Supermarket Retailing in Africa

Felix Adamu Nandonde, John L. Stanton, Felix Adamu Nandonde, John L. Stanton

• Publisher: Routledge
• Year: 2022
• ISBN:
  9781000562712
• Edition: 1
• Topic: Commerce
• Subtopic: Commerce de détail

This book surveys the landscape of supermarket retailing in Africa, showing how this expanding part of the retail sector is changing consumerism on the continent.

Drawing on research covering retail formats, consumer behaviour, strategies, operation research, ICT, relationship marketing, and market linkage, the book investigates the many factors impacting the growth of supermarkets in Africa. The contributors employ theories, concepts, and methods in order to help us to understand changing consumer behaviour, the strategies used by suppliers to access supermarkets, the role of service suppliers in the growth of the sector, and ultimately how supermarkets can assist in making the market linkage between producers and consumers in Africa. The chapters provide a comprehensive exploration of modern retail, discussing its growth and future, identifying consumer preferences, as well as suggesting solutions to the challenges that retailers and suppliers on the continent face in developing the sector.

This book will be of interest to scholars and students of the retail sector and retail management in Africa.

1 Understanding performance of retail formats in Africa

John L. Stanton and Felix Adamu Nandonde

DOI: 10.4324/9780367854300-1

Introduction

Africa has witnessed a rapid increase in supermarkets as a market channel for convenient consumer goods. There are many factors that have accelerated the growth of the retail supermarket business on the continent, and these include the swelling of the middle class, an increase in income, urbanisation, and macro policy changes that attract foreign direct investment (FDI). As a result of these factors, international retailers such as Carrefour, Walmart, and Sainsbury’s have successfully opened stores in various African countries. Similarly, African retailers such as Shoprite and Game (South African retailers), Tuskys, Uchumi, and Nakumatt (Kenyan retailers) have followed suit and opened stores in many countries on the continent. However, the supermarket business terrain is not a smooth ride for retailers operating in Africa.

Despite this positive trend of supermarket emergence across the continent, strong signals of the failure of African retailers began to manifest in the initial stages of the operations of such retailers. For example, Shoprite, a South African retailer, closed its operations in Tanzania and Uganda as early as 2017 (see Nandonde, 2019 for details). Further, the retailer planned to exit from a number of African countries such as Nigeria and Ghana on the grounds of poor performance. Furthermore, the retailer is closing many stores in its home market (South Africa). In this respect, it is important to understand the business environment of African retailers for the future sustainability of the supermarket sub-sector on the continent. There is a need to investigate where people buy their food and who the major players are in each market.

Following the rise of retail distribution in Africa, different structures have emerged, such as hypermarkets, superstores, discount stores, supermarkets, and convenience stores. It is crucial to understand the extent to which the African retail business environment favours all these forms of business. Accordingly, this study is intended to understand the performance of various retail formats on the continent and suggest which forms are suitable for growth of the retail business in Africa. In this chapter, the definition of supermarkets is not based on space but rather on self-service, whereby consumers can select his/her preferred items from an assortment of items in the form of self-service.

Previous studies on retail formats in developing economies have paid significant attention to China (Goldman, 2001), more specifically on the manner in which international retailers change the formats of their stores in these developing economies. The studies, however, have paid little attention to consumer purchases in these stores. Therefore, the current study tried to understand the kinds of products consumers purchase in the cited stores to determine how these emerging retail businesses can remain competitive and grow sustainably in developing economies.

There are various types of retail format that are emerging in Africa. This chapter argues that it is very important to understand the business environment and culture of the host country before starting to operate in any of the retail formats. Literature shows that many retail formats that exist in developed countries are shifting to developing economies.

One should not expect to have every format available in every market. In cases where there was only one modern chain in the country, figures were excluded in the interests of space. We should also note that we did not include every country in Africa. This is not to suggest that those not included are less important, but rather that the countries in general are meant as examples of how modern African retailers function.

To achieve its objective, the study relied on the information from the webstore Planet Retail. This website was used to collect the information below, but this is only a small amount of the material that can be gained from their data. The study used data on sales, consumer spending, and a number of different retail formats in different countries in Africa. We understand that the data used in the study is not representative, as some stores were not presented in the database. Furthermore, we relied on the available data from 2014. In this respect, the information provided will enable the reader to get an overview of what each market is like.

