Big Boy motorbikes are fast becoming as ubiquitous as hadedas and minibus taxis. And they reflect not just a change in the way we shop, but a whole new economic reality for tens of thousands of South African families. Doing its bit to boost this new economic sector, while getting its own products and services into the hands of South African families, is SPAR, which outsources some township deliveries for its SPAR2U to businesses like Delivery KA Speed SA and KasiD, which offer local knowledge and access with a side-order of economic progress for the communities where they operate, which so far include Kempton Park, Kaalfontein, Ivory Park, Mamelodi, Glen Marais and Hammanskraal. “The success of Delivery KA Speed and KasiD in townships underscores the transformative potential of community-focused initiatives enabled through partnerships such as these with SPAR2U,” says SPAR’s PR, Communications and Sponsorships Manager Mpudi Maubane. SPAR2U, a late arrival on the home delivery scene, offers delivery from 459 stores around the Beloved Country, with more surely to follow.

Comment: A very South African solution to a range of local challenges. Nice work. For more on these dynamic businesses and others shaping our informal trading landscape, take a look at the latest release of our Informal Retail Channel report here.

A big old trading update from the Verdant One, for the 18 weeks through January, and it’s fairly solid, with total sales in Southern Africa up +8.2% year-on-year, and Group turnover up +5.8% to R45.5bn. One of the big drivers of this growth was TOPS, which saw sales surge +56% in the period during which there was no lockdown. Last year, the business lost 58 trading days over the same 18 weeks. The core grocery wholesale business increased sales by +3.7%. In other SPAR news, the business will soon launch its very own online grocery delivery, Spar2U, which will initially be running out of selected Joburg stores. SPAR, you would be correct to point out, is the last of the major Groups to offer grocery delivery. But then, it has both unique challenges and unique opportunities in this regard: “We believe that the SPAR business model requires an online shopping solution that serves our SPAR consumers but one which also will add value to our independent retail partners and the communities in which they operate,” observes CEO Brett Botten.

Comment: SPAR will be surely looking for a recovery in its core grocery market as the year progresses.

Big up to SPAR this week, whose rural hub programme has been announced as the winner in the rural and township development category at the Absa Business Day Supplier Development Awards for the second consecutive year. Launched in 2016, the hub contributes towards food security, food safety, nutrition, job creation and transformation by empowering small-scale farmers through skills transfer and economic participation. The first hub was established in Limpopo with five small-scale farmers producing vegetables on 22 hectares of farmland. Since then, it has expanded to 13 farmers on 126 hectares, all of whom provide produce to local SPAR stores. In other SPAR news, the Verdant One has added two new SUPERSPARs to its haul in KZN – one in the subtropical resort town of Umkomaas on the South Coast, and the other in the more rarefied environs of the Kensington shopping centre in Durban North. Both were upgraded by their owners from existing SPAR stores.

Comment: SPAR’s strategy of growth by store upgrading is well-established and effective, and entirely suited to the owner-manager model.

A muted set of annual results from SPAR, in a year which started bad and got worse for everyone in the industry. Turnover was up +2.9% R127.9bn for the year through September, but it was very much a game of two halves: turnover grew +7.9% in the first half but was weighed down heavily by the civil unrest and the ongoing impacts of COVID-19 in the second. Once again, solid performances by Build it (up +23.5% to R9.8bn) and TOPS (+11.2% to R7.2bn) kept the turnover numbers in positive territory. Operating profit was down -1.5% to R3.4bn for the year, as expenses grew +5.3%. On the upside, footprint grew this year, despite 53 stores remaining closed after July’s looting and arson, and refurbishments continued at a cracking pace. In Europe, the business continued to advance, with sales up modestly in Ireland and Switzerland but more dramatically in Poland, growing +10.8% despite major challenges. In the next few weeks, SPAR will be rolling out its SPAR2U delivery service with an as-yet-anonymous logistics partner, operating mainly via a fleet of e-bikes.

Comment: A tough year for a great South African business, which seems to have borne the brunt of July’s civil unrest. For more on these results, click <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/168075/211117_SPAR%20FY2021%20Results%20Summary_final.pdf" target="_blank">here</a>.

A trading update from our friends at SPAR, where sales for the 48 weeks through August grew +3.9% to R116.1bn, while SPAR Southern Africa increased wholesale sales by +4.5%. The grocery business grew sales +0.5%, with liquor up +12% despite the frequent lockdowns, and Build it absolutely shot the lights out at +27.6%. Moving abroad, the BWG Foods business in Ireland and South West England increased turnover +3.3%, with Switzerland growing +7.3% and Poland up +17.5%. The growth in grocery back home was actually better than it appears. “SPAR Southern Africa benefited from increased home consumption with consumers choosing local, convenient and community-based SPAR stores during the initial hard lockdown in 2020,” the Group explains. “Consequently, the business has been impacted by the effect of the high base in the second half of the prior comparative period.”

Comment: SPAR’s strategy of diversification – into different categories and different geographies – has paid off in this difficult period.

Green of logo, and of ambition, SPAR is on a mission to eliminate problematic and unnecessary plastic, and to design new packaging that is recyclable or reusable. To this end, it’s going hard after its extensive private label lines, with a short-term focus on the 10 categories that deliver 80% of SPAR’s house brand volumes. “The two-litre milk cartons used for extra shelf-life milk are 100% recyclable and made from 87% renewably sourced material,” explains SPAR, who is committed to having 100% of plastic packaging which is reusable, recyclable, or compostable by 2025. As a founding members of the South African Plastics Pact, SPAR is committed to the creation of a circular economy that drives investment in infrastructure, supports livelihoods and keeps our environment plastic free. In other news, SPAR is also pioneering a non-toxic, odourless, eco-friendly firelighter made from rhino dung.

Comment: Powerful stuff – retailers like SPAR are taking bold and increasingly meaningful steps to reduce their environmental impact, and packaging suppliers would do well to help them achieve this.

A handsome set of numbers from SPAR, who report a +7.5% increase in wholesale turnover to over R64bn for the six months through March, with operating profit up +28% to R1.7bn. This was due in large part to strong performances in Ireland, with BWG growing turnover +13.3% and Switzerland at +21.6% both in rands; growth back home reached only +3.1%, with grocery sales almost flat at +0.8% and TOPS, typically a strong performer, losing 72 trading days over prohibition, with sales declining -7.8% YoY as a result. On the upside, Build it, benefiting from the lockdown DIY spree, grew a remarkable +26.2%. Completely shooting the lights out, however, was SPAR’s Polish business, which grew +32.2% in rand terms despite the closure of its locations in malls due to local lockdown, delivering a reduced operating loss. SPAR’s network in Ireland now comprises 1,392 stores, Poland has 230, while the total in Switzerland is 388 after the recent acquisition of a chain of forecourt convenience stores. For more on those numbers, have a look at our results summary here.

Comment: SPAR’s strategy of overseas acquisitions used to look like a hedge. Now it’s a mighty green forest.

Globally, the SPAR Group are rolling out an important initiative to reduce food waste: a real-time, automated mobile platform helping food stores sell more close-to-expiry date, discounted food products. The aptly-named Gander, a location-driven app, plugs into retailers’ POS systems and allows shoppers to see all the reduced-to-clear product in their area and make their shopping choices accordingly. “Our food waste reduction strategy leverages technology to achieve greater efficiency at each step,” says Tobias Wasmuht, CEO of SPAR International. “Working with entrepreneurial platforms such as Gander provides sustainable solutions that are important as SPAR seeks ways to reduce the environmental impact.” The system has already been trialled in Northern Ireland through the local Henderson Group of SPAR stores.

Comment: We’ve downloaded the app and it looks legit. This may be one of those ones that every retailer will eventually have to have to capture value-conscious shoppers with an interest in doing the right thing by dear old Mother E.

Self-described “normal, Eastern Cape boytjie” and new SPAR CEO Brett Botten has definite ideas about what drives the ongoing performance of the business. “We have to continuously look after the wellbeing of our retailers, their growth and profitability,” he says. “Their success is our success.” He also points to the post-lockdown promise of Tops: “The large footprint of Tops liquor stores near SPAR stores highlights the strength of the Tops brand in attracting weekend shoppers to our stores because of the convenience of a ‘one stop’ shop,” he notes. He remains concerned about the South African shopper though: “We are worried about the health of the consumer. There have obviously been the additional government grants and all the relief that has assisted significantly, but that is now drying up.”

Comment: The membership model remains at the heart of the SPAR business. Suppliers who wish to list with this force of SA retail would do well to bear that in mind.

SPAR’s AGM was on Tuesday, and what better time to also release an 18-week trading update, 18 weeks being that joyful milestone of 2.8 of a year. Group sales were up +9.8% to R43bn, near enough for the period, with sales in Southern Africa up +3.4%, and the core grocery business increasing sales +2.8%. Tops, generally a, ahem, top performer, saw a decline of -17.9% for the period, “as a result of the pandemic,” says SPAR,” and periods of restricted trading when the ban was lifted. So what have people been doing in lockdown then, with no booze to keep them busy? You’ve got it. Dickying up the treehouse. Painting the tiles in the bathroom. Fashioning themselves a workout bench out of scaffold planking. And generally seeing to it that Build it’s sales grew an absolutely whacking +25.6%. Overseas, much? Sales in Ireland were up +4.3%, +13.8% in Switzerland, and a massive +38.1% in Poland, where apparently the SPAR retailers are coming onboard nicely.

Comment: Some very good numbers, presaging a promising set of interims in May, by which time Tops will have come back onstream.

If you’d invested a bob or two in SPAR seven years ago, you’d have a bob or two more today. Back then, the business reported revenue of R47.8bn and operating profit of R1.6bn for the year through September 2013, with a market capitalisation of R20.9bn, and for happy punters, headline earnings of 694.8c per share. Fast forward, etc, and what you have is a very different story: turnover up threefold to R124.3bn, operating profit more than doubling to R3.4bn with HEPS at 1,135.3c, a market cap of R36.5bn and a share price gain over the period of 68.41%. On the downside, the balance sheet (having once been relatively free of red ink) now reflects R6.9bn in long-term debt, resulting in part – back to the upside – from SPAR’s ambitious but canny European acquisitions, which have hedged the business against challenging conditions back home and fluctuations in the dear old ZAR.

Comment: A bold strategic vision, that retailer! While the margins may currently be down slightly, they should improve once the acquisitions are bedded down.

SPAR’s Rural Hub initiative is aimed at bringing smaller agricultural producers into the grocery value chain. The first one was established in Mopani in the Limpopo province in 2017, with a dedicated packhouse established to buy the product direct from local farmers, who are also given support in the form of grants and loans, mentorship, and training in market readiness, market access, and leadership. All the current participants have been trained in financial management, land preparation, planting, integrated pest and disease management, fertilisation, irrigation and harvesting. Importantly, they’ve also been accredited in the critically important area of food safety: all of them achieved the LocalGAP Intermediate level in 2019, and all will be GlobalGAP certified this year. Future hubs are planned, to build on the success of the first one, some of whose participants are achieving commercial scale, and have supplied SPAR’s Freshline brand with produce.

Comment: Another amazing homegrown initiative that demonstrates the potential for social development and enterprise to complement each other.

A very tidy set of results from SPAR, with turnover up +13.5% YoY to R124bn for the year through September, and operating profit up +15.6% to R3.4bn. This as the various lockdowns saw an increase in sales in high-margin categories like grocery and fresh. Here in SA, wholesale turnover grew +5.8% to R78.6bn. On the downside, prohibition caused wholesale turnover at TOPS to drop -15.8% to R6.4bn. Pharmacy wholesale was a better story, with turnover growing +3.6% to just north of a billion. Further afield, during the second half revenue rose +32.2% and operating profit +66.6% in Ireland, with Switzerland growing turnover +49.1% and operating profit a startling +316.7% in H2. The Piotr i Pawel trading brand in Poland was hard hit by the pandemic, but SPAR assures us it will break even by December 2021. Store numbers increased by 65 net new stores across the various formats, raising the total store number for the Group to a whopping 2,414.

Comment: Excellent results from a business which was well positioned to ride out a tough year – its exposure in liquor notwithstanding. For more on those number, click <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/154049/201119_SPAR%20FY2020%20Results%20Summary_Final.pdf" target ="_blank">here</a>.

That SPAR trading update for the 48 weeks through August: Group sales grew +12.4% to R112.04bn, but sales here at home – in the SPAR Southern Africa region – were more muted, up just +4.8% in the face of our lockdown and the liquor ban: sales at TOPS were down -16.4%, and Build It -3.5%. Sales out of wholesale performed better, growing revenue +8.7%. Ireland trundled along, growing +5.5%, while both the convenience and the cash & carry business in Switzerland seem to be gathering steam, growing by a combined and considerable +11.4%.

Comment: From a successful retailer with exposure across a wide range of formats and markets, this update is something of a bellwether for this difficult age.

Big changes at SPAR, where Graham O’Connor will be stepping down as CEO and Mike Hankinson as Chair as of the 2021 AGM. O’Connor will replace Mr Hankinson and will in turn be succeeded at the helm by Brett Botten, currently MD of SPAR South Rand, and previously of the North Rand, Lowveld and Eastern Cape divisions. Graham O’Connor succeeded Wayne Hook as CEO in 2014 and has presided over an exciting period in the business’ history, with solid growth back home and diversification into new geographies including the UK and Ireland, Switzerland and Poland, with varying degrees of success. In other moves, South Rand marketing executive Jerome Jacobs is taking over as MD of North Rand, and moving onto the executive committee, replacing Des Borrageiro who has been promote to the now-vacant South Rand slot. And Mr Hankinson is just retiring outright.

Comment: Exciting times. And no doubt good for the business, with lots of continuity.

In Ireland, SPAR has become the first grocer in the country to roll out mobile self-checkout in two of its strategically located stores. It’s a JV with supplier BWG, who is using Scan, Pay & Go checkout technology, developed by MishiPay, for the endeavour. Still on SPAR, the business has added its first e-vehicle to the delivery fleet in Switzerland, transporting food products emission-free and almost silently from the central warehouse through vertiginous valleys and rolling pastures and past rushing mountain streams and snow-peaked alps to SPAR stores in the Appenzell region and Thurgau, on 180km per charge. To Ghana now, where SPAR International is adding to its global total of 13,300 stores another 17, which it is converting from existing supermarkets in Accra, Ghana’s capital. This marks the 10th African country with access to the delights of the red, white and green.

Comment: Powerful stuff SPAR!

Big news this Women’s Month from SPAR, which has partnered with Lifeline to help end gender-based violence by leveraging their extensive store network and media reach to communicate an ‘END GBV’ message and inform women about the services Lifeline provides to victims. SPAR is also supporting many of the country’s care centres through initiatives like the Women’s Month ‘Make Change Happen’, where customers purchase a pair of bracelets for R5, which goes to a regional charity that uplifts women in the area. Centres supported include the Saartjie Baartman Centre for Women and Children in the Western Cape and The Open Door Crisis Centre in KZN. In other SPAR news, the spat with the Giannacopoulos family has come to an end after a judge at the Pietermaritzburg High Court ruled that the family’s 41 stores be reinstated into the SPAR Guild. SPAR, as you will recall, had argued that the family’s business practices brought the brand into disrepute.

Comment: So that’s that then. And big up to SPAR for taking steps towards ending that scourge afflicting the beautiful women of our country.

