What went wrong when Shoprite tried to push north

By Janice Kew

(Bloomberg Businessweek) – Two decades ago, Shoprite Holdings Ltd. unveiled an ambitious plan to expand beyond its home base in South Africa, and over the following years the company entered more than a dozen countries north of the border. Along the way, it became the continent's biggest grocer by tapping into markets with rapidly growing populations but little formal retail. Investors loved the idea, confident that developing economies would spur demand for bread, Champagne, and just about everything else. And Shoprite seemed the right vehicle for their optimism, given that it had outperformed competitors in South Africa and proved its aptitude for selling basic groceries, housewares, pharmaceuticals, and luxury goods.

Today, Shoprite has largely retreated back to South Africa and a few nearby places after shutting its operations in eight countries farther north. In September it said it had wrapped up operations in Madagascar and Uganda, and last year it left Nigeria—where it once aimed to have as many stores as in South Africa—and Kenya. The operations suffered from difficulties finding good real estate, high relocation costs for managers, and subpar infrastructure (simply getting a truckload of goods across Lagos could take 24 hours). Currency instability and foreign exchange shortages, meanwhile, made it hard to repatriate any earnings. "The stark reality is the farther Shoprite moved away from South Africa's borders, the less profitable, more complex, and more difficult it became," says Syd Vianello, an independent analyst in Johannesburg. "Each market has its own peculiarities."

___STEADY_PAYWALL___