SHOPRITE

UNWAVERING FOCUS ON AFFORDABILITY & ACCESSIBILITY FOR CUSTOMERS

I am a firm believer in the saying Invest in what you know. My first investment was in Sasol because that was where I was working at the time in 2005. My very second investment was Shoprite because that was where I shopped. I remember living in Sasolburg at the time and having a R750pm food budget. Ive been riding Shoprite from under R20 per share and it is my ride or die because it has never wavered from their core solution to South Africa: Access to Affordable Quality for Everyone.

FACT: Shoprite is the largest supermarket retailer on the African continent. We all experience brands differently and that is okay. I am going to state why I love the Shoprite brand and will continue to invest alongside Dr Wiese.

Shoprite has a customer-first approach. They put the customer at the heart and soul of their brand. The company has three core values:

1. Always doing the right thing
2. Saving customers money
3. Developing local

Shoprite has over 20 brands, but the top three help you understand the core strategy in the South African context.

SHOPRITE

Shoprite is a full-service supermarket for the mass middle-income market customers where they can do their shopping, pay their bills, receive government grant pay-outs and get their monthly prescription medicine.

USAVE

Small-format stores serving customers in the lower-income market, mostly in non-urban areas. Usave extends the Groups footprint into rural/outlying areas, giving more people access to food and basic services in their communities.

CHECKERS & CHECKERS HYPER

When Shoprite bought Checkers in 1991, it was one of the most legendary moves in retail history. Shoprite was coming for everything!!!

Checkers and Checkers Hyper are perfectly positioned to grow their share in the mid-to-upper segment of the market that prioritises convenience, quality, fresh and prepared products.

WHAT MAKES THE SHOPRITE GROUP DIFFERENT?

Any company in FMCG (fast moving consumer goods) will confess that distribution is the biggest nightmare. Goods need to move fast, efficiently, and cost-effectively. The less people involved in this process, the better.

Shoprite is genius in controlling their entire supply chain. They have invested billions in infrastructure, software solutions, skills and knowledge  with only two things in mind:

• Sustain low price points for a longer duration than competitors
• While at the same time maintaining a high level of product availability from its own distribution centres.

Ive had the privilege of visiting a Shoprite distribution centre. It is magical when you see how fast trucks from suppliers come in and offload goods and how fast a Shoprite truck subsequently fills up for a specific store.

This has been a winning recipe for maintaining customer loyalty and boosting sales growth at minimal cost. The Groups strategy to control the supply chain not only provides a distinct competitive advantage and an ability to manage risk, but it also has made sound business sense.

The Group also continues to actively manage and control its value chain while maintaining a strong drive to improve efficiencies. The focus has been on four primary areas namely

1. Inventory management
2. Transport optimisation
3. Operational productivity and
4. Store processes

These efficiencies continue to drive costs down and improve cash flow. Although inventory levels have increased, a scientific approach to forward buying was adopted. This allowed the Group to sustain its low price position and simultaneously to achieve high levels of product availability.

The Money Market concept is an increasingly important part of the sales offering. Its main objective is to save consumers time by enabling them to undertake most of what they have to do in town -buying groceries, settling accounts, reserving seats for a show or a sports event, booking a flight-all in one place. In this way it contributes to positioning the Groups supermarkets as destination stores that offer consumers a unique range of services. The real-time transfer of money to any Shoprite or Checkers supermarket of the Group anywhere in South Africa. The service is aimed primarily at lower-income consumers without bank accounts and offer people with no collateral the opportunity to send up to R5 000 at a time to friends or family at a cost far lower than charged by any financial institution.

As early as October 2007 management decided to reduce selling prices, particularly on the staple foods sustaining lower income groups. This led to the growth in value per transaction remaining below the food inflation rate. However, these savings also brought increasing numbers of consumers into Shoprites outlets. With operating costs meticulously controlled, the increase in sales considerably exceeded the increase in expenses resulting in a strong rise in trading profit.

Outside South Africa, Shoprite is focusing on markets with growth potential and rich natural resources, which will drive future economic growth and therefore increased GDP per capita and consumer spending figures. Shoprite models its cross-border investments on its shopping centre developments in South Africa, featuring a Shoprite supermarket as the anchor store. These shopping malls change local consumption and urban environments dramatically. 

INNOVATION

Shoprite embraces innovation for growth. Some innovative solutions for you to read up on.

1. Checkers Sixty-60 app
2. ShopriteX
3. Computicket virtual grocery vouchers
4. Petshop Science
5. Pet Insurance
6. Little Me

THE NUMBERS

Instead of just looking at Shoprite, I have compared the three giants in the attached image. I focus on revenue growth and profitability for sustained long-term share price increase.