Shoprite

Company Profile and History

Shoprite Holdings Limited is an investment holdings company whose combined subsidiaries constitute the largest fast moving consumer goods (FMCG) retails operation on the African continent. Today the Shoprite Group trades with 1068 corporate and 275 franchise outlets in 17 countries across Africa, bringing the total number of stores in the Group to 1343.

The Shoprite Group of Companies started from small beginnings in 1979 with the purchase of a chain of 8 Cape-based supermarkets for R1 million. In 1983 the Group opened its first branch outside the Western Cape-in Hartswater in the Northern Cape. A year later Shoprite sped up its growth by buying six food stores from Ackermans. In 1986 the Group expanded to the Free State, opening a store in Bloemfontein. Shoprite was listed on the JSE Securities Exchange South Africa with a market capitalisation of R29 million. Two years later Shoprite opened two stores in the former Transvaal province, the first of which is situated in Polokwane (Pietersburg).

In 1990 Shoprite opened in Namibia; in 1991 it acquired the national Checkers chain of supermarkets; in 1997 Shoprite acquired the OK Bazaars Group; in 2000 the Group opened its first supermarkets in Zimbabwe, Uganda Malawi, Lesotho and Egypt; 2002 saw the acquisition of the French-owned Champion supermarket group in Madagascar and Score Supermarkets' Tanzanian operation; in 2004 Shoprite started trading as a wholesale operation in India; in 2005 the Group acquired both Foodworld, with 13 stores, and Computicket, as well as opening the first Shoprite Liquor Shop and it entered Nigeria; and in 2007 Shoprite announced an investment of US$80 million into the Democratic Republic of the Congo.

Shoprite Holdings Ltd comprises the following entities: the Shoprite Checkers supermarket group, which consists of 380 Shoprite supermarkets; 132 Checkers supermarkets; 24 Checkers Hypers; 148 Usave stores; 20 distribution centres supplying group stores with groceries, non-foods and perishable lines; 199 OK Furniture outlets; 14 OK Power Express stores; 46 House & Home stores; and 125 Hungry Lion fast food outlets. Through its OK Franchise Division, the Group procures and distributes stock to 26 OK MiniMark convenience stores; 24 OK Foods supermarkets; 75 OK Grocer stores; 43 Megasave wholesale stores; 26 OK Value stores and 81 Sentra stores and buying partners.

Shoprite’s expansion plan into Zambia started in 1995 with the purchase of six buildings in a privatization deal. By 1996, a full chain of state-owned retail stores were under Shoprite control. The first refurbished Shoprite retail store opened in Cairo Road, Lusaka. Shoprite Zambia currently operates 18 retail supermarkets (trading as "Africa Supermarkets") together with seven Hungry Lion outlets, Shoprite’s fast food initiative. Freshmark, the company’s distributor of fresh fruit and vegetables, also operates depots in Lusaka and Kitwe.

In Country Location

Chilenje
Address: Plot 169, Penda Road, Cilenje
Contact Number: 00 260 2 312253

Chingola
Address: Plot 141, Kwacha Street, Chingola
Contact Number: 00 260 062 22233

Chipala
Address: Plot 8, Umodzi Highway, Chipata
Contact Number: 00 260 5 222456

Kabwe
Address: Plot 149, 1241 Mumbuna Crescent, Kabwe
Contact Number: 00 260 2 229518

Kitwe
Address: Plot 135, Matoka Avenue, Kitwe
Contact Number: 00 260 3 324410-12

Livingstone
Address: Plot 482/3, Kaponda Avenue, Livingstone
Contact Number: 00 260 2510160/ 510030

Luanshya
Address: Plot 33, Zaone Avenue, Luanshya
Contact Number: 00 260 1 231755/ 229886

Lusaka Megasave DC
Address: Plot 1468/9, Kafue Road, Lusaka
Contact Number: 00 260 1 251155/ 230313

Manda Hill
Address: Plot 19255, Cnr GreatEast & Manchinchi Roads, Mandahill
Centre, Lusaka
Contact Number: 00 260 2 821847

