CAPE TOWN, South Africa -- It has been the greatest turnaround in South African supermarket history.
Three years ago the tiny Shoprite supermarket chain seemed about to collapse, apparently having failed to digest the many times larger and highly unionized Checkers chain it bought in a mood of confident expansionism in 1992. Shoprite had 20 stores at the time; the ailing local supermarket pioneer Checkers had 190.
However, by the end of the financial year in February 1995, Shoprite/Checkers had turned an after-tax loss of 44 million rand ($12.2 million) in 1992 into an after-tax profit of 100.6 million rand ($27.9 million).
This month, plans were also announced for expansion into neighboring Mozambique, while five new stores are on the local drawing boards.
"We made our improvements through greater productivity and by lifting our operating margins," said Whitley Basson, managing director.
This was done by means of better stock control, which sharply reduced the level of shrinkage, the company said. Projections are that operating margins in the short term will improve from 0.9% to between 1.75% and 1.8%, again owing to reduced shrinkage, but also to improvements in the group's property portfolio.
The chain operates 234 retail outlets, but has 430,400 square feet (40,000 square meters) of unleased property in the country's main urban center in Johannesburg. Some of the tangled property positions inherited at the time of the Checkers takeover are still being sorted out.
Under Basson, the management style has also proved highly flexible, observers say. A potentially bruising confrontation with the militant shop assistants' trade union was avoided in a series of negotiations. In the three years since the takeover, wage rates have gradually been equalized and the union pacified.
The Shoprite strategy is to continue targeting the broad, middle-income mass market to reap the benefits of what Basson sees as a "rapidly developing economy."