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Africa: Massmart, Shoprite unveil big spending plans after strong FY

Shoprite and Massmart, Africa’s two largest grocers, have unveiled plans to invest hundreds of millions of Euro on expanding across the continent. The separate announcements, which will see the two groups increasingly open warehouses and stores in markets outside of South Africa, came even as both reported strong growth for their fiscal years.

Walmart-owned Massmart, South Africa’s biggest food and goods wholesaler, said it will spend about 2.6bn rand (€251m) across the next 16 months, as it plans to open as many as 40 new stores.

Massmart currently operates around 340 stores in 12 African countries (all south of the Sahara), and said five of the new outlets will be outside its home market. The group said it was hoping to open more outlets internationally, but added that it was facing difficulties in securing property. CEO Grant Pattison noted that Massmart has identified around 15 locations across Africa where it wants to add sites, in countries such as Kenya, Angola, Mozambique, and Zambia, and will work on securing property rights.

The comments came after Massmart said total sales for the year ending 25 June jumped up 15.6% to 61.2bn rand (€5.9bn), with operating profit up 3.7% to 2.14bn rand. Sales at its food business broke through the 9bn rand mark during the year, and Pattison said Massmart was investing heavily to help boost such sales further.

The group noted it invested a record 1.7bn in its stores and infrastructure during the year. It expects net trading margins to grow from 2014, once it “overcomes the hurdles” of adding more distribution centres and upgrading its technology systems.

Meanwhile, main rival Shoprite (Africa’s largest pure grocer) said it will invest $205m (€165m) to open new logistics centres and outlets in Angola and Nigeria. The group also said it is looking to re-enter the Indian market, which it exited in 2005.

Shoprite said it will open warehouses in Luanda, Angola, before Christmas this year, and will set up a “big distribution centre” in Lagos, Nigeria, as soon as it finds a suitable site. It said the moves will help reduce the negative effects of road and port congestion, and help it react to consumer needs quicker. In the last fiscal year (ending June 2012), Shoprite’s international sales jumped up 20%, and it said improving its distribution network was “a must”. Besides DCs, Shoprite also continues to expand its store network. The group said it plans to open 30 new outlets within the next year in the two countries – nine in Nigeria, and 21 in Angola.

Shoprite also said it is considering re-establishing a presence in India, with CEO Whitey Basson noting: “We pulled out of India in 2005 even though we liked doing business there. Now [COO] Pieter [Engelbrecht] and I are going back to set up offices before we decide on going back.”

The announcements came as Shoprite saw its sales for the year rise by 14.4% to 82.7bn rand (€8bn), with headline earnings per share

up 19.6%. The group saw its best results come from its International operations, where sales jumped up 25.4%, while its core supermarkets division reported a 14.3% rise.


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