Shoprite, which widened its market share in the grocery market, sees growth opportunities in the pharmacy market dominated by Clicks and Dis-Chem.
The owner of brands such as OK, Checkers and Usave, has 140 pharmacies under the Medirite brand, mostly in its grocery stores.
Sales from Medirite, Transpharm — a wholesale pharmaceutical business that supplies medical products to hospitals — and Computicket rose 23% to R9bn in the six months to December.
CEO Pieter Engelbrecht said the health and wellness market has become premium, with consumers preferring to buy from what they deem as specialist retailers, and the market is dominated by Clicks and Dis-Chem.
“I believe there is room for another player. We already own Transpharm so we basically have the supply line. It is not difficult for us to get in and get to a fairly sizeable business in a short time. And there is very good acceptance from our consumers in that space. I do see some potential from competing with the other two players,” he told Business Times.
Engelbrecht said the group's non-grocery businesses such as Medirite, Uniq Clothing, Petshop Science and Little Me baby stores were a “long-term play”.
“We are investing for the future. Most probably they will contribute meaningfully long after I am gone at Shoprite.”
We are investing for the future. Most probably they will contribute meaningfully long after I am gone at Shoprite.
— CEO Pieter Engelbrecht
Some of the businesses are in the early stages while others are already profitable.
Shoprite wants to have 100 Petshops and 40 Uniq outlets by the end of the year.
Being the preferred anchor tenant in new shopping mall developments gives Shoprite the advantage to add its non-grocery brands in those centres.
“It's quite attractive for a developer to attract Shoprite as a tenant because we have so many brands that we can place in a centre. We've got supermarkets, liquor, Medirite, Petshop, Outdoor, Little Me, and furniture stores. This is compelling for landlords.”
Of those adjacent businesses, Engelbrecht said the pet business was showing the fastest growth and the company is able to secure space quicker.
For the half year to December, Shoprite South Africa supermarkets — Checkers, Shoprite and the liquor division — grew sales 14.6%, or R12.4bn year on year, to R 97.5 bn.
Shoprite and Usave, which target the low-to-middle segment of the market, grew sales 13.1% to R49.5bn, about half of the group total. They have a 19.7% market share. Checkers and Checkers Hyper sales were R38.5bn, up 13.7%, with a market share of 15.2%. Customer visits to Shoprite SA supermarkets increased 6.4% and average basket spend increased 7.7%. Shoprite group's total sales rose 13.9% t R121.1bn.
Engelbrecht said Shoprite has performed exceptionally well in a much tougher and fiercely competitive market. “People forget that it's not only the listed companies we compete with. There are many players in that market like OBC and Roots.”
He said the Shoprite group can gain further market share. When he joined the group in 1997, he said, it took 19 years to make R10bn in sales, and now it makes that in 15 days. Shoprite has positioned itself as the lowest-price retailer and ensures that stock is always available so customers do not shop elsewhere.
“We are unapologetic when it comes to pricing. Shoprite doesn't get beaten on price. So we will continue giving customers the best value offering. Every day we think about how we can make products more affordable. There are millions of people who rely on the R350 monthly grant. That's why we have products for as little as R1.”
Shoprite has had 58 months of uninterrupted market share growth as two of its rivals in the grocery market, Pick n Pay and Spar, battle a range of internal and external issues that have muted their growth.
For the first six weeks of this year, Shoprite said, sales growth at its core supermarket brands was about 10%, driven by the stores acquired from Massmart that have been included in the Shoprite and LiquorShop businesses. Selling price inflation for February in its local supermarkets division slowed to 5.3% compared with 7.7% in the six months to December.
During the period under review the group opened 215 new stores, expanding its footprint to 3,543 stores. An additional 140 new stores, which include 81 among the local supermarket brands, are expected to be opened by June. Shoprite will spend R8bn this year in expanding its footprint and on other areas such as distribution and supply chain, as well as on such areas as AI and machine learning.
Commenting on the outlook for Shoprite and its rivals, Mohamed Mitha — an investment analyst for Camissa Asset Management — said he expected the industry to remain cut-throat, with consumer affordability a key focus.
“Trading momentum is an immensely powerful tool in grocery retail, where success often leads to further success; here we expect Shoprite’s strong relative performances to continue for the foreseeable future. Two of their major competitors [Pick n Pay and Spar] are both grappling with significant operational and financial challenges, limiting their ability to compete effectively against a formidable Shoprite that is firmly on the front foot.”
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