At a glance

• South African retailers continue to dominate Top 5.


• Nakumatt targets East Africa for expansion.


• Regional powerhouses beginning to form in the Gulf states.


• Carrefour forecast to become the third largest retailer by 2012.

Latest sales data for Africa & the Middle East continues to highlight the fragmented nature of the market. In 2006, the region's Top 30 grocery retailers accounted for just 29% of overall modern grocery sales in the region, compared with 59% in Western Europe, for example.

Most countries continue to be dominated by independents, 'mom & pop' stores and, especially in Sub-Saharan Africa, the informal sector. However, the rise of modern retailers in the region's more lucrative markets, especially in the Gulf, is contributing to higher levels of concentration. Domestic and international retailers have established a growing presence in the Gulf due to high levels of spending, relative political and economic stability and a greater demand for modern shopping facilities and international products.

South African retailers continue to dominate the ranking. Last year, not only did they account for the lion's share of the region's sales (60%), but they also held the Top 5 positions. Their strength reflects the overall size and developed nature of their home market.

After the South Africans, French retailers hold the second highest regional share, reflecting Carrefour and Casino's operations in Northern Africa and the Middle East via franchises. Their collective share of sales within the Top 30 amounts to 12% of the regional total, although individually they only obtain single-digit shares. Kenyan retailer Nakumatt is a player to watch. It holds the leading position in Kenya and has ambitions to open stores throughout East Africa. Apart from Nakumatt, no other African retailer (excluding South African ones) has made it into the ranking.

Challenging future for South African retailers

One of Shoprite's latest openings in Angola in December
2006: the 5,000 square metre store in the Belas Shopping
Centre, Luanda.

Shoprite's leading position in the ranking is due to its presence in South Africa mainly, while its presence in 15 countries across the rest of Africa is largely symbolic of its leading position in the ranking. The retailer's activities in countries such as Ghana, Nigeria and Angola have been vital to the development of modern retail structures in these countries. Shoprite is now concentrating on these three markets as their size and economic structure promises the best return on investment in the long term. Both Nigeria and Angola have been attracting investment because of their oil reserves, while Ghana's stability and economic growth make it a fertile ground for development.

Shoprite is planning to open several new stores in each country. Despite structural and bureaucratic problems, most of these new Shoprite outlets are trading well, mainly with the small, but rich, social elite. The first store in Lagos, Nigeria, was profitable within a year, despite the fact that 90% of products are imported from South Africa. However, Shoprite believes that structures will develop inside its foreign bases to improve trading and sourcing conditions in the long term. Across its Sub-Saharan markets, the retailer continues to fund local projects aimed at helping farmers and manufacturers to achieve appropriate standards so that regional products can eventually be stocked across all Shoprite stores.

Checkers, owned by Shoprite, is getting a facelift in the
wake of increased competition for more affluent
customers. The Checkers store in Willow Bridge, Cape
Town, is one of them.

At home, Shoprite, which has historically targeted the lower segment of the market, is upgrading most of its locations to address changes in consumer spending power. Shoprite's Checkers stores, for example are being upgraded to compete more directly with Woolworths, a retailer that is positioned to attract more affluent consumers.

The other retailers within the Top 5, all of which originate from South Africa, have held onto their positions in the ranking for some time. Their domestic operations have continued to grow as a result of an increase in consumer spending and a growing black middle class that has been empowered by economic development. However, macroeconomic challenges are presenting themselves in the form of rising interest rates and curbs on borrowing, while supply shortages of grocery items have hampered retailers' operations. Despite these difficulties, the market is growing nonetheless.

LEFT: SPAR South Africa's outlet in Cape Town's Khayelitsha township is bringing the modern superstore to townships previously serviced by spazzas, South Africa's version of the 'mom & pop' shop. RIGHT: The meat counter in the store, mixing traditional shopping habits and modern design.

With more consumers moving into more affluent socio-demographic categories, these retailers which had previously targeted the mass market have been developing store concepts and product ranges to attract these new types of customers. Pick 'n Pay in second place, like Shoprite, has been improving its upmarket product ranges, particularly in the fresh and ready meals sectors.

The new Woolworths Home & Food store concept: pushing
Woolworths' trend-setting credentials further.

