Africa’s biggest grocery retailer Shoprite looks beyond the continent

CAPE TOWN (Reuters) – Africa’s biggest grocery retailer Shoprite is considering a push into Eastern Europe, where it hopes to use knowledge gleaned from former suitor Steinhoff International, its new CEO told Reuters.

The move signals a change in strategy for Shoprite under Chief Executive Pieter Engelbrecht, 47, as sovereign rating downgrades and a weak economy cloud prospects at home. It also leads it down a competitive path crowded with established retail giants such as Tesco, Carrefour, Lidl and Aldi .

Engelbrecht, who took over from 37-year veteran Whitey Basson in January, said the company wants to enter markets in Eastern Europe that either “have low competition or high economic growth”.

Shoprite has grown rapidly over the past two decades as shoppers from Lagos to Luanda increasingly shunned street markets and spent more of their wages in formal retail stores, but still less than 20 percent of its sales are outside its home market.

“We will look at other developing countries. That is also something that came out with our Steinhoff discussions and they’ve got good presence there, so we would like to leverage off that knowledge and definitely have a look at the East Bloc countries,” he said in an interview at the company’s head office outside Cape Town.

Steinhoff in February called off a plan to merge its African clothing and furniture assets with Shoprite’s stores, a deal bankers had said could create a giant valued at more than 180 billion rand ($13 billion).

“The two types of entry countries that you look at is either one with low competition or you look at one with high economic growth,” he said, adding that a trip to the region was planned although he did not say which countries he was considering.

“We will go slow. We are not going to over commit ourselves to learn if the market accepts us. So we will first establish a couple of stores and make sure the market likes us, and if we find acceptance then one can look at a merger or acquisition.”

However, a move to Eastern Europe would be fraught with risks and would not likely provide the profits necessary to offset the impact of reducing its exposure to the impact of credit ratings downgrade on South Africa, analysts said.

“So whatever ratings uplift one can expect from reducing South African exposure, might well be given up on lower profit margins and execution risk from such an acquisition,” said Unathi Loos, an Investec Asset Management retail analyst.

But Shoprite’s experience in selling to low income earners in far-flung cities across Africa could help it mount a strong challenge.

The company is also pondering a move into the South American market, Engelbrecht said.


Engelbrecht, a chartered accountant who – before a serious neck injury – had dreams of playing rugby professionally, said Shoprite was maintaining sales and customer growth in South Africa and should reach its profit targets this year, but was concerned that a weaker rand currency could hurt consumers.

South Africa’s rand was the worst performing emerging market currency this month, retreating more than 10 percent against the greenback, as the shock of a midnight cabinet reshuffle and subsequent credit ratings downgrade weighed on sentiment. [

Engelbrecht said Shoprite had a strong balance sheet to help weather the volatile rand and was talking to banks to raise between 10 billion and 15 billion rand for its capital requirements over the next six years.

Though raising funds in South Africa is likely to be more costly due to the downgrades, Shoprite can still tap foreign markets through its structures in Mauritius.

And raising funds in Eastern Europe could be significantly cheaper than in South Africa, analysts said.

($1 = 13.6146 rand)

(Editing by Louise Heavens and Susan Thomas)

© Thomson Reuters 2017 All rights reserved

Related Content

This husband-wife duo is empowering kids with black dolls they can relate to

CNBC Africa is joined by two entrepreneurs who have earned a place in Africa's largest retailer for their unique offering. Thabo and Mpumi Motsabi, the founders of Toys with Roots, just launched a range of dolls available exclusively in Shoprite and Checkers supermarkets throughout South Africa.

Massmart scraps dividend after tough year

The second largest distributor of consumer goods in Africa, Massmart has scrapped its dividend after widening its headline losses for the first time in 5 years by 490 per cent to R796.6 million. Like its counterpart Shoprite, Massmart is also battling with currency weakness in Africa with a R81.9 million loss in foreign exchange. The group's trading profit has also decreased by 52 per cent. CNBC Africa is joined by Guy Hayward, outgoing CEO of Massmart.

