Wholesale retailer the Spar Group is reviewing its store names to give more prominence to the SaveMor brand by establishing more stand-alone stores aimed at the low-income market.
The country’s second-largest retail group has for decades driven store rollouts for its Spar and SuperSpar formats. It also operates KwikSpar and Spar Express outlets at Shell petrol stations, as well as 85 SaveMor stores. SaveMor is also one of its affordable in-house grocery products labels.
This year, Spar announced plans to have separate brands for premium and discount categories to cater to different market segments.
“We are working on rationalising our range a bit and simplifying it for our customers, because they get confused sometimes with the number of Spar brands, banners and formats. It’s more about shifting our focus to what our customers need. It doesn’t have to be about size — it’s rather about simplifying our offering to our customers. We are doing some strategic work in that space. It’s not finalised yet, but we know we want to have a niche offering and a discount offering,” said Max Oliva, CEO of Spar Southern Africa.
He said the supermarket chain had not really driven SaveMor store growth in the past, and they believed now more than ever there was an opportunity to use it to grow the low-end market. “We see it as a low-cost discount format providing a limited range of products,” said Oliva.
The new SaveMor stores, which will require lower capital expenditure to be set up, will be rolled out in rural areas and townships.
There is a big opportunity in the SaveMor space. We have 85 of those stores in South Africa, and growing sales at double digits. So we know there’s a market
— Max Oliva, Spar Southern Africa CEO
“Spar’s strength is in rural communities ... almost half of our business comes from there,” Oliva said.
The group’s stronghold is KwaZulu-Natal, one of the most competitive regions for grocery retailers.
In the first quarter of next year, Spar will unveil a concept store for its new SaveMor outlets.
“There is a big opportunity in the SaveMor space. We have 85 of those stores in South Africa, and growing sales at double digits. So we know there’s a market,” said Oliva.
He said Spar prioritised expanding its network of independent retailers rather than pursuing a corporate store strategy. It is selling most of its corporate stores, and Oliva said there had been great interest in the purchase of the stores because of their locations.
Last year, Spar opened 104 new stores, bringing the total number to 2,519, adding more than 2,765 jobs to communities across the country.
It is considering launching a programme to help entrepreneurs who want to enter its network of independent retail members.
“We haven’t done it yet, but it’s something we are actively developing. We want to make sure new entrants to this business have the retail knowledge or the ability to be successful entrepreneurs. We get inquiries from people who are retiring and want to cash in their pensions and invest their life savings in a supermarket, thinking it’s an easy business to run. Over the last 18 months, some of the stores inland had challenges ... We did not provide the new entrants with enough support to help them succeed,” said Oliva.
Traditionally, Spar is a wholesaler whose member stores stock its grocery products.
“The future of retail should not be about big corporates going into remote areas to extract value, but rather about them being value creators for as many communities as possible across the country. And, being the only true home for independent entrepreneurs, the Spar Group is committed to this ambition.”
The group has set ambitious retail-growth targets for 2028, and a crucial focus will be on expanding SaveMor and its in-house branded products. About 90% of its private-label business is from local suppliers, rather than big corporates.
It has 900 suppliers in its Spar supplier development programme, with 95 being fully compliant, and more to follow. Through its rural-hub skills transfer and empowerment programme in Limpopo, Spar is now buying between 30% and 60% of farmers’ monthly output and bringing it to market under its Freshline and Country Value labels. Spar plans to increase this support to 80% in 2025.
“Our private-label range is being tiered to align with customer segmentation after the acquisition of private-label business Encore. Our private-label business is growing ahead of our wholesale business.”
The aim is to have 30% of sales coming from in-house brands in the next three years, up from about 26.4% at the moment. Southern Africa operations reported a turnover increase of 4.8% to R49.3bn for the six months ended March 31 2024.
Spar has the liquor brand Tops, pharmacies and hardware-store brand Build-it in its stable. It also has an online delivery platform, Spar2U, which has been rolled out to more than 426 stores. Oliva said, “Our strategic ambition is that within the next five years online sales will mirror our bricks-and-mortar share.”
It is pursuing new opportunities in non-grocery areas such as pet products, where rivals are a step ahead. Oliva said discussions were under way, but nothing had been concluded yet. However, he said they were “aggressively looking at a couple of acquisition opportunities in that area and others as well”.
Last year, Spar’s performance was hit by failed software implementation at its distribution centre in KwaZulu-Natal, which negatively affected gross profit margins, because buyers could not see pricing and subsidies properly, hindering sensible pricing decisions. As a result, Spar retailers opted to stock competitors’ products. However, Oliva said there had been an upturn, and all those members had returned.
The Spar Group also operates in Namibia, Botswana, Eswatini, Mozambique, Switzerland, Ireland and the UK. It is exiting Poland and has a joint venture in Sri Lanka.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.