Dis-Chem's baby range is booming – and that's got some retailers rattled
Major South African pharmacy retailer Dis-Chem is charging into the baby market, acquiring two big brands in almost as many years, drawing concerns from competitors around its increasing purchasing power with both local and international suppliers.
Baby City, a retailer selling a wide array of products for moms-to-be, babies, and toddlers, had more than 30 independent stores across South Africa, making it one of the biggest specialist chains in the country's infant sector.
In late 2020, Dis-Chem bought Baby City for R430 million. The following year, it opened three clinics, with one flagship in Johannesburg, using the Baby City name. In April 2022, Dis-Chem fully integrated Baby City into its own brand, with a logo and name change.
But Dis-Chem wasn't content with owning the biggest baby retail brand in South Africa. A year after buying Baby City, Dis-Chem announced that it was looking to get another local baby goods retailer onboard, Baby Boom.
Like Baby City, Baby Boom, with 23 stores nationwide, caters to parents-to-be and parents of children up to the age of three, selling prams, strollers, car seats, bottles, baby foods, breast pumps, nappies, and wipes. The difference between the two, according to the Competition Commission's recent approval notice of the merger, is that Baby Boom "does not carry a wide range of premium products and stocks products at a lower price point."
Dis-Chem's takeover of Baby City and Baby Boom has rattled its competitors, as noted by third-party concerns raised with the Competition Commission, which are detailed in its reports on both transactions.
While these competitors aren't mentioned by name, the Competition Commission does, in other sections of its reports, make reference to Clicks, Checkers, Game, and Pick n Pay. It also mentions the recent surge in specialised online retailers like Chelino Baby, Clicks Baby, Little Me by Checkers, and Everyshop, all launched within the last three years.
Concerns raised by competitors in both cases relate to Dis-Chem's increased "bargaining power to negotiate better pricing with suppliers that will give them a competitive advantage in the market for baby care and mother care products."
"One competitor submitted that it is concerned about Dis-Chem attaining significant market share as a result of the transaction, thereby increasing its purchasing power with both local and international suppliers," noted the Competition Commission.
"Another competitor indicated that while it does not believe that this merger will have a significant impact on its business, it points out to the Commission that Dis-Chem's acquisition of Baby Boom (Dis-Chem having already acquired Baby City) significantly increases its buying power within this market including in portfolios such as nappies."
In both instances, the Competition Commission dismissed these concerns, noting that "it is unlikely that the merged entity will, post-merger, have significant bargaining power against its suppliers."
Dis-Chem's buyouts and the concerns they've raised come amid fierce new competition in the baby retail sector.
Clicks' dedicated baby brand opened two standalone stores in 2021, at Mall of Africa and Gateway Theatre of Shopping in KwaZulu-Natal, with plans to roll out more in the coming years.
Mr Price Baby launched several stores in August, while the Shoprite Group's Checkers launched its first specialised, standalone Little Me store at the end of 2021. All competing retailers have confirmed their mission to grow their standalone offerings.