Shoprite hurt by currency devaluations in Africa

One of Africa's biggest retailers is reporting a trying year for their core operations. Shoprite's South African division grew second half sales by 7.4 per cent. Profitability in the rest of Africa also remains a challenge. Basic headline earnings per share fell 19.6 per cent to some 780.8 cents. Joining CNBC Africa for more is Pieter Engelbrecht, CEO, Shoprite Group.

How Christo Wiese the rich dad of South Africa nearly became poor dad

Billionaire Christo Wiese says he was on the verge of losing everything in the Steinhoff scandal.

Subscribe to our newsletter

Sign up for free newsletters and get more CNBC AFRICA delivered to your inbox

More from CNBC Africa

How COVID-19 impacts the health & well-being of children

Research shows that children have a lower rate of contracting the Coronavirus and bringing infections to the household. This should provide comfort to South African parents that are in two minds about sending their kids back to school next week, when physical teaching is set to resume. Epidemiologist, Dr Boshoff Steenekamp joins CNBC Africa for more.

Rebosis rolls out COVID-19 testing stations outside malls

Property Group Rebosis, has partnered with government to roll out testing stations for Covid-19 outside its shopping malls in Pretoria – South Africa’s capital. However, foot traffic into these malls is expected to have dived due to the virus lock-downs prevented non-essential stores from trading. Rebosis is yet to release its interim results. Rebosis CEO Sisa Ngebulana joins CNBC Africa for more.

Distell CEO: What the sale of alcohol under level 3 means for the industry

South Africans can look forward to popping their favourite bottle of bubbly or sipping on a glass of pinotage to warm up from the cold winter. That’s as alcohol sales, that were banned for over two months under the Covid-19 lock-down, will be lifted. Distell CEO Richard Rushton joins CNBC Africa for more.

This Rwandan publisher is creating buzz with new book App

After realising the challenges that come with publishing fellow African writers, home-grown publishing house, Imagine We Rwanda launched their very own mobile app, dubbed, Imagine Books. Fast forward 2 weeks and hundreds of titles have been purchased worldwide and the numbers are only going up. CNBC Africa spoke to the founder, Dominique Alonga for more.

Partner Content

VIVO CEO is a dynamic leader for this innovative global brand

May 2020 -- Six months ago the vision for vivo in South Africa was just beginning to...

Building Africa’s Biggest Digital Classroom

An enduring lesson learnt throughout our 175-year existence is that, while things rapidly change around us, the things that truly matter don’t!...

Trending Now

What Happens To Frequent Flyer Miles If An Airline Goes Bankrupt?

With U.S. passenger traffic down by 90%, airlines are desperate to fill seats and are offering big incentives to keep their most reliable customers loyal. But what happens to frequent flyer miles when almost no one is flying and can an airline loyalt

How The Medical Device Supply Chain Failed During Covid-19

More than three months into the coronavirus pandemic, health-care workers on the front-lines of the battle against Covid-19 say they still face shortages of personal protective equipment. The personal protective shortage was one of the early flashpoi

Tsogo Sun Hotels FY profits plunge, COVID-19 lock-downs weigh

Hospitality Group Tsogo Sun Hotels reported a 31 per cent plunge in full year headline earnings per share, with Covid-19 resulting in demand from international tourist retracting in the fourth quarter, due to global lock-downs.

Nampak swings into H1 loss, suffers R3bn impairment

Nampak swung to a half year loss of R2.4 billion as revenue plunged and it impaired its Angola and Nigeria assets by R3 billion, which is four times its market value. The also warned that future profits were in South Africa were at risk from the ban on alcohol sales due to Covid-19 lock-downs. Nampak CEO, Erik Smuts joins CNBC Africa for more.
- Advertisement -