Further down the ranking in sixth place, Woolworths has been the champion of the more upmarket sector for some time; its stores and product ranges have traditionally been an attraction for the smaller, above-average income segment of the population. However, Woolworths' dominance of the more affluent South African consumer market is likely to be challenged by the new positioning of market leaders Shoprite and Pick 'n Pay.

East Africa in Nakumatt's sights

Entrance to the Nakumatt Junction store in Nairobi. Most
Nakumatt stores are in and around Nairobi but more stores
are opening around the whole of Kenya - and soon beyond.

Outside of the Top 10, East Africa's leading retailer Nakumatt, in 25th position in Africa and the Middle East, is looking at an ambitious expansion strategy across East Africa, with stores scheduled to open in Rwanda's capital Kigali, Uganda's capital Kampala, and the Tanzanian cities of Arusha and Dar es Salaam. More stores across Kenya are also on the cards. Nakumatt has said that while this expansion is ongoing, manufacturers in Kenya should adapt their strategies and package sizes to the future market conditions. The COO of Nakumatt, Mr Ramamurthy, has challenged the manufacturing sector by saying: "The manufacturing sector should prepare in terms of product innovation, changes in packaging and volume production while they economise their operation." Nakumatt is also considering opening smaller outlets with a convenience store strategy at petrol stations across Kenya. Overall, the retailer has seized the moment to become Kenya's leading operator while former rival Uchumi recovers from bankruptcy.

Other than the principal South African players and Nakumatt, there is little to report on movements by other chains across Sub-Saharan Africa. Good news comes in light of Uchumi showing signs of recovery after last year's financial collapse that saw the retailer close down its operations and lose its position in the Top 30 ranking. However with government help and a refinancing programme, stores have gradually opened again. Uchumi's revival is like to lead to a revival of competition with Nakumatt again, which could have a positive impact on the Kenyan market. However, Uchumi has a tough act to follow, with rival Nakumatt receiving government certification for its high level of corporate governance.

Middle East and Gulf: Regional powerhouses developing

Over the past few years, Gulf Coast Countries (GCC) in the Middle East have seen the rise of the hypermarket concept, which in turn resulted in higher levels of market concentration. The charge has been led by French internationals Carrefour and Casino, ranked eighth and ninth place respectively in the regional ranking, which have created the conditions to spread this format across the region.

As the image suggests, Carrefour is busy building a
presence around the Middle East, pioneering new markets.

Carrefour has continued to open new stores in these markets, targeting countries such as Kuwait and Jordan, at the same time as building and extending its existing network in Saudi Arabia and UAE. The rise of private label products manufactured locally further points to the French international's long-term and serious commitment to the region. Carrefour has picked an ambitious and wealthy partner in the Majid Al Futtaim group, with wide-reaching contacts across the region. Local know-how is invaluable, especially when targeting new markets such as Syria and Iran, which could offer long-term prospects despite the initial risks and obstacles involved.

Behind Carrefour, fellow French retailer Casino is present in various African countries ranging from Morocco to Comoros and Benin via franchise stores or stakes in local companies. However, most of the Sub-Saharan franchise operations have little growth forecast, and it is the Middle East and North Africa where Casino's most worthwhile operations are active.

In Saudi Arabia, via new franchise partner GSL, about 16 Géant stores are planned to open in

2007. If Casino's hypermarkets are to threaten Carrefour's ambitions for dominance in the region, a surge in openings is needed. Casino's campaign has lost impetus in countries such as Dubai where there have been no further openings since a Géant store opened in the Ibn Battuta Mall in March 2005.

Two players have emerged as domestic or even regional powerhouses. The leading regional player in terms of sales and expansion is the Dubai-based Emke Group in 12th place. Over the past few years, its Lulu hypermarket brand has become a regional trailblazer in Yemen, a market leader in Oman and a pioneer in Kuwait. Market entry into Saudi Arabia will be achieved this year, with plans for up to eight stores in the medium term. Kuwait has seen the opening of one store already, one has opened in Dubai and three in Abu Dhabi. Qatar and Bahrain are also in Emke's sights; once achieved it will have seven regional markets. Only Carrefour can match Emke for number of countries of operation.

Panda's first opening abroad: the Festival City Hyper Panda
in Dubai. Alongside Panda's target of 25 hypermarkets in
Saudi Arabia by 2010, more international openings are also
on the cards.

