Retail news. Semester 1 of 2014 table of contents

Shoprite holds market edge through convenience, pricing. 3 Jul 2012

Shoprite's dominance in the grocery market looks set to continue for the foreseeable future, according to new research released yesterday, 2 July 2012, by TNS.

The Commitment Economy, an independent global survey of over 39 000 people in 17 markets, reveals that competitive pricing and the convenient location of Shoprite's 1 520 stores are giving it the edge over its competitors, despite the fact that rival brands are more highly regarded in the minds of people.

The researcher's unique modelling exercise found that 12% of Shoprite's market share (equivalent to R28 billion) comes from people who actually feel ambivalent about the brand, but who shop there for practical reasons. These shoppers would go elsewhere if alternatives were closer to home or more affordable. However, competitors are not currently in a position to challenge it on either count in the near future.

Neil Higgs of TNS South Africa, said, "For most market leaders a lower brand loyalty would be a cause for concern, but its position is so firmly entrenched that it would take a significant effort for any competition to make a serious dent in this market giant's armour. However, it would be wise not to be complacent. We are detecting real demand out there for alternatives and smaller players who can meet that demand do stand to make significant gains."

Growth potential

The study points to valuable growth opportunities for smaller retailers such as Woolworths and Fruit & Veg City/Food Lovers Market, which are more warmly regarded by South African shoppers. It found that if consumers were able to act on preference alone, Fruit & Veg City would double its market share from 3% to 6% (equivalent to R7 billion), whilst Woolworths could triple its share. In addition, Pick n Pay Hypermarket could double its market share.

However, affordability and location emerged as the main barriers preventing shoppers switching retailer, especially for these three outlets, suggesting that whilst premium grocers may not be able to compete on price, they could punch above their weight by focusing on convenience. The extent to which these retailers can capitalise on the potential opportunity depends on their ability to remove or reduce these barriers. Higgs added that, in the 2011 Times/Sowetan Top Retailer survey, also conducted by TNS, Woolworths had indeed already made significant upward progress in the scores.

The research estimates that Fruit & Veg City/Food Lovers Market, which recently launched its Freshstop outlets in partnership with Caltex, could generate almost half of the potential R7 billion of additional business available, by simply choosing sites close to other large retailers and locating express stores in urban, high traffic areas.

The survey showed that Pick n Pay is in a similar situation to Shoprite, with lower levels of customer commitment relative to the chain's market share. The figures suggest that up to R12.7 billion of Pick n Pay's revenue may come from shoppers who are more swayed by practicality than brand loyalty.

Interestingly Pick n Pay Hypermarket is seen more favourably than its supermarket offering but the location of these outlets mean that the warmth felt towards them by people in South Africa is unlikely to translate into growth in the near future.

Jan Hofmeyr, chief researcher, behaviour change, at TNS said, "As people are confronted with more choice, retailers should be asking themselves whether footfall is backed up by real commitment to the brand. People may continue to part with their money for reasons beyond their control, but the minute more attractive options are available they are likely to switch. This makes them an easy target for competitors looking to steal market share."

Biggest opportunities

TNS has calculated which retail chains have the greatest growth opportunity in total market share terms.

Ranking (Top 5)	Monetary value attached to opportunity (in billions of Rand)
Woolworths	13.6
Pick n Pay Hypermarket	12.3
Fruit and Veg City/Food Lovers Market	7.0
Makro	6.1
Game/Foodco	5.4

Tiger Brands boosts Zimbabwe unit. 7 Sep 2012

An investment in Zimbabwe's National Foods by Tiger Brands has helped the Zimbabwean company boost capacity utilisation to 404,000 metric tons in the full year to the end of June.

Tiger Brands last year raised its stake in National Foods after buying a further 11% of the company for $11.7m. It now owns 37% of the company while the majority of the remaining interest is held by Innscor Africa, which has interests in fast foods, retail and distribution sectors.

However, National Foods, a maize and flour milling, stock feeds processing and fast moving consumer goods company, is battling against imported processed foods. Its fast moving consumer goods unit's products, which include packaged rice, pastas, and tinned beans are struggling to beat foreign products.

Group chairman Todd Moyo said yesterday a turnaround strategy had been put in place to revive the ailing fast moving consumer goods unit. This includes "streamlining distribution costs, reducing the interest burden and developing category plans". It is expected that these moves will significantly raise volumes.

National Foods has pinned its hopes of further growth from continuing operations on likely demand for maize meal and flour owing to a possible shortage of food supplies both domestically and in the Southern African region.

However, with Zimbabwe's agricultural season in limbo - it is projected to record negative growth this year - the company could well be forced to rely on imports for its raw materials.

"The possible grain shortages reinforce the need for our local agriculture to be more productive so that we are not dependent on other countries for agricultural raw materials and related finished goods," said Moyo.

David Morgan, chairman of Innscor Africa - the other major shareholder in National Foods - said yesterday the company's results for the period under review were "pleasing".

Morgan attributed the results to "increased capacity utilisation" after the investment by Tiger Brands, and further investment "into core plant and equipment".