Mansa
Address: Plot 309, Chitimukulu Road, Mansa
Contact Number: 00 260 1 249055

Matero
Address: Plot 122, Off Commonwealth Road, Matero
Contact Number: 00 260 32 30404/ 30668

Mazabuka
Address: Plot Sub A, Farm 1246, Livingstone Road, Mazabuka
Contact Number: 00 260 7 221397/ 221425

Mongu
Address: Plot 306, Cold Storage Road, Mongu
Contact Number: 00 260 2 412855

Mufulira
Address: Plot 1161, Buteko Avenue, Mufulira
Contact Number: 00 260 2 612121/ 612122

Ndola
Address: Plot 91, President Avenue, Ndola
Contact Number: 00 260 8 821494 / 821491

Solwezi
Address: Plot 960, Independence Road, Solwezi

Services and Products

The Group’s primary business is food retailing to consumers of all income levels. Freshmark is South Africa’s largest fruit and vegetable distributor. They distribute produce to over 440 Shoprite Group stores as well as other retail outlets. The Shoprite Group has two furniture outlets, namely OK Furniture and House & Home. OK Furniture is aimed at the general public, while House and Home caters for the more discerning buyer.

Operating in all Shoprite, Checkers and Checkers Hyper stores, the Meat Market Division (the largest fresh meat supplier within Africa) offers prime cuts and top quality fresh meat. Fast foods are sold through its Hungry Lion outlets. There are 47 Hungry Lion outlets in South Africa and 18 in other African countries. The Group also operates 32 liquor stores.

It further offers all major service providers’ starter packs and pre-paid/re-charge vouchers; bus tickets in-store; Medi-Rite is a pharmacy inside selected Shoprite stores; and airline tickets, now available in more than five hundred retail outlets countrywide.

Number of Employees

The Shoprite group employs 81 000 people-1692 in Zambia

Financial Information

Shoprite reported a 22.8% increase in its core South African supermarket sales for the year-ended June 30 2009. Total group sales, which also include an international retail division registered ZAR59.3bn (US$7.2bn). Shop rite’s international business also grew, registering y-o-y turnover growth of 39.9%.

For the 12 months to end June 2008 the Shoprite Group increased total turnover by 22,3% to about R47,7 billion. Growth on a like-for-like basis was 18, 0%.

For the 12 months to end June 2008 the 100 supermarkets the Group operates outside the borders of South Africa increased turnover by 38, 3% from the previous year. The growth achieved on a like-for-like basis was 30, 2%. Reported turnover was R29, 604 billion for the 6 months ended 31 December 2008. The retailer ended the period with net profit of R962m, an increase of 40, 8% over the comparable six months in 2007. Africa accounted for 14% of revenue, up from 12%.

Market Share

Zambia remains the Group’s largest and most mature business outside South Africa. With 39 percent of the domestic retail market (Zambia Investment Centre), it is the largest retailer in the Zambian market.

Share of food in total retail sales in 2007

Gross sales: 23 million euro
% food sales: 90%
%non-food sales: 10%
% of all stores: 2.5%

Business Objective

Shop rite’s objective is to provide all communities in Africa with food and household items in a first-world shopping environment, at the lowest prices.

Business Model

Its key objective is to control its supply chain. More than a decade’s worth of investment in infrastructure, software solutions, skills and knowledge delivered both a mechanism by which to sustain low price points for a longer duration than competitors, while at the same time maintaining a high level of product availability from its own distribution centres. This has been a winning recipe for maintaining customer loyalty and boosting sales growth at minimal cost. The Group’s strategy to control the supply chain not only provides a distinct competitive advantage and an ability to manage risk, but it also has made sound business sense.

The Group also continues to actively manage and control its value chain while maintaining a strong drive to improve efficiencies. The focus has been on four primary areas namely inventory management, transport optimisation, operational productivity and store processes. These efficiencies continue to drive costs down and improve cash flow. Although inventory levels have increased, a scientific approach to forward buying was adopted. This allowed the Group to sustain its “low price” position and simultaneously to achieve high levels of product availability.

