Choppies expands footprint beyond region
Leading Johannesburg Stock Exchange (JSE) listed Botswana supermarket chain Choppies has revealed ambitions to expand its footprint beyond the region.
Choppies, which also announced that it is evaluating a possible secondary listing on the JSE soon, revealed that it is building from its strong market-leading base in Botswana.
The supermarket chain said it is growing rapidly and profitably in South Africa and Zimbabwe, and is building its first stores in Zambia and Tanzania.
The grocer plans to roll out more than 35 stores in all regions by the end of 2016, excluding acquisitions and also hopes to enter the East African market.
Following the successful listing on the JSE on May 27, 2015 Choppies is not slowing down.
The plans are contained in the company’s operational and financial highlights for 2015.
The company announced that it is well positioned to achieve its target of over 200 stores across six countries on the continent by December 2016.
It said a secondary listing is anticipated to provide access to additional source of capital to support “our continued expansion into existing and new markets; enhance the liquidity and tradability of our shares on the BSE (Botswana Stock Exchange) and the JSE through a greater spread and diversity of investors”.
The secondary listing would enhance Choppies’ public profile in the South African market. The company said despite investing heavily in rapid growth, it continues to generate cash, increase gross profit margin and grow profits.
One of the most profitable and fastest growing grocery retailers in Africa, Choppies has added 16 stores to its footprint – five new stores in Botswana, six new stores in South Africa, five new stores in Zimbabwe.
Choppies now has 121 stores with total retail space of 177 031 square metre and has opened two new distribution centres, 8 000 square metre fruit and vegetable facility in Rustenburg and 3 000 square metre facility in Harare.
Choppies now also has seven distribution centres with total warehouse space of 50 313 square metres. It is also assessing entry into the Namibian market.
For its Botswana market the company said formalisation of the retail channel provides an opportunity for growth. The company opened its first store in Lobatse, 75 kilometres from Gaborone in 1986 and today has a compliment of 72 stores across the country.
“Choppies has entered into a joint-venture agreement with a strong local partner for expansion into East Africa,” the company said.
It added that, it is well poised to capture the ongoing shift from informal to formal trade in Botswana.
“Growth has been strong and consistent. Highly cash generative business will continue to support the group’s expansion plans,” the company said.
It added that “extensive logistics infrastructure and a strong base to enable rural expansion and plan to open five new stores by December 31, 2015”.
In Zimbabwe, Choppies acquired 10 Spar stores in Bulawayo in 2013.
All stores have been rebranded under the Choppies banner and are easily serviced with Choppies’ existing supply chain.
“There are opportunities to open more stores in Harare alone. Zimbabwe is significantly less penetrated by formal retail and expansion from the Bulawayo hub to the north; over 30 identified sites in Harare alone. There are plans to open 12 new stores by 31 December 2015,” said Choppies.
In South Africa, the company said it is targeting medium scale towns in the Mpumalanga, Limpopo, North West and Northern Free State provinces.
“Strong store pipeline of over 30 high-probability locations identified and plans to open 19 new stores by 31 December 2015,” said Choppies.
Choppies said investment in marketing and promotional campaigns negatively impacted operating margins but expects improvement.
The company said it was significantly impacted by the mining sector strike in 2014 but added that financial performance and profitability have recovered strongly in 2015.
Chief Executive Ram Ottapathu said they are planning to expand to 200 outlets by next year.
“The opportunities are there in Zambia, Tanzania and Namibia, and we will be concentrating on those markets significantly in the areas where the retail penetration is well below the market average,” Ottapathu said.
South African retailers such as Shoprite provide stiff competition in the Africa expansion strategy, as Shoprite is already present in Angola, Namibia, Tanzania, Mauritius, Madagascar and Uganda. Shoprite, like Choppies, also caters for the middle to lower income classes.