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SPAR plans to open premium and discount food stores

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Retailer exploring foray into non-food niche categories

By Nqobile Dludla

JOHANNESBURG, March 14 (Reuters) - South Africa's

second-biggest supermarket retailer, SPAR Group, plans

to open premium and discount grocery stores while also entering

new niche retail markets, its chief executive said on Thursday.

South African grocery retailers have been refining their

strategies to appeal to both affluent and low-income customers,

to gain a bigger share of customers' wallets.

They are also moving into new non-food markets by opening

standalone stores for such items as pet and baby supplies,

clothing and outdoor adventure products to help diversify and

generate additional income.

While rivals including the country's leading grocer,

Shoprite, and Pick n Pay have distinctive

brands that serve the different income groups, SPAR has fallen

behind.

"With SPAR, what we have been struggling with in the last

while is that, because we tried to cover both markets with one

brand, being able to draw that distinction has probably been a

challenge in the last while," SPAR Group's CEO, Angelo Swartz,

told reporters.

"So we've found ourselves at the crossroads."

The retailer, which also operates in Ireland and

Switzerland, is looking to tier its private-label ranges and

create new grocery store formats, he added.

"Our differentiation is going to focus on premiumizing

and(therefore) we might see a premium format being created and

then at the other end of the market, globally we're seeing the

emergence of discounters, and discounters have been really

strong," Swartz said.

"So we're looking at creating a discounter format."

South Africa's higher-margin upmarket grocery niche is

dominated by Woolworths, while in the discount space,

Shoprite has Usave while Pick n Pay operates Boxer chains

catering for that market.

Outside of grocery, SPAR owns liquor stores and a building

materials business called Build it, the biggest supplier in the

country.

"There is space for growth in adjacent categories, where

specialist offerings can drive feet into stores," Swartz said.

"There are a number of niches which I think food retailers are

going to move towards and we're looking at something similar."

Categories like pet supplies will be considered but the

grocer also wants to branch out into segments that will give it

"first mover advantage," he added.

Swartz did not disclose a budget for the new strategy.

To mitigate further impact from a failed implementation of

SAP enterprise software that hurt SPAR's annual operating

profit, Swartz said the group has requested proposals for a

specialist warehouse management system so that SAP's enterprise

resource planning software is not used in its warehouses.