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Nestle South Africa is introducing its second phase of the Starbucks At Home range in retail stores such as Checkers, Pick ‘n Pay, Spar and Makro. The launch comes amid the Covid-19 crisis taking a knock on traditional coffee houses and some non-essential products. Nestle South Africa CEO, Bruno Olierhoek joins CNBC Africa for more.

Nestlé introduces second Starbucks At Home range in SA

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CNBC Africa is joined by two entrepreneurs who have earned a place in Africa&#8217;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.

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

As South Africa slides into recession, and households have less and less to spend, the number one supermarket group Shoprite is adopting an unlikely strategy: it&#8217;s pushing upmarket.
While the lower-income families that have long been its core customers cut back, the spending of the wealthier class remains undented by the downturn.
In a bid to retain its leading industry position, the discount retailer&#8217;s new boss is driving hard into the upmarket, higher-margin niche dominated by rival Woolworths.
The stage is set for a turf war to win the hearts, minds and wallets of South Africa&#8217;s richest 2 million households &#8211; and ultimately preeminence in the supermarket sector.
Shoprite CEO Pieter Engelbrecht told Reuters that affluent areas and customers were where he saw growth in the maturing South African market.
&#8220;A lot of those (wealthier) customers, 2 million of them, actually frequent our stores already, but not exclusively,&#8221; he said in an interview. &#8220;Our job is to get a better share of their wallets when they are in our stores and then impress them so that they come back again.&#8221;
Shoprite is doubling its offering of the kind of high-end convenience foods that Woolworths has built its reputation on &#8211; from gourmet lamb shanks and oxtail stew to teriyaki-and-ginger basted pork ribs. Its range will reach around 500 products by the end of this year, Engelbrecht said.
These products typically cost about 200 rand ($15) for a meal for four &#8211; 10 times the minimum wage of 20 rand an hour as set by new labor laws making their way through parliament.
As part of the drive to expand its range, Engelbrecht said Shoprite had upgraded its food technology and development facilities and gone on a hiring spree for food developers and technologists. He said the department had grown 10-fold in a year, without giving more specific details on staff numbers.
The mainly discount retail group is executing this strategic shift by expanding its higher-end Checkers chain of stores.
It plans to open 23 new outlets, mostly in wealthy suburbs such as Waterfall City north of Johannesburg, by June next year to bring the number of stores to about 230.
Checkers has for years been underrepresented in the wealthiest neighborhoods with the most spending power, according to analysts.
New Checkers stores, and established ones that have been refurbished, resemble Woolworths outlets with sparse lighting and wood-panelled sections boasting extensive wine and gourmet coffee selections, as well as counters selling quality selections of cheese and meat.
NUMBERS GAME
Shoprite&#8217;s core, low-income customer base has been battered by a year of high inflation, stagnant wages and unemployment reaching a 14-year peak. Higher interest rates and currency depreciation have further eroded consumers&#8217; disposable income.
Africa&#8217;s most advanced economy has fallen into recession for the first time since 2009, data showed last week, in a slide that has slowed profits across the grocery sector.
The discount group&#8217;s push upmarket has been driven by its own economics. It is grappling with an internal inflation rate &#8211; the rise in what it pays for its goods &#8211; of 7.4 percent, the highest level in years, but has not been able to fully pass the increase on to poorer consumers.
This has undermined its traditional, mass-market strategy of low margins and high volumes. To absorb the hit, and continue to secure the growth demanded by investors, it is hunting the higher margins and healthier sales growth on offer at the higher-end of the market by expanding Checkers.
While Shoprite-branded stores&#8217; sales have grown by 8.8 percent over the past 12 months, Checkers&#8217; have risen by 11.1 percent.
&#8220;The Checkers supermarkets have reported low double-digit sales growth over the last three years, growing well ahead of the Shoprite brand, which supports management&#8217;s ambition,&#8221; Investec Asset Management analyst Unathi Loos told Reuters.
The Woolworths and Shoprite groups also variously encompass the likes of furniture and clothing. Woolworths Foods&#8217; margin is about 7 percent, according to the company&#8217;s financial reports.
Shoprite does not separate the margin on its supermarket food division from the financial services products offered in-store, but Loos said the consensus view among analysts was that the figure was between 3.5 and 4 percent.
Shoprite did not immediately respond to a request for comment on the food margin figure.
&#8216;I LOVE WOOLIES&#8217;
The country&#8217;s &#8211; and the continent&#8217;s &#8211; two largest retailers have very different backgrounds.
Shoprite, which is 16 percent owned by retail tycoon Christo Wiese, has grown from 8 supermarkets in 1979 to a no-frills mass-market grocer with operations in 15 African countries. Woolworths, which is over 80 years old, morphed from a clothing chain into South Africa&#8217;s fine-foods market leader in the early 2000s.
Engelbrecht took the reins of Shoprite in February from Whitey Basson, who had led the group for 37 years. Part of his strategy is based on a bet that he can lure affluent shoppers away from Woolworths with high-quality convenience products priced slightly below those offered by its rival.
&#8220;Woolworths over time has constantly moved the price of (those products) up and up, because they were virtually the only players in that market, which gives us the opportunity to come in,&#8221; Engelbrecht said.
A crucial question is how will Woolworths respond to defend a market that has delivered handsome profits for the company and whose chief executive Ian Moir said in February its food business continued to grow ahead of the market.
When asked by Reuters about Shoprite&#8217;s push into upmarket convenience food, Woolworths told Reuters that it had an &#8220;incredibly valuable emotional connection&#8221; with its customers.
&#8220;Retail is a dynamic environment and the competition in the Grocery and Food market category means that we will always keep a watching brief on our competitors&#8217; activities,&#8221; it added. &#8220;We conduct weekly basket checks against the prices of competitors to ensure that our prices are comparable.&#8221;
Analysts say the high-end clash between the two industry titans was unlikely to develop into a price war because that part of the market was not as price-sensitive as the lower end.
But Woolworths will be forced to respond and would likely push back with new products and pack sizes, they say.
&#8220;They have been good at introducing new products and other innovations in line with consumer trends and feedback,&#8221; said Old Mutual Invest food retail analyst Kaya Nodada.
It&#8217;s a tall order for Shoprite to break Woolworths&#8217; stranglehold. If it is to prevail, it will have to win over shoppers like JF Fourie.
&#8220;I love Woolies. The microwave meals are a bit overpriced, but they are tasty,&#8221; the 28-year-old who works in marketing said in the Woolworths branch in eastern Pretoria as she added shimeji mushrooms to the baby brinjals in her basket.
But Fourie &#8211; a big fan of Gordon Ramsay &#8211; said she would need some convincing about the quality of Shoprite&#8217;s products, but would give it a go because Checkers adverts feature the British celebrity chef.
&#8220;I like the chef and he hates airplane food,&#8221; she added. &#8220;He&#8217;s fussy and I am too.&#8221;
(Editing by Pravin Char)

Checkers

Nestlé introduces second Starbucks At Home range in SA

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

Shoprite group adopts unlikely strategy and goes upmarket

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Checkers

Nestlé introduces second Starbucks At Home range in SA

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

Shoprite group adopts unlikely strategy and goes upmarket

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