Shoprite takes on the DRC
Africa’s largest supermarket group, Shoprite, entered the Democratic Republic of the Congo (DRC) with the opening of a supermarket in the capital Kinshasa. The South African company has been planning to enter the DRC since 2007, according to a report by Cedric Bra, retailing analyst at Euromonitor International.
The DRC is currently one of the fastest growing markets in sub-Saharan Africa and is steadily seeing the improvement of living standards. According to Bra, the country has seen real GDP growth of 6% per annum from 2003 to 2011.
“As a result, Kinshasa has experienced a construction and real estate boom,” stated Bra. “This has led to skyrocketing property prices and a rise in the cost of living.”
Challenges to Shoprite in the DRC
The DRC was ranked in the bottom six of the World Bank’s 2012 ease of doing business report, placing 178 out of 183 countries. This has a lot to do with the power blackouts and lack of infrastructure needed to conduct business successfully. Kinshasa, the most populated city in the DRC, has major transport and road infrastructure problems, as well as underdeveloped local supply chains.
The majority of competition in the area comes from a large informal trading sector. “Formal grocery retailers have to combine competitive prices with a superior shopping environment so consumers move away from open markets and street sellers,” stated Bra in his report.
Between 2006 and 2011, the DRC saw 20% growth in real gross national income (GNI) per capita which Bra predicts will “lead to the emergence of a middle-class which will switch to formal retailing”. However, the DRC currently suffers from widespread poverty and the formal trading customer base is small. Bra believes it may be some time before the bulk of consumers can afford to do their daily shopping at Shoprite.
However, the positioning of the Shoprite in the upmarket district of La Gombe allows it access to a base of high-income earners and expats who can afford to shop at Shoprite.
Bra also pointed out that the DRC is the first francophone country on the continent where Shoprite has decided to open a supermarket, which could provide the retailer with some useful insight concerning the decision to expand into other French-speaking countries in Africa.
“Furthermore, marketing material and in-store billboards will have to be written in French or Lingala (the native language in the region),” explained Bra. “The DRC could thus provide a stepping stone to the neighbouring Republic of the Congo, Gabon and Cameroon as well as other markets in Central Africa.”
Kinshasa’s population of 10 million is projected to expand by 50% in 2020, and Shoprite is strengthening its foothold by trying to develop local supply chains. South Africa’s second largest grocery retailer, Pick n Pay, has also eyed the DRC and has announced its plan to make its entrance into the country in the next few months.
Shoprite’s success in Africa
The Shoprite Group has over 15 years experience in Africa and has stores in 17 countries. The 155 supermarkets outside of South Africa are estimated to serve around 10 million customers per month. Part of their success has to do with partnering with local food suppliers and their progressive property division.
Shoprite has also recently opened a store in Abuja, the capital of Nigeria. The group has had a presence in Nigeria since 2005 and has established distribution networks and local supply chains that would pave the way to further expansion. For example, Zambeef, a Zambian meat producer, is a US$200 million business involved in the production and retailing of meat and food products and its retail arm operates Shoprite’s in-store butchers in Zambia, Ghana and Nigeria.
A problem faced by many retailers interested in entering African countries is the lack of retail space or shopping malls. Part of the reason for the Shoprite Group’s success in Africa is due to their Shoprite Checkers Property Division, the property arm responsible for the group’s supermarket expansion programme, either by researching, identifying and leasing new supermarket premises or by developing new shopping centres to accommodate a supermarket.