Those SPAR interims to which we alluded last week: as we reported, the acquisition of the loss-making Polish enterprise Piotr i Paweł, which requires still to be restructured and reorganised, saw the Jolly Green One post a decline in normalised diluted HEPS to the tune of -13.4%. Sans Piotr, say SPAR, they would have been +8.5% to the good. And Piotr i Paweł has performed well in the last six months, with the acquisition enabling 157 existing SPAR retailers to join the group, the conversion of nine Piotr stores to SPARs and the rest remaining as they are for a tidy haul of 219. Overall, SPAR saw an increase in turnover of +10.1% to R59.75bn, with operating profit down -3.4% to R1.33bn. SPAR SA grew turnover ex-DC +7.8%, with Tops considerably weaker than it’s been (for obvious reasons) at +3.9% up. Across Southern Africa, 53 net new stores were added; the total now stands at 2,402.

Comment: All of this info and more can be yours if you simply <a href = "https://www.tradeintelligence.co.za/App/Uploads/File/0/0/152186/200521_SPAR%20HY2020%20Results%20Summary_final.pdf">click here </a> for a look at our more detailed result summary.

The Jolly Green One demonstrates that it is possible during a pandemic to both walk and chew gum at the same time, provided there has been no panic buying of gum. Or better, that it is possible to take meaningful measures against one crisis while continuing to address another. In this instance, this second crisis is the ongoing destruction of the environment caused by our current way of life and consumption. In one small step for poultry but a giant leap for packaging, SPAR have introduced an all-plastic packaging for chicken pieces that extends shelf life and reduces food waste while cutting by up to 25% the amount of plastic used. The packaging uses amorphous polyethylene terephthalate (PET) underneath the product and recyclable PET on top, shrunk wrapped. This combined with a policy of re-introducing every last scrap back into production sees an overall reduction in carbon footprint of 60%.

Comment: Comforting confirmation that amid our current crisis, some of SA’s great businesses are forging ahead with innovations that will benefit us all in the long run.

A trading statement from SPAR, who have let it be known that sales grew +5.4% YoY for the 18 weeks through January, for a total of R39.79bn. SPAR Southern Africa grew sales +4.9%, and its core SPAR business +6.1%, with same store sales up by +4.6%. This is par for the course or slightly better than its domestic rivals, but falls short of the performance punters have come to expect from the Jolly Green One, something SPAR attributes in part to their liquor division, which grew sales only +4.5% in an increasingly competitive environment. Build it – much like Massmart’s Builder’s divisions – also disappointed, with sales declining -3.4% for the period. Business was up by +0.7% in Ireland, but down -1.9% in Switzerland.

Comment: Like every other South African retailer, SPAR has begun to feel the bite of a truly awful economy. And yet, somehow, things seem even worse in Europe for retail right now.

A very tidy set of results indeed from among the green hills and deep shaded valleys of KwaZulu-Natal. SPAR Southern Africa – the only listed SPAR globally, ahem – grew turnover +8.4% to R109.5bn for the year through September, with operating profit up +7.2% to just shy of R3bn, and diluted HEPS up +9.9%. Wholesale turnover was up +8%, with TOPS once again shooting the lights out, growing +17.6%. Ireland reported a strong performance and Switzerland a vast improvement in the second half of the year over the first. House brands – “as good as the best for less” grew +10.1% to R13.4bn, and now account for 23.3% of wholesale turnover. On the wholesale side, the number of cases through DCs was up +5.3% to 243.9 million, and solar plants will be operational in all six SPAR DCs in South Africa before the end of the year. The Group also reports (significantly, in the light of the next story) that its retailer loyalty rates remain high. The really big news, though, is that they’ve formalised the acquisition of Polish retailer Piotr i Paweł, consisting of 66 supermarkets and a DC, at a princely consideration of €1. See more on these numbers and what they mean right here.

Comment: The continued expansion of SPAR into new geographies is perhaps the biggest story in South African retail right now. Nice one. Good results, too.

If you can get to the bottom of the dust up between SPAR and the Giannacopoulos family, call us, and we’ll send a rope down. Last we heard, the family, which owns 41 stores, had been handed back control of the businesses in both the Pietermaritzburg and Pretoria High Courts. SPAR have subsequently revoked the family’s membership of the SPAR Guild, and with it their de facto ability to trade under the SPAR brand. Briefly, SPAR have argued that the Giannacopouli have in various ways brought the SPAR brand into disrepute; the Family G. contend that SPAR is merely angry that they have been procuring merchandise elsewhere for less than would pay at the local DC. Some observers believe that the entire conflict results from a clash of personality between the family and a couple of SPAR directors.

Comment: We have worked with SPAR, and even attended some of their membership events, in an observer capacity. It strikes us that the Guild members satisfied with the Group out number any dissidents by several orders of magnitude.

A very tidy set of results indeed from among the green hills and deep shaded valleys of KwaZulu-Natal. SPAR Southern Africa – the only listed SPAR globally, ahem – grew turnover +8.4% to R109.5bn for the year through September, with operating profit up +7.2% to just shy of R3bn, and diluted HEPS up +9.9%. Wholesale turnover was up +8%, with TOPS once again shooting the lights out, growing +17.6%. Ireland reported a strong performance and Switzerland a vast improvement in the second half of the year over the first. House brands – “as good as the best for less” grew +10.1% to R13.4bn, and now account for 23.3% of wholesale turnover. On the wholesale side, the number of cases through DCs was up +5.3% to 243.9 million, and solar plants will be operational in all six SPAR DCs in South Africa before the end of the year. The Group also reports (significantly, in the light of the next story) that its retailer loyalty rates remain high. The really big news, though, is that they’ve formalised the acquisition of Polish retailer Piotr i Paweł, consisting of 66 supermarkets and a DC, at a princely consideration of €1. See more on these numbers and what they mean right here

Comment: The continued expansion of SPAR into new geographies is perhaps the biggest story in South African retail right now. Nice one. Good results, too.

If you can get to the bottom of the dust up between SPAR and the Giannacopoulos family, call us, and we’ll send a rope down. Last we heard, the family, which owns 41 stores, had been handed back control of the businesses in both the Pietermaritzburg and Pretoria High Courts. SPAR have subsequently revoked the family’s membership of the SPAR Guild, and with it their de facto ability to trade under the SPAR brand. Briefly, SPAR have argued that the Giannacopouli have in various ways brought the SPAR brand into disrepute; the Family G. contend that SPAR is merely angry that they have been procuring merchandise elsewhere for less than would pay at the local DC. Some observers believe that the entire conflict results from a clash of personality between the family and a couple of SPAR directors.

Comment: We have worked with SPAR, and even attended some of their membership events, in an observer capacity. It strikes us that the Guild members satisfied with the Group out number any dissidents by several orders of magnitude.

An unpleasant dispute between SPAR and one of its retail members – the Giannacoupolous Group, which owns 22 SPAR stores and 21 TOPS bottle stores – resulted last week in the closure by SPAR of these stores. It was intended that SPAR would take over their running, until the High Court upheld an appeal by the Giannacopoulos Group and ordered that the stores be returned to their control. SPAR alleges that the franchisee in question was “competing with businesses of retail members and bringing the SPAR brand into disrepute”, in part through unfair labour practices. In other (and better) SPAR news, 4.5% of a store’s sales now come from their store-within-a-store SPAR Natural concept, launched last year as a healthier, organic range for SPAR shoppers. The range includes such products as healthy snacks; grocery products like grains and pasta; coffee and tea, and confectionery.

Comment: A very sharp move by SPAR at a time when the market for this sort of line is really starting to mature.

One of the many benefits of SPAR’s owner-manager model is how great ideas can be originated and trialled by particularly motivated franchisees then rolled out group-wide if they prove particularly effective. And indeed how the business model can be adapted according to the demographics served by individual stores. This it may all prove to be in the case of the Hillcrest KWIKSPAR in the rolling KZN interior, whose enterprising owners, having turned their physical property into an endearingly quirky retail wonderland and their Tops into a reliable source of everything up to and including cannabis beer, are proving early adopters of online grocery retail too, delivering to punters within a 10 kay radius of the store, and even nationally. This has required beefing up stock integrity, through such measures as additional staff and electronic shelf labelling.

Comment: Hopefully, all worth it. Online grocery shopping is something one generally associates with the larger scale. But who says the smaller guy can’t make it work.

SPAR is taking a typically considered and strategic approach to doing the right thing while bringing the punters along for the ride. We refer of course to its campaign in the Eastern Cape to reduce the use of plastic bags, Phase 2 of which is just launching. Shoppers there will get a free paper bag for every ten plastic bags they bring to the store, and SPAR is offering prizes to the total value of R250,000 for entities that come up with innovative ideas to make a difference. They will also be working with suppliers to achieve responsible packaging solutions. Phase 1 of the campaign, which ran from April last year, saw the sale of 4.3 million fewer plastic bags in the region compared with the previous year. “Plastic does have a place in our lives, but we have to find responsible ways to use it and to come up with innovative solutions for re-use,” says incoming SPAR Eastern Cape managing director Angelo Swartz.

Comment: All of us were born after the dawn of the age of plastic. It’s all we know, and we’re only now realising that its convenience comes at a terrible cost. Big up to those businesses like SPAR which are actively doing something about it.

SPAR are partnering with FutureMe, a social enterprise that connects enthusiastic young people with progressive businesses to their mutual benefit. About 400 Grade 11 and 12s will spend a day connecting with employees from SPAR stores across the company, then 70 of them will be selected to attend the one-day boot camp. 30 to 40 of these will be selected to undertake the learning journeys into the SPAR world, and those that show real interest and aptitude for a career in SPAR will be further immersed in work experience opportunities. Pick n Pay, meanwhile, have launched their third annual Mandela Day Food Drive with the goal of collecting 500 tons of food or enough to produce two million meals. To reach this ambitious goal, the drive will run over a three-week period compared to one weekend previously. The food collected supports the 530 beneficiary organisations in FoodForward SA’s national distribution network, helping to meet immediate needs and also to help in stocking FoodForward SA’s warehouses with staple food reserves for months when supply is low. And in news of the not-so-nice, Woolies are being accused by a business that rejoices in the name of Sexy Socks, for bringing to market a set of socks with pictures of bicycles on them, something Sexy Socks had already apparently done, some years ago, because putting bicycles on socks requires a leap of genius that doesn’t come round more than once in the life of the average sock manufacturing business.

Comment: Nice work from two great nation builders. And open season once more on Woolies, discovering once again that truly there is nothing new under the sun, not even socks with bicycles on them.

SPAR are partnering with FutureMe, a social enterprise that connects enthusiastic young people with progressive businesses to their mutual benefit. About 400 Grade 11 and 12s will spend a day connecting with employees from SPAR stores across the company, then 70 of them will be selected to attend the one-day boot camp. 30 to 40 of these will be selected to undertake the learning journeys into the SPAR world, and those that show real interest and aptitude for a career in SPAR will be further immersed in work experience opportunities. Pick n Pay, meanwhile, have launched their third annual Mandela Day Food Drive with the goal of collecting 500 tons of food or enough to produce two million meals. To reach this ambitious goal, the drive will run over a three-week period compared to one weekend previously. The food collected supports the 530 beneficiary organisations in FoodForward SA’s national distribution network, helping to meet immediate needs and also to help in stocking FoodForward SA’s warehouses with staple food reserves for months when supply is low. And in news of the not-so-nice, Woolies are being accused by a business that rejoices in the name of Sexy Socks, for bringing to market a set of socks with pictures of bicycles on them, something Sexy Socks had already apparently done, some years ago, because putting bicycles on socks requires a leap of genius that doesn’t come round more than once in the life of the average sock manufacturing business.

Comment: Nice work from two great nation builders. And open season once more on Woolies, discovering once again that truly there is nothing new under the sun, not even socks with bicycles on them.

Remember SPAR’s “Natural” concept they introduced last year? Let’s recap: “health and wellness solutions for three specific customer needs: those who have special dietary requirements or food intolerances, those who have made lifestyle choices and changed their eating habits, and those who simply wish to eat more healthily”. Turns out the concept, which was originally introduced in Italy, India, and Oman, has done rather well. It’s now live in 30 stores across the Beloved Country, and they plan, rather cryptically, for “further roll-out” in the ’19, although they’re not saying to what extent. Apparently the response has been great from retailers and punters alike, with the range now accounting for 4.5% of sales at the Athol SPAR in Jozi, to pick a store totally at random.

Comment: Excellent work SPAR, quietly going about the business of expansion and reinvention.

A trading update from SPAR, for the oddly specific period of the 17 weeks up to the 26th of January. Total sales for the period were up +8.2%?to R36.53bn, and +7.6% on a like-store basis within Southern Africa. The core business grew sales +5.7%, or +3.8% comparably, reflecting the restrained trading environment in which our industry finds itself, but also, a good result when looked at relative to Shoprite, for example. Tops, however, grew +19.2%, and Build it +10.3%; these have long been bulwarks of SPAR’s performance in tough times. Overseas? The trend continues: Ireland up by +8.4% in euro terms, with a boost from recent acquisitions 4 Aces Wholesale and Corrib Foods, and Switzerland down by -1.5% in francs under tricky local conditions. The pharmaceutical business continues to please, with distributor S. Buys making a healthy maiden contribution to results.

Comment: SPAR has hit upon a mix which seems to be working. Be good to see the issues in Switzerland ironed out, then watch the business really fly.

So the Deloitte’s (grandiosely titled) ‘Global Powers of Retail’ 2019 report is out, and good news for Shoprite, in a bittersweet way, is that with the collapse of Steinhoff into scandal and penury, the Big Red One was our globalest power of retailness back in FY2017, in a solid 86th place. SPAR made it into 140th place, with Pick n Pay in third at 160th and Woolies at 179th. Number one was Walmart, with turnover of half a trillion dollars, followed by club-discounter Costco at $160bn. While our retailers are relatively small globally, Africa looks promising, second only to Latin America in regional growth in that FY. And retail itself seems a good space in which to operate: the top 250 cumulatively grew revenue +83% over FY2017, for total global value of $4.5trillion.

Comment: A bit of perspective there. SA retail is relatively small, globally, but has lots of potential, while in terms of shopper in-store experience and ranges on offer – it can be argued – sits alongside those at the top of the log.

A truly beautiful new SPAR has just opened in Kalubowila, Sri Lanka, where place names, like those here in the Beloved Country, tend to run to a few syllables. The new store is SPAR’s second in that newly resurgent geography and it’s everything you’d expect from a spanking new SPAR, plus, as seen in this extremely cheerful video, a couple of local additions: spices forever, a magnificently stocked and appointed fish section, and a promise above each gondola end that Every Rupee Counts. The original store, at Thalawathigoda in Colombo, has just received its wine and spirits license. SPAR plans to open at least another 44 stores by 2023, primarily through its proven method of developing independent retailers. Its Sri Lankan business is owned 50/50 in a JV with Ceylon Biscuits Limited. Sri Lanka has emerged as a retail hotspot in recent years, with rising consumer disposable income, increased urbanisation, growing tourism and the shift to a more formal food retail economy. 

Comment: The expansion of SPAR South Africa into unexpected new territories is one of the great South African business stories of the current decade. We look forward to seeing how it unfolds.

Big up to SPAR Eastern Cape, which was recognised at last month’s SPAR International Conference for leadership in sustainable retail as exemplified by its Stop Plastics campaign, which saw them sending 3 million fewer bags into the world from April to September this year than in the same period last year. And big up to SPAR generally for their success in Ireland and Switzerland, which jointly now account for 31% of turnover and make up over a third of all the stores in the Group, contributing 25% to operating profit. A good year for an enterprising business.

