Walmart’s South African subsidiary Massmart has outlined its top level expansion plans: 20 new stores outside South Africa and a possible entry into major Francophone markets in West and Central Africa, which almost certainly means Côte d’Ivoire and Cameroon and may include Senegal and Gabon.
Massmart’s Chairman Kuseni Dlamini has given some indication of the company’