Shoprite reportedly in talks with Majid Al Futtaim to exit and sell its Uganda stores

There is speculation from inside Uganda that Shoprite has opened talks with Majid Al Futtaim (MAF), Carrefour’s partner in the Middle East, Egypt and East Africa, for MAF to acquire Shoprite’s store network. Both Shoprite and Majid Al Futtaim have not confirmed or denied news of the deal.

Shoprite has previously exited Tanzania (2014) and announced its plans in September 2020 to exit Kenya. It has has 5 stores in Uganda. A sixth store is due to open in the new Arena Mall in Nsambya, in Kampala.

Both Shoprite and Majid Al Futtaim have not confirmed or denied news of the deal.

MAF’s Carrefour network is putting pressure on Shoprite. There are two stores already open and three more in the pipeline. Shoprite CEO Pieter Engelbrecht has made clear that he is prepared to exit underperforming markets, which has led to Shoprite’s exit of Kenya and the sale of its stores in Nigeria to Persianas Group.

Shoprite has operated in Uganda since 2000 but only ever had a handful of stores. When Kenyan supermarket chains including Nakumatt, Uchumi and Tuskys exited Shoprite did not accelerate store openings – an indication that the demand probably wasn’t there. The last of its stores opened in 2018. If that is the case, and we think it is, it means Shoprite and Carrefour will compete for the same customers, especially in Kampala.

Strategically, Uganda is an odd fit for Shoprite. It is Shoprite’s only East African market and its isolation from Shoprite’s South African-based supply chain makes it harder and less profitable as a market. The exit from Kenya means there is little regional strategic value in Uganda. The increase in tariffs on imported food products in 2020 has compounded issues.

So while we do not have confirmation of a Shoprite exit it is not prima facie unlikely. For MAF, if it is does indeed acquire 5 or 6 Shoprite stores we think it is also unlikely it will also open another 3 planned stores. Rather, the more likely scenario is that any potential purchaser of Shoprite’s stores will pick and choose.