Algeria

Currently, there is only one type of market structure in place in Algeria, besides the local markets, which is the hypermarket/superstore format. There are only two hypermarkets in this country, which are owned by French retailer Carrefour. The retailer re-entered the Algerian market in 2013 after its failed operation in 2009, following its first foray in the country in 2006. Rising incomes and underdevelopment of the retail sector attracted investors to this country (Vidalon, 2015). The amount of sales increased from 2014 to 2019. From 2014 to 2015, there was a spike in sales from 0 to US$12 million. From 2015 to 2019, there was a huge increase in sales, which reached US$22 million.

The projected sales for 2020 to 2024 show a steady increase to US$25 million. Visitors spent on edible grocery. Retailers saw a slight decrease in sales in 2015 and 2018. Consumer spending per capita initially decreased from 2014 to 2015. From 2015 to 2024, spending per capita increased slowly, but the amount never expected to reach the level of 2014. In 2014, the spending per capita was about US$780, and the expected amount in 2024 is US$700.

By 2014, there was only two supermarket-format retailers in Algeria, Inditex and Yves Rocher. Inditex had superior sales at the value of US$11 million; Yves Rocher had a value of US$5.1 million. Yves Rocher’s sales decreased from 2014; the forecasted sales for 2024 are 4.9 million. In 2015, two more retailers, Carrefour and Intersport International, entered the competitive landscape in Algeria. Carrefour entered the market generating US$11.2 million in sales. Carrefour steadily increased its sales from 2015 to 2019. It is projected to generate US$25 million in 2024, while Inditex is forecasted to generate US$15 million. The increase can partly be attributed to the development of society and partly to consumers increasingly using the modern grocery channel.

Yves Rocher is considered the leader in terms of the number of stores; it started with 13 outlets in 2014 and increased to 16 stores in 2016. The retailer is forecasted to have 19 outlets by the year 2024. From 2015 to 2019, Carrefour had steady sales in their one location, and they are projected to still be at only one location by the year 2024. Inditex started with three outlets in 2014 and then increased to six outlets in 2016. Inditex is projected to have 11 outlets by 2024. Intersport had one outlet in 2015, which steadily increased throughout 2019 to six outlets. By 2024, they will have 11 outlets.

Angola

Angola is characterised by four store formats: hypermarkets, superstores, supermarkets, and convenience stores. In 2020, the wholesale and retail business was estimated to contribute 18% of the GDP and employ 1.7 million people. The formal retail business was estimated to control 30% of the annual sales of the retail business in the country in 2019, and this increased by 5% in 2000 (www.researchandmarkets.com).

Generally, each business banner, such as Shoprite, operates in different formats, such as supermarkets and discount stores, in Angola. There are two retailers, Kero and Nosso Super, owned by the Angolan government that operates as hypermarkets and superstores. In 2004, Kero’s sales were at US$520 million, and this increased to US$590 million in 2005. From 2005 to 2019, the sales decreased to US$190 million. This is projected to increase steadily to US$230 million by 2024.

Nosso Super was estimated to have annual sales of US$180 million in 2014. However, their annual sales decreased to US$125 million in 2016, and then increased to US$170 million in 2019. There are several reasons for this change in sales in Angola, which had an impact on retail income. It is projected that retail sales will reach US$250 million by 2024. Shoprite started in 2014 with US$100 million in sales; sales are projected to be US$90 million by 2024. Kero had US$49 million in sales in 2014, which steadily fluctuated through to 2019; sales are projected to be US$39 million in 2024. Fruit & Veg City had the lowest amount of sales of all the retailers in this category. They started at US$10 million in sales and this fluctuated through to 2019; they are projected to see a decrease in sales from 2020 to 2024, with sales finishing at US$7 million.

Shoprite is the only retailer operating in the discount store format in Angola. In 2014, it started at US$19 million in annual sales. In 2016, Shoprite reached US$25 million in sales. However, the retailer is confident that sales will increase in the future due to changes in consumer lifestyles and the attractive business environment generated by the Angolan government. In 2016, the retailer announced it would invest US$517 million in the Angola market following the government announcement that it was removing some of the business hurdles for South African retailers (www.supermarket.co.za).

In both, consumer spending is on edible groceries. For consumer spending, in 2014, total spending was US$38 billion. For consumer spending per capita, in 2014, the spending was US$1,400. There was a surge in income spent on groceries in 2017, with consumer spending at US$45 billion and consumer spending per capita at US$1,600. The spending overall decreased from 2018 to 2019. In 2024, consumer spending is projected to decrease to US$34 billion and consumer spending per capita to US$1,250.