Saudi market leader Panda in 13th place is set to follow its plans for 100 supermarkets and 25 hypermarkets there by 2010, as the market experiences a mushrooming of hypermarket locations across its major cities. Panda is expected to remain the leading retailer in its native Saudi market for the time being, but local competition is rising rapidly. Its head-start, however, has enabled it to keep a watchful eye on foreign markets while its domestic rivals concentrate on building domestic size first. In May 2006, Panda opened its first foreign store in Dubai. The Dubai Festival City store marked the beginning of Panda's foreign ambitions, with a second outlet set to open sometime later in 2007. Further openings across the Gulf are more than likely.

The new Danube hypermarket in the Hayatt Mall in Riyadh.
The Saudi capital has seen an explosion of hypermarket
openings in the past two years. This is only the beginning
as new and established players scramble for real estate to
ensure further openings.

In terms of retail development, the UAE is still the most attractive GCC country for retailers to establish themselves. Dubai, the centre of attention, is becoming saturated, Abu Dhabi is becoming more prominent, while Sharjah and Al Ain prepare themselves for a similar pace of retail development. Markets so far not in the limelight such as Oman are becoming of interest, especially for retailers seeking a regional presence, such as Emke and Carrefour. While Emke's ambitions in Oman have been described above, Carrefour is more timid, with only one store present at the moment and a second site under construction.

One of Emke's Lulu stores in Muscat, the Omani capital.

The Sultan Center, ranked in 20th place in the Top 30 ranking, has a high profile across Kuwait, its business diversified between hypermarkets, superstores and convenience stores - a sophisticated structure unseen by most other regional retailers as most of them concentrate their ambitions on the hypermarket format. The Sultan Center (TSC) has about 16 stores across the kingdom, and it will now face new competition from Carrefour and Emke. However, TSC has other irons in the fire, namely its Omani operation, which has been established for some time and is due for expansion over the next year or so.

Despite their limited market size, Qatar and Bahrain are expected to receive more attention from Lulu and possibly Panda, as regional retailers develop an appetite for growth and expansion - taking advantage of economies of scale used by the international retailers operating in their territory.

Outlook: The best is yet to come

Given their head-start, most South African retailers present in 2006 will continue to dominate the ranking in 2012. However, a few of them are likely to lose their positions to French and GCC retailers, which are forecast to climb up the ranking due to the growing importance of their markets and network size.

Carrefour is forecast to be the region's number three by 2012. Its operations in numerous North African and Middle Eastern markets are expected to pay off for the French international while rival Casino achieves similar importance, lagging just two spots behind.

By 2012, the Top 10 is expected to include two ambitious GCC retailers, Panda and Emke, buoyed by their relentless expansion in key regional markets. Panda has made a significant surge upwards, illustrating the importance of the Saudi market, and its position in it. For both retailers, there will still be plenty of room for growth, allowing them to challenge the dominance of other retailers on their way to the top.

In the case of the Middle East, as these markets grow and hypermarkets become more commonplace, most retailers are likely to diversify their portfolio of banners, opening supermarkets and convenience stores in the process. This will spur ongoing growth in the region, and points towards a fast moving and sophisticated retail environment. In some parts, such as the Gulf, this development will take place quickly, but similar patterns are expected to occur elsewhere. The outlook points to a future in which opportunities abound.

Related Articles from the Global Retail Bulletin

Top 30 Grocery Retailers in Africa & the Middle East, 2005 -- Issue 180: 21 Sep 2006 read
Top 30 Grocery Retailers in Africa & the Middle East, 2004 -- Issue 154: 22 Sep 2005 read
Top 30 Grocery Retailers in Africa & the Middle East, 2003 -- Issue 130: 14 Oct 2004 read


Retailer Factsheets

Abu Dhabi Co-op read Al Othaim read Al Safeer read Auchanread Bin Dawood read Blue Square read Carrefour read Casino read Choitram read Consumer Co-op UAE read Emke Group read Farm read Fruit & Veg City read Giant Stores read Le Charcutier Aoun read

Massmart read Metcash (RSA) read Metro Group read Nakumatt read New Clicks read Panda read Petronas read Pick 'n Pay read Shoprite read SPAR (South Africa) read Spinneys read Supersol read The Sultan Center read Tiv Taam read Woolworths (RSA) read

Country Factsheets

France read Germany read Israel read Kenya read Kuwait read

Lebanon read Malaysia read Saudi Arabia read South Africa read United Arab Emirates read