African safari brings the lure of prize game for Shoprite.

Posted On Monday, 09 December 2002 10:01 Published by
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Whitey Basson is redrawing the retail map of Africa, his group operates stores all the way from Cape Town to Cairo Tanzanian acquisition takes groups tally to 13 countries outside SA, writes Gaenor Lipson.
Retail group Shoprite Holdings continues to cut a swathe across Africa. Its latest acquisition is the Tanzanian operation of Pick n Pay subsidiary Score Supermarkets.

Last month, the group opened its first Checkers Hyper in Mauritius and acquired the five-store Champion supermarket chain in Madagascar.

Africas largest retailer now operates in 13 African countries, excluding South Africa. They contribute about 10% to the groups annual turnover, which was R22billion in the 2002 financial year.

Though the African operations still have a long way to go towards contributing half of the groups profit, Whitey Basson, managing director of Shoprite Holdings, is confident this will happen by 2005.

Basson expects the stores elsewhere in Africa to outgrow the South African market in the next few years. He gives the example of Mozambique. Its economy has had a five-year annual compound growth rate of 10% as opposed to South Africas 2%.

Africa has wealth. Its lack of infrastructure is an advantage to us because we can expand without competition.

Basson is quick to dismiss comments that it is different doing business in the rest of Africa. Basically, the people have to take in the same amount of calories whether its here or Ghana.

He says it was more a culture shock for him to move from Porterville in the Western Cape, where he grew up, to Rondebosch than to go to the Egyptian capital, Cairo, where Shoprite Checkers set up its first North African store in 2000.

The group opened a store in Zimbabwe last year, and soon after the Zimbabwean currency fell to an official exchange rate of Z55 to the dollar.

Basson points to other SA retailers doing good business in Zimbabwe. I think it is wrong to stay away if we think a country, in the long term, will recover.

The multibillion-rand groups march into Africa is a far cry from how it started out: an eight-store national business run by the Rogut family.

The company then had an annual turnover of R12-million something Shoprite Checkers today makes in about a quarter of an hour, says Basson.

But 22 years later the Roguts are still involved in the company. Barney Rogut is director of buying and merchandising.

Sergio Martinengo, former head of Checkers (which Shoprite bought in 1993), is chief executive of the OK franchise division. Shoprite Checkers believes that retaining senior management when it makes an acquisition adds value to the company.

The original Checkers was one of four big acquisitions by the business. Grand Bazaars was the first purchase, in 1990, followed by Checkers in 1991, Sentra in 1995 and OK Bazaars in 1997.

This last acquisition, from SA Breweries (now SABMiller), raised a few eyebrows.

Shoprite paid a token payment of R1 to take over a chain making annual operating losses of more than R250-million.

Shoprite discovered there were stock losses of R100-million, and in the 1999 financial year paid R373-million to refurbish the struggling OK Bazaars chain.

But Basson is quick to defend the purchase from SAB. OK Bazaars was a messy company. For a R1 purchase price we bought assets of R900-million. All we had to do was restore profitability, which we did within six months.

OK was key to Shoprites expansion plans because it gave the company the critical mass it needed.

We had a choice: either be taken over or do the taking over.

Shoprite then set about establishing its brands. The process is now almost complete.

Ideally, you only want one brand. That is how it is done globally. However, we wanted to retain the standard and discipline associated with the Shoprite brand and did not want it franchised.

The group settled on a three-brand alternative.

Shoprite is the groups primary brand, and is being rolled out across Africa.

Checkers Hyper (formerly Hyperama) is positioned as the complementary brand, says Basson, and is aimed at higherincome groups.

In the 2002 financial year there were just 19 Checkers Hypers, all in South Africa.

We would open Shoprite Hyper (the brand name used outside South Africa) in Africa only if the market showed a specific location for the brand.

Shoprite Checkers various franchising brands, which included Sentra, Eight til Late, Value and Megasave, were consolidated under the OK banner.

Another inclusion is Hyperamas former furniture division, which was rebranded OK Furniture. OK is an exceptionally strong brand name, says Basson. Franchising now has three subbrands: OK Foods, OK Grocer and OK Mini-Mart.

The franchising operation is operational in southern Africa only. Basson says franchisees must have lots of money or credit guarantees: The risk is still too high in the rest of Africa.

Business Times

Publisher: Business Times
Source: Business Times

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