Tuesday, January 18

Checkers challenges the Woolies head-on in a space of convenience

Checkers is stepping up its battle with Woolies for a share of the wallets of higher-income shoppers. Last week, it opened its first smaller-format Checkers Foods in Weltevreden Park in northwest Johannesburg. Three more stores will open early next year in Ballito, Westlake (along with Steenberg in Cape Town) and Franschhoek.

All four of these locations are indicative of exactly the types of neighborhoods and towns Checkers are targeting with this push.

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Read: Checkers vs Woolies over the past decade

Previously, the size and economics of even the smallest of their Checkers supermarkets just didn’t work in these areas. To begin with, there was often no commercial space available for a 2,000 m2 store.2 or less, and the demand in many of these types of communities was not great enough for a supermarket to do business profitably.

Freshness from Checkers Foods in Weltevreden Park. Image: supplied

In Franschhoek, for example, there are only two supermarkets: a smaller Pick n Pay (franchise store) and a Woolies Food. Checkers is betting that it will be able to capture a fair share of shoppers in that community with a high-end convenience offering.

Read: Grocery Store Showdown

The new Checkers Foods format is around 1200 m2 – comparable to a mid-sized neighborhood Woolies Food store, where you probably don’t (and can’t) do your monthly shopping.

Cool, convenient

It has an obvious focus on fresh food, and its convenience ranges target lunch, braai, and dinner, as well as emergency shopping.

There are standard, albeit smaller, butcher, bakery, ready-to-eat and fresh food departments (fruits / vegetables), as well as a Starbucks counter and a wine cellar in the Weltevreden Park store. The grocery ranges are relatively comprehensive, but with a limited number of brands and products in each category.

Read: Checkers Targets Woolies Convenience Market [2017]

Checkers Foods’ first store is about half the size of a new generation FreshX store (such as the 2800m2 Chartwell Corner in Dainfern, which opened last month) and nearly three times smaller than one of the group’s oldest supermarkets.

It was always a matter of time before Shoprite Group extended the Checkers proposition to smaller stores.

Read: Massmart sells most food assets to Shoprite for R1.36bn

It was never going to be able to sustain its above-market growth and store rollout plan by opening only ‘standard’ supermarkets and high-end Fresh X stores. Until recently, the group’s only convenience offering was through its OK Foods franchise division. However, this is generally aimed at a customer other than Checkers and is typically found in middle-income communities and smaller, rural towns.

Hot food at Checkers Foods in Weltevreden Park. Image: supplied

The launch pace of Checkers stores in recent years provides some clues as to why the group had to extend its offering to the convenience segment.

Since 2018, it has opened six or seven Checkers stores a year. This suggests that there are not many markets left where large stores can be built. Its next-generation stores are already much more compact, with the same space selection that hovers around 70% of older stores. Adding four Checkers Foods stores in just a few months offers an indication of how aggressive the group can be in the years to come when entering this space.

For the first time, it will now compete head-on in many markets with not just Woolworths Food, but Spar (and sometimes Pick n Pay) for a share of the convenience wallet.

The current footprint of the rivals’ store shows what is at stake …

At the end of June, Woolworths Food operated 194 independent food stores (not food departments that are part of larger clothing stores, usually in shopping malls). Of these, there are likely more than 50 who do not compete directly with the ladies in their catchment area. This is what Checkers Foods is looking for.

Meanwhile, Spar has 918 stores in South Africa, spanning the Superspar, Spar and Kwikspar formats. This push from Checkers puts it squarely against Spar’s main proposition (there is likely already a Checkers near every Superspar, whereas Kwikspars generally serve very small communities or towns). Here the number of Spar stores that are not directly competing with Checkers is probably around 100.

And what about Pick n Pay? It has generally relied on franchise (family) supermarkets to address the convenience market. The group has around 284 franchised supermarkets in South Africa, but many of them are larger stores. These are similar to Spar in that they are operated by their owners and the group has limited control of the shopping experience in these stores (although some may argue that it is better!). One wonders if the new CEO, Pieter Boone, will modify this strategy …

By the end of next year, we will have a clear view of how aggressively Shoprite is going after this market segment with Checkers Foods.

Any bets on the group that will launch about 20 of these stores by the end of 2022?


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