All data are collected in the Fiscal Year of 2008-2009.

Madagascar / Distribution, Retail

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 2002 the company acquired the Madagascar stores of the French chain Champion. The Group has continued to operate seven stores in Madagascar. Of these, five are in the capital, Antananarivo, where about 50% of the island’s population resides. The shops are in the following locations: Airport in Mahajanga; Antsirabe in Photosele; Tamatave store in Toamasina; Andravoahangy in Antananarivo; Ampefiloha in Antananarivo; Waterfront in Tanawater Front; and Downtown

Airport: Address: RN7 Carrefour Route de Mahajanga; Contact Number: 00261 – 2022 485 49

Ampefiloha: Address: Nouvel Immeuble Fiaro, Ampefiloha, Antananarivo 101; Contact Number: 00261 - 2022 288 56

Andravoahangy: Address: Immeuble Soloprix, Andravoahangy, Antananarivo 101; Contact Number: 00261 - 2022 254 82

Antsirabe: Address: Antsenakely face boutique, Photosele; Contact Number: 00261-2044 497 04
Downtown: Address: 28 Rue Andrianampoinimerina; Contact Number: 00261 - 2022 360 89

Toamasina: Address: Avenue de L'Independence Toamasina; Contact Number: 00261 - 53 316 88

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.

383 employees

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). Shoprite’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%.

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

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.

Goods imported into Madagascar are subject to various entry duties and taxes, fixed annually by the Finance Law. In 2005, Madagascar simplified the structure of its duties and taxes, in particular by abolishing the statistical tax on imports (TSI) and the import tax. Thus, apart from the tariff, Madagascar has not applied any other entry duties or taxes since that date. Numerous tariff concessions are granted on a discretionary basis.

Madagascar applies VAT. The standard rate was reduced from 20 per cent to 18 per cent in 2005, then restored to 20 per cent for 2008. VAT is levied on goods for home consumption whatever their origin. The taxable base for imports is the customs value plus duty and other taxes, where applicable (apart from VAT itself), whereas that for local goods is the sale price plus other taxes, where applicable. Some staple goods, whether imported or produced locally, are in principle exempt from VAT.

In 2007, Madagascar levied excise duty on alcoholic beverages, perfumes and cosmetics, cigars, cigarettes and tobacco; there was also a charge on alcoholic beverages, perfumes and cosmetics, cigars, cigarettes and tobacco. A charge (but not excise duty) was levied on sugar, wheat and meslin flour, and chemical matches. In several cases, the rates in force in 2007 differed according to the origin of the product for the purpose of protecting the local industry. The taxable base for locally manufactured products is the sale price, whereas that for imports is the c.i.f. customs value plus duty.

In Madagascar, rules on compulsory marking apply to pre-packaged foods, in accordance with the relevant Codex standard. All perishable foods must bear a label, in French or English, indicating the origin, the sell-by or use-by date, the ingredients, the method of storage, the name of the manufacturer together with his registration number, where appropriate, and the intended use. The utilization of the metric system is compulsory in Madagascar.

Madagascar adopted a new regulatory framework for competition in 2005, but the provisions concerning good practice are not yet operational. The legislation establishes free enterprise and free pricing as a general principle, but, where prices are concerned, recognizes that the State, by regulation, can impose limits on this freedom in the presence of a monopoly situation or continuing supply problems, as well as at times of crisis, for a period of not more than six months; these provisions are already in effect. The framework also prohibits certain anti-competitive practices.

Madagascar's current policy is mainly aimed at monitoring the prices of basic necessities (PPN), namely, edible oils, condensed milk, baby food, cement, flour, bread, sugar, household soap, school exercise books, candles, packaging products. These are defined within the historical context of the price control policy followed by the authorities up to 1987 when the regime was first liberalized. Moreover, the Ministry of Agriculture monitors the price of rice on Madagascar's main markets; the results of the surveys conducted by the monitoring body are published weekly. Exceptional measures to exempt rice from import duties and taxes were taken in 2005 to deal with shortages.

In the unrest following the coup in early 2009, business was disrupted in only one of the seven stores that the Group operates on the island. The new government closed down suppliers with links to the previous regime, resulting in temporary stock shortages of especially dairy products. Despite the upheaval the six stores that remained in operation performed satisfactorily.

During 2008 the lease contracts of two stores, one in Antananarivo, the other in Tamatave, expired. They were replaced with two larger and more modern outlets. To achieve critical mass a further two stores are being planned.