South Africa has more retail space per
capita than most emerging markets.
With more than 1,400 shopping malls
dotted across the country, retail is big
business. And in the hunt for growth,
many companies have looked to overseas
expansion.
The Spar Group is one example. Just over
a decade ago, the company acquired
licenses to operate spar branded shops
in countries including the UK, Ireland,
Switzerland, and Sri Lanka. I met the
CEO, Angelo Schwarz, at Spar's Durban
headquarters. He told me local
investment restrictions were part of
that motivation. I think that idea was
driven primarily by South African
legislation which limited investment
managers from from investing too big a
part part of their portfolio out of
South Africa and therefore many
investment managers were really looking
for South African companies to be
proxies in other markets.
>> SPAR is largely a wholesale business. In
the UK for example over 300
independently owned shops all carry the
same brand. They benefit from
centralized marketing and distribution.
In exchange, the Spar Group collects
fees and leverages purchasing power with
suppliers. But in recent years, its
African revenue has far outpaced what it
gets from Europe. Take Switzerland, a
country with strong trade protection
measures. Groceries there are often 50%
more expensive than in its European
neighbors. When Schwarz took over as CEO
just two years ago, he decided to divest
the Swiss and UK businesses materially
strengthening the balance sheet.
>> When we looked at at the businesses in
the UK and and the business in
Switzerland is our view that those
businesses are subscale and the amount
of um capital that it would have to go
into those businesses to get it up to
scale to meet our strategic ambitions
was was um would be misplaced. Retail
analyst Alec Abraham argues Spar's
biggest mistake was taking its eyes off
South Africa.
>> When you go into a new country, there's
a very different operating environment
and you need to be focused to um to
understand that market and to succeed in
that market.
>> Back home, Spar is expanding its DIY and
pharmacy businesses and is building out
its liquor operations. And I think with
spa being where it is and how
competitive the South African market is,
we really just want to refocus on our
home markets.
>> That's because liquor shops in South
Africa are expanding fast. Last year
they grew almost twice as quickly in the
country as conventional supermarkets.
>> Our liquor brand Topps has been has been
around for also about 25 years. And
through independent retails, we become
the single biggest retail liquor brand
in this country. Spar CEO has branded
this battle for shoppers as South
Africa's wine wars, a high margin, high
growth area in an otherwise struggling
consumer market.
>> We have shown that our business has the
ability and our independent retailers
have the ability to compete directly
with the chains um empowered by us and
we are now the second biggest
supermarket brand in this country. Um
which is no mean feat. Having sparred
with what today are smaller supermarket
rivals, Schwartz may soon be ready to
take on number one Shopright in what
could be his toughest fight yet.
Sorry.