Choppies looks to the skies for hope
Mbongeni Mguni | Friday February 24, 2017 16:54
Choppies is a big numbers’ group. Billions of Pula in turnover annually, more than 14,600 employees in seven countries and more than 260,000 square metres of office space in 203 stores.
For all the numbers, Choppies’ heart beats in the modest, rural economies made up of ordinary citizens eking a living off agricultural activities.
Where its hyperstores and superstores compete with rivals in the cities and urban areas, its value stores enjoy the loyalty and patronage of the rural folk.
After all, Choppies first forays were into the low income and bargain market, an offering bespoke to rural consumers.
The company’s loyal following in the non-urban areas of Botswana and South Africa have helped build the Lobatse-born group into a mega-chain stretching to Zimbabwe, Zambia, Tanzania, Kenya and Mozambique.
With successive droughts – including a record breaking 2015/16 agricultural season – the rural economies across Choppies’ footprint have suffered a drop in disposable incomes.
Many moved off the fields and onto government relief programmes, while urban consumers’ purchasing power came under pressure from generally weak economic conditions.
The 2016/17 season, with its bountiful rains and promise of robust harvests, will be a blessing for rural households, their disposable incomes and the shops they are loyal to.
The fact is not lost on Choppies CEO, Ramachandran Ottapathu.
While he could comment on the share price as the group was still in a “closed period” ahead of its full year results, Ottapathu said he was sensitive to the impact of the rains, counting them as one of the key factors to shape Choppies in 2017.
“We are seeing better rainfall and the crops will be good,” he said.
“There should be more money in people’s pockets and we are hopeful of a good year.”
In South Africa, one of its fastest growing regional nodes, Choppies has successfully diversified away from a reliance on mining towns. When it first entered the South African market, Choppies focussed on mining towns, particularly in the North West, reaping the benefits of the cash-flush economies there.
However, the group noted “very depressed trading in areas dominated by mining” in its 2016 interim results, a direct results of declining mineral prices. In Botswana, it was revealed yesterday that 7,244 people lost their jobs in the closure of BCL and Tati Nickel mines.
While Selebi-Phikwe only had two Choppies stores, the impact on the household incomes in areas countrywide where the workers had to return to, will undoubtedly factor on Choppies’ concerns about the year ahead.
“We have not started feeling the pinch, but when you have even one person losing his job, that income is down by that much. That’s a concern for any retailer.”
Still, some diversification has been achieved within South Africa, where concerns were highest. “When we started, our concentration was in mining towns and of the 26 stores we had in South Africa, 18 of them were in mining towns,” Ottapathu said.
“Now, we have 46 and still 18 or 19 are in mining towns. We are trying to move away from this reliance and as the footprint grows, that won’t be an issue.”
Part of the diversification will be helped by the recent purchase of Jwayelani Retail Limited, a billion-rand a year group with 21 stores in KwaZulu-Natal and Eastern Cape.
The urban/peri-urban as well as low-tier mix offered by Jwayelani fits so snugly into Choppies’ own market approach that the South African group is presently running a competition to win a Chevrolet bakkie, echoing Choppies’s own vehicle giveaways.
For Ottapathu, however, there’s no “one size fits all” approach whenever a new market is entered. “It about the demographics and being a small group gives us flexibility,” he said.
“We take each new area case by case and see how we can differentiate ourselves in each town to provide a better offering.”
Apart from Jwayelani, Choppies will spend P300 million this year opening up to 26 more stores across the group’s footprint.
The stores are part of a ramp-up to 250 stores by 2018, after which Choppies plans to consolidate its footprint. “We are in a growth momentum at the moment,” he explained.
“The goal is to grow the footprint in the right places. We will start consolidating after 250 stores. At this point, we will sit back and take a view that says ‘that’s what the footprint is going to be’ and cap it there.
“We should reach that point by 2018.”
The journey to 2018 will involve more hyperstores and superstores in strategic locations, but Choppies will no doubt keep an eye on its rural heartland.