Tiger Brands, South Africa’s largest food producer, says informal stores in townships are the fastest-growing channel on its books and it is making steady progress in pushing brand relevance and market share in this segment.
Group CFO Thushen Govender said the company plans to add about 50,000 spaza shops to its network to drive market penetration of its products.
However, he said the group is realistic that it is not feasible to have all the country’s tuckshops on its radar as the cost to serve them would not make economic sense due to the size of the market.
“It is the fastest-growing channel. These spaza store owners go to wholesalers to buy products and resell them. What we are doing is to make sure that whatever product is on the tabletop is a Tiger Brand product,” Govender said.
“We have about 110,000 [spaza shop] stores right now. There is significantly more in the market. We believe if we take this number of stores that we service with our on-the-ground sales representatives, we can get north of 150,000 stores.
“If we can get to around 150,000 to 160,000 stores that we service effectively, we would have done a really good job.”
The informal economy, said to generate turnover in the region of R900bn a year, has attracted the attention of the country’s consumer companies.
One of the biggest players in the market is Pepkor, whose investment in fintech group Flash 17 years ago has paid off. The firm is now available to about 175,000 informal traders around the country.
Flash collaborates with top brands and businesses to offer quality products and services to the informal sector. Cash is still king in this segment and the company has been gaining traction in South Africa.
Pepkor has identified growth in the informal economy as a priority in its growth blueprint. Flash leverages connectivity and smartphone access to extend reach beyond traditional retail through a technology-driven business-to-business and business-to-customer business focused on empowering informal market traders with smart technology solutions.
The business provides virtual products such as airtime, mobile data and prepaid electricity. At the heart of Flash’s business are its point-of-sale machines with 75,000 acquiring devices in the market, which reported a tapped value of R21bn in the year to end-September.
One of South Africa’s fastest-growing banks, TymeBank, last week partnered with Kazang, the prepaid value-added services and card acquiring business, to provide flexible working capital advances to licensed taverns and liquor outlets that use the Kazang point-of-sale devices.
Capitec has also identified the informal sector as a growth lever for its small business and credit facilities offerings.
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