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Zimbabwe: OK Seeks to Claw Back Lost Market Share

Chris Muronzi 25 March 2010

EARLIER this month, a representative of the Retailers Association of Zimbabwe (RAZ), a group of the largest retail companies in the country, told delegates at an industry breakfast meeting that the sector had suffered from the emergence of new players who do not play by the book.

His beef with the new players was that their prices were too low despite both importing from the same markets. In short, it was a curious case of the bigger player crying foul over dirty tactics at the hands of a smaller and inexperienced player.

The RAZ official did not grasp why "them," a Goliath in their own right, were losing against some dwarfish enterprises founded on thin capital at a game the big guys knew from the first letter of the alphabet to the last.

He had a theory though -- the smaller players must be avoiding duty and taxes. At the end of his speech, it was clear the official wanted authorities to probe smaller retailers.

The comments showed that the pendulum swung against the bigger players in the sector after President Robert Mugabe launched price controls in 2007 allegedly to stop profiteers bent on sabotaging the economy through price increases.

When the policy was launched, the retail sector was hit hard.

Almost overnight, shops became empty. Two years later, government adopted the use of multiple currencies but the damage had been done. Almost overnight new retailers emerged. Chinese, Nigerians and other ambitious businesspeople saw opportunities.

The bigger players were still on the corporate drawing board trying to make heads and tails of the new multi currency policy. In late 2008, the central bank had licensed shops to sell goods in foreign currency but many had resorted to importing groceries.

The official dollarisation of the economy saw the new entrants moving swiftly to acquire and rent space in the city. In a short space of time, the new players had set up shop and carved a niche of the retail market for themselves.

This year, OK Zimbabwe, the second largest retailer in the market, has everything figured out and plans to recapitalise the business and claw back market share.

OK plans to spend US$20 million to achieve this.

This will be achieved through a US$15 million rights issue at a price of US$0,6 cents per ordinary share and additional 250 275 133 million ordinary shares will be issued on the basis of 3,42 new ordinary shares and a US$5 million convertible loan.

The proceeds will be directed towards working capital growth and cutting short-term debt and strategic expansion of the retail network

The company hopes to get back lost market share and "compete effectively" in a trading environment where, by their own admission, bigger retailers have carved a sizeable piece of the market. Already players such as Afro Foods have gotten themselves a market share in a short space of time.

OK reckons fresh capital could increase trade capacity. But analysts said the retail sector has gone mostly to the new players -- Chinese, foreign owned outlets and many convenient grocery stores.

OK's situation is not entirely unique.

Delta also suffered in 2008 after bootleggers emerged on the market with various beer brands imported from the region and beyond. Delta's market share was gone almost overnight. But Delta's relationship with SAB Miller helped the company reclaim its old turf.

However, analysts say for OK Zimbabwe, the situation is a little different although an underwriting deal with Investec might change the fortunes of the company.

In the event that OK fulfills terms of a US$5 million convertible loan notes, the move would result in a dilution of 7% on conversion after the rights issue. This will give Investec 7% stake in OK Zimbabwe, a move that could bolster the company's financial position. Analysts say OK's battle to reclaim market share might be an uphill task and depend on a rights issue awaiting rubber stamping from other shareholders.

OK chief executive officer Willard Zireva and chief operating officer and finance director Alex Siyavora, who hold 14% in the group are said to have also thrown their support behind the deal.

Through its investment vehicle -- Investec Frontier Private Equity Fund, a pan African private equity fund managed by Investec Asset Management -- the company might emerge with a larger stake if some of the shareholders do not follow their rights.

Investec Group is an international banking group listed on the Johannesburg Stock Exchange and the London Securities Exchange.

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Zimyellow.com [8 March 2011]

