Spar has warned that a decline in loyalty from its independent retailers has become a big risk to its business, even as the group reported growth in turnover, profit and cash generation for the year to end-September 2025.
Spar’s business model depends on independent retailers choosing to buy through its distribution centres. According to the group, any sustained loss of loyalty directly threatens throughput, margins and market share, making this risk more material than inflation, infrastructure or competition.
In its latest annual report, the group says the eroding loyalty could undermine its wholesale model, reduce distribution volumes and hurt long-term competitiveness across its markets.
“Sustained margin pressure and the emergence of alternative buying groups further threaten network cohesion and long-term brand equity,” it says.
The group says independent retailers are the foundation of its business that sets it apart from corporate retail chains, but these store owners are under growing pressure. Rising costs, energy prices and changing consumer habits are squeezing retailer margins, while shoppers are more price-conscious and expect convenience, digital services and strong local relevance, it says.
The company also warns that economic uncertainty, tougher competition, new regulations in Ireland and ongoing cost pressures in South Africa mean retailers and Spar must work more closely together and upgrade their capabilities to stay competitive.
Spar’s distribution centres also form the backbone of the business, moving goods from suppliers to stores across grocery, fresh food, liquor and private-label products.
In Southern Africa ― which includes South Africa, Botswana, Namibia, Mozambique, eSwatini and Lesotho ― Spar reported a turnover of R97.7bn boosted by nine distribution centres and 2,523 stores. The region employs 4,657 people and remains the group’s largest and most important market.
The group says that every increase in loyalty leads to higher volumes flowing through its distribution centres, which improves revenue and profitability.
To address this risk, the group says it is focusing on improving retailer profitability, strengthening supply chain efficiency and expanding digital and data-driven retail support. It has set a target of achieving retailer loyalty of at least 80% and retail profitability above 3.5% as part of its long-term strategy.
The annual report also shows that Spar is reshaping its business after exiting operations in Poland, Switzerland and southwest England. These exits have reduced long-term debt by 40%, simplified the group structure and allowed management to focus on core markets.
Spar says the disposals are an important lesson from its international expansion, highlighting the need for scale, strong local partnerships and disciplined capital allocation.
Chair Mike Bosman says the group has learnt that expanding into new countries is complex and must be approached with patience, strong local partners and disciplined use of capital, and that not every market will deliver the scale or strategic fit needed for long-term success.
He says Spar has spent the past two years reassessing each operation, weighing options such as growing organically, buying businesses, restructuring or exiting where necessary, while tightening its approach to capital allocation to ensure every investment is data-driven, aligned to strategy, delivers clear returns and protects the group’s financial stability.
The group is now refocusing on a capital-light, cash-generating model while reinvesting in areas that support independent retailers, including distribution centres, digital systems and supply chain resilience, Bosman says.
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