The Shoprite Group, South Africa’s biggest retailer, has invested heavily over the past six years in core systems to protect it from blackouts, food spoilage, crime and other consequences of the power crisis. And while they have managed to contain their costs as best as they can, with the high levels of blackouts since September 2022, diesel has now become the “overpowering cost” – amounting to an additional R465-million over the past six months.

Shoprite released its unaudited results on Tuesday, for the 26 weeks ended 1 January 2023, which reflect an operating environment defined by chronic power outages and surprising resilience: It has increased group sales by 16.8% to R106.3-billion, and in South Africa, supermarkets increased sales by 17.5% to R85.1-billion. Diluted headline earnings per share increased by 10.2% to 577.5c, while adjusted headline earnings per share increased by 10.1% to 599.3c. It also increased its interim dividend per share by 6.4% to 248c.

Excluding the impact of social unrest closures, its South African supermarkets opened 190 stores over the past 12 months, giving the group a total of 1,952. The group also created 3,881 new jobs over the six months – not including the 4,480 people they employed from January 2023 as part of its purchase of select businesses from Massmart Holdings. This purchase was approved on 9 December 2022 by the Competition Commission, enabling the group to acquire Cambridge Food, Rhino and Massfresh (comprising Fruitspot and two meat-processing plants), as well as 12 Cash & Carry stores. 

Checkers opened 23 new supermarkets over the past 12 months, six of which were in its new neighbourhood Checkers Foods format. In addition, 30 Petshop Science stand-alone premium pet stores and five Little Me stand-alone baby stores were opened in that period. Checkers, inclusive of Checkers Hyper, ended the period with 293 stores. 

The group expects to open 238 stores in the second half of this year and is already on track for 512 new stores in the year through June, reports Bloomberg.

Shoprite’s South African supermarkets, where 80.1% of its group sales are made, increased sales by 17.5%, with customers spending R12.7-billion more at Shoprite stores compared with the same period last year. This growth was seen in all its stores, including Shoprite and Usave (up by 15.1%) and Checkers and Checkers Hyper (by 16.9%). 

Checkers’ on-demand grocery delivery app Sixty60 grew 86.% year-on-year and expanded to 94 new locations, making it now available at 394 stores.

Non-South African supermarkets increased sales in rand terms by 17.5% and contributed 9.4% to group sales.

Pieter Engelbrecht, CEO of the Shoprite Group, told Business Maverick that since the inception of Sixty60, they have created almost 8,000 new jobs.

Money down a pit

When blackouts started ramping up in September, costing about R100-million a month, in January 2023, their generators’ additional diesel needs were north of R150-million for the month.

But while the focus is on the diesel cost, the total value chain is suffering, starting with farmers who cannot irrigate; the abattoirs that cannot slaughter, causing chickens to grow too large; and unavoidable food waste, their biggest concern. 

Solution at hand

Engelbrecht said South Africa needs to enable the private sector to get renewable energy into the grid. 

“There are quite substantial numbers of wind and solar panel farms, where people have the ability to add to the grid, supplying electricity to help circumvent or at least reduce the impact. So we need to get the transmission system up and running as quickly as possible to be able to absorb alternate sources of electricity into the grid.”

Waste of food

Besides the cost of diesel, there are also other factors to consider: the interruption to power supply, and extra security costs to protect against the criminality.

“Food waste is twofold: In the first instance, when a fridge breaks down because we have many issues with the powering on and off of equipment. The second issue is when you are interrupted during the food production cycle. So, for example, we expected load shedding to start at 8am and suddenly it starts at seven, when you’re halfway during a baking cycle. The same for manufacturers: then that food has to be wasted.” 

Shoprite was acutely aware of the pressures customers face, he said.

“We can only do what we do at Shoprite. Every day we wake up to another crisis. We might complain, but we go and [do what we need to do]. We believe that nobody executes like the Shoprite Group. We cannot let the public down in South Africa.”

Engelbrecht says they are acutely aware of the pressures their customers face and they thank them for their valued support in recognition of Shoprite’s commitment to price leadership.

It doesn’t and hasn’t come easy, for the retailer that has not only sold loaves of bread, deli meals, a packet of soup and sanitary pads for R5. Times are tough and consumers appear to be rewarding the group for its efforts. BM/DM