Shoprite perks up offerings

ONE would be inclined to think that Shoprite was having Woolworths tendencies when it launched a range of ready-to-eat meals that included osso buco.

Across its formats, Shoprite’s distinction has been that it was a largely primitive offering selling cheaply, and it has continued to make fat profits from this.

Now the discounter, through its Checkers stores, is moving upmarket to capture spend from the country’s wealthier shoppers. Its timing could not have been better.

Shoprite’s plan is to open fancier-looking Checkers stores with coffee bars and taste stations in mostly affluent areas and to extend the range of high-margin privatelabel products. The company has also recruited more food technologists to develop a convenience offering that includes pizzas, salads, pastas and soups.

Eight new Checkers stores were opened in the past year, with a further 14 to be added in the current year to take the total to 223 stores.

In trying to reposition Checkers, the group has since 2001 launched a few premium play iterations. The target, more often than not, has been Pick n Pay or SPAR, not Woolworths.

Quality offered at a good price is something upper LSM (living standards measurement) consumers will pay attention to, says Daniel Isaacs, an equity analyst at 36One Asset Management.

“I think that when it comes to food, if the quality is there, you will capture people’s interest; and Shoprite has done a lot of work in this regard. In terms of price, upper LSM consumers may be resilient, but they are certainly not immune,” Isaacs said.

“Having said that, Woolworths has built up its name in this part of the market. You may not get a flood of customers out of Woolworths into Checkers, but I think Woolworths would have to pay even more attention to its strategy and pricing in this space.”

Its food margin at 7% is way ahead of Shoprite’s 5.4% and Pick n Pay’s 2.2%. Given how competitive the market has become, the group has perhaps pushed pricing too hard and a slightly lower margin might be more prudent profit growth.

Shoprite hasn’t disclosed what its spending on developing new ranges, what type of sales it might generate or whether Checkers stores in more modest locations will be refurbished.

What is clear is that this time it has set its sights beyond Pick n Pay and SPAR. One portfolio manager, who cannot be named, in line with company policy, says: “You can’t make money selling cereal and toilet paper; it has to be on the juicy stuff. And the juicy stuff [at Woolworths] is too expensive.”

Woolworths would be wise to be more ‘thug’ on price investment, and Checkers’ best bet would be to prove it can sell quality stuff cheaply. — BDLive for sustainable