Market and Trade Data
Supermarkets Boast Super Sales and Potential
By Chase Winter and
. . .
FAS Report SF7008
Supermarkets account for approximately 55%
reap record profits and aggressively expand, South
African supermarket chains offer more products than ever
to their consumers — and possibly more opportunities to
U.S. exporters.Retail grocery sales added up to nearly
$22.4 billion in calendar year 2006, and market
observers expect that amount to shoot up by as much as
25 percent in the next four years.
Sizing Up Supermarket Chains in Southern
(July 1, 2005-June 30, 2006)
major South African supermarket leaders — ShopRite, Pick
’n Pay, SPAR, and Woolworths — dominate the country’s
flourishing retail grocery market. They claimed almost
65 percent of retail grocery sales last year. In the
future, they expect to capture an even greater market
share and to expand into other countries in Southern
observers project that if U.S. exporters can
successfully navigate the procurement, distribution, and
import practices of the dominant players in the
market—and overcome concerns about price and
distance—South Africa may prove a lucrative opportunity.
Creates Economic Opportunities
The nation’s first multiracial democratic elections in
1994 signaled the end of apartheid, a system of
institutionalized racism. Retail grocers quickly
capitalized on a new era of economic opportunity.
inhibited by racial segregation, South African
supermarkets expanded and diversified. They now cater
not only to upscale neighborhoods, but to townships and
lower-income market segments. With this placement
strategy and so many new supermarkets, the average
distance a South African must travel to a supermarket
has decreased from 20 kilometers to 1.7 kilometers.
the fact that supermarkets have experienced explosive
growth in South Africa and now account for approximately
55 percent of national food sales, they still make up
only about 2 percent of all food retail outlets. The
growth potential for South African supermarkets is
therefore huge — and untouched so far by foreign chains.
Weighing the Alternative
Third-Party Importers, Agents, Distributors,
Knowledge of U.S. products
Some supermarket chains import predominantly
via third parties
Can deal in large quantities as well as
small quantities that supermarket chains
might not want to handle
Can mean low overhead costs for supermarkets
Sell to multiple retailers
Dealing with HQs reduces cost of middle-men,
potentially reducing expenses to the
SPAR, Woolworths, and Shoprite all have
prominent import divisions
Have interest in procuring U.S. exports
directly from manufacturer
Wholesalers deal in large volumes
U.S. product lines can enter non-supermarket
chain food retail sector
Cut into profit margin of supermarkets
May make U.S. exports more costly at point
Pick ’n Pay primarily imports through third
Supermarket chains do not have a great
understanding of U.S. products
Supermarkets may be hesitant to import high
volumes of product due to overhead costs
Supermarkets require U.S. manufacturer to
The four supermarket chains detailed in this
article do not typically source from
South Africa is the economic powerhouse of Southern
Africa. Major supermarket retailers are expanding north,
drawn by higher profit margins and with a view to being
the first to make commercial inroads.
potential benefits motivate South African grocers to
move despite the problems that plague the region. South
Africa’s neighbors — Angola, Zimbabwe, Mozambique,
Swaziland, Lesotho, Botswana, and Namibia — struggle
with AIDS and crippling economic problems.
problems South African retailers encounter as they
expand elsewhere into Southern Africa include the
problem of reorganizing stores to suit local preferences
and pricing, handling currency volatility, border
crossings, trade barriers, non-tariff barriers, and
developing supply chains and local procurement from
South African supermarkets which have established a
presence in neighboring markets strive to source from
local producers, but many times, it is cheaper — even
with transportation costs — to source from South Africa,
where distribution channels are reliable and products
are high quality.
approach, however, has led to claims of South African
corporate imperialism and accusations that South African
supermarkets undermine local farmers, manufacturers, and
less-competitive supermarkets. Supermarkets counter with
claims that they create employment, lower prices, and
With a modern industrial base, fertile soil, and a
favorable climate, South Africa is largely food
self-sufficient with the exception of wheat, rice, and
oilseeds. This reduces the need of supermarkets to
import foods. However, South African supermarket chains
still must import fruits and vegetables to adjust to
seasonality and to provide their customers with products
not found in South Africa.
expressing an interest in U.S. products, none of the
four major supermarkets import U.S. fruits or vegetables
because of distance, cost, and South African trade
barriers. They do, however, stock a small amount of
processed U.S. goods.
main supermarket distribution channels, but how each
supermarket chain utilizes them varies. U.S. exports can
enter supply chains via specialized third-party
importers, supermarket chains, and wholesalers. Each
method has its own advantages and disadvantages.
South Africa suffers from tremendous income inequality.
Its population can be classified into modern consumers
and marginalized consumers.
that offers the most promise to U.S. producers is that
of the established consumer, which constitutes about
one-quarter of South Africa’s population — just over 12
million people. They represent approximately 65 percent
of total household cash expenditure.