Comment:

Hot off the PowerPoint mill, those SPAR results that have had you wearing a hole in the carpet these how many days now? Let’s cut to the chase: Group wholesale turnover up +5.9% to – wooohoooh! just north of a hundred billion, for the first time ever, with operating profit up +7.9% to R2.8bn. The Southern African business grew turnover to R68.8bn, with Ireland contributing R22.5bn and Switzerland close to R10bn. TOPS was, as always, the star performer, with wholesale turnover up +13%. SPAR Southern Africa now serves 2,236 stores, with 145 new stores opened across all brands in FY18, and 276 refurbished, up 20-odd from last year. Operating expenses were tightly managed amid challenging trading conditions, while the Irish and Swiss acquisitions are beginning to pull their weight with greater vim and vigour. For more details, have a look at our synopsis here.

Comment: The translation of the Group’s recently refreshed strategy, the ability to maintain member purchasing loyalty of ±80% and being adaptable enough to respond to changed market conditions, will inform the success of this impressive business going forward. We look forward to seeing how this plays out.

A periodic look under the bonnet, if you will, of one of our retailers to see what really makes it tick. Spoiler alert: computers! SPAR is in the process of migrating a big old chunk of its operations to the Cloud, that mystical realm where tattooed IT fellers in Slipknot t-shirts romp with unicorns made entirely of 1’s and 0’s. Their plan is to reduce their server footprint by a third and their virtual machine count by a half over the next 24 months, cutting costs on hardware for servers, storage, and backups and reducing admin overheads. But efficiencies are not the only goal: “The cloud gives us the flexibility and scalability we need to expand operations at will and not be constrained by the capacity limits of an on-premises IT infrastructure," explains Group technology and operations executive Greg Hay. For the migration, the Group have chosen Microsoft Azure (we advise you merely to nod knowledgably here) having had a good experience with Office 365 of late.

Comment: Good move, especially on the flexibility front, for a business with a lot more growth in it.

Woah. SPAR in Ireland, through its BWG vehicle, is intent on adding 45 new SPAR and larger-format Eurospar’s to its current stable of 450 stores over the next two years, employing 1,000 new staff and dropping (with the help of its franchisees) a cool €25m on store refurbishments. The refurbs will include all sorts of techy gizmos, like digital shelf labels, digital menu-boards and in-store Wi-Fi. The new format is being pioneered in Dublin, but rollout is likely to be global. For the new stores, SPAR is looking for high-transit locations, like town centres and commuter hubs. The strategy was apparently developed in consultation with the SPAR global parent company, and according to BWG CEO Leo Crawford, does nothing less than transform the retail sector.

Comment: The synergies! Looking forward to seeing how it rolls on south of that Emerald Isle.

Among the headaches Massmart and SPAR didn’t think they would be facing this time last year, would be the arrival in South Africa of an eccentrically named French purveyor of home improvement materials. And yet, here we are. Leroy Merlin – the third largest retailer in the world – has just set up shop in Stoneridge Centre, Edenvale, Gauteng, with 17,500m2 of floor space, every department you can imagine from plumbing to lighting, a large selection of brands imported from Europe and – get this – a Mugg and Freaking Bean. And something called a Workshop Fan Group of likeminded handy people who get together every month to chat about how much they enjoy changing lightbulbs and installing cat-flaps. This group was established some 15 months ago as part of the advance brand-building operation, and sounds millennial as all get out to us. And as if all this isn’t enough, they’re pioneering a type of business they’re calling “phygital”, which…actually we can’t.

Comment: We just can’t. But: it sounds like an impressive operation that will appeal to those weekend warriors who pride themselves on a certain je ne sais quoi.

Top of the morning to yez! Tose BWG results ye were after (OK, you can drop the accent now): Ahead of SPAR’s forthcoming results, and as conditions tighten here at home, it’s time to remind ourselves of why diversifying offshore can be such a solid hedge for a business. Pre-tax profits at the Irish outifit owned 80% by our very own SPAR South Africa were up 23% to a more than tidy €29.8 million last year, on revenues that climbed marginally to €1.39 billion, with much of it generated on the Emerald Isle itself and Just €175-odd million in the UK. BWG runs the Spar, Spar Express and Eurospar franchise in Ireland and the south-west of England and the the Mace, Londis, and XL brands in Ireland, together with 21 Value Centre cash n carries, and a couple of DC’s to keep everyone supplied and happy. Of interest to you weather nuts out there is the fact that panic-buying ahead of Storm Emma last year drove sales through the roof. 

Comment: No, it would not be appropriate to talk about any “silver linings” here.

Taking the stage at a major industry event last week was our very own SPAR South Africa, whose national fresh produce manager James Lonsdale thrilled the audience at the Purchasing Manager’s Association (PMA) Fresh Connection Event in Pretoria with an account of how formal retailers can support emerging black farmers whileaddressing food insecurity. If you’re a big fan of central distribution, you may want to look away at this point. Anyway, simple idea: SPAR’s Rural Hub programme identifies areas with good agricultural potential, some mergingfarmers and the technical support they need to achieve their potential and – no surprises here – a friendly SPAR. So the local farmer sells her produce to the local SPAR, and … erm, that’s it. No expensive 3pl, no massive orders she has no hopes of filling, no extraneous carbon omissions, just a whole bunch of fed and happy punters with a few extra roubles in their wallet.

Comment: Brilliant in its simplicity.

"Our new customer kiosk destination will allow customers to enjoy transactional capability over a host of value-added services including bill payment and ticketing,” says Ticketpro CEO Brandon Duffield. If we may translate: you’ll now be able to buy tickets and pay bills at Ticketpro customer kiosks at SPARS all over South Africa. Excellent news forms the Verdant One, moving more deeply into Shoprite territory every day.

Comment:

SPAR’s ‘little-stores-that-could’ have been hitting it out of the park, with results described by CEO Graham O’Connor as “phenomenal”. This is why they’re intent on upping the numbers of forecourt stores – which they opened in 2013 as a JV with Shell – from 22 today to as many as 70 or 80 by the end of 2020. That, says Mr O’ C., is equivalent to nine or ten SUPERSPARS, i.e. and viz. a big freakin’ deal. And speaking of little stores and big deals, Freshstop, the FVC collab with Caltex, is going even smaller, opening a whole bunch of 40m² outlets using existing unbranded stores or disused mechanics workshops at forecourts in small towns and rural outposts around the country, where drivers yearn for the signature Freshstop offering but might not pitch up in sufficient numbers to support a larger store. Freshstop has 279 existing locations, of which three are of the dinkier variety; they anticipate having 30 open by the end of 2019, each of which should come in at a very modest R1m or less.

Comment: Globally, the small-format retail is worth $1trillion a year and climbing, so a good move by these canny businesses.

Four years ago, BWG was in a spot of bother, with piles of debt and vulture funds looking to finish it off and sell its organs to the highest bidder. Enter – as you are well aware – SPAR South Africa, which bought the business for €55m, lock, stock, barrel and €130m worth of debt. In 2017, BWG showed turnover of €1.4bn, with operating profit of €33.3m, and they’re expecting profit growth in the double digits this year. “[SPAR] would tell you that we've outperformed, above their expectations, which is great because from their perspective it was a big move for South Africa to invest in Ireland," says ebullient Irish CEO Leo “The CEO” Crawford. After the SPAR transaction, BWG went on to acquire rival Londis, and have just been given the nod by the authorities to buy 4 Aces, a supplier to other rival Gala, and who knows whether Gala itself might not be next. Certainly Mr Crawford isn’t saying.

Comment: The gift that keeps on giving for SPAR, whose move to diversify at a critical time will surely find a place of honour on the business’ figurative mantelpiece one day.

More from the Green One, whose interims we gave you a taste of last week. This week we’re out of the PowerPoint and back in the aisles, where SPAR have identified three core categories as drivers of organic growth for the business, namely and viz. personal care, baby, and health & wellness. And how will they impel this organic growth? With research and supplier collaboration to bring product to shelf, driving for the correct range, flow and forward share. Suppliers: start your engines. In other SPAR news, recent UK acquisition BWG has freed up €33m – a fair chunk of change in ronts – for new acquisitions of its own. And further afield, in Sri Lanka, they’re looking at opening a couple more stores in their JV with Ceylon Biscuits. To access the one-page review of SPAR’s half year results, click here.

Comment: SPAR are indeed looking to the future and have recognised the need for a strategic review. We will follow how things unfold with keen interest.

Our friends over at SPAR have sent the newsroom into a tailspin, with grizzled old reporters chainsmoking at their typewriters and harried interns weeping into their herbal tea on the release of the interims through March. But we’re equal to the task: turnover growth at +5.6%, assisted thither by the early arrival of Easter this year. SPAR Southern Africa was slightly up on this at +6.8% in wholesale turnover, with help from both TOPS and Build it, and the inclusion of S Buys pharmaceutical wholesaler. Offshore acquisitions, which service the high-margin convenience sector, helped with gross profit margin, which increased to 9.9%; margin here at home improved slightly to 8.2%. Exciting news for the business is that rather than sitting on its hands it is embarking on a strategic review of what the member organisation of the 21st century looks like. For more on this breaking story, have a look at the Trade Intelligence special commentary.

Comment: Spoiler alert: it’s probably going to look a lot like whatever SPAR figures out it should look like. Excellent work, the Verdant One.

Czesc, przyjaciel, and a jolly dzien dobry to you and yours! That’s right, as you’ve guessed by now, SPAR South Africa is embarking on one of its foreign adventures, this time to Poland, where it is rumoured to have its eye on a controlling stake in charmingly-named local retailer Bac-Pol. Not a done deal by any means though – SPAR is still battling somewhat with traction in Switzerland and Ireland, in both of which territories sales dropped last year. Although (and this speaks well of the long term) SPAR has made strides in distribution in these new geographies. Poland may also represent an opportunity in this regard. To be clear, of the potential acquisition, Mr O’Connor has this to say: “It would not be appropriate at this time to further speculate on any such transaction.”

Comment: And we here at the Tatler are nothing if not entirely appropriate. Still, Poland, eh? Where one day it might share companionable vodka with Shoprite, if our memory serves us.

As we await the upcoming SPAR half-year results at the end of the month, let’s take a moment to reflect on how things went for the Group during its previous financial year and the strategy that has been in play since. In FY2017, the SPAR Group delivered turnover growth of +5.3%, muted relative to its prior two financial periods. Modest turnover growth of +4.5% was reported in Southern Africa (despite double-digit growth in TOPS at SPAR liquor stores), which the Group attributed to the impact of a highly competitive retail market and depressed consumer spending. A slight decline in local gross profit margin from 8.24% to 8.17% is suggestive of SPAR supporting its retailers through better pricing. Then there were acquisitions, growth in store count, revamps, increased focus on efficiencies etc. etc. etc. If you’re itching to know more, and you’d be right, click right on over here.

Comment: We always look forward to the results of a proudly Durban-run business such as ours. Go, that sprightly little green tree.

In Ireland, SPAR acquisition BWG is poised to acquire rival 4 Aces Wholesale. This has raised a red flag with the Competition and Consumer Protection Commission, which says that BWG might access sensitive information during the negotiation about the rival Gala wholesale network, which 4 Aces supplies. BWG, you will recall, supplies goods to SPAR, Eurospar, Londis and other independent stores in Ireland.

Comment:

Very occasionally, barely ever really, we let something slip through the cracks, and thus it was with SPAR’s surreptitious entry into … anyone? Anyone? Sri Lanka! Pay attention now, this involved a JV and you know how tricky those can be: last year, it seems, SPAR International, granted the licence to Ceylon Biscuits Limited (CBL) to operate the SPAR brand as SPAR Sri Lanka in a joint venture with SPAR Group Ltd South Africa. The plan is to open 20 stores in the first five years, starting with one soon to open in the lush Colombo suburb of Thalawathugoda, which a simple Google Images search will show you is fairly posh, and which Wikipedia says is packed to the gills with expats and local gentry. It should not surprise you to know that modern retail in Sri Lanka is in its infancy, with just 20% penetration. Local retailers are ramping up their efforts to see off the threat, with Cargills promising 80-odd new stores in the next few years and Keells Super about half that number.

Comment: A bold play from the verdant one, whose most recent foray into countries beginning with S was in Switzerland.

Good news for those perspicacious enough to bank with FNB, as we ourselves have been doing these two decades and more. That erstwhile institution, you see, has teamed up with another South African icon – retailer SPAR – and tech-savvy shoppers will soon be able to purchase goods from participating SPARs with the cash safely squirreled away in their FNB eWallet. The cardless wonder uses a cellphone to enable eWallet recipients to make over the counter purchases and withdrawals at over 1,300 SPARs. “The partnership complements our long-term digital strategy to expand access to financial services,” said FNB’s Sandi Madikiza. “Our customers are increasingly making cardless withdrawals at our ATMs and we see this becoming a common trend where mobile technology is preferred instead of the physical cards.”

Comment: When it comes to mobile tech, South Africa is a nation of early adopters. Smart move on SPAR’s part to put its faith in the coming mobile money revolution.

A heck of a trading update from SPAR this week – sales up everywhere across the group for the 17 weeks to end January, with only Switzerland recording a decline. Overall, sales, including the Christmas bump, were up +7% to R33.8bn, with Group sales here at home up +7.9% with the inclusion of the recently-acquired S Buys pharmaceutical distributor. Tempering the good news a touch, like-store sales in the South African business were up +6.4%, reflecting the tough trading conditions under which the industry has laboured these past couple years. Its core business reported a sales increase of +5.7%, while Tops – traditionally the top performer – blasted through with an increase of +11.1%. Build It also performed well, growing +7.2% for the period, compared with +4.3% last year. On the back of this good news, the share price climbed +3% on the Johannesburg Securities Exchange (JSE). 

Comment: An indispensable and iconic South African business, trading well in adversity.

SPAR’s lucrative holdings in the UK and Ireland have become a little more complex, stick with us here. BWG, the retailer group which controls the SPAR franchise in Ireland, and which is 80% owned by SPAR South Africa, has agreed to buy 4-Acres Wholesale, a family-based business out of County Laois, with its mossy byways, stone castles and mist-shrouded hills. 4-Acres has contracts with 1,500-odd small retailers, including 35 of the 220 stores in the Gala group, and this represents BWG’s first foray into Gala, a convenience franchiser. 4-Acres turns over around €57m a year, a number BWG is intent on growing.

Comment: SPAR’s European adventures are a story we never tire of hearing. A creative and strategic approach to growth out of a consolidated and competitive domestic market, and a hedge against difficult conditions here in the Beloved C.

As followers of social media may be aware, when the Bela-Bela SUPERSPAR in Warmbaths burned down in September, the owner decided to keep the 150 staff there busy with community projects rather than laying them off during the rebuild. So far, they’ve contributed 30,000 hours on projects which include building churches, tidying up a library, planting veggie gardens, refurbishing hospitals and cleaning schools. Further than this, there’s not too much detail – although it appears from the posts that the various projects were handled by different teams from within the store – so Team Fish and Chips, for example, were responsible for the work on the Mmampathile Public Primary Library – which must also be good for morale both now and when the doors reopen.

