The company has noted that its three most popular R5 ($0.35) meals are:

• Large igwinya/vetkoek (deep fried bun) – R3 ($0.21)
• Fried egg & tomato sandwich – R4 ($0.28)
• Hot dog – R3.50 ($0.25)

Consumer confidence in South Africa was negative for almost the entire period from mid-2012 to the beginning of 2018, reflecting issues such as high levels of consumer debt as well as rising fuel, electricity and food prices. At the beginning of 2018, however, confidence began to soar and while it has since fallen back in the second half of 2018 it remains net positive.

Within the context of Shoprite’s overall sales, its R5 deli menu is tiny: equating to less than R500m ($0.35m). The company has donated more surplus food over that period. However, it plays an important role in positioning Shoprite as a destination store for black South African consumers, combined with Shoprite’s strategy of price cutting on 10,000 core SKUs.

These lessons are also incredibly valuable in Shoprite’s expansion markets, where average incomes are typically much lower than in South Africa. We already know, in Kenya, for example, that rival supermarket chain Naivas derives up to 10% of its store income in some outlets from its in-store takeaway counter. Shoprite has its own separate takeaway brand: Hungry Lion, giving it two price points and formats through which to target consumers.

Traditionally, one of the problems for expansionist retailers is that they are typically targeting the upper middle class. But middle class (people earning more than $10 a day) incomes are volatile, and for all the talk of the growing middle class the pace of growth is often below that of the economy overall e.g. Nigeria). The exception to this is Botswana supermarket chain Choppies, which has made strong inroads in South Africa’s north west with its no frills supermarkets that target low and middle income consumers.

This is a key growth opportunity for Shoprite, too, which is increasingly going head to head with French supermarket giant Carrefour (which partners with CFAO in West Africa and Majid Al Futtaim in North, East and Southern Africa. In July 2018 Carrefour and UK supermarket giant Tesco formed a buying alliance, with the aim of driving down prices. Last week, Majid Al Futtaim announced it might acquire a South African supermarket chain, rather than build organically. So the pressure on Shoprite is not just to meet South African competitive benchmarks for price competitiveness, but to try and compete with Carrefour’s global buying power.

Here, Shoprite still has the advantage – both in terms of product pricing and store formats. Even in Kenya, one of the most developed African retail markets, Carrefour stores are sited in premium malls. While they stock some low priced SKUs, Carrefour stores are not positioned to target genuine middle class consumers. Shoprite’s strategy in Kenya is initially be to enter via existing premium malls. But its growth depends on it being able to leverage its expertise in targeting the aspiring and lower middle  class consumers and to establish its own mini malls (as it does in Southern Africa and Angola, for example).