Shopite and Pick n Pay take on Woolworths with new premium formats

Sep 30, 2019

Pick n Pay Shoprite_flagship
Both Shoprite and Pick n Pay are taking aim at premium South African supermarket chain Woolworths, rolling out new format, upgraded stores with more fresh food and experiential offerings. Shoprite’s concept, called FreshX, has already been introduced into international markets as well.

Shoprite is expanding its FreshX concept by upgrading existing Checkers (Shoprite’s premium banner) stores, with upgrade costs typically around $3m per store. Upgraded stores have a more premium feel in key areas such as produce, meat and bakery. They have wider aisles, “artisanal” style signage larger cheese, fish and meat counters, and in-store bakeries and open areas to accentuate their “market” credentials.

The first FreshX store was launched in 2017 at the Mall of Africa in Johannesburg. The flagship Checkers store is in Sandton City, Johannesburg – the commercial centre of the city. It features a temperature-controlled wine cellar, sushi bar, coffee shop, test kitchen, coal-fired pizza oven as well as an in-store branch of upmarket wellness café brand Kauai.

Overall, Shoprite plans to upgrade 80 Checkers stores to the Fresh X concept, which has also been rolled out to two sites in Lusaka, Zambia. 21 stores have already been converted.

Pick n Pay has also begun rolling out its new premium format, called Next Generation, with a flagship 4,367m² store at the Mall of Africa. As with the FreshX concept, the focus has shifted onto fresh food and a premium shopping experience: one third of the store will be devoted to fresh food, with larger cheese, fish and meat counters, an in-store bakery and sections such as a biltong counter and a sushi bar.

Pick n Pay said that it has 26 of its new, premium stores in the pipeline. As with Shoprite, we expect that the rollout will vary from store to store – in other words, not all of the premium elements such as sushi bars or test kitchens will be implemented in most stores.

Woolworths’ market share in South Africa has risen to 10%, up from around 9.5%. With Shoprite, Pick n Pay and Spar all competing in the mainstream supermarket sector and pushing hard to emphasise their pricing credentials, Woolworths has enjoyed some breathing room at the premium end of the market.

That looks to be coming to an end, but it is not without risk for ether Shoprite or Pick n Pay. Woolworths has a fiercely loyal customer base. Furthermore, its core model – investment in premium and innovative private label products (frequently with one eye on the UK and Australian markets) is replicable but a step change for Shoprite and Pick n Pay.

The issue is not whether customers will enjoy the new format stores. They have been designed around the customer experience and look and feel great. Rather, the challenge is whether enough customers switch and spend enough to merit the costs of the upgrade, the loss of shelf space given over to food counters, and the potential wastage from having higher quantities of fresh food.

Beyond the hype of the flagship stores, the introduction of more premium private label and more artisanal fresh food areas is an attempt to challenge Woolworths’ premium credentials, but will ultimately be backed up the price competitiveness of the core ranges of Shoprite or Pick n Pay. The strategy here is to use the new formats to tempt wealthier customers away from doing all of their weekly shop at Woolworths.

One notable absence in the South African market are medium sized format, food focused discounters. Massmart’s Game format is both larger and has a stronger focus on general merchandise. The real gaps look to be where German retailers Lidl and Aldi exploit: the former by offering a no frills range in return for consistently delivering cost savings of 10% to 30% compared to mainstream supermarket chains. The latter by restricting the offer and promising near premium quality at 10%-20% below mainstream prices.

Loading...

Looking for more trends and insight on FMCG in Africa?

Join Trendtype's mailing list for news, events and more.

Thank you for joining us. Speak to a member of our team today on +44 333 567 9995

Looking for more trends and insight on FMCG in Africa?

Join Trendtype's mailing list for news, events and more.

Thank you for joining us. Speak to a member of our team today on +44 333 567 9995