Comment: One of those stories which makes us proud to be South African, and demonstrates what a truly humane business model can look like. Says Maryla Masojada, MD of Trade Intelligence, “Steinhoff, zuptagate with KPMG, McKinsey and Bell Pottinger, are the rock-bottom, the antithesis of what we as South Africans and us FMCG’ers, want and need. This story is another reminder that each of us, every day, can influence where we are headed as a country; what doing good business and what the much spoken about “community-based retailing” actually means. It’s this, retailers truly integrating and responding to their local community’s reality – and sticking to the values and principles that count. These are the only way to sustainable business, healthy, employed shoppers and future profits.”

In the heady days of 2010 when the nation was abuzz with World Cup fever, we reported how SPAR had launched its money transfer service, joining the likes of Shoprite at the time. SPAR has quietly been gaining users ever since and the distinguishing feature of SPAR’s Instant Money service has become its reach: it claims to offer punters “South Africa’s Biggest Supermarket Money Transfer Network”, with transfers possible from over 4,000 till points nationwide, a fact it is making known on screens in taxis, in train stations and at bus and taxi ranks to an audience of 16.5million commuters in its collaboration with Transit Ads™. SPAR reckon that 200 million money transfer transactions take place annually, and are all out to get a bigger share of these.

Comment: Refreshing transparency there SPAR, allowing us a window into this thriving industry and why retailers are so keen to keep it going.

So, those SPAR results then, summarised and in a much more easily digestible format than that brief we received earlier. “Modest” in their words, with turnover up +5.3% to R95.5bn for the 12 months ended 30 September, and gross profit up +14.6% to R9.6bn. “These results reflect the weak state of consumer buying power and confidence,” their words again, although they could be the words of any business within our sector at this troublesome juncture. On the upside, things in Ireland have been going as swimmingly as Durban’s, and indeed Dublin’s, weather right now, with solid operating profit growth and market share gains across most of its retail brands. And on the pharmaceutical wholesaler front (yes, they have one of those now too), the group purchased a 60% shareholding in S Buys effective 1 October 2017 for a sweet R45m. The remaining 40% will be scooped up in 2022. Need a nifty 1-page summary that you can slap on your boss’ desk, or if you’re the boss, peruse at cruising altitude in your G6? Click right on here then. You’re welcome.

Comment: This is the first time in a long while that we have seen ripples in SPAR SA. But with Ireland, Switzerland and pharmacy humming along as they are, we’ve no doubt such ripples will be smoothed out soon enough.

When SPAR bought a 60% slice of SPAR Switzerland last year, it created a bank account in the Isle of Man to hold the stake. “It’s about the currency risk,” said Mr O’Connor, alluding to the travails of the poor old ZAR, when news of the account came out in the recent Paradise Papers leak. The account, set up with the assistance of the law firm Appleby that sits atop the giant pile of documents, was to be used for borrowing and lending money for the operation of the Swiss business and its member stores. The effect of foreign income tax rates saw SPAR’s after-tax profit growing +27.7% against pretax profit growth of +24.6%. This, says Mr O’C., is as a result of the tax structures in Switzerland and Ireland rather than any advantage derived from banking on the Isle of Man, a tax haven and occasional home to hell-bent hordes of motorcyclists. The original plan, apparently, was to set up the account, in the name of SPAR Africa Holdings, in Ireland, but the thinking changed for some reason.

Comment: Also in the Paradise Papers, coincidentally, it was revealed that Irish U2 frontman Bono had used an offshore account for his stake in a Lithuanian shopping mall.

‘Seize the Moment’ was the theme of this year’s SPAR Convention, which we at Trade Intelligence had the privilege of attending last week. As always, SPAR’s culture is palpable, and the powerful impact that the ethos of family values has on the organisation, as it sits real at its heart, is directly linked to the success of this business model. There are two stories here though… this one is about culture at a macro level, and the impact of corporates getting it right. The other, a more operationally relevant SPAR convention report-back for Ti clients who fall within the SPAR supplier community. The latter will be distributed directly to Ti supplier clients. Read more here.

Comment: Our article says it all. Go on…have a read.

‘Seize the Moment’ was the theme of this year’s SPAR Convention, which we at Trade Intelligence had the privilege of attending last week. As always, SPAR’s culture is palpable, and the powerful impact that the ethos of family values has on the organisation, as it sits real at its heart, is directly linked to the success of this business model.There are two stories here though… this one is about culture at a macro level, and the impact of corporates getting it right. The other, a more operationally relevant SPAR convention report-back for Ti clients who fall within the SPAR supplier community. The latter will be distributed directly to Ti supplier clients. Read more here.

Comment: Our article says it all. Go on…have a read.

We are told on exceptionally good authority that SPAR are in the process of buying pharmacy wholesaler business, S Buys. This is big news: SPAR are going great, and indeed green, guns into pharmacy, growing their portfolio from zero to 82 stores in just five or so years, with 36 more in the pipeline. S Buys is a full-line pharmaceutical wholesaler that services pharmacies, hospitals and doctors as well as the State and NGOs, and in the context of SPAR will be supplying the owner-run stores the business is adding furiously to the family – with an end goal of as many as 400, enough, certainly, to give pause to Clicks and Dis-Chem, and to arouse the envy of Pick n Pay, whose experiment in pharmacy has not been that successful, and Shoprite, which also hasn’t made the splash one might have expected. 

Comment: Why would SPAR be any different? Well, Clicks has done pretty well by owning its own wholesaler, for starters, and Shoprite owns one too. And the small-business model that works so well for SPAR probably finds a certain resonance with pharmacists, who are by and large a fiercely independent bunch.

Over in the UK, the BWG Group are talking up their investment in SPAR wholesaler Appleby Westward, which bought 63 SPARs in the south-west of England last year, has added another 4 and expects to recruit 24 independents to join the party this year. BWG, in line with the significant convenience trend, see consolidation in the convenience sector as a big opportunity for the business, rightly so.

Comment:

Well this is it. The Earth has reached the halfway mark of its 150million km-odd journey around the sun, and bang on schedule SPAR has released another set of interims, albeit uncharacteristically patchy ones. Revenue was up 13.9% to R48.4bn, and gross profit up to R4.5bn from R3.7bn, while operating profit fell 4.1% to R1.2bn. This as operating expenses rose 54.4%, incurred during its acquisition in Switzerland, where sales declined 3.1% for the period. But enough of the past. The Jolly Green One plans to fork out R500m in CAPEX over the next six months to boost the capacity of its DCs, with an expansion in KZN and a whole new facility west of the city of Johannesburg.

Comment: It was ever thus: a decline in profitability after a major acquisition which takes a little time to bed down.

Hot on the heels of Clicks and Dis-Chem is SPAR, which with 82 pharmacies already in place and 36 in the pipeline, plus a whole bunch of franchisees just champing at the bit to jump in, is positioned to take the number two slot sometime soon. They say that once they get to 140 stores they’re going to emulate the other two and open up a distributorship. And they really are not being shy about all of this, targeting 300 to 400 stores in the next five, although they say they would be happy with just 250 really good ones. They’re also getting into through-the-line healthcare with their first clinic opening in Stanger in a couple months and more doubtless to follow. The interesting thing about the SPAR move is that the challenge to Clicks and Dis-Chem, and of course along with Pick n Pay and Shoprite who are operating in this space, comes with the added dimension of grocery retail, a model that works well with such players as Walgreens and CVS in the US, a market not dissimilar from our own. 

Comment: Go, SPAR. With Pick n Pay and Shoprite already in the fray, the hunt for personal care ‘lipstick index’ impact and higher margin on front shop items, continues.

SPAR have made a further foray into the inviting, not to mention high-margin waters of pharmacy, with the launch of a series of partnerships with independent pharmacists under the Klinicare group in the Nelson Mandela Bay area. The initiative is confirmation of their intention to accelerate the development of the third leg of a complementary retail offering which currently includes Tops and the SPAR brand itself. The Pharmacy at SPAR offering allows these businesses to benefit from branding, marketing and advertising firepower of the Verdant One and procurement muscle through SPAR’s significant buying power, well-established supply chains and extensive logistics systems. In other SPAR news, Rob Philipson, current MD of the Kwazulu-Natal Division, has been appointed to head up the newly-acquired yet underperforming Swiss business and teach them a thing or two about cleanliness, efficiency and punctuality. 

Comment: The first years of this young century were owned by Shoprite. The third decade might well belong to SPAR.

Those icons of business based in KZN (whence comes all manner of good things except perhaps presidents) SPAR and Mr Price, are joining forces to take on youth unemployment which of all the problems lined up against the Beloved Country these days is perhaps the most pressing. Through the MRP Foundation’s Jump Start skills development initiative, they are partnering to provide valuable retail work experience for school leavers. The programme has trained more than 22,000 previously unemployed youth and jump started more than 10,000 jobs and careers since it kicked off in 2008. Now it has been bolstered by support from SPAR, which initially kicked in R1.5million worth of training but has since upped its stake to over R10 bar, providing foundational life skills and valuable hands-on work experience, specific to SPAR’s retail environment.

Comment: For anyone with doubts about the worth of the initiative, we would refer you to our Weekly Guru.

And speaking of SPAR, which we were earlier, and also new stores, which we were a bit before then, SPAR has opened a cracker, a SPAR Express forecourt convenience store, at the Shell in Gateway, KZN. And it’s a handsome little devil, jam-packed with the sort of stuff that gets weary travellers rolling in: real Italian coffee at the beantree express, crispy-crumbed Chikka Chicken and SPAR freshline baked goods and produce. Nice one.

Comment:

Cleverly capturing the hearts and minds, and of course wallets, of the increasing number of South Africans who hanker after toned abs and tight glutes is SPAR, which has just launched an exercise programme, My Home Gym. My Home Gym was designed by registered biokineticist Joe Xaba, and hosted on the videos (downloadable from the SPAR website) by the equally fetching Lelo. It’s an eight-week programme based on bodyweight exercises, and practiced, as the name suggests, in the comfort and privacy of your own home. SPAR have traditionally been active in the sport and fitness space, with sponsorships of a series of road races around the country with a particular focus on women’s running, and of South African Netball and AmaZulu.

Comment: It will be interesting to see whether SPAR ties other promotions – of functional foods and beverages perhaps – to this very cool initiative.

Some quarterlies from SPAR, who report a handsome increase in sales of 16.9% to R25.6bn for the 13-week period through 31 December. So far so promising, but digging into the numbers, sales at home were up just 5.8%, held back by a slowdown in the Build it division. The South African grocery retail business grew 6.1% with like-store sales up 5.2%, while Tops came through as the star performer for the season with growth over 11.3%. Surprisingly, the numbers were down for Ireland, which recorded -2.6% sales growth in the face of (are you sitting down for this?) sterling weakness and the strengthening rand. Reading between the lines, then, we’d hazard a guess that the more robust number in the first line of this story reflects sales ex-DC, which is after all the cornerstone of the SPAR business model.

Comment: A solid business which like its peers is adjusting to a challenging new economic reality.

SPAR Zimbabwe Ltd has only been heading the Zimbabwean business for a year – the owners were granted the license by SPAR International last January – and it’s looking forward to a cracker of a 2017. Currently, SPAR Zimbabwe itself operates 10 stores, with another 21 owned 100% by Zimbabweans according to the usual model – up from a total of 6 they inherited from the previous licence holders. They’re all served by the Harare DC, and kindly supported by SPAR SA, which provides the goodies it’s still difficult to find in that creaky basket of frustrated potential up north. Increasingly, though, even the private label stuff is being produced by local suppliers. And the plans for 2017? Well they’re being a little cagy, to be honest, but they’re keen to bring more existing independents into the fold, according to MD Terrence Yeatman.

Comment: A typically canny and community-minded strategy for this wonderful retailer. The role of the SA business is a particularly nice touch.

If you like to read between the lines, try these ones. SPAR has announced that it will stand surety for TIL JV Finance Designated Activity Company (a subsidiary of TIL JV Ltd) in Ireland, in favour of Barclays Bank, to the tune of €15.6 million, a sum SPAR is confident will sort out any solvency issues the business may have. TIL JV is housed in BWG House, BWG being the Irish business of which SPAR acquired an 80% majority last year. Rum.

Comment:

As you know, SPAR bought an 80% share of an Irish retail outfit in 2014 for €55million and has done rather tidily out of the transaction so far. Little wonder then, that they’re doubling down on the investment in the form of capex on upgrades – by BWG – of around €23million, culminating in the construction of a €5million cash n’ carry in County Louth. The facility will service stores in Louth, Cavan and Monaghan. BWG has announced its intention to grow both its retail and wholesale operations while continuing to provide excellent service to retailers – including SPAR’s and business customers. In the annual results just gone by, you will recall, BWG reported turnover growth of 14.5% to €1.4billion, with a 41% increase in operating profit. Ceteris paribus, as our father is fond of saying, the business is on track to meet its commitment to the investment of €100million into the wholesale and convenience retailing operations over the next five years.

Comment: Verdant pastures indeed.

There are results, as we have seen in recent weeks, and there are results, and SPAR’s fall very much into the latter category: revenue for the year ended September up 24.5% to R92.2billion, with operating profit up 12% to R2.6billion. The boost in turnover was due in part to recent acquisitions – notably 60% of SPAR in Switzerland. On the downside, Switzerland has not been a notably sterling performer for the Group, and management there are on notice to bring the tops of their sterling alpine stockings in closer proximity to the bottom of their lederhosen. Also on the downside – although probably a good move – The Verdant One has closed its Zimbabwe DC, and will now supply the independent stores there from its Gauteng facility. And back to the upside: SPAR has announced that it will soon be entering a JV with Sri Lankan outfit Ceylon Biscuits. For details of the JV, which is a fairly opaque arrangement at present, stay posted.

Comment: One in the eye for analysts who just a short year ago were characterising SPAR as too safe a bet for too much exuberant interest.

Another trading update, another … what? Really? Apparently so: SPAR have announced that they expect headline earnings per share for the 12 months through September to come in 20 to 25% higher than for the same period last year, bucking this week’s trend of grey-faced CEOs delivering the bad news to sharp-eyed analysts ahead of the results presentation.

Comment: Nice one.

The Verdant One (SPAR, for goodness sake) has taken major steps to ensure that the goodies it sells you for your seafood potjie, and also your other seafood needs, are sustainably procured. Among the Own Brand products it is now monitoring closely for sustainable practices are its canned tuna, Norwegian Salmon, Namibian Hake and Prawns. This means, for example, that SPAR private label canned tuna is traceable back to the exact boat that caught it. Sustainable seafood is defined – and this is important – as “seafood that originates from a fishery or farm that can continue to operate indefinitely without reducing a species’ ability to maintain a viable population.” Note the indefinitely. The proviso, here, or even the caveat, is that SPAR cannot insist that all of its member retailers buy seafood from similarly responsible sources.

Comment: Although the SPAR influence is not to be sneezed at. Excellent work.

Entrenching its investment in the Emerald Isle is SPAR, which is soon to be opening 20 more SPAR and EuroSPAR outlets under the BWG Foods Group over the next year. BWG, which already supplies all SPARs and EuroSPARs in Ireland, is 80% owned by SPAR South Africa as of last year. It also operates the Mace, Londis and XL brands, for a total of 40% of the Irish convenience retail market. It’s the belief of BWG that Ireland is mad for convenience right now, and as such is working hard to help the retailers it either owns or supplies to attract new customers and grow revenues by focusing on fresh food, innovation and digital trends. All this, and those hilarious Irish rowing twins spoke at the BWG Conference.

Comment: The scale of the BWG acquisition just keeps on unfolding. Amazing work there, SPAR SA.

