Spar resets for future growth — CEO
● Spar will open 70 new stores by the end of the year as South Africa’s second-biggest grocer by revenue looks for growth in the highly competitive market and plans to pursue opportunities in areas such as pet care, where its rivals are already a step ahead.
The company is also looking at having two brand formats in the premium and discount categories to cater for different market segments. This is in line with Shoprite and Pick n Pay, which have different brands for different customers.
The retailer’s business has been under pressure in recent years for various reasons, including a disastrous SAP software rollout at its distribution centre in KwaZulu-Natal, a failed venture into Poland, and strong competition, especially from the Shoprite group, which has been taking market share from all competitors.
Still, Spar, which at the end of September had 4,579 stores in Southern Africa, Switzerland, Ireland and Poland, believes it is on the road to recovery and previous profitability levels.
“We have made some difficult decisions to reposition the group as a stronger organisation for the benefit of all our stakeholders,” said CEO Angelo Swartz.
“I don’t think people realise that we are the second-biggest grocer [by sales] in this country. We have been shy to stand up to that position and I think our journey in the next while is going to own that position as the strong second player in South Africa and no longer be shy.”
Swartz said Spar has so far opened 50 new stores and 70 more will be opened by the end of the year. However, the new store segments — premium and discount — will probably start to be rolled out from next year as the company is still finalising its plans and budgets, he said.
“We want to segment our store formats more clearly so that consumers can more intuitively resonate with the format that suits their individual needs. The outcomes of this work will bring excitement and differentiation to the market,” said Swartz.
Regarding expansion into adjacent markets, Swartz said there are burgeoning categories where independent companies are operating.
“There are opportunities we are exploring at the moment. The easy ones are pets and babies.
“Pet care is a must-have for food retailers simply because it is a big category for us in our supermarkets. There are burgeoning pet ventures and some other categories, but I’m hesitant to name them.”
Swartz added that regulations also require separate businesses for pets, hence there is a strong push for stand-alone stores in that category. Spar’s aim is to venture into non-grocery categories that will give it firstmover advantage.
He described the past six months as exceptionally challenging for the group, but added: “We are also fixing those areas that have held us back.”
One of those is the failed implementation of the SAP enterprise resource planning (ERP) software system, which has cost the company more than a billion rands.
“We have now completed a thorough reassessment of the SAP project over the past six months, which involved stabilising the KwaZulu-Natal implementation, assessing the warehouse management system and reviewing how the system can continue to be rolled out at a significantly reduced risk level,” Swartz said.
“That will include separating the ERP from the warehouse system and implementing them independently. We expect to see improved optimisation in the coming few months of these changes, which are all being fast-tracked.”
Spar announced in September that it will sell the loss-making Poland business, with the aim of closing that deal by the end of September this year. Management will put most of its energy into the South African businesses.
Spar is also sitting with R10bn of debt, most of it funding for expansion in Poland. Swartz said the company is working with banks to restructure the debt, but it won’t tap shareholders for funding.