The Money Market concept constitutes an increasingly important part of the sales offering of the Group’s two major chains, Shoprite and Checkers. Its main objective is to save consumers time by enabling them to undertake most of what they have to do “in town”-buying groceries, settling accounts, reserving seats for a show or a sports event, booking a flight-all in one place. In this way it contributes to positioning the Group’s supermarkets as destination stores that offer consumers a unique range of services.

As early as October 2007 management decided to reduce selling prices, particularly on the staple foods sustaining lower income groups. This led to the growth in value per transaction remaining below the food inflation rate. However, these savings also brought increasing numbers of consumers into Shoprite’s outlets. With operating costs meticulously controlled, the increase in sales considerably exceeded the increase in expenses resulting in a strong rise in trading profit.

Outside South Africa, Shoprite is focusing on markets with growth potential and rich natural resources, which will drive future economic growth and therefore increased GDP per capita and consumer spending figures. Shoprite models its cross-border investments on its shopping centre developments in South Africa, featuring a Shoprite supermarket as the anchor store. These shopping malls change local consumption and urban environments dramatically. Locally-owned internet stores and music outlets often make up part of this cluster. In a number of cases, the Shoprite Group establishes partnerships with a local group.

Ownership of Business

Shoprite Holdings Ltd is a public company listed on the JSE Limited, with secondary listings on both the Namibian and Zambian Stock Exchanges. Its ownership therefore lies in the hands of its almost 5 000 shareholders.

Interests in Subsidiaries

Benefits Offered and Relations with Government

Prior to the privatisation process government agencies and parastatals were operating a number of retail (chain) stores. These included the Zambia Consumer Buying Corporation (ZCBC), National home stores, Mwaiseni and ZAMHORT (marketing horticultural produce). These stores were scattered in all provinces of Zambia. The government withdrew from the retailing sector by selling its loss making retail chains to Shoprite. Shoprite obtained many concessions during this period for example tax holidays and other incentives and this gave them an edge over other local chains. The tax holiday ended after 5 years and meaning that Shoprite had to now compete on an equal footing with the other local chains and independent retailers.

Shoprite’s operations in Zambia were placed under the spotlight when the company attempted to pull out of Zambia once the tax holiday had come to an end. After the announcement, the workers sought court action against the supermarket store. Zambia's High court blocked Shoprite from leaving the country and taking its assets with it, until it paid benefits to its Zambian workers. According to the High Court judge, Shoprite could not transfer its funds and assets back to South Africa - even though it had completed the sale of its shares and wanted to exit Zambia - until some 800 workers received their benefits. After the judgment, the issue has been silent but Shoprite has continued to operate in Zambia

The Zambian government has put in place measures to attract and retain foreign direct investment (FDI). This saw the creation of the Zambia Investment Centre (ZIC). This was subsequently merged with similar institutions to create the Zambia Development Agency (ZDA). The incentives under the Zambia Investment Centre, which applied to Shoprite at the time, consisted of general incentives and specific incentives. The general incentives provided in the Act were the a) wear and tear of equipment invested and b) transfer of losses from one year to the next year c) education and training deductions for tax purposes and d) incentives for investments in rural areas.

In addition to the general incentives, investors were entitled to an exemption from customs duties and sales duties and sales tax on all machinery and equipment (other than motor vehicles) required for the establishment, rehabilitation or expansion of that enterprise. The incentives under the Zambia Investment Centre have been altered and enhanced under the new Zambia Development Agency Act. An incentive offered under the Act is valid for a period of five years from the grant of the licence, permit or certificate or for such period as the Minister responsible for finance may prescribe. Shoprite benefited from these incentives.

Product Development

The more significant services added in the last 18 months is the real-time transfer of money to any Shoprite or Checkers supermarket of the Group anywhere in South Africa. The service is aimed primarily at lower-income consumers without bank accounts, and offer people with no collateral the opportunity to send up to R5 000 at a time to friends, family or business associates at a cost far lower than charged by any financial institution.