Experts say success starts with culture, and if you were ever in any doubt about the culture and values of the SPAR Group, you only need to immerse yourself amongst its people, which we at the Trade Tatler had the privilege of doing at last week’s SPAR Convention. A cracker of an event to say the least, that not only showed off the scale of SPAR’s ops, but also highlighted its five strategic drivers. Of course, every event of this kind needs its fair of glitz, which came in the form of the announcement of the 2016 SPAR award winners. And that’s all we have space for here, but if you would like to read a more comprehensive summary of last week’s goings-on, slide that cursor right on over, and click here. 

Comment: If the distinctive way a company behaves and the values it embraces are the foundation upon which the company builds its strategy and operations, then it is clear why SPAR as an organisation continues to go from strength to strength. To Mr O’Connor and the Men and Women in Green, nice one.

Here’s an idea for anyone wishing to save a buck and do the right thing by the dear old earth: drive slowly. This typically simple, but just as typically ingenious idea comes to you courtesy of our friends at SPAR, who are giving it a try in the Western Cape. There, their fleet has achieved remarkable savings, going from 44 litres per 100 kilometres to 32 litres in the last four years, and racking up 15 million accident-free kilometres over seven years. The plan, inspired some time ago by a sharpish hike in the price of diesel, focuses on a combo of driver behaviour and technology usage to achieve its goals, with drivers handsomely incentivised to drive slower and more safely.

Comment: Excellent work. Now if SPAR could also convince everyone on the planet to stick to two kids per family, we might get somewhere as a species.

Massive congrats and indeed kudos to Mr. Graham O’Connor, CEO of SPAR South Africa and now also President of SPAR International, which as you are aware is the world’s largest voluntary retail chain, with sales of €33bn in 2015. Mr. O’C takes over from Leo Crawford, Chairman of SPAR Ireland, who has held the top job since 2005. Under his leadership, the Group underwent an impressive growth spurt, winding up at 12,100 stores in 42 countries. He is confident that under his successor, more of the same will ensue.

Comment: The appointment is testament not only to formidable abilities of Mr. O’Connor, but also to the radiance of the South African operation in SPAR’s international firmament. With successful acquisitions in Switzerland and the UK, and growing market share under tough conditions back home, SPAR South Africa is truly a global power of retailing.

Some further observations about the fortunes of SPAR, on the very nice results of whom we reported last week. The acquisition of a 60% stake in SPAR Switzerland from the Leuthold family Swiss retailer is proving to have been a very canny move indeed. It should add about R12.8bn worth of revenue to the annual coffers, bringing SPAR’s total up to around R135bn this year – a solid second behind Shoprite, but way ahead of Pick n Pay at R72.4bn. The deal brings 58 corporate and 247 independent SPAR stores into the fold, together with 11 cash-and- carry’s under the TopCC brand. SPAR has big plans for Switzerland, where the group has only 2.5% of the market, and where SPAR CEO Mr. O’Connor believes there is huge potential to grow footprint amid the clocks and cheese and flaxen haired maidens and whatnot. And the great thing is, if all goes well they have the option to buy the other 40%.

Comment: As the rise of Shoprite was to the noughts, so shall the rise of SPAR be to the teens. You heard it here.

Verdant times over at the Jolly Green One, as it reaps the bounty from the softly saturated swards of the Emerald Isle and the vertiginous, viridescent spring meadows of Switzerland. Whew. Where were we? Ah yes. The SPAR interims after which you had so solicitously enquired. Turnover up 16.72% to R42bn, helped along by the strength of the Euro in its recent overseas acquisitions, and operating profit a more than respectable 13.8% to R1.2bn. The Group added 8 new SPAR’s, 18 new Build It’s and 30 new Tops’s to the mix, revamping 66 stores and bringing the group’s total up to just short of 2,000 stores. One of the big successes of the cycle was Private Label – SPAR’s own brands increased their turnover to the tune of 10.6%. For a more detailed and nuanced take on the interims, you will most certainly want to consult our Results Summary.

Comment: Excellent work under tough conditions, SA’s friendliest retailer.

That’s quite the war chest the Jolly Green One is packing these days. SPAR has just raised R2.2billion through the placing of 11.9million new shares, and this will be used to fund the purchase of 60% of SPAR Switzerland and knock off some of the debt incurred in the purchase of 80% of SPAR Ireland (and presumably the BMG Group) in 2014. The punters are apparently just eating these shares up, and why wouldn’t they? They were going for R185 apiece, or 0.18% off last Tuesday’s closing price. The move is a shrewd one, leaving SPAR unencumbered by what we financial boffs call “gearing”, and in a position to invest in ongoing operations and to cast about for further value-enhancing opportunities.

Comment: The acquisitive expansion of SPAR South Africa is turning into one of the most exciting stories in retail right now. Where to next? Go on, give us a clue…

While business is challenging at the best of times (understatement? Ed.) in the oily waters of Nigeria, SPAR is there, and doing rather well by all accounts. The Nigerian operation is run under the usual licence by the Artee Group, which has seven stores across Lagos, Abuja and Port Harcourt, aggregating over 20,000m² of retail space. The plan is to open up in three further cities by the end of 2016, upping the number of stores to 12 and adding another 9,000m² of retail space. The latest store is particularly worth noting: it’s located in the Murtala Muhammed Airport Domestic Terminal in Lagos, offering groceries and fast food to passengers and terminal staff alike.

Comment: Local knowledge is a key ingredient for any business wishing to succeed in Nigeria.

So here’s a thing: SPAR South Africa (you know the one: cheerful, unpretentious, jolly green logo) has just dropped a relatively modest R690million or about three Swiss francs for a 60% stake in SPAR Switzerland (mountains, cheese, chocolate, posh watches). SPAR Switzerland apparently had some succession issues and was looking for someone to come in and sort them out. While SPAR SA’s bid was not necessarily the best financially, the Swiss outfit liked the South African business, upon which, interestingly they had based their own operation. SPAR Switzerland is a smaller though still substantial business, turning over around R12.5billion per annum, compared with R56billion here in the Beloved Country. In other SPAR news, local CEO Graham O’Connor has been appointed chairman of SPAR International.

Comment: A big week all round. Fantastic news there SPAR and veels geluk Mr O’C.

Nice work from the Jolly Green One, with group sales up 14.1% to R28billion for the 18 weeks to the end of January, with domestic growth coming in at 8.4% and like-store sales growth of 7.5%. Our friend and colleague Syd Vianello reckons that SPAR is continuing to pick up market share from Shoprite, which is no small achievement.

Comment:

If you like a skinny decaf latte and some eggs benedict with the shopping, and you happen to live in the greater Durban area, you’re going to love Waterfall SUPERSPAR, where the clever blighters have just gone and installed a BeanTree Café. (Punctuation. See me.) This BeanTree is the largest of its kind in KZN, and is a new concept from SPAR, which has started rolling them out nationally.

Comment:

So SPAR, as we might have mentioned on the Twitter just the other day, have opened their first Good Living Home Store, in the pleasantly bucolic Village Mall in Kloof, KZN. The jolly green one is apparently testing the waters there with this new format, which by all accounts is well worth a look.

Comment:

Well hello there, SPAR! Long time, no Tatler. The Verdant One (International version), we are told this week, is increasing the pace of its push into Africa. Just a week after opening its first emporium in Lilongwe, Malawi (where it will benefit no doubt from the inexplicable hunger pangs of young overlanders, as well as those of the locals), SPAR has announced that it’s also opened up in Douala, Cameroon, in a JV with a local partner, L’Atrium S.A, which already has 17 stores in Douala and the capital Yaoundé, as well as six DCs scattered around the country. Next up for SPAR are three more stores, including a Hyper. While SPAR South Africa does have some stores beyond our borders, these are not those: they’re operated under the international division, which nevertheless credits SPAR South Africa with a major assist in terms of local knowledge and best practice.

Comment: And so it begins: SPAR in Africa will be, we confidently predict, one of the big stories of the next ten years.

TOPS in Hillcrest, KZN, has on occasion been our go-to place for unusual beer. Now, we’re told, it’s upped it game, stocking the largest variety of South African craft beer in a single fridge. And this collection, we are told, includes some of this gorgeous stuff from some old friends of ours.

Comment:

The good news is that BWG’s €23million purchase of the Londis franchise has been given the cheery Irish nod by the Competition Authorities over on the Emerald Isle, giving BWG ownership of ±50% of the convenience market there. The bad news, because there’s always a bit of that, is that our very own Verdant One has had to provide a €220million (about R3biljoen) guarantee for the purchase of BWG to the Bank of Ireland, instead of the €130 million they thought they were in for at the time of the purchase. And reasonably so: the latter sum was the term debt owed by BWG at the time. It appears however that since an earlier management buyout, BWG’s performance has been fairly flat, at a time when discounters like Aldi and Dunnes were upping the competitive heat in Ireland. SPAR remains sanguine about its prospects with BWG, however, and shareholders seem to agree, with the share holding its value on the news.

Comment: SPAR’s venture into a reviving Irish market is not without its risks, to be sure. But somehow, we share their confidence on this one.

Premise no. 1: We’ve never quite wrapped our heads around SENS announcements, but we’re pretty sure you’re smarter than us, so here’s the story and then make of it what you will. Premise no. 2: On 13 February 2015, the shareholders of SPAR approved a special resolution authorising its Board to provide financial assistance to related and inter-related companies. Now the Verdant One has resolved to provide a guarantee to the Bank of Ireland to secure “banking facilities” (moola?) for Caher Limited (an Irish subsidiary of SPAR) amounting to €220million – or in other words one-tenth of 1% of SPAR’s net worth.

Comment: And what will Caher Limited be doing with all that dosh? We await with baited breath.

The sharp suited analysts over at snappily-named research business Intellidex, are liking SPAR’s chances post the acquisition of jolly Irish retail group BWG. But, they caution, with growth in SA slowing, the rest of Africa is going to be critical in the verdant retailer’s future progress. You will recall that the acquisition of BWG boosted interim sales to the tune of 21%, and interim profit by 10%. Down the line, with the Celtic Tiger if not exactly roaring but looking well-rested none the less, and GDP in the Emerald Isle expected to come in at 4% this year, prospects there look fairly buoyant. Back home, competition for a declining consumer rand is fierce, although Intellidex believe that SPAR could grow its margin nicely by leveraging economies of scale. And Africa? SPAR has built a healthy springboard in what used to be called the frontline states, hopes to open in Zambia soonish and has plans for heading even further north in the near future.

Comment: (Nods sagely). Economies of scale, eh? Good things to, er, leverage, those. Lots of potential upside. Or even upside potential, as we in the industry say.

Verdantly-logo’d retailer SPAR has just had a tidy little half, and no mistake: revenue up a whacking 41% to 36.4billions of rand, with profit up 22%, and net income rising to R784million. In part, of course, we attribute this to canny trading and an eye on expenses. SPAR have, after all, been bringing the punters in with deeper discounts in these trying times, and profiting handsomely from the sale of more private label gear, up 21% in value to R3.2billion. But substantially, the jump is due to the acquisition last year of the BWG Group, which owns SPAR in Ireland and southwest England, markets which are unencumbered by the worries back home. For the first time, results there were included. Next up for SPAR might be acquisitions in Zambia, where the brand has been operating under local ownership since 2003, then a similar transaction might be on the cards in Ghana and Kenya

Comment: An incredible model for growth, available only to SPAR, and which must be causing other retailers (coughshopritecough) to gnash their gleaming white teeth.

The jolly green one has been running the TOPS at SPAR Wine Week for a decade already (Never! Ed.) and kicks off in Joburg in May before going on the road to Durbs, Nelspruit and PE. This year, it will be upping its spend on various media to the tune of 300-700% and generally taking this well-established event to the next level.

Comment:

This SPAR numbers for you, then: group sales increased by 38.3% for the all-important 17-week trading period ended 24 January 2015 over the comparable period in 2014. Excluding the impact of the BWG Group (SPAR Ireland), Group sales in South Africa increased by 8.7%, with internally measured price inflation of 5.9%. Like-store sales grew by a pleasing 8.1%.

Comment:

We’re not sure that anyone has said the word “Begorrah!” in Ireland in the last fifty years, or even before that come to think of it, but it seemed an appropriate response to the news that the BWG Group, 80% of which was recently acquired by SPAR South Africa, has just forked over €23million for a trading group which will add 200 stores to its footprint in the Emerald Isle. ADM Londis owns the Londis retail brand, which as far as we can tell runs much like SPAR does, overseeing a network of owner-operators, who generated sales of €195m in 2013. BWG itself turned over €1.2bn that year, mostly from its wholesale arm. SPAR’s plans for BWG include a €100m expansion of the Irish business over the next five years. 

Comment: Of which this tidy little acquisition appears to be the first step.

Last week we mentioned in passing that SPAR had big plans for the one five. These, to rehash, include 35 spanking new stores, and refurbs of 180 existing ones. Also a whole passel – 45 to be exact – of new TOPS at SPARs. 2014 turned out to be a year of some consolidation for the core business, with 19 new SPARs opening (a touch under the targeted 23) and 17 underperforming ones closing. TOPS on the other hand opened 51, way ahead of the predicted 35. Build it opened 18, in a tough environment which included such hazards as industrial action and cheap imported cement. Longer range plans include the new DC in Lanseria, which hit a speedbump in the form of zoning issues, but which Mr O’C. assures us will be up and running by 2019. And then of course there’s the huge but still slightly mysterious acquisition of 80% of Irish retail group BWG, giving SPAR the footprint on the Emerald Isle and in southwest England after which we had no idea they were hankering. 

Comment: Although Mr O’Connor’s own presumptively Hibernian roots might be a factor…

“I think it's going to be another very, very tough year for retailers,” – not us, Chris Gilmour, of Absa Wealth and Investment Management, no less, and he goes on to say that most retailers are “priced for perfection,” whatever that may mean, although (and he gets quite pointed here) Pick n Pay isn’t. While he concedes that the business under Mr Brasher is doing everything right, “clawing its way back is going to be an exceptionally long and difficult process.” SPAR, in the meantime, from their secret lair in the subtropical paradise of Pinetown, KZN, have announced diabolical plans to open not one but 35 new stores in the year we have no choice but to call 2015. They will also renovate 180 stores, and open 45 TOPSes, liquor being a growth industry now for oh, about 8,700 years. Shoprite, now – not much there except are they going to keep all those Wetherly’s open that they bought on the Ellerines fire sale? The Competition Comish approved the deal only on the grounds that no jobs would be lost. Something else that we might have missed in the flurry of last minute trading that was the holiday season was that Massmart are launching a click and collect service by which online Makro punters can buy their groceries online then pick them up from a sturdy locker conveniently located at a Sasol near you, rather than having to go through the mission of schlepping out to the nearest Makro in its windy acres of carpark. And from Woolworths? Not much, except a breezy two line press release, circa mid-December, to the effect that they’d had a productive meeting with BDS re the protests in Woolworths stores. On the wholesale front, some pretty exciting news, and close to home, also: Jad Perreira, CEO and founder of Voluntary trading group Unitrade Management Services will be speaking at the Trade Intelligence Independent Trade Forum, kicking off on 19 February in Jozi. If you haven’t got your tickets yet, there is one very compelling reason to do so.

