Checkers takes aim at Woolies’ convenience market

Checkers, part of the country’s largest supermarket group Shoprite Holdings, has mounted an onslaught on Woolworths’ lead in the convenience food market. Its mission is deceptively simple: “Match [the] taste and quality of [the] market leader at better value”. Until recently, this segment had effectively been ceded by all competitors to Woolies, which built a R2 billion-a-year business on it.

Shoprite notes that there is a “trend towards fresh, convenience and added-value foods”. What it doesn’t mention explicitly is that this is a global phenomenon. Pick n Pay attempted an entry into the ‘ready meal’ about five years back and has recently make a second run at it. Spar, due to largely structural distribution reasons, is relatively limited in what it’s able to do. It has had some success with its Freshline range.

In the latter half of last year, Checkers has made a decisive and aggressive entry into this segment of the market. It launched 135 new ‘convenience’ products in 2016. These range from ready-to-bake pizzas, to salads and sandwiches, typical ‘microwave meals’ like pastas, to soups and prepared veggies. In this range, it launched a number of ‘Ready-to-Braai’ prepared meats and side dishes.

Competing with Woolworths in the upper segment of the market is not only about convenience, however. But it’s a noticeable offering to be missing. Woolies came at this from the other direction and realised that it needed a more complete supermarket offering. This is why, five years ago, it started building (and expanding into) bigger supermarkets with larger ranges where customers can complete their shop.

Generally, of course, we still shop at more than one store. So, you’ll find people shopping at both Woolworths and Checkers or Woolworths and Pick n Pay or Woolworths and Spar (or even three or four of these).

One of Shoprite Holdings’ six stated “strategic focus areas” is to continue to grow its share of wallet amongst so-called “LSM 8-10” shoppers. It argues that Checkers has seen the “largest gain in LSM 8-10 [shoppers] since 2011”. According to the All Media Products Survey (Amps), Woolworths serves 67.1% of this market, while Checkers is at “only” 44.7%.

Nearly 2 million (1.9 million) shoppers in the LSM 8-10 bracket who shop at Woolworths, Pick n Pay and Spar (labelled ‘Competitors “A”, “B” and “C” in Shoprite’s results presentation) also shop at Checkers. This is most pronounced in the Woolies base, where roughly six out of 10 also shop at Checkers.

Source: Shoprite Holdings

Getting convenience done right is not easy. This effectively has to be reverse-engineered into a supply chain that’s been optimised to deliver groceries. This speed with which Shoprite managed to do this is notable, given that it has approximately 200 Checkers and nearly 50 Checkers Hyper stores across South Africa.

On the plus side, it’s gotten convenience products into stores and “now sells more in a day than [it] sold in a month”. Its prepared meat and braai products seem, anecdotally at least, to have been very well received. Beyond the 135 products already in stores, it says it has a pipeline of “110 new products currently in development”. Presuming these hit shelves and fridges this year (with no doubt more to come), it’ll have effectively doubled its range!

Entry into this segment hasn’t been without hitches. Stocking and ranging varies widely from store to store and in certain outlets, the ranges aren’t working as well as in others. Here, it’s been shrewd and marks down products that have reached their ‘sell-by’ dates (on the day they do) by 50%. This cuts back on wastage and incentivises customers to try products that likely wouldn’t have.

Source: Author

It’s not clear at this stage whether or not Checkers is producing all of these products in-house (it owns fresh produce giant Freshmark and it launched a food services business serving the hospitality and catering industry in 2011, which is useful). Woolworths, for example, contracts out production to a number of suppliers, including (listed entities) RCL Foods and Rhodes Food Group.

Can it get its share of the LSM 8-10 market to over 50%? Almost certainly. But closer to 60%? That’ll be far tougher. Its next generation stores (like Mall of Africa) are truly world-class but it’s about refurbishing and upgrading the remainder of its real estate which look a lot more like Shoprite stores than flagship, brand new Checkers Hypers. Pick n Pay has not been sleeping either, with new-look, refurbished stores popping up all over the place. And Woolies is, well, Woolies.

Checkers’ in-store offering is, largely, sound. Its staked out a claim in the cheese space and its butcheries and seafood counters are strong. The bakery, however, needs a little more work. But, price (and price perception) trumps almost everything, especially in a moribund economy. There, Checkers has done the hard work.

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