Spar stakes its claim on outlying areas

Nompumelelo Magwaza

Food retailer Spar Group is setting up “nursery retailers” under the Savemor brand to give Usave stores a run for their money as the battle for lower-income consumers in outlying areas intensifies.

Spar stressed that this was not part of its main strategy but a way of giving independent store owners a chance to be part of the Spar franchise.

“Before we set up a store in any town or rural area we first look for an opportunity to open a Spar store,” Spar Group’s chief executive, Wayne Hook, said yesterday.

If the market was not large enough or did not justify the cost of opening a Spar store, “we then open a Savemor store”, he said.

The brand was launched 18 months ago and already has 28 stores in places such as Qunu, Mthatha and Tugela Ferry. In the past six months Spar has opened 11 Savemor stores in outlying areas and as far afield as Swaziland.

Hook said Savemor was a small part of Spar’s business and he added that it was all about identifying opportunities in outlying areas.

“Our first priority will be to open a Spar business, as we have done in the past.”

Just like Shoprite’s Usave stores, Savemor will have no sophisticated butchery and bakery equipment but will have basic products and acceptable shopping standards.

Although competitor Usave already has 256 outlets in nine countries on the continent, Spar said it would not rush into opening stores because it was still “testing” the concept.

For the six months to March, Spar’s turnover increased 9.6 percent to R23.3 billion, while profit before taxation advanced 5.2 percent to R821 million.

Evan Walker, a portfolio manager at 36One Asset Management, said this was a good opportunity for independent store owners at the bottom end of the market who wanted to be part of the Spar business.

Walker said it cost between R2m and R10m to refurbish or set up a store in a way that achieved an authentic Spar look and feel.

“So what Spar is trying to do [with Savemor] is to offer an independent store owner an opportunity to join a franchise at a more competitive price, which will be able to compete against the likes of Usave and Pick n Pay’s Boxer stores.”

This did not mean that Spar had not been active in rural areas and smaller towns.

“Spar has dominated in these areas and has been a leader in most of the regions.

“But just as they have presence with the Spar store, they could still have the same presence with [the] Savemor store,” Walker said.

He said there was still a big opportunity to convert independent store owners into franchisees, because it would probably be hard for them to survive the competition in this market.

“Savemor is an affordable model for independent owners to buy into a buying group and get a franchise base behind them without having to spend a huge amount of capital expenditure in refurbishing the store.”

Walker said, however, that Spar had been very slow in rolling out this concept. “We think they were a little bit lacklustre in their approach, as Shoprite was taking a lot of market share in rural areas.”

Spar’s liquor brand, Tops, continued to be the group’s star performer, with turnover rising 18.2 percent to R1.9bn.

Hook said Tops stores had become a well-known brand among South Africans. He said Spar had spent time making its stores more customer-friendly and visually appealing.

Spar shares gained 1.76 percent to end at R124.59 yesterday.