All’s right at Shoprite

Whitey’s re­tire­ment, while an end of an era, will un­likely mean rad­i­cal changes in lo­cal re­tail, writes Colleen Goko

Financial Mail - Investors Monthly - - Feature -

here is lit­tle that James Well­wood “Whitey” Bas­son hasn’t seen or done dur­ing 40 years in the re­tail busi­ness.

At the height of racial ten­sion in SA, in the decade of the Soweto Up­ris­ing, Bas­son was the head of op­er­a­tions at Pep Stores, an of­fice he held un­til late 1978.

Pep Stores was one of a few South African cor­po­rates which made an early de­ci­sion to fo­cus on the low-income mar­ket de­spite the pol­i­tics of the day. Black con­sumers could go to Pep and dress their chil­dren from head to toe for less than a rand. Bas­son’s key role in the young or­gan­i­sa­tion — founded in 1965 — was to ex­tend its brand and reach.

His time at Pep re­vealed Bas­son’s am­bi­tious na­ture. Hav­ing tasted the fruits of suc­cess after ac­quir­ing his first busi­ness Half Price Group and turn­ing its for­tunes around through in­te­gra­tion into Pep, Bas­son felt ready to start a new ven­ture in the food re­tail­ing busi­ness.

With Pep’s bless­ing, he did just that and 37 years ago ac­quired an eight-store West­ern Cape gro­cer named Shoprite from the Rogut fam­ily. The legend as we know it had be­gun. From a busi­ness with a value of just R1m, Shoprite now has a mar­ket cap­i­tal­i­sa­tion of R114bn.

Bas­son changed the game. Apartheid had frac­tured the na­tion along the lines of racism as well as wealth dis­tri­bu­tion. His street smarts did not dis­crim­i­nate. The for­mal re­tail sec­tor in town­ships and ru­ral ar­eas was un­der­de­vel­oped by

Tyears of ne­glect. The govern­ment of the day also made it ex­tremely dif­fi­cult for black busi­ness minded peo­ple to be­gin their own for­mal and le­gal en­ter­prises.

Con­sumers in those re­gions re­lied on lo­cal spaza shops for their needs and goods. The of­fer­ings were usu­ally not fresh and prices could vary. The mar­ket was ripe for the in­tro­duc­tion of a for­mal player of­fer­ing good ser­vice and prod­ucts at rea­son­able prices. Dom­i­nant play­ers in gro­cery re­tail had ig­nored this de­mo­graphic be­fore apartheid and were slow on the up­take even when it ended.

Shoprite, un­der Bas­son’s guid­ing hand, snatched the car­pet from un­der the feet of the ma­jor re­tail­ers. Pick n Pay, OK Bazaars and Check­ers were fo­cus­ing their strate­gies and at­ten­tion on mid­dle and up­per-income con­sumers. With the coun­try just find­ing its feet, that tar­get mar­ket was feel­ing the pres­sure. OK and Check­ers were soon swal­lowed up into the Shoprite Hold­ings group.

With the chang­ing con­sumer land­scape, Bas­son un­der­stood that the only way to be­come one of the big­gest play­ers in the sec­tor was through ag­gres­sive ac­qui­si­tions and to have ex­po­sure to as many seg­ments of the mar­ket as pos­si­ble. But he and Shoprite never lost fo­cus on their core mar­ket.

Bas­son was also a pi­o­neer in in­tro­duc­ing a cen­tralised dis­tri­bu­tion cen­tre, which al­lowed the group to sta­bilise sup­ply lines when sup­plier ser­vice lev­els dropped. More tellingly, he was the only food re­tailer am­bi­tious and hun­gry enough to ex­pand into ter­ri­to­ries else­where in Africa.

With SA open for busi­ness to the rest of the world, after the first demo­cratic elec­tions, Shoprite was quick to open its first store in the rest of the con­ti­nent — in Lusaka, Zam­bia. This at a time be­fore the “Africa ris­ing” nar­ra­tive. Shoprite now has op­er­a­tions as far north as Nige­ria and Ghana.

As Shoprite chair­man Christo Wiese says, Whitey’s charis­matic lead­er­ship and cal­cu­lated risks spear­headed the group into a lead­ing food re­tailer on the con­ti­nent. Other re­tail­ers have tried to mimic the strat­egy but it has been too lit­tle too late.

The re­tail land­scape has changed since Bas­son was first ap­pointed Shoprite CEO. The news of his im­pend­ing re­tire­ment at the end of the year, while sig­nally an end of an era, will un­likely mean rad­i­cal changes in the lo­cal re­tail land­scape.

While shop­ping cen­tre de­vel­op­ments have been in­creas­ing rapidly in SA, Shoprite will likely con­tinue to dom­i­nate. Since the 1960s, the num­ber of re­tail de­vel­op­ments in a decade has been in­creas­ing by an av­er­age of 36%.

A Euromon­i­tor re­port says Shoprite led South African gro­cery re­tail­ers in 2015 with 19.4% mar­ket share. Its ex­pan­sive re­tail net­work across gro­cery re­tail chan­nels such as su­per­mar­kets, dis­coun­ters and hy­per­mar­kets gives it a com­pet­i­tive ad­van­tage. Shoprite is also po­si­tioned as a low-priced re­tailer, so in tough eco­nomic times, con­sumers con­tinue to be at­tracted to Shoprite by the prom­ise of low-priced prod­ucts.

The com­pany’s first-quar­ter trad­ing up­date of the 2017 fi­nan­cial year points to ex­actly that. The group re­ported strong dou­ble digit growth across most of its di­vi­sions. Group rev­enue grew by 15.7% com­pared with the prior year. Its South African su­per­mar­kets in­creased rev­enue by 12.4% — greater than the 12.1%

Picture: WALDO SWIEGERS/BLOOMBERG

Shoprite has never lost fo­cus on its core mar­ket

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