Africa’s Retail Market

December 7, 2015 |

AfricaRetailMarket 300x244 Africa’s Retail MarketFOR formal retail, Africa is one of the world’s few remaining frontiers. It is one on which SA retailers are making their mark, with the combined footprint of the 13 main contenders now in excess of 1 400 stores.

Shoprite leads the pack, its 320 stores in 14 countries generating R19bn in annual sales, which is 16,4% of the group total. Shoprite CE Whitey Basson, who has long termed Africa “our future growth driver”, is just getting into his stride.

Shoprite will, in its year to June, have pumped R1,5bn into African expansion, primarily in Angola and Nigeria. More than double the planned spending in SA of R697m, it will lead to the opening of 30 supermarkets.

Setting Shoprite apart is Basson’s vision, which drove its early entry into markets way beyond SA’s neighbouring states. The growth focus is now on Nigeria and Angola, arguably the toughest African markets but the two with the greatest potential.

Even Woolworths, which has a solid 64-store footprint in 11 countries, found Nigeria a tough a nut to crack, exiting the country in 2014.

Woolworths CE Ian Moir noted: “We had three tiny stores in a nightmare market. It was not worth a candle to us.”

Angola is as daunting a challenge. “There are many African countries I would tackle before Angola,” says Mario Santana of Spar Group, which opened its first Spar store in Cabinda City in 2013. “If not for having a great partner we would not have gone into Angola.” Santana’s comments are an indirect tribute to Shoprite, which has Angola as its biggest sales contributor outside SA and has a medium-term target of 43 stores in Angola.

Walmart saw the African potential when it acquired a 51% stake in Massmart in 2011 for R16,5bn. With non-SA sales of R6,4bn (16% of group total) Massmart trails Shoprite but intends to catch up, ranking African expansion as one of four strategic priorities.

“We will add 45% to our [non-SA] trading space in the next two years,” says Massmart CE Guy Hayward. “Our focus is on cash and carry operations and Builders Warehouse.”

Pick n Pay trails Shoprite and Massmart, its total non-SA sales running at R3,7bn (5,3% of group sales) in its latest financial year. The group is also confined to less far-flung countries, its biggest footprint being in Zimbabwe, which is home to 53 of its 98 non-SA stores through a 49% stake in TM Supermarkets.

Pick n Pay CE Richard Brasher is more cautious, referring to the continent as “a potential second engine of growth”.

Indicating the adoption of a more daring strategy, Pick n Pay will open its first store in Ghana in 2016.

It is not only SA food retailers staking their claim in Africa. Botswana retailer Choppies is also on the move, recently acquiring 10 stores in Kenya. “Tanzania and Zambia will be added in a few months,” says Choppies CE Ramachandran Ottapathu. “We also target 80 stores [now 35] in SA.”

For sheer store numbers Steinhoff’s Pepkor is second only to Shoprite, its reach in six African countries now at 258 Pep stores.

It hasn’t just tackled the easy targets. Angola has 57 Pep stores, Nigeria 29 and Malawi 15.

Other SA clothing retailers also have big ambitions, not least The Foschini Group (TFG), which aims to grow African store numbers from 148 to 375 by 2020. Soon to be added to TFG’s country line-up — which already includes tough-nut Nigeria — are Ghana and Kenya.

Mr Price, which derives R1,5bn (8,6%) of its sales outside SA, is also on an African growth track. However, the retailer is treading cautiously, calling Africa a region to be invested in “for the long term”.

Africa, with its potential for huge formalisation, is certainly attractive in the long term. Epitomising this, Nigeria alone is served by 745 000 informal food retailers, according to global consumer research firm Nielsen.


Source:     Stafford Thomas

Category: Blog

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