Despite the economic climate which is hampering the development of many of South Africa’s large companies, SPAR’s strategy and focus on people is allowing it to grow continuously and take advantage of opportunities all over the continent.
A shining light in South Africa’s business sector, SPAR has, for more than 50 years, been leading the way when it comes to retail strategy and customer service. Now operating across the entire rainbow nation, as part of the global group, SPAR has not allowed economic, political or social issues to slow its rapid growth. Now occupying a strong position among the top three supermarket groups in South Africa, and a top player in the global market (2ndby number of stores), SPAR is planning on further strengthening its grip on the SA market, offering industry leading service to customers and playing a bigger role in developing the communities in which it operates.
In February, the company announced a robust set of results, claiming that sales had increased by 14.1% from R24.5 billion to R28 billion for the 18 week trading period to January. Its subsidiary companies showed strong growth and liquor sales in particular were impressive, showing more than 12.5% growth – ahead of the market trend.
CEO Graham O’Connor says that although there is growing competition, SPAR remains a firm favourite in the SA market place and this is down to an ambitious growth strategy.
“In South Africa, we are a big player,” he says. “We are the second largest supermarket group operating in the country. The market is very competitive between Pick n Pay, Shoprite and ourselves and now new players like Massmart coming into the equation.
“Our core business is independent wholesaling to independent retailers. We’re a voluntary trading group with retailers who own their own business and operate under the same banner which is SPAR. They operate in the retail space with support from ourselves and the SPAR group.
“In terms of the group, we’re at about 4500 people and in the wider retail group it’s probably in the region of 25,000 people.
“Business has been very good, we’ve had strong growth in South Africa and we’ve acquired an Irish business two years ago which has done very nicely for us and will continue to do so – business has been strong,” he adds.
THREE DECADES OF GROWTH
O’Connor joined SPAR for the first time 29 years ago as a Group Accountant. He became the Head of the SPAR KwaZulu-Natal division in 1987 but in 1997 he left the group to start his own industrial catering business and became a partner in five SPAR retail stores. He returned to the group in 2014 as Chief Executive Officer taking over from long-standing predecessor Wayne Hook. Looking back over three decades of involvement with SPAR, O’Connor says that much has changed and the business is now a completely different, much more competitive organisation.
“We have improved our game enormously in that time – we’re much more competitive in a range of areas,” he says. “We’ve become much more price competitive, we have bigger stores, the sales in our stores are excellent, the quality of our retailers has improved over time, and with all those things combined we’ve made a radical change. If you look back 29 years, we were on the peripheral, operating small stores and battling to compete with the opposition. As time has gone on and we’ve become more professional, we’ve competed better in a range of areas and become bigger and better.”
Refreshingly, this is not a company that is happy to sit still and is always looking for growth – even during tough economic situations. In July 2015, SPAR announced the opening of two new stores in South Africa, one in Oudtshoorn and one in Plattekloof. The store in Oudtshoorn is run by a team of three husband and wife entrepreneurs – Johnny and Isabel Forbes, Heinrich and Raba Terblanche and Skillie and Petra Pretorius. According to SPAR, the store has “a clean, bright, modern interior with good signage throughout. It has a large deli and bakery section and a solid grocery offering.”
In Plattekloof, the newly revamped SUPERSPAR has a fabulously bright, freshly stocked interior and has essential conveniences such as a large parking lot, an instore florist, a coffee shop, a butcher and a TOPS liquor store right next door.
The Western Cape is strategically important for SPAR and so the company will soon undertake an expansion of the regional distribution centre.
“We’re about to embark on a big expansion of our Western Cape distribution centre and we’re continuing to expand our wholesale footprint so we’ll be spending something in the region of R400 million in the next year through capital expenditure,” explains O’Connor.
“We’re always looking for opportunities to expand our business, whether it’s into Africa or the rest of the world. The opportunities are there because SPAR operates in 42 countries worldwide and there are big opportunities that arise from that.”
AFRICAN SPAR
In October 2015, SPAR International announced plans to grow its footprint in Africa with the opening of stores in Douala, Cameroon and Lilongwe, Malawi. The company also stated that it was planning a further three SPAR sites in Cameroon including a Hypermarket in Yaoundé. This followed on from the announcement of growth in Nigeria where the company has opened a new flagship store in Murtala Muhammed Airport in Lagos, and a hypermarket in Port Harcourt.
