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News Junction > Blog > Business > Woolies Food faces fresh onslaught from Shoprite
Woolies Food faces fresh onslaught from Shoprite
Business

Woolies Food faces fresh onslaught from Shoprite

Published July 31, 2023
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6 Min Read
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The Woolworths Food business, already facing stiff competition from Shoprite’s Checkers brand, is under fresh attack from the relentless outfit from Brackenfell.

Shoprite’s franchise division, OK, has opened its first OK Urban convenience retail store in Durbanville, Cape Town (just 6km from the group’s head office).

This is not the small-town OK Foods or MiniMark store you may be familiar with.

Its black and white colour scheme with hints of green means it looks a lot more like a Woolies than a Kwikspar. There is a strong fresh offering (including convenience foods, sushi and coffee) and a similar stripped-down range of groceries that one finds in its neighbourhood Checkers Foods format.

Instead of the full variety found in large supermarkets, there are one or two brands (or flavours) per category. Products from the group’s strong and growing Checkers private label offering (including Forage And Feast, Oh My Goodness and Simple Truth) are part of the selection.

Like its new UNIQ clothing stores, OK Urban is cashless, although it has ‘cashiers’ unlike its clothing cousin. The group is aiming squarely at the convenience market – you’re not going to do your monthly shop at these stores – with long trading hours (7am to 8pm).

  • OK Urban stores have a strong fresh offering, including convenience foods, sushi and coffee. Image: Supplied

  • The stores have a stripped-down range of groceries with products from the group’s Checkers private label offering being part of the selection. Image: Supplied

    The stores have a stripped-down range of groceries with products from the group’s Checkers private label offering being part of the selection. Image: Supplied

  • OK Urban is cashless, although it has ‘cashiers’ unlike Shoprite’s UNIQ clothing stores. Image: Supplied

    OK Urban is cashless, although it has ‘cashiers’ unlike Shoprite’s UNIQ clothing stores. Image: Supplied

Moneyweb understands the group has identified a number of sites for these stores in the Western Cape.

The most interesting aspect of this move is that OK is a franchise business. The OK Urban store is company-owned, and once it gets the model right, it will franchise the stores.

This means Woolworths will be facing an onslaught from the group on three fronts: first, Checkers Fresh X supermarkets (the ones with Starbucks and Krispy Kreme) are aimed squarely at the larger Woolworths Food (‘Market’ stores); second, the neighbourhood Checkers Foods stores are allowing the group to enter areas it hasn’t been able to until now; and third, OK Urban will see savvy franchise operators trade in markets they know incredibly well.

That Shoprite has made this move following Woolworths’ decision in 2010 to buy back all its franchise stores is particularly shrewd.

(Spare a thought, too, for Pick n Pay’s franchise business – although PnP has far bigger problems to contend with.)

Under pressure

The Woolies Food business has been under pressure for some time. Almost exactly a year ago, it reported a decline in volumes (sales less inflation) on a like-for-like basis.

This year, it’s in the same boat.

Top-line sales numbers for the 52 weeks to the end of June look decent – up 8.5%, or 6.3% on a comparable store basis. But price movement was 8.3%, meaning volumes were up just 0.2%. When excluding new stores, they declined 2%. One bright spot is that sales growth accelerated to 9.4% (7.2% in comparable stores) in the second half – effectively January to June.

Read:
Numbers show Checkers, PnP eating Woolies Food’s lunch
Mighty Checkers machine rolls on, Sixty60 sales up 150%
Retailers going backwards as SA consumers buckle

Contrast this to Shoprite, which reported an 18% increase in sales at Checkers over the 52 weeks to 2 July.

This was higher than its overall 17.8% gain for its RSA Supermarkets business, where comparable growth was 10.3% (its update did not disclose the like-for-like growth at Checkers). This is a remarkable result, considering its internal selling price inflation was 10.1%.

It opened a total of 301 stores in SA over the past year, which include the 94 acquired from Massmart (all rebranded to Shoprite or Usave). It opened 18 Checkers stores in the first half.

Has this growth accelerated, particularly with the new, smaller Checkers Foods format?

In the first half of the financial year, Shoprite says Checkers grew its market share by R1.9 billion (market share growth was similar at Shoprite).

Overall, the group increased market share by 1.4% in the half, with 46 months of consecutive market share gains. This number will surely go to 52 months when it reports results at the beginning of September.

The momentum at Checkers continues to build. Add the energy from a world-class grocery franchise business, and Woolies (and Pick n Pay) are going to have a lot more to worry about than hefty load shedding diesel bills.

Read:
Supermarkets’ diesel bill nears R3bn in nine months
Will load shedding cut SA Inc profits to zero?

#Woolies #Food #faces #fresh #onslaught #Shoprite

TAGGED:facesfoodFreshonslaughtShopriteWoolies
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