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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.

The food retailing environment is more competitive than it’s ever been, making no-one impervious.

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 private-label 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.

It’s a decisive, well-considered and, by the looks of it, well-executed strategy. And if this evokes a sense of déjà vu, there is reason for it.

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. 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

What it means: Woolworths says it does not feel threatened by Shoprite’s food offering plans

for sustainable profit growth.

Some customers walked away from Woolworths in 2008 because they deemed it too expensive.

Isaacs argues, though, that pricing has increased significantly across the board and “across all retailers”.

“You can’t just look at CPI or the inflation numbers the retailers report, because these [relate to various] food types. For example, in a year like this, with the price of maize and wheat down significantly, food inflation will look very low. But I think that owing to the depreciation of the rand [many items are much more expensive],” he says.

Shoprite hasn’t disclosed what it’s 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. People are under [financial] strain, and discretionary spend through Woolworths Food is not what it used to be — it’s become too much of a luxury.

“The new Checkers stores look like art galleries. [With their convenience food] offerings they are going squarely after the Woolworths customer.”

Checkers is showboating a prepared foods offering of 135 new products — a further 110 are in the pipeline — as well as meat and dairy, which are the hallmarks of Woolworths’ R27bn food business and the points of difference that attract and retain Woolworths’ core customer base.

Shoprite boss Pieter Engelbrecht’s food ambitions are as large as life: “We want more of Woolworths’ customers. We are dismantling this monopoly in what we call the premium food trade,” he says.

“Why are we after its customers? They are four times more lucrative than our average customer in terms of basket size.

“Somebody said: ‘Yes, but you’re just copying the brand leader.’ So we brought out the Oh My Goodness children’s meals [developed by chef Gordon Ramsay and his daughter Matilda]. I will now wait and see who copies whom.”