Shoprite hasn’t come across much competition as it has established itself as Africa’s largest retail grocer and its South African rivals only just catching up. But they might just meet their match in Kenya’s Nakumatt group, which has announced its African ambitions - just as Shoprite finds itself distracted by the Walmart threat. By SIMON ALLISON.
While Shoprite’s African adventure has come with many challenges, serious competition hasn’t been one of them. Undeniably the only genuine pan-African supermarket, with 113 grocery stores (including 81 supermarkets) in 15 countries, Shoprite has exploited untapped markets for its remarkable continental growth. Last year alone it posted an 18% increase in turnover from its African operations.
But the expansion plans of Kenya’s Nakumatt group might just make things a little more competitive, and uncomfortable, for Shoprite. Nakumatt is Kenya’s largest retail group, owned by the wealthy and enormously powerful Merali family – think the Oppenheimers, with a little more diversification. And Nakumatt’s just announced that Kenya’s too small for it. In a project the group’s calling Nakumatt 2.0, it’s looking at moving into other, potentially lucrative African markets, including Botswana, Zambia and Nigeria. The expansion will be financed by four Kenyan banks, as well as the sale of nearly half of the group’s equity – an initial sale of 15%-18% should raise about $50 million.
This news comes at a bad time for Shoprite, which is tying up most of its resources in preparation for a mammoth fight with American retailer Walmart. Walmart has finally cleared most regulatory hurdles in its acquisition of Massmart, and Shoprite, along with all the other domestic retailers, is scared. To counter Walmart’s impact, Shoprite has announced a huge South African expansion of its own, with 72 new stores expected to open next year.
While its African operations haven’t been forgotten, with another 13 stores slated for the continent, Shoprite’s focus will be firmly on the home front next year.
But Africa’s a big continent, with plenty of commercial potential, especially for supermarkets, which are such a symbol – for better or worse – of growth and development. There should be plenty of space for Nakumatt and Shoprite and Spar and Walmart too – especially given the growth of Africa’s middle-class. But Nakumatt’s list of potential markets shows there’s not yet enough countries with the infrastructure necessary to handle large-scale supermarket supply chains. In Zambia, for example, there’s already a Spar and a Pick ’n Pay in Lusaka as well as 18 Shoprites across the country.
Another country targeted by all the major players is Nigeria. While Nigeria’s not an easy market in which to operate, with product supply taking as long as 100 days, its population of 150 million means it’s the biggest market around and a potential goldmine for anyone who can conquer the bureaucratic, security and supply chain difficulties. Shoprite only has two stores there, but is planning more, while Spar recently bought a local retail chain and is in the process of rebranding.
The success of South African supermarkets in Africa is not of interest only to shareholders. South African supermarkets mean South African product lines, which mean South African manufacturing, which mean South African jobs. The more business Nakumatt takes from Shoprite, the more the Kenyan manufacturing sector gets a fillip. While not a bad thing for the continent as a whole, it certainly is not what South African business will be punting. Africa remains the great untapped market, and the real race is not about which company gets to sell products to Africans, but about what products are sold to Africans and who gets to make them. DM
"The soul is known by its acts" ~ Thomas Aquinas