Detailed Information Supplier of goods and services to the hospitality industry in Zimbabwe Hotelserve Holdings Location - Msasa/Harare Listed Under - Wholesale Supplier Tel [phone]    Fax [phone] Google Map - Click Here Email - Send Email Website - No Website Physical Address Postal Address 1 Martin Drive Msasa, Harare BACKGROUND Hotelserve Distribution was established in 1990 as a supplier of goods and services to the hospitality industry in Zimbabwe. In 1992 the company commenced supplies to retailers and wholesalers becoming, in the process, the brand representative for a number of leading international and regional manufacturers. With three distribution centres located throughout the country- Harare, Bulawayo and Victoria Falls- Hotelserve is well placed to service all geographical  regions of Zimbabwe. Each depot is fully equipped with dry goods storage, refrigeration ( chilled and freezer) and distribution vehicles. The Harare depot also has customs bonded warehouse facilities where goods are stored whilst foreign currency is sourced and also help in reducing duty outlays. Staff compliment is 120 which include office and admin, sales merchandising, warehousing and deliveries. CUSTOMER AND SUPPLIER RELATIONSHIPS CUSTOMERS Hotelserve enjoys close and mutually rewarding relationship with its customers and suppliers. All major wholesalers, retailers, hospitality operators, restaurants and departmental stores arse customers as well as significant number of independent operators. There are three major retail groups, all of whom are customers. These are : TM Supermarkets – the largest retail group, part of Kingdom Meikles Africa Ltd, Zimbabwe’s largest public listed company. TM is 25% owned by Pick n pay South Africa. Spar Zimbabwe – the fastest growing chain in the country with in excess of 30 stores countrywide. OK Zimbabwe – includes Bon Marche’ luxury supermarkets. Major wholesalers, all of whom are customers  : Jaggers (associated to Metcash), Makro, Redstar and Mohammed Musa. All hotel groups including African Sun Limited, Cresta Hospitality, Rainbow Tourism Group and Victoria Falls Safari lodge are and have been customers for  a number of years. The relationship with all of the operators and others is such that our vehicle fleet is utilised by them to carry critical consumable needs besides those supplied by ourselves. SUPPLIERS Hotelserve imports and  distributes a number of leading consumer brands exclusively into Zimbabwe from significant brand owners. These are : Nestle` - Confectionery, Cross and Blackwell, Maggi, catering products and pet care (Alpo and Friskies) National Brands – Bakers, Pyotts, Baummans I & J – Frozen fish and meat products. Oceana – Lucky Star Pilchards Appletizers – Carbonated beverages. DGB – Boschendal, Douglas Green, Butlers Diageo (Brand house) – Johnnie Walker, J&B, Bells, White Horse, Gordon’s, Captain Morgan, Baileys etc McCains – Frozen vegetables Parmalat – Purejoy fruit juices, Everfresh Milk, Bonita Butter etc General Mills – Cake mixes and other flour products Lillets – Women’s sanitary wear Tradall – Barcadi, Martini, Bombay Sapphire GROUP COMPANIES SHIPSERVE (PVT) LTD Hotelserve Distribution established its own clearing agent, Shipserve (Pvt) Ltd, in 2000 to facilitate customs clearing of imports from various principals. Over the years this business has added a number of the FMCG importers to its customer base. With clearing offices in Harare, Beitbridge and Chirundu, this company includes the following in its customer base : TM Supermarkets- clearing, bond storage house brands. Nestle` Zimbabwe- clearance, bond storage raw materials and export clearance Spar Zimbabwe- clearance and bond storage  house brands African Distillers- clearance and bond storage Innscor Africa- clearance and bond storage various group companies Kingdom Meikles Africa –clearance and bond storage ESTIMATED SALES VOLUMES PER MONTH Including all products 15000-20000 cases with an estimated sales value of USD800 000 to USD1200000 depending on the availability of product. SHOP SIZE Our Harare warehouse has a single floor space of 2000 square metres. SYSTEMS FOR QUALITY CHECKS All our products are manufactured in countries that uphold high quality control and standards and as such all come with relevant food warnings and expiry dates noted on the packaging. In terms of our operation we have adopted a first in first out stock control method.

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bizcommunity.com [8 March 2011]

[Staff reporter] Zimbabwe's retail super-brand winner 2010, supermarket franchise Spar, and TM Supermarkets, the biggest supermarket by outlets, trailed rival OK Supermarkets as the most preferred outlet, with emerging Chinese-owned Afro-Foods Supermarkets taking the fourth spot. 21 Feb 2011.

Zeenat Moorad] SA's second-largest grocer, Pick n Pay, said on Tuesday (25 January 2011) that it had not received any notification from the Zimbabwean government of its intention to halt its bid to acquire 24% of Zimbabwean retailer TM Supermarkets. 26 Jan 2011 09:10
South Africa's Massmart, a sitting duck for a US$2 billion takeover bid by US retailer Wal-Mart Store Inc., has sold its Zimbabwe unit to retail group, OK Zimbabwe. The deal ends months of speculation over Massmart's planned disposal of Makro Zimbabwe and the identity of the buyer. 10 Dec 2010 11:22
Zimbabwe's Meikles group has agreed to allow Pick n Pay to rebrand TM Supermarkets after a deal in which the South African retailer will shore up its shareholding in the supermarket chain to 49%. 2 Dec 2010 11:28