SPAR Group SPAR, the quiet upstart from Durban has shaken up the retail industry. SPAR was born

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SPAR Group SPAR, the ‘quiet upstart from Durban’ has shaken up the retail industry. SPAR was born from an idea by Adriaan van Well, who felt that independent wholesalers and retailers could work and prosper together through a voluntary trading model. The first SPAR store opened in the Netherlands in 1932 and was initially called DE SPAR, an acronym used to describe the organisation: Door Eendrachtig Samenwerken Profiteren Allen Regelmatig, which translates into English as ‘all benefit from joint co-operation’. After rebranding as “SPAR’, the brand expanded into Belgium and by the end of the 1950s, signalled its intention to move beyond Europe. SPAR South Africa was established in 1963 by a group of eight wholesalers to service 500 small retailers.

By 2003, SPAR South Africa had grown through a series of takeovers to become one consolidated wholesaler controlling the rights to the SPAR brand as mergers and well the following brands: SAVEMOR (launched 1975), KWIKSPAR (launched 1990), SUPERSPAR (launched 1998), Build it (Building materials brand, launched 1985) and TOPS at SPAR (liquor brand, launched 2000). SPAR continued with its growth and in 2011, introduced Pharmacy at SPAR and SPAR Express (convenience stores at petrol stations). Today, SPAR has expanded into Switzerland, Sri Lanka and Ireland. According to the 2021 integrated report, SPAR Southern Africa comprises eight distribution centres, employs 4 476 staff and offers 2440 retail stores (including food, liquor, building materials and pharmaceuticals). Countries served include Lesotho, Botswana, Malawi, Zimbabwe, Seychelles, Namibia, Mozambique and Eswatini. The SPAR operating context 2021 has proven to be a challenging year across the board. SPAR refers to the two black swan events – the onset of the Covid-19 pandemic in early 2020, which continued to disrupt all the groups’ markets, and the civil unrest in South Africa during July 2021. The events were shocking and sad, and SPAR reacted quickly to the initial violence by closing all distribution centres considered to be at risk. The 2021 financial year also welcomed a new CEO and executive director, Brett Botten. Brett has many years’ experience with SPAR and his first priority is to deliver a much-improved performance in the year ahead. During 2021, SPAR partnered with Naveo Commerce to develop a unique end-to-end e-commerce platform which would be piloted in South Africa. The e-commerce platform sets out to digitally empower people and use data science and marketing technology to offer retailers more information on their consumers. In addition, the e-commerce platform is set to enhance the existing loyalty programme to establish a loyalty ecosystem that can operate effectively in both ‘brick-and-mortar and digital formats. SPAR is harnessing the value of data and insights to predict how best to engage with their consumers.

But, the 2021 financial year was a tough year. SPAR Southern Africa saw a 0,4% decline in its core grocery business. Overall store growth was hampered due to the civil unrest. To mitigate this, the SPAR group engaged in an aggressive store upgrade programme, which demonstrated retailer willingness to reinvest in their stores and the SPAR brand. In total, 219 SPAR stores were upgraded during 2021, which is 38 more stores than upgraded in 2019, before the disruption of the pandemic. The SPAR house brands saw a turnover growth of 1.2%. Included within house brands, the SPAR private label turnover declined by 0.4%. SPAR private label represents the SPAR-branded products competing with proprietary brands on the shelf. Private label sales were also impacted by the unrest. Of the five affected private label factories, two resumed production in September 2021 and were able to meet approximately 90% of SPAR’s volume requirements for these products.

TOPS at SPAR seems to be making a recovery with liquor turnover increasing by 11.2%. Yet, liquor turnover in 2021 was still 6.4% lower than in 2019 – a clear demonstration of the impact of the government-enforced liquor restrictions which resulted in over a third of the available trading days being lost, most of which occurred over weekends. These liquor restrictions also impacted the performance of certain grocery stores located adjacent to TOPS at SPAR liquor stores. SPAR Southern Africa celebrates the Built-It brand that offered a 23.5% turnover growth. According to the CEO, the performance of Build-It is underpinned by the strength of their supply chain and a focus on retail implementation. One of the smaller retail units, Pharmacy at SPAR, responds to the growing trend of self-care and personal health and offers continued opportunities to drive their pharmaceutical offering. At the same time, increased travel boosted the performance of SPAR Express, located on petrol forecourts.

Their coffee and food-to-go offerings within these stores are well supported and SPAR launched 14 new SPAR Express stores during 2021. In his closing remarks in the 2021 Integrated Annual Report, Brett Botten confirms that the uncertainty surrounding Covid-19 pandemic remains. He states that the consumer environment is expected to remain constrained. They have increased their promotional programme for the year ahead to assist their retailers in supporting consumers and their communities. Being positive about future opportunities, SPAR has a strong pipeline of new stores for development, as well as a robust store upgrade programme committed to by their retailers.

Questions

1. Explain the strategic importance of analysing the external environment and 10 critically discuss the various methods for external environment analysis.

2 . Using the information in the case study, conduct an analysis of the SPAR 20 internal, macro- and market environment.

3. Distinguish between different business-level strategies that SPAR can use to 10 achieve its strategic goals.

4. Identify and critically evaluate the business-level strategy of SPAR and comment on its appropriateness based on your findings in questions 1 to 3 above.