Comment:

Excellent work those sprightly fellows in green: SPAR’s revenue was up 15% to R55billion for the 12 months through September, with net income up 13% to a tidy R1.35billions, confounding the expectations of sundry analysts who had pegged it at R1.29billion. This largesse was driven by a couple of factors: sales of house brands, which offer succour to the cash-strapped consumer, and revenue growth of 14% to R6.6billion at TOPS, which come to think of it, offers succour to cash-strapped consumers. And if you’re looking for them to rest on their laurels, don't: 36 sparkly new SPARs will be opened in the next year, we are told, with 59 twinkly new TOPSes and 30 brand spanking Build its. Newly-purchased BWG, which owns the SPAR brand in Ireland and the southwest UK, contributed R2.7billion to turnover, and is expected to bring in 30% of the total next year. 

Comment: All of which must be causing the competition to run their fingers nervously around the inside of their suddenly damp collars.

The SPAR acquisition of 80% of the BWG Group in the UK we reported a month back really is, in case we hadn’t made this perfectly clear, a Big Freakin’ Deal. The BWG Group, you see, services over 1,100 stores, including 100 outlets it owns. It owns the SPAR brand in Ireland and south-west England, servicing 700 SPARs in a model similar to the one they run here. The acquisition comes at a time when the Irish economy is enjoying a modest rebound, growing at 3.5%, and with it the Irish consumer – a relief to SPAR back home, some of whose franchisees are taking some strain under the current economic regime. SPAR is apparently looking at the ownership model in South Africa – not in preparation for a Woolworths-style takeover of franchise stores, but to ensure that the current model is optimised for both SPAR and its members.

Comment: Tough times for everyone out there. SPAR, with its unique model, is meeting these challenges head on, with its unique trading model and an added twist of boldness.

“Nice work”, “thumbs up” and “good job” is what a bunch of market analysts have to say about SPAR’s acquisition of 80% of Ireland’s BWG Group. And why not? Combined with BWG’s SPAR assets in south-west England, the local group will add 695 stores to its quiver, including 421 in Ireland, along with another 400 or so forecourt shops and neighbourhood convenience stores.

Comment:

After the SENS update last week - a mystery worthy of Scooby & the gang - ‘The Men in Green’ have announced the acquisition of an 80% stake in the BWG Group. 

BWG are a leading food retail and wholesale distribution company, with operations in Ireland and South West England servicing more than 1,100 stores (largely equivalent to the local KwikSPAR format), including 100 company-owned stores, with an annual turnover of approximately €1.2 billion. Significantly, the group own the rights to the SPAR brand in Ireland and South West England. The deal is worth €55m and expected to bring growth through synergies, new reach and rand hedged revenue streams. 

Comment: A bold, but carefully considered move under the new leadership of Graham O’Connor - taking SPAR into its next era of evolution as a solid, power player.

Shareholders of SPAR ("Shareholders") are advised that the Company has entered into negotiations, which if successfully concluded, may result in a material effect on the price of the Company’s securities. Or so we are told, in stark Courier, by SENS, mouthpiece of the JSE. And Shareholders are advised to exercise caution and blah blah blah. What can this mean? Other than a 3.4% jump in the share price as those punters, duly advised, exercised as much caution as they could find in their wallets, of course. So, an acquisition or merger of some sort? But who’s doing the buying? SPAR, or is someone buying SPAR? If we were SPAR, we would be looking at Choppies, that feisty Botswanan outfit who having sewn up the market in the motherland have launched an incursion across the border, too, and the acquisition of whom would have a very promising effect on footprint, turnover and the entrepreneurial appetites of prospective members.

Comment: But that’s just us.

The good folk at SPAR don’t mess around. It seems like only December 2013 (It was. Ed) that they announced they’d be heading north of the Cubango any day now, and here it’s only July and they’ve trundled into Angola, opening a 1,600m2 store in the province of Cabinda. (Don’t mention the war!) The store will feature a number of innovations, including full-service bakery, butchery and food-to-go, including the popular ‘Chicka Chicken’ offering, and will be supported by the Western Cape DC, which interestingly will be schlepping out some product from SPAR Portugal to serve the cosmopolitan tastes of that former basket case. And in the time-honoured tradition of those who succeed in Africa, SPAR are not going it alone but have brought Webcor, an importer of foodstuffs, along for the bumpy but scenic ride.

Comment: We mentioned the war once, but we think we got away with it.

Solid if unspectacular interims from SPAR for the six months to March, with turnover up 7.6% to R25.6billion and profit before tax increased by 8.6% to R889.5million, and gross margin up to 8%. The big performers in an otherwise difficult ambit for the Group, and indeed all retailers, was TOPS, increasing its wholesale turnover 11.4% to R2.1billion and Build it recovering nicely with an 11.3% climb to R2.7billion. Trading space also increased modestly at 0.8%, with eight new SPAR stores opening, and 65 upgrading, in line with the focus on organic growth. More is naturally to be expected from TOPS, which may see 300 new outlets opening in the next six or seven years. And in order to attract and retain cash-strapped consumers, expect more in the way of price promotions, which currently account for about 20% of revenue.

Comment: Mr O’Connor has stepped in at a difficult time. But SPAR is a retailer with a sensible head on its cultural shoulders, and this will alleviate his burden somewhat.

In what you’d have to read as a canny vote of confidence, the Public Investments Corporation Limited (PIC) has upped its stake in SPAR to 20.086%. The PIC, you will recall, invests the hard-earned pensions of South Africa’s civil servants in enterprises where they will presumably work hardest (the pensions, that it, not…oh, never mind) and is Africa’s biggest money manager.

Comment:

While the bad news last week was the resignation of Wayne Hook as CEO, the good news for SPAR was as solid a set of results as you could hope for given recent conditions: turnover up 9.8% to R47.4bn with profit after tax up 12.4% to R1.2bn. And here’s an interesting one for you: volumes through the seven DCs were up 4.3%, for a total of 203.5 cases for the year. Here’s the breakdown: Retail turnover for SPAR stores up 9.1% to R58.5bn, with Tops up 15.9% to R5.8bn, and Build it up 12% to R8.3bn. The Distribution model is a winner for SPAR, providing as it does a captive market, and cutting out the risks of owning all but a handful of the 850 stores trading under its banner. On the downside, the wholesale margin of 3.5% on which it relies is slimmer than that of Shoprite, say, at 6%, and there’s not a lot of room to grow it.

Comment: The SPAR model proves itself again, this time as a brand which retains the loyalty of the South African punter even when times are tough. Nice one.

SPAR has informed us with sadness and regret that Wayne Hook has resigned as CEO in order to focus on his family over a difficult time for them all. Mr Hook will continue with the SPAR Group in a development role and as a director and, as such, his skill and experience will continue to benefit the SPAR Group.

While the resignation as CEO will not come as welcome news to investors, Hook having steered the business with a steady hand since taking over from Peter Hughes in 2006, they will be encouraged by the speedy appointment of a successor. Graham O’ Connor, formerly MD for KZN and a partner in five SPAR stores, will be stepping up to the plate in January, bringing a balance of distribution and retail experience to the position.

Comment: SPAR is by its very nature a business of families – from those who own and run the stores to the extended family at head office and in the DCs. For this reason, suppliers and shareholders, as well as the SPAR team itself, will no doubt be supportive of Mr Hook’s very difficult decision. We wish Mr Hook well in the months and years ahead. You will always be the Captain to us, sir.

Remember that story about the Gillitts man who was set upon by rogues in his driveway and left for dead halfway down Kloof Gorge? In our rat-eyed, sceptical Durban way we thought there was something funny about that and of course we were right. It turns out that Mr Bruce Galloway is the target of a strongly-worded letter penned by the lawyers of three businessmen who allege that he bled their business dry in his capacity as minority shareholder and imparter of wisdom in a BEE scheme he had sold to both them and SPAR. This is how it was meant to work: SPAR would provide finance for black businessmen to open branches in partnership with Galloway, who took responsibility for repaying SPAR over five years. Problem was, Galloway was allegedly siphoning off spurious but substantial amounts of cash to pay off unspecified loans pertaining to the operations of these branches, but not showing his partners the supporting financials. The businessmen in question are now going after both Galloway and SPAR for restitution – the later because they believe that there should have been better oversight.

Comment: Oh dear, oh dear, Bruce. What have we got ourselves all tangled up in?

Again with the obscure SENS announcements, but reading between the lines it looks to us like SPAR is lending R100million-odd to its employee share scheme to enable employees to exercise their options on the shares in the scheme, and further that this loan will not have an appreciable effect on SPAR’s ability to get stuff done. Nice one, that jolly green retailer.

Comment:

With stores in Swaziland, Namibia, Mozambique and Botswana, and a 35% interest in Spar Zimbabwe, currently on a drive into Zambia, the Jolly Green one has opted for a strategy of slow movement and consolidation on the Mother of All Continents. Until now that is. Now they’re gaaning all Boetie on us and heading Angola toe, planning a store in Luanda with an as yet unnamed local partner, that should open in the next six months. Spar South Africa will be providing most of the product and all of the logistics, which is after all what it does best, but sourcing some stuff locally, presumably on the perishables side. Angola, it will interest you to know, has GDP of $114billion, making it the third biggest sub-Saharan economy after SA and Nigeria, and growing at 6.5%, over three times the speed of our own.

Comment: And thus a no-brainer for Spar as they shift into full Africa mode.

The Jolly Green One has joined Pick n Pay, Woolworths and Fruit & Veg City with the opening of its first forecourt store in the motor-obsessed conurbation of Germiston, whose denizens will be regaled with a 24-hour retail offering which includes much of what you’d expect from a KWIKSPAR, but on a smaller scale. Interestingly, SPAR has gone into forecourts as a JV with fellow Dutch giant Shell, which may or may not mean something more than windmill jokes in the old stockroom and clogs on the checkout staff, and reflects an arrangement the two have had in other geographies, ahem. The Gautengoise can expect another three or four of their water-testing endeavours to roll out over nine months, then it’s open season.

Comment: The analysts are of a mind that the move will contribute pleasingly to revenue but will not be a game changer.

SPAR Botswana is running a co-branded loyalty programme with cement makers PPC, offering anyone who buys 25 bags of BOTCEM, 20 bags of SUREBUILD or one ton of PPC cement a chance to win P2,500 worth of groceries every month for a year and a grand prize of P100,000 cash. Back home, the verdant one is cementing its relationship with the famous brewing monks of the ancient SABMiller order, with whom it is once again hosting SA’s biggest Bierfest, at Durban’s Suncoast Casino from September 12 through 15. SAB will be showcasing three especially brewed beers, and entertainment will include an actual oompah band, presumably resplendent with some flamboyant whiskerage. Here, SPAR is cannily tapping into beer culture, which is exploding globally like something you brewed in an old HTH bucket under the sink.

Comment: What we’re looking at in this story is SPAR’s nimble adaptability in pleasing and surprising the shopper, whether it’s the beer-quaffing boytjies of Durban’s Sunrise Strip or the industrious homemakers of dusty Gaborone.

SPAR International have taken the bold and controversial step of entering Lebanon. This has sparked an unlikely alliance between the Ba’ath Party and the Armenian Democrats in response, fresh unpleasantness between Shiite and Sunni, the resurgence of the Druse militia, nameless but terrifying threats from Israel and the sale of Katyusha rockets by Russia to anyone who will have them. Oh, wait, that’s Charlie Wilson’s War, currently gracing my marble nightstand. Short story, the jolly green one though has signed a licence agreement to operate in that once-troubled and occasionally Biblical land. That The Human League once wrote a song about.

Comment:

SPAR’s interims were in this week and after the recent gloom they came as a moderately-sized if not a tall drink of water: sales up 9.5% to R24billion from the DCs with net profit up 12% to R589million. And HEPS, which as anyone could tell you is the truest measure of a company’s profitability, were up at 12%. The star performer has been TOPS, with turnover up 18.2% to R1.9billion. Build it growth was down, increasing only 6.7% to R2.4billion, which is puzzling everyone, Captain Hook included, as they were “rollicking along” (his words) at about 15% until October, when labour unrest in the mines and the transport sector put everyone on edge a bit.

Comment: Solid fundamentals, dodgy economy, like pretty much everyone these days.

Read this piece for a bit of local colour, if you will. It turns out that Lex Hollman, owner of the SUPERSPAR and TOPS in Malelane is well-chuffed with his Pricer Electronic Shelf Labelling System, a product which caught his eye some ten years ago, but he has bought only recently, given the cost. Pricer, you see, don’t come cheap. But with 16,000 labels to manage in his SUPERSPAR alone, it turns out that it’s well worth the expense: it has enabled him to eradicate any discrepancy between till and shelf pricing (his policy is to honour the lower price) and to update prices in minutes, a process that used to take him a full day. And the system is not some mute bit of tape that sits on the shelves: it provides feedback, informing Lex that a price has been updated, that it might be incorrect, or that the label is obscured by a stray litre of milk. Finally, those labels are a lot more difficult for dishonest customers to switch for the purposes of claiming a lower price.

Comment: And that is how today’s modern retailer does it, housewives!

In line with its longstanding and savvy (and dare we say it – sassy?) policy of sponsoring women’s sports, SPAR will be renewing their sponsorship of Netball SA for another three years, covering the national team and the national championships, and extending this year to the Under 19s and the Under 21s, at a cost of R20million all in. They’ll also be a broadcast sponsor for netball on SuperSport, where they’re perhaps best known for their annual sponsorship of Wimbledon. The tried and tested thinking is that as women make up “a huge majority” of SPAR’s customers, it is the Jolly Green One’s duty to support them in their athletic or spectatorial endeavours. The Proteas (as the national team is known, although since that flower has technically been taken might we respectfully submit The Ericas, which has a more hearty, sporty flavour anyway?) now rank number 5 in the world, and believe that with SPAR’s backing they’re headed for the top 3. 

Comment: Typical SPAR: sensible, nice and effective all at once. Reminds us of a girl called Erica we once knew…

As South Africa’s friendliest retailer turns 50, let’s have a look at some of the other numbers which make up the business. The Group employs about 4,000 people, whose main roles are in distribution, support and marketing, but the headcount goes up to around 65,000 if you count all the stores in the group – which now total 1,740 under their various trading brands, with 900 SPAR stores in South Africa. Combined turnover is R68billion, up quite substantially from R24billion when Captain Hook took the helm in 2006. And being a business primarily concerned with distribution, SPAR’s 345 trucks and 400 trailers travel 35 million kilometres a year to bring the good stuff to their customers in the trade and thence to you. 

Comment: A heck of a business, with more impressive numbers, we suspect, to come.

It seems like only yesterday that SPAR was agonising over who to take to the Matric Dance and pestering us for the car keys, and yet here they are at 50, happily married to the second wife, playing golf with Sullivan O’Carroll and driving their own E-class. Let’s take that trip down memory lane, shall we? (Cue deep masculine voiceover artist): “1963: In response to the emergence of grocery chains, a group of eight wholesalers hold a foundation meeting, together with 500 potential members. The SPAR Guild is established. Control moves to W.G. Brown Limited, the forerunner of SPAR South Africa.” This, of course, from our own Trade Profiles, to which you can subscribe here if you haven’t already. But what is interesting to note is how much of SPAR’s current success it owes to that first meeting: its innovative defensive position between wholesale and retail, the primacy of its member retailers from day one, and its strong regional focus, which paradoxically gave it an immediate national footprint as it started up.

Comment: Big congrats, SPAR, and here’s to another fantastic 50.

SPAR International now has 12,000 festively-liveried stores around the globe, but is not stopping there, oh, no. They’re going into the Middle East now, with plans to open 30 stores by 2015, kicking off in Abu Dhabi, Qatar and Lebanon before donning its Lawrence of Arabia robes, saddling up its finest racing camel and venturing further into the United Arab Emirates, Oman and Saudi Arabia.