Woolworths, Pick ‘n Pay, and some SPAR stores target
these established consumers.
members of the target group live in the other countries
into which South African supermarkets have expanded.
Though these markets may not offer as much potential for
U.S. exporters, spillover benefits are still possible.
Pick ‘n Pay :
Pick ‘n Pay serves
consumers in a variety of formats, including
hypermarkets, supermarkets, and gas marts. The stores
strive to appeal to middle- and upper-income consumers
who live in South Africa’s urban and suburban areas.
Last year, the chain earned $5.25 billion in revenue.
Pay has not done any recent business with U.S. suppliers
— despite interest in product lines — because of the
high freight costs and cost of U.S. products. The last
import from the United States to South Africa’s Pick ‘n
Pay was a shipment of grapes in 1998.
ShopRite, the largest
supermarket chain in Africa, aims to continue expansion
across the continent. Its three chains — ShopRite,
Checkers, and U Save — target different demographics.
ShopRite and U Save cater primarily to the lower- to
middle-income segment, while Checkers focuses more on
those in the middle- and upper-income groups.
Currently, ShopRite does not import from the United
States because its goods cost more than those of other
suppliers. Two years ago ShopRite expressed an interest
in U.S. chicken, but anti-dumping measures closed the
market despite ShopRite’s lobbying.
SPAR South Africa has
operated under a licensing agreement with a parent
company in the Netherlands since 1963. SPAR operates
under a voluntary trading system, in which individual
SPAR stores rely on headquarters for guidance but have a
high degree of independence. Last year, these business
practices helped SPAR stores — Superspar, SPAR, and
Kwikspar — earn $2.4 billion in revenue.
marketing representatives visit trade shows throughout
the world looking for products to take back to South
Africa and present at a special biannual SPAR trade show
for franchise owners and distribution centers. Regional
distribution center owners visit these tradeshows and
choose products to buy. Headquarters then imports the
products through a clearinghouse or importer. Imports
can also come to distribution centers or stores through
a local importer or supplier.
Analysis of South African
as a Market For U.S. Food Exports
Many U.S. product lines unavailable
Uniqueness of some U.S. product lines
Diversity of U.S. products
U.S. goods expensive
Unfamiliarity with U.S. products
Niche markets-such as organics
Marketing of products, development of brand
Direct supply of supermarkets via
Growing upper and middle classes
New market for product lines not yet
European and Far East competition
Large fluctuations in rand-dollar exchange
Protectionism, such as sanitary and
Woolworths’ 300 South
African stores include food stores, corporate stores
with apparel sections, micro food stores in rural areas,
franchise stores, and gas marts. It caters to consumers
in the upper- and middle-income groups. Last year it
earned $2.2 billion, with food sales accounting for $1
the past few years, Woolworths has experienced explosive
growth averaging 22 percent annually, and has launched
aggressive expansion plans to open 130 new stores in the
next five years.
Woolworths avoids importing from the United States
because executives feel unfamiliar with the market, have
not found a viable source, and have concerns about
product prices being accurate when they get to the
Woolworths indicates that U.S. producers need to make an
effort to market products and correlate with Woolworths’
customer profile. Woolworths’ efforts to stock green
goods may provide an opening for U.S. organic product
Products South African
Supermarkets May Be Interested in Importing
Seafood, especially shellfish and canned
Tree nuts, especially Almonds
Processed fruits and vegetables
Products not currently available in
*Currently facing import restrictions
The dynamic growth in the South African supermarket
sector in the last two decades, and its potential to
expand, indicate its significance for U.S. food
consolidation of the retail grocery sector around the
four main supermarket chains, giving them a combined
market share of 65 percent, makes them primary markets
for U.S. food exporters looking at South Africa.
suppliers can connect to the South African consumer
market by dealing directly with supermarkets’
procurement and distribution networks. This
consolidation can reduce costs for both South African
supermarket chains and U.S. food exporters.
however, U.S. food exporters must convince South Africa
to buy their wares. Commonly cited barriers to this
objective include distance and price. Other obstacles
include a lack of general knowledge about U.S. products
problems have not kept all U.S. exports out of South
Africa, however. In fiscal 2006, U.S. agricultural,
fish, and seafood exports totaled close to $150 million.
Just over $55 million was shelf-ready, consumer-oriented
foods and beverages, and essentially the same amount was
in semi-processed agricultural products, primarily
destined for food and beverage manufacturers.
United States has the opportunity to provide South
Africa with much more. By importing from the United
States, South African supermarkets could increase the
variety of products they stock on their shelves and
offer U.S. exporters an incredible new opportunity.
Winter was an intern in the FAS Office of Agricultural
Affairs in Pretoria, South Africa, Jill Havekost is an
intern in the FAS Office of Public Affairs and Executive