“[Choppies’] organic growth in both Botswana and South Africa has been very positive. It was one of our concerns when we invested three month ago is what would organic growth look like,” Brett Stewart, director of Standard Chartered Private Equity, told CNBC Africa.
“Clearly their expansion has been excellent. Organic growth has showed up very positively in the results that have just been released.”
Choppies, which released results today, reported a 25 per cent increase in interim revenue, as well as a 31 per cent rise in profit.
With a total of 104 stores, 67 of which are in Botswana and 24 in South Africa, Choppies plans to take on other African retail markets could be a fruitful move.
Stewart however added that Bostwana still remains Choppies’ most important region, and that the focus in future will be maintaining that market share as the company expands into other African countries.
“[Choppies] have proven themselves to be good at expanding into African countries. They successfully expanded into Zimbabwe recently, so we think there’s a tremendous opportunity to expand into other markets in the region: Namibia, Zambia, and Tanzania,” Stewart explained.
“The opportunity is huge, and certainly Ramchandran and the management team have done very well at expanding so far.”
There is however a significant lack of retail infrastructure in many parts of the continent, a tough obstacle that local and international retailers have nonetheless managed to overcome. According to Choppies CEO Ramachandran Ottapathu, the pickup of the regional expansion trend can therefore be used to buoy Choppies while in unchartered territory.
“If you look at sub-Saharan Africa, the only place where there’s about 50 per cent retail penetration is South Africa, and Bostwana is coming closer to that. Zimbabwe may get there in the next two years,” said Ottapathu.
“The opportunities are there in Zambia, Tanzania and Namibia, and we will be concentrating on those markets significantly in the areas where the retail penetration is well below the market average.”
Companies such as South African retailer Shoprite could however provide stiff competition in the Africa expansion strategy, as Shoprite is already present in Angola, Tanzania, Mauritius, Madagascar and Uganda. Shoprite, like Choppies, also caters to the middle lower middle class.
“South Africa is still a big opportunity for us. We’re only 24 stores at the moment. We’ve built infrastructure where we could expand up to 100 stores, so [there’s] huge room in this market,” Stewart added.