Comment:

Over at the verdant one, turnover grew 12.2% to R43.2bn with profit before tax up 8.1% to R1.5bn, a result which the phlegmatic Captain Hook has described as “a solid performance, not a spectacular one.” But there were nevertheless spots of spectacularity within that: TOPS, for eg, grew sales 21.2% to R5bn, while Build it upped turnover by 17% to R7.5bn. SPAR stores were indeed more solid, ahem, with turnover up 11.5% to R53.7bn (anyone, anyone? Yes that’s right: the overall result is smaller because it reflects SPAR’s sales to those stores, not from them, clever) in a competitive environment with rattled punters. During the year, which ended in September, SPAR added 23 new stores for a total of 868 and a 3.2% increase in retail space, and upgraded 147 existing ones. By contrast, TOPS added 47 stores for a total of 538, who would have thought, and Build it added 20, for a total of 281. Another highlight of the results was the rise of the house brands, which now account for R6.2bn of wholesale turnover.

Comment: Cut the green guy some slack, they’re trading very smart with an unusual model under difficult circs.

Back in Sparville, in the meantime, the Verdant One has upped and revamped its website without so much as a by your leave. Very nice it is, too: the site is a paragon of cleanliness, super easy to navigate whether you are a shopper or a shareholder (although if the former, no online retail as yet) and offers all sorts of current news, from sustainability (check out the wonderful Sydwell story) to national specials. The site is dangerously easy to like on Facebook, where the social aspect of the user’s engagement with the SPAR brand resonates neatly with the ongoing My SPAR brand platform. If, like us, you hanker after orderly columns of optimistic numbers, the Financial section in the About SPAR section is the spot for you.

Comment: Having a good site is one of the costs of doing business these days. But with this new site, SPAR have integrated their various constituencies in a fresh, unique and powerful way.

Here’s what some well-placed sponsorship can do: the SPAR-NMMU Netball Club down in PE, having recently been recognised as Sports Club of the Year, has won the provincial netball league for a seventh consecutive year, sending several players and management to represent South Africa internationally. And naturally, SPAR will be investing for another three years, good on them.

Comment:

According to the office ticker tape, Dave Gibbon has retired as a non-executive director of SPAR, with effect from 7 August 2012, having served honourably since 2004. He will be replaced as chair of the Audit Committee by Chris Wells, in case you were thinking of applying.

Comment:

Splendid work, that pleasingly verdant retailer, on the launch of a very nice online magazine. SPAR, having occupied the digital space as it were with its fresh and easy to navigate website, have taken things to the next level with Savour magazine, a combo of bold simple layouts, cunningly inserted video and pertinent links back to the parent site, all in a computer and tablet friendly format, which covers all sorts of ground from affordable recipes to sports and even travel. SPAR marketing director Mike Prentice explains that the launch of the mag was something of a leap of faith, with a not-insubstantial investment having been made and at one stage some doubt as to whether the title would find its way into digital print.

Comment: With decades of experience at communicating with various constituencies – analysts, consumers and retailer/franchisees – SPAR have a confident facility for this sort of project.

Our thoughts and prayers go out to the family and colleagues of Paul Androliakos, manager of the Jukskei Park SPAR, who was murdered during a hold-up on June 10. SPAR have taken out full page newspaper ads offering a substantial reward for information leading to the arrest of the gang, who are thought to be responsible for at least eight similar crimes in recent months.

Comment:

The pleasantly verdant one has received a prestigious vote of confidence – and not of the phony-awards variety. The Government of Singapore Investment Corporation, which runs one of the world’s largest sovereign investment funds, last week bought up 5.18% of the ordinary shares in SPAR, leaving analysts grasping for their underutilised superlatives. “SPAR is definitely doing something right,” effused our usually taciturn Uncle Sydney. Last month, you will remember, SPAR reported six-monthly turnover up 13.6%, and more importantly for investors has delivered consistent returns to the punters over the past 40 years. Nor are its future prospects any dimmer, with an experienced and respected management team in place under Captain Hook, Tops and Build It going great guns and 100 stores of one sort or another to be opened in the next 12 months.

Comment: And the retail sector continues to attract the big international money, a pleasing expression of interest in an economy which could use a little love.

While some retailers have announced lavish things coming down the track for forecourts, and others have ignored the format with studied insouciance, SPAR have taken a more measured approach to the channel. According to Captain Hook, they will shortly be entering the forecourt convenience market, after thinking about it on and off for years, and despite some initial trepidation. They are now focused on the opportunities represented by the format, and have been approached in this regard by various fuel retailers. Forecourts are a potential winner for SPAR – as our Uncle Sydney points out, the group is well set up for distribution to widely scattered small formats. Another drawcard is the stiff competition for retail space now that another player in the form of Massmart has entered the food retail game.

Comment: Not to mention (although granted, we are mentioning) the fact that SPAR has an excellent existing franchise model, although we don’t call it that, which will be a good fit for the hardworking owners of service stations all over the map.

Excellent work from the men in the green striped shirts in the first six months of the FY we are pleased to call 13. Turnover up 13.6% to R21.7bilions, with operating profit up 10.8% to R782.8million, where operating expenses increased by 11.5%, with fuel costs up 38% as a major contributing factor. That turnover growth, it is worth noting, in comparison to 13.2% over at Shoprite and 8.6% down at Pick n Pay. Serious performers for the group were TOPS, with turnover growth of 19.7% to R1.6billion and the opening of 25 new stores and Build it, up 19.2% to R2.25billion, while SPAR’s core wholesale operation was up a respectable 12.1% with the opening of 12 new stores. And other ventures are coming along nicely – SPAR now have 16 in-store pharmacies and 13 of the new SaveMor (hard discounter) stores now up and running. SPAR are sanguine about their prospects for the next six months, during which, the odd Mayan apocalypse aside, they do not expect market conditions to change materially.

Comment: A great set of numbers for the quiet man of SA retail.

So it turns out that no-one has been “asking” ahem, “suggesting” or even “encouraging” pensioners collecting their monthly scrapings from various retailers to fork out any of it whatsoever in-store. As you will have heard, with the cessation of pension payments at places like the Post Office, the South African Social Security Agency (Sassa) has said that they are aware of “unscrupulous retailers”, including some belonging to the major chains, which have been requiring that the recipients of social grants spend 10% of their pension in the store where it has been collected. There’s also the suggestion that some retailers hike the price on the basics on pension day. Not so, say statements from Pick n Pay, Shoprite and SPAR.

Comment: In fairness, collecting in-store is probably the safest, most convenient way to get the job done. And some retailers, whose left hands tell not their right hands what they are doing, go out of their way to in fact provide value for anxious pensioners.

Smarting from its recent defeat at the hands of the Competition Appeal Court, the Department of Economic Development is taking aim at all the other retailers for their allegedly monopolistic practices in the sale of alcoholic beverages, which, it claims, drive the smaller retailers out of business. The instrument with which they are taking this aim is a possible addition to the Gauteng Liquor Act which if amended will stipulate that the Liquor Board may refuse an application if it “may cause a harmful monopolistic condition to arise or be aggravated”, which is a soothing broad expanse of legal scenery as one might like to contemplate of an evening. Pick n Pay, as they do, are taking up cudgels on behalf of everyone, averring that “the four major grocery groups, including Pick n Pay in South Africa, own less than 10% of the total off-consumption liquor sales.” Liquor City are giving it right back: “We deny all the allegations which have been made against Liquor City” while SPAR are pointing out that they own only 11 liquor outlets and ahem, six DCs, and that their members are the very independent retailers that the Department wishes to protect from, well, SPAR.

Comment: Pour yourself a double scotch and settle back into the chesterfield. This is going to be good.

Weighing in on the Walmart discussion in Namibia last week were some of the country’s smaller retailers – and surprisingly, the target of their ire was not Walmart or Massmart, but the Namibian government, which, they feel, has offered them insufficient protection from other international retailers, namely our very own Shoprite, Pick n Pay and SPAR. The march of the majors has played merry hell with the little guy, apparently, with four chains – Punyu, Continental, Elago and Black – having gone out of business since the 90s, and others like Okalindi shrinking dramatically, having gone from 10 stores in Windhoek to just three. The issue, according to Chris Siririka, National Coordinator at the Indigenous People’s Business Forum (IPBF) is simply purchasing power. This has led the IPBF to look into a group purchasing scheme for retailers, and the government to consider an amendment to the Foreign Investment Act.

Comment: Anti-freemarket protectionism? Or the legitimate encouragement of the diversity which when nurtured can be a powerful engine for sustainable economic growth?

Last week we scooped everyone with a tight little story about Spar International’s numbers, and for good measure threw in a voorskou of the local digits too. What we didn’t realise is that there are two Spars – the retailer we all know and love, and this other crowd, inexplicably and possibly inexcusably known as Spar Group, Inc., a services company. It was on the latter’s numbers that we erroneously reported. Apologies, of course to the real SPAR. Locally, SPAR have since reported that turnover was up 13.5% to R10.98billion for the quarter ended 24 December 2011, nice one.

Comment:

It always pleases us to lead with a story about SPAR, the Quiet Man of SA retail, although this time around the story is global. The cheerfully verdant retailer has announced that it anticipates turnover for the soon-to-be-deceased FY 2011 – ie, somewhat confusingly the one that has just gone – to be around $72million, 14% up on the haul from the year 10. Contributing substantially to the number are subsidiaries opened recently in Mexico and Turkey as well as solid incremental growth in the more established markets. And good news for the FY we’re going into is that SPAR has what it calls a “steady pipeline” of new contracts, which presumably means lots of franchisees champing at the bit to don their green stripy shirts and open shop all over the show, starting in the first quarter. Locally, SPAR has mentioned that turnover is likely to be up 13.5% to R10.9 billion.

Comment: That’s the way to do it.

How is the indigenisation programme in Zimbabwe affecting those South African retailers bold enough to operate in that bread basket case to the north? Let them speak for themselves:
SPAR: “All our outlets are owned by the locals. We only have a small stake in distribution of about 35 percent, which is not in retail. The impact is virtually nothing.”
Pick n Pay: “The group has approval for the company’s shareholding in TM Supermarkets from the Zimbabwe Investment Authority, Zimbabwe’s Reserve Bank, and Zimbabwe’s National Indigenisation and Economic Empowerment Board.”
Shoprite: “We have only one Shoprite store in Zimbabwe and we do not report on revenue contributions by country. Furthermore, Shoprite is currently in a closed period until the announcement of our mid-year financial results.”

Comment: So there you have it. Of interest is the fact that Zim is the one market where Shoprite lags PnP to any significant degree.

Say what you like about accountants, they’re not boring. Oh, wait, that’s marine biologists we’re thinking of, and firemen. But when accountants name a survey, they do it with a certain je ne sais quoi. Thus the Deloitte Global Powers of Retailing Survey, in which our big boys have done rather well this year: Shoprite in 92nd position globally, up from 95th last year, and still the biggest in Africa and the ME. Massmart coming strongly in at 126th globally and second in Africa, and Pick n Pay at number 133 and third respectively – having once been the indisputable biggest retailer in the RS of A. SPAR a handsome 179th and 4th, with Woolies in a suitably muted but pleasingly symmetrical 222nd. Africa was the world’s fastest growing region, with 15.4% growth compared with Latin America’s 14.8%, which augurs well for the future.

Comment: Take that, Captain Ackerman! Kerpow!

Here at the Tatler we like to nurture our own little portfolio and leave the irresponsible public bloviating about what to do with other people’s money to our sharp-suited and sharper-minded friends the analysts. Occasionally, however, it is our sad duty to report on what they are saying, and what they are saying this week, if Investec’s John Biccard is to be heard, is that the retail sector, so beloved of foreign investors, is way overpriced. Using the example of SPAR, he points out that the Jolly Green One, while superbly run and a good long-term prospect, is trading at a P/E of 20. In layman’s terms, this means something like that you are paying R20 for your R1 slice of this year’s takings.

Comment: For a business which is growing comparably with its sector at 3-4% at the moment, that’s a handsome fee.

The jolly green retailer that somehow isn’t a retailer grew turnover 10.4% to R38.459billion for the year to September, while operating profit was 7.8% higher at R1.404billion. Wholesale turnover increased by 8.6% to R31.9billion. Retail trading space was up by 3% with the opening of 25 new stores, for a total of 859. Of these, it added another 5 to its in-house retail division, for a total of 10, although sadly those stores are not contributing vastly to the swag, with the division losing R29.9million for the year. On the upside, liquor was strong like witblits, with TOPS lifting turnover to the tune of 19.9% for a total of R2.6billion, and wholesale sales in hardware up 18.2% to R3.9billion over at Build it on a Saturday morning.

Comment: Powerful, confident stuff for a business which hit its stride some years back and like that feller on our favourite bottle of scotch has just kept walking.

A canny move on SPAR’s part, to decentralise its wage negotiations to the regions. This has meant that an ongoing strike of around 800 workers in its KZN DC has not affected operations elsewhere. Even in the blessed province itself, Mr and Mrs Punter have been thus far unaffected by stock shortages.

Comment:

A couple years back, in-store TV was the next big thing, with most major players announcing their intention to turn every store into an all-singing, all-dancing, all-branding feast for the eyes, ears and wallets. Only SPAR, however, together with their clever friends over at One Digital Media, have really made the investment and got it right. Today, it will flabbergast you to know, the SPAR Digital TV network features digital advertising screens in 120 large format SUPERSPARs across South Africa, reaching a total footfall of 25 million visitors per month. The system in these stores is hierarchical, with big entrance screens, smaller category screens and shelf-level screens educating the tele-literate punter about the specifics of the brands on offer.

Comment: Outsourcing to an innovative and committed third party was probably the smartest move SPAR could have made, enabling rapid and very visible coverage across the relevant stores and a rapid implementation of new technologies and packages as they become available.

SPAR offshoot TOPS has once again availed itself of the opportunity of partying with some of SA’s most convivial people in its headline sponsorship of The TOPS Soweto Wine Festival, 1–3 Sept, get your booty down there. And while we’re talking TOPS and good times, nice one Mike down at our local TOPS for your gemütlich selection of German weissbiers.

Comment:

Joining the ranks of the retailers who aren’t going to rush it in Africa are SPAR, who nevertheless have more than a passing interest in this great and mysterious continent. According to Captain Hook, the model for expansion into Africa might not be the traditional DC setup. As he so correctly points out, if you’re going to drop R400 bar on a warehouse, it’s a good idea to have some stores in the area. Currently, the Gauteng DC is supplying stores in Namibia, Botswana and Swaziland, as well as some independent SPARs in Zambia and Malawi, which are licensed directly from Amsterdam. However, Wayne Hook is confident that SPAR South Africa would receive licenses from SPAR Head Office to open up elsewhere in Africa – for e.g. Angola, where SPAR is looking for somebody local to work with. SPAR currently owns a 35% stake in a Zimbabwean business that owns 68 stores and has recently opened a SPAR and a Build it in Mozambique.

Comment: The rollout of modern retail in Africa is one of the biggest business stories of our age. Nice one, that friendly green feller.

