Leading UK supermarket chain Sainsbury’s has selected International Distribution Network (IDN) as its distributor partner in the Middle East and North Africa. The Omani-based distributor, which was founded in 2020 will look after Oman, Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, Jordan, Pakistan and Egypt from its operations hub in Sohar Port. We look at that deal and the risks and opportunities for UK supermarket chains wholesaling in Africa.
Sainsbury’s plans to offer more than 12,000 products to its network partners in the Middle East via IDN. If successful, it marks an interesting development for the British retailer. Sainsbury’s has some form in the Middle East. At one point it had more than 100 stores in Egypt, a failed venture that led to it exiting in 2001. Subsequently, CEO Mike Coupe found himself indicted by Egyptian courts on embezzlement charges relating to the failed venture. Coupe, who only became CEO in 2014, was subsequently acquitted in 2015.
Tesco has, in the past, had some wholesale trade relationships in Africa and one can still find one or two stores in West Africa painted up in versions of Tesco branding. It is not uncommon to see British supermarket private label products on shelves in West Africa, imported by entrepreneurs with connections in the UK. At one point after Gadaffi was removed from power in Libya, Iceland had a small presence there. M&S has a presence in Libya, Morocco and Egypt, albeit for non-food only.
Waitrose has 12 stores in the UAE with partner Fine Fare Foods Market. Waitrose also has wholesale relationships in Malta (Arkadia Foodstore) and Ghana (MaxMart) and started a wholesale relationship with South African supermarket retailer Fruit & Veg City (owner of the Food Lovers Market chain).
However, the real inroads into African markets have been made by French (and Belgian) retailers. In particular, sales of Casino and Leader Price products (there are, also franchised Casino and Leader Price stores in several francophone countries). Increasingly, Carrefour, which also has retail partners in North Africa, West Africa and East Africa, is also looking at African markets as a wholesale channel. It has partnered with online retailer Jumia. In DRC, Colruyt’s Everyday brand can be commonly found in supermarkets.
As yet, neither Sainsbury’s nor Tesco have signed up African distribution partners, as far as we know. For both companies, the priorities will likely be major anglophone markets: Nigeria, Ghana, Kenya and possibly also South Africa or Mauritius. Secondary markets of potential interest will be Tanzania, Uganda, Rwanda, Gambia, Sierra Leone and Liberia.
It will be interesting to see how Sainsbury’s gets on and how IDN manages to position the brand. Sainsbury’s exited Egypt during the second intifada under accusations from Egyptian shoppers that it was pro-Israel. While the Egyptian military government under Abdel Fattah el-Sisi has adopted a pro-Israel stance and Israel has sought to normalise relations across the Gulf region, that is at government level. Many consumers remain opposed. The issue isn’t just about perceived relations with Israel: in there was widespread anger in Egypt towards French brands as a result of comments made by French President Emmanuel Macron perceived to be insulting to Muslims.
The anger led to a boycott of French goods by consumers in Muslim countries and while it has died down now it affected Carrefour, as well as several major French FMCG brands including Danone and L’Oréal. We think there is a risk the boycott can spread further in Africa.
Those issues tend to affect markets in sub-Saharan markets less, but they still offer a cautionary tale to brands that are perceived to be representative of a particular country. Shoprite’s stores in Nigeria found themselves under attack after Nigerians in South Africa were subjected to xenophobic violence. The lack of empathy for Shoprite also helped foster a situation in which Nigerian regulators targeted the South African retailer. Shoprite is now seeking to partially exit Nigeria (in effect taking a minority share so that its retail operations can be fronted by a Nigerian-owned company).
