The Grocers’ Great Trek

Wednesday, September 25, 2013

A SHORT drive along Cairo Road, a clogged artery that runs through Lusaka, the capital of Zambia, affords a glimpse of the progress South Africa’s big grocery chains have made in the rest of Africa. The rather dowdy Shoprite store situated on the busy main road was opened in 1995 and was the firm’s first venture beyond its immediate South African hinterland. Farther along the road is a shiny shopping centre at Levy Junction, which opened in 2011. Its main tenant is Pick n Pay, a long-established retailer in South Africa but a recent entrant to Zambia. Woolworths, an upmarket chain (unrelated to some similarly named firms in other countries), has also opened a store here. So have many other South African retailers.

Where Shoprite has led, others have followed. Its first store was one of eight acquired from a failing state-owed chain. It now looks a shrewd purchase. Zambia’s economy was then a mess but has since grown rapidly thanks to burgeoning demand from China for the copper that Zambia has in abundance. The country’s fortunes mirror those of the continent. Of the world’s ten fastest-growing economies in the past decade, six were African. Formal retailing is in its infancy and is fragmented. The top six retailers in Nigeria, a country of 167m people, account for barely 2% of sales. The continent’s appetite for air-conditioned stores with tiled floors and branded goods seems almost limitless.

The growing demand is drawing investment from South Africa, whose big chains are keen to escape a sluggish domestic market. Sales in Shoprite’s supermarkets in the rest of Africa grew by 28% in the year to June, compared with only 9.8% at home. The chain has 47 new African stores in the pipeline, mostly in Nigeria and Angola, two of Africa’s largest economies. The firm’s boss, Whitey Basson, has said there could eventually be room for up to 800 Shoprites in Nigeria. The seven it already has there sold more Moët & Chandon champagne in the past year than its South African stores combined.

Source: The Economist (link opens in a new window)

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