SPAR delivered, as the expression goes, a solid set of results for the six months ending March 2011, with turnover up 9.1% to R19.1billions, and operating profit up 4.1% to R706million. Captain Hook is cautiously optimistic about likely trading conditions for the rest of the year, although factors like rising fuel and utility prices will continue to put the squeeze on shoppers, he believes. He is also of the view that the business in turn needs to be squeezed harder to deliver the sorts of results that happy punters have come to expect from the business. For example, while warehouse volumes were 6.9% up for the period in question, costs were up 16.8%, due in part to the rising price of getting goods to stores, but also because of the 11 stores SPAR has bought back from members in order to keep the footprint up, and all the bills associated with running those. And then there was the move of Build it (which grew turnover a whacking 21.4%) into wholesaling, itself a not inexpensive exercise.

Comment: A business quietly continuing to deliver the goods, quite literally, as it always has, in some tough trading conditions.

Not so long ago, we were tutting and clicking our tongues at pictures of echoing Zimbabwean aisles with no glimmer of merchandise to be seen. And now, we are reliably informed, SPAR has launched a brace of SPAR Express convenience stores in Harare, having opened 12 stores nationally in the past 18 months and are planning on another 10 by June this year.

Comment:

SPAR has quietly set up its own retail division, nothing major, just to manage five stores at the moment, bought when their owners went bust. But it will be buying another five before the year is out, and that amounts to a certain scale. In the past, the Friendly One would have held onto the stores to preserve its footprint until a suitable buyer could be found, but now – a retail division. According to Captain Hook, the move is purely defensive, and geared merely at keeping key sites in play. SPAR’s unique franchise model has been good for the Group, even in these tricky times – for the year to September, turnover was up 9% to R35 billions, with operating profit up 8.4% to R1.3 billion, and trading margin a happy 3.8%. Why would SPAR get properly into retail? Some franchisees are battling to get finance from the Fica-embogged banks, and there’s the small matter of bad debt from franchisees to the tune of R55 bar.

Comment: So a retail division could be a shrewd move, helping the group manage more efficiently stores it will be holding onto for longer than it would have liked.

The My SPAR campaign, which is probably the biggest thing, brandwise to hit these shores since the Pick n Pay and Woolies rebrandings, is gathering momentum, with POS rolled out to the stores, and the heartening story of a man who loved his woman so much that he used an entire store to propose to her all but entering folklore in the last week. And don’t think this is just a campaign – it’s a mission statement that replaces the iconic "Good for You". "The time has come to refresh the SPAR brand," says Group Marketing Executive Mike Prentice. "We wanted to re-enforce the key role that our customers play in our business and communicate the close alignment and kinship we have with them."

Comment: One of the things that SPAR has consistently got right is making an emotional connection with its shoppers. Now they’ve taken that core value, and embedded it more deeply in the South African brand.

SPAR has kicked off a great new repositioning campaign which places the customer at the heart of everything it does, based on the simple but striking premise that everyone has a relationship with a particular SPAR in their lives – hence “My SPAR”. The campaign has kicked off with TV ads, press inserts, in-store point of sale and of course the ubiquitous social media, and is aimed at refreshing the traditional marketing approach which focuses, as you know, on product price and range. “SPAR isn’t in the food business, serving people,” points out Group Marketing Executive Mike Prentice. “We are in the people business, serving food.”

Comment: Great stuff – a campaign which takes the essence of a much-loved brand and distils it into a concept with which all comers can identify.

The Times/Sowetan Retail Awards results are out, and the big winner is Shoprite, who took gold in all five categories in the grocery section, viz: overall customer experience, supermarkets and hypermarkets, and stores used for daily, weekly and monthly shopping. Economies of scale did not hurt the Big Red One, which now claims 16 million individuals frequent the stores under the actual Shoprite brand. Second was of course Pick n Pay, third SPAR, forth Checkers, and in a very creditable fifth, Boxer Superstores. TOPS at SPAR won hands down in liquor, pipping Ultra and Pick n Pay for the honour, and claiming that the recession turned out not to apply to them at all. The Awards are run by TNS Research Surveys, who canvas a range of punters for their views on the subject.

Comment: Awards eh. Where would the PR ladies be without them. And the gents, of course.

Last week’s convention at Sun City was a cracker of an event, highlighting not only the scale of SPAR’s operations – 900-plus delegates, including some suppliers – but also its family ethos. At a time when the alternative ownership models are under some strain elsewhere, hem, hem, the convention was characterised by high spirits, constructive engagement with the relevant issues and an abiding sense of us all being in this together, through good times and bad. In other SPAR News, the Verdant One has just opened its sixth feeding scheme with Operation Hunger, this one in the picturesquely-named village of GongGong in the Northern Cape.

Comment: Inspiring stuff, all round.

In more Clicks news, they’ve just reached the happy milestone of 250 instore pharmacies, which makes them the biggest pharmacy retailer in the country, with pharmaceutical turnover at R1.5billion last year. Distribution arm UPD is also the largest of its kind on these shores, growing turnover 14.9% last year and increasing market share. No time to relax, though: Shoprite is in the unusual position of snapping at Clicks’ heels, with 104 MEDI-Rite pharmacies in selected stores, dispensing 1.9million prescriptions in the year ended June 2010, and growing sales 60%. Pick n Pay with 18 stores and plans for 40, and SPAR who have just rolled out their pilot store at Shelly Beach, have also thrown their hats into the ring, although Woolworths has judiciously removed it with the closure of their three experimental outlets.

Comment: A hotly contested space, where the numbers are not huge but which certainly seems to bring the punters into the shop.

SPAR has announced its Mr SPAR winners for the year. Mr SPAR Retailer is Wiebe Zoetmulder, who runs a group of stores which includes Gateway, the legendary Knowles and Richdens in Hillcrest, and which turns over R600bar per annum. Mr SPAR DC is Group Marketing Executive Mike Prentice, who joined the Group some 19 years ago. The award has been going since the late 60s, and weathered some pretty dodgy hairstyles in the two decades which followed.

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An update on SPAR’s venture into pharmacy: the idea is not, unlike some of the other big players, to gut the independent sector and march roughshod over the competition, but simply to add value to SPAR’s existing service offering. The plan, apparently, is to open 10 or so pharmacies, in either an in-store or a TOPS-like format just outside the store. Interestingly, the concept is only available to existing SPAR members. The inaugural store has just opened at Shelley Beach, with additional licences currently being applied for.

Comment: Refreshing that SPAR is not talking about demolishing the competition and stamping out the little guy as some other players have been doing, at least by implication.

Heartened no doubt by breathless McKinsey reports of the pending retail explosion on this African continent, and champing at the bit to go head to head with Shoprite for a swing (to mix three sporting metaphors) at Nigeria’s 150million punters, SPAR are opening a flagship shop in Lagos, and have plans for others in Otta, Abuja and Port Harcourt. The idea is for all stores to be owned corporately for the first five years, then to license them to employees and other interested entrepreneurs thereafter – a compelling model in that hard-trading economy. An interesting challenge for retailers in that market is the resistance – now breaking down – on the part of suppliers, who historically and in the absence of retail infrastructure, preferred to sell their wares to licensed dealers.

Comment: A culture for which SPAR’s DC model might be well-adapted.

SPAR has rolled out its new money transfer service to 190 of its 850-odd stores, and while it’s early days yet, the signs are promising. Of SPAR’s 45 million transactions every month, around 60,000 are utility bill payments, indicating a receptiveness to the idea of SPAR as a financial services provider. The money transfer transactions, which take place at dedicated kiosks, cost the transferer R9.90 – a not inconsiderable sum for SPAR should things really get up to speed – but are free for the recipient. According to group ops director Roelf Venter, the initiative was a no-brainer. “Everybody is selling bread and milk,” he says. “You need to give customers more reasons to come into your shop.”

Comment: Especially when so many of them are drawn from the ranks of the great unbanked.

The Verdant One’s turnover was up a pleasing 8.8% to R17.5billion for the six months to Feb, with operating profit up 13.2% to R685.1large. While low inflation has hit home, and while Captain Hook anticipates slightly slower growth for the second half, a generally pleasing set of numbers, with some exciting news in the pipeline, viz. that SPAR is succumbing to peer pressure and getting into drugs at last, with a stand-alone SPAR pharmacy opening at Shelley Beach next month, where it will do a roaring trade in sunblock and implements for the removal of fish hooks from the fleshy part of the hand. More exciting news is the opening of a store in Mozambique, where any rollout will be served by the Lowveld DC in Nelspruit, just 200km from die grens.

Comment: Great stuff, that jolly green feller. While the DC/wholesaler model does have its drawbacks for a rollout all over the continent, it’s dashed handy for opening stores in neighbouring states.

Pick n Pay, Shoprite and Nielsen have agreed not to talk about market share any more, which is great news for us, because, um, because ... hey wait a minute! Last time anyone checked, Pick n Pay was still the biggest guy in town with 34% (or 33.7% without its now defunct Score stores) while Shoprite had grown 1% to 30%, SPAR was coming in a game third at 25% and Woolies an understated 10%. Together, interestingly, they own only 50% of the South African food market, the rest of which is owned by the independent and the informal sector, who are more concerned with making a living than beating their chests and haggling over percentages which may or may not mean anything.

Comment: But assuming they do, isn’t it in the interests of various stakeholders to know? And isn’t it anti-competitive to collude in the suppression of those numbers? Tweet us <a href="http://twitter.com/TradeTatler" target="_blank">here</a> if you have a view on this.

Clicks, you will recall, now has 224 in-store dispensaries in its 354 stores. Shoprite, next off the blocks, has 100 and counting, quite rapidly. Pick n Pay has 17 in its Hypers, and despite the fact that Pharmacy doesn’t offer anywhere near the margins but does offer twice the headaches of Liquor, they plan on rolling out another 40 in short order. SPAR is trialling a couple, something Woolworths has not done very well – despite their deal with Netcare who were going to be getting the licenses and running the dispensaries. In 2003 legislation was passed to the effect that pharmacies, once the preserve of actual pharmacists, could now be owned by anyone, which meant open season on the now-struggling independent pharmacy sector. Pharmacy licenses are still only issued by the Department of Health, who apparently do it seldom and at random, to the frustration of the big boys.

Comment: The one advantage privately-owned pharmacy has over the corporate dispensary, is of course the personal care and service on offer – something for which many South Africans still seem willing to pay.

Capitec, who do the back-end for retailers allowing punters to draw cash at the tillpoint, are waiving their R1 withdrawal fee at various retailers for the next three months, including Pick n Pay, Checkers, Shoprite, Pep, Boxer and various SPARs. This to encourage Mrs Shopper to draw cash at the safe, well-lit till rather than the shady ATM, where all manner of muggers and scammers are champing to relieve her of her hard-earned. The upside for retailers here is that they’re able to channel their cash overflows back to the consumer, rather than having loads of the tempting stuff on hand to be filched from them, either by robbers or the banks who charge exorbitant deposit fees.

Comment: A win-win situation, as the expression goes.

Around 35 million people in SA have a cellphone, it seems, while only 11 million of us have a bank account. And of those who have the former but not the latter, plenty want to get some of their money from point A to point B, pronto. Enter SPAR, whose Instant Money JV with Standard Bank enables people with cellphones to transfer cash between SPAR branches for cheap. The big plus for rural punters, who are more likely to be on the receiving end of these transfers, is that SPAR has such a healthy footprint in the sticks, and the banks do not. Research business Gartner believes that by 2012, cellphone banking will be in the top 10 mobile apps.

Comment: An ingenious twist on Shoprite’s Money Market idea, and perhaps the first brave steps in the race to become SA’s first true retailer/banker.

Business data boffs McGregor BFA have put together the collected thinking of all the gimlet-eyed analysts we love to meet over tiny little quiches at results presentations, and the sharp-nosed fellers don’t have a kind word to say about retail right now, unless they’re talking about Woolies, which broker consensus rates as a “buy”. Shoprite and Pick n Pay are rated as “sells”, while SPAR cracks the nod as a “hold”. Food retailers – a defensive stock in these treacherous times – are generally held to be overpriced at the Johannesburg Securities Exchange (JSE) where they trade at premium multiples of up to 18 times. However – and here’s the rub for Johnny Foreigner – they’re considered to be underpriced for adventurers relative to retail stocks from other developing countries, currently trading at a 25% discount.

Comment: Arcane stuff, but the lifeblood of this great creaking edifice we call capitalism.

The big chaps are (slightly) at odds about how low food prices will go at the till, and how long they’ll stay there. SPAR’s marketing head Mike Prentice believes that food inflation has bottomed out (StatsSA are calling it 1.6% for Jan) and that it is likely to start picking up again in the next month or so. Pick n Pay food director Kevin Korb is of the view that it will flat line at its current position for the next five or six months. While the availability of agricultural commodities and the price of food itself are of course the major factors driving inflation at the till, others naturally also come into play. Eskom’s hikes will cost Pick n Pay R85million in the first year alone, and while the intention is to absorb as much of the cost as possible, some of it will inevitably come from Mrs Punter’s patent leather purse.

Comment: The good news regarding food inflation is that at the moment, globally, supply outstrips demand.

SPAR are busy earning all that green in the logo, having sponsored and hosted a wonderful Environmental Summit for kids from all over South Africa and the continent last year, and running an absolute hoot of an ad on Animal Planet showing various fauna refusing plastic bags at the checkout. And all of this with the joie de vivre that distinguishes them in the SA retail environment.

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SPAR’s turnover rose 9.2% to R8.8billions for the quarter ending December, which the consensus seems to be was a solid performance. Our Uncle Sidney, who knows a bit about this sort of thing, points out that trading space was up around 4% for the period, suggesting like store growth of 5%, a number which points to the general toughness of Things Out There at the Moment. On the cautious upside, volumes were up as food inflation declined, and the smart money says both inflation and consumer spending should be up as the year unfolds, with full-year sales a little more on the bullish side.

Comment: A difficult Christmas then, like that one time with the in-laws.

SPAR’s second half performance (turnover up 15%) was down on the first half (24.5%), attributable in part to a decline in inflation from 16% to 9%, with a further decline to around 6% expected by the end of the year. Taking SPAR’s real growth into account, and adding that 6% for inflation, the Green One could be looking at growth of around 8% in the next financial year, in line with their slightly more modest expectations – although Wayne Hook believes, quote, “we may have to dance a little, but we think we can hold on to our gross margins.” Profit for the year before tax rose 15% to a solid, comforting R1.1 billion.

Comment: Nice one for the shareholders, too, whose dividend this year increased 26% to 322c per share.

SPAR’s turnover increased 19.5% to R32 billions for the year ending September 30, while trading profit was up 25%. But as SPAR point out, it has been a year of two halves – the friendly, buxom first half when inflation was running at 16% and turnover was up 24.5%, and the skinny, mean-spirited second half when it increased only 14.9%, which is actually not too bad in these testing times, and may be attributed in part to the reduced price of petrol. Upgrades to various DCs haven’t hurt either, with SPAR dropping R145bar finishing off the KZN perishables outfit and R104 million on the final phase of the South Rand expansion. The rural location of many SPAR stores continues to do the right thing by turnover as the government social grants programme presses on, and expansion into Mozambique is now on the cards. On the downside, some Build It owners have been squeezed somewhat in the downturn, with SPAR making net provisions of bad debt to the tune of R890 million, 50% up from last year.

Comment: Still jolly, still green. And as we never tire of saying, that turnover is only out of the DCs, or so we’re told.

SPAR was named as the Top Symbol/Fascia group in the UK at the annual Retail Industry awards, and not just for the general snappiness of their logo – among the achievements which counted were their training programme and bringing the Eurospar format to the UK for the first time. As far as we can tell, a Symbol/Fascia group is what we might call a trading brand in these parts.

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