight to his optimism, the McKinsey Global Institute forecasts that the number of African households with annual discretionary incomes of US$5000 or more will rise from 85m at present to over 128m by 2020. Total consumer spending in Africa is projected by McKinsey to reach $1,4trillion in 2020, $540bn more than in 2010, with food and beverages accounting for $175bn of the increase.
Shoprite is no stranger to Africa. The retailer made its first move outside SA in 1990 when it opened its first store in Windhoek, Namibia. But Basson had set his sights way beyond SA’s neighbouring countries, a strategy he had to do a hard-sell job on.
“Questions were asked by the investment community and by people inside the group,” says Shoprite nonexecutive chairman Christo Wiese. “I was always very supportive of his [Basson’s] African strategy.”
Basson has gone on to prove the critics of his Africa strategy wrong. Shoprite ended its year to June 2012 with 131 non-SA supermarkets in 16 countries. African stores represented almost one in seven of its total corporate-owned supermarkets. In turnover terms the contribution of African supermarkets came in at R9,174bn – 11,1% of the group total.
Turnover growth of non-SA supermarkets in the year to June was an impressive 25,4% (19,7% at constant currencies) compared with 12,9% growth from SA supermarket operations. “Our stores in Africa are achieving substantially higher turnovers than our stores in SA,” says Basson.
As for profit, non-SA supermarkets are a growing factor in Shoprite’s performance. In the year to June trading profit from non-SA supermarkets was up 12,2% at R446,3m, 10% of the group total. Trading margins from African supermarkets were also solid, coming in at 5,1% compared with the 6% generated by SA supermarkets. Shoprite as a group exceeded a 5% trading margin for the first time in its year to June 2010.
Its first move beyond a neighbouring country came in October 1995 when a Shoprite supermarket was opened in Lusaka, Zambia. The number of stores there has since grown to 21 , the highest after SA and Namibia.
A store in Maputo, Mozambique, followed in 1997, the year Shoprite acquired OK Bazaars, which added Swaziland and Botswana. By June 1998 Shoprite had 25 supermarkets outside SA.
Over the next five years, it entered Zimbabwe, Uganda, Malawi, Lesotho, Madagascar, Mauritius, Tanzania, Ghana and Angola. By June 2003 the group was operating 66 supermarkets and 12 OK furniture stores outside SA.
The next big step came in December 2005 when Shoprite opened its first store in Nigeria. Basson sees Nigeria holding huge growth potential for Shoprite. “By 2020 Nigeria’s economy will be bigger than SA’s and by 2050 it could be one of the biggest in the world,” says Basson…..
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