SPAR International Managing Director, Dr Gordon Campbell said: “Five years ago we identified the major potential for growth of the SPAR brand in Africa. Building strong partnerships, sharing international best practice and adhering to the SPAR principles of focusing on freshness, quality, choice and customer service has meant that SPAR is now at the cutting edge of retail in the region. SPAR South Africa has been a key enabler of this expansion and has made a major contribution to the success across the African continent, sharing best practice and experience with new partners.
“Our partnership approach, as well as the flexibility and adaptability of our brand, has resulted in an offer that can meet the various needs of the modern African consumer. Recent developments in Cameroon and Malawi are an example of how success can breed success in SPAR with established partners contributing their knowledge and expertise to make new market entry a great success.”
O’Connor says: “We have moved into Zimbabwe, which is a difficult market, and we’ve also made moves in a couple of other African countries as well. When opportunities arise, we will certainly go and make a move. Our model is different to the chain stores that are already there. We like to find a local partner and then operate on that basis and we are busy with that now.”
BUILDING ON A STRONG PLATFORM
The supermarket/retail environment in South Africa is extremely competitive. Established big name players, who have also spread into Africa, are providing stout competition for SPAR and this means SPAR businesses have to work hard internally to drive customer loyalty.
“We have independently owned stores with retailers who are very entrepreneurial and that certainly gives us an edge,” says O’Connor. “Our drive on fresh and our drive on store upgrades helps us – we try and do major upgrades to 20% of our stores each year, which is much more than opposition, and that helps us stay ahead. The fresh food ratios in our stores are higher than our opposition and we’re concentrate hard on that and we believe that gives us an edge.
“Tough opposition is one thing, the tough economy is another. It has created pressure and has forced consumers to be selective and look for value for money. There’s been a whole range of challenges that have come to the fore but we have addressed those.”
And it seems like consumers have welcomed SPAR’s efforts as it continues to post strong results and encourage customers through the door even though research released recently by Retail Price Watch suggests that SPAR is not the cheapest brand on the market.
The research website compared the prices of 50 national brands from SPAR, Pick n Pay and Checkers stores across the country from 2012 to 2016. In January 2012 a basket of 50 identical grocery items cost R1,033 in SPAR, R1,036 in Checkers and R1,058 in Pick n Pay – a differential between Spar as the cheapest and Pick n Pay as the most expensive of only 2.4%. By January 2015, the same basket cost R1,120 in Pick n Pay, R1,214 in Checkers and R1,237 in SPAR. Pick n Pay came in cheaper but the difference between the three stores remains marginal at 3.1%. By January 2016, the basket was the least expensive (R1,281) at Checkers, R1,316 at Pick n Pay and R1,351 at SPAR, with the differential widening to 5.4%.
O’Connor says that effective marketing and an ongoing focus on company values mean that the company will continue to develop in the future.
“We have a detailed promotional program whether it’s on television, on leaflets or in press, we use all media avenues to promote SPAR to the consumer.
“We hope to improve our brand image, making sure that’s top of mind with our consumers. We want to play a major role in the communities we serve and drive the business forward. We are a values based organisation and we base our whole business on passion, entrepreneurship and family and that’s absolutely important for us. We see ourselves growing organically and growing our market share in the next few years,” he says.
And of course, while focussing on growth, the company will not ignore its most important asset – its people. In fact, the company is placing a huge emphasis on people development and as a result, was awarded by the Top Employers Institute as one of the country’s best employers for 2016.
The research from the Dutch HR business found that provides exceptional employee conditions, nurtures and develops talent throughout all levels of the organisation and has demonstrated its leadership status in the HR environment, always striving to optimise its employment practices and to develop its employees.
At the certification ceremony in Johannesburg in October, O’Connor said that people development is vital for SPAR.
“Most important for us is succession planning and leadership development because we believe we need leaders from the ground of the business all the way through. We’re a very culture oriented business and people are our most important asset so for us it’s crucially important.”
By investing in people and partnering with individuals who understand local communities and their needs, SPAR will continue to thrive and develop successful operations in its chosen markets. Further development in Africa and the ongoing growth in SA look set to cement SPAR’s position at the peak of its industry, with no sign of any slowdown anytime soon.