The leading retailers are Kero, Nosso Super, Shoprite, Fruit & Veg City, and Yum! Brands. For Kero, sales were US$597 million in 2014 and they reached an all-time high in 2015 with US$605 million. The sales plummeted in 2019 but are projected to be US$230 million in 2024. Nosso Super started with US$190 million, which decreased in 2016, but then increased steadily soon afterwards. The projected sales for 2024 are US$260 million. Shoprite’s sales in 2014 were US$185 million. Throughout the years, their sales fluctuated and reached an all-time high during 2017 with US$190 million. Sales have continued to go up and down and are projected to do the same through 2020 to 2024. In 2024, their projected sales are US$150 million. In 2014, Fruit & Veg City had US$1 million in sales; however, the retailer closed in 2019. For Yum! Brands, sales started in 2015 with US$950,000; sales have remained the same and are projected to be US$950,000 in 2024.

The retailer with a largest number of outlets is Shoprite: The retailer started with 40 outlets in 2014 and employed 4,000 people (www.shoprite.co.ao). Shoprite is projected to have 69 outlets by 2024. In 2014, Nosso Super had 32 outlets. These have slowly increased and are projected to reach 48 outlets by 2024. Kero had 13 outlets in 2014 and this increased to 18 in 2015. Kero is projected to have 13 outlets by 2024, which will be a decrease.

Benin

Since 2014, the Benin market has witnessed the emergence of hypermarkets and superstores. Systeme U, a French retailer, has the only hypermarket and superstore in Benin. Their sales were consistent from 2014 to 2019 with around US$15 million; sales from 2020 to 2024 are projected to increase by a large margin moving up to US$30 million by the year 2024.

Just like the hypermarket and superstore categories, there is only one retailer in Benin in the supermarket and in the neighbourhood store category. Another French retailer, Casino, also enjoyed fairly consistent sales from 2014 to 2019, sitting at around US$1.3 million sales. These sales are projected to remain consistent until the year 2023, when sales are expected to jump up to US$1.8 million. It will remain on the rise throughout the year 2024, capping out at about US$2.1 million.

Casino remains the only retailer in the discount store category in Benin. Although their discount stores are doing better in total sales, ranging from US$2.8 to 2.1 million, these stores are following the same patterns as their supermarkets. Sales remained consistent from 2014 to 2022 and sales are projected to spike in 2023. These sales increases are expected to be bigger than the sales in their superstore category, where discount stores are projected to almost double their sales in 2023, and almost triple their current sales in 2024. In general, the Benin market is dominated by French retailers.

Edible grocery spending is among the top-selling items in retail in Benin. Retailers saw a slight decrease in sales in 2015 and 2016. Since then, sales and consumer spending per capita have been gradually increasing and eventually surpassing their 2014 sales and consumer spending per capita in 2019. Both categories will continue to increase slowly through the years 2020 to 2024 in edible grocery spending. Consumer spending is expected to be around US$4 billion in 2024, and consumer spending per capita is expected to be about US$400 spending per person.

Although Systeme U only has stores in the hypermarket category, it is the top retailer in Benin when it comes to dollar sales. Sales by Systeme U’s remained at US$12 to15 million from 2014 to 2019; whereas Casino was consistent with around US$4.9 million sales. In 2021, Systeme U was projected to increase their sales up to US$20 million and up to about US$30 million in 2024. Casino retail sales are expected to remain the same from 2019 to 2022 and have a slight increase in 2023 and 2024, reaching around US$8 million. In this respect, Casino has more outlets in Benin than Systeme U. Systeme U has only one hypermarket in Benin, where Casino has three stores in total including their supermarkets and discount stores. In 2021, Systeme U is expected to add another outlet, whereas in 2023 Casino is expected to add two more outlets.

Botswana

Shoprite, a South African retailer, has the only hypermarket in Botswana. Dollar sales in Botswana were on a steady increase from 2014 to 2019, where sales were only a tad down from 2018. Dollar sales are projected to increase in 2020 to about US$37 million; the sales are expected to increase even higher to almost US$50 million from 2021 to 2024.

In the supermarket category, the Botswana market is more competitive since there are five different retailers competing. Leading in dollar sales in this category is Choppies, followed by SPAR (a South African firm), Shoprite, Pick n Pay, and Fruit & Veg City. In 2014, Choppies started very inconsistently until 2017, when it remained fairly consistent in dollar sales, and it is expected to remain consistent at around US$500 million in dollar sales.

SPAR has a trend in dollar sales similar to that of Choppies except that Choppies is expected to remain consistent with sales of US$500 million from 2021 to 2024. SPAR is projected to see a steady increase in sales from US$300 million in 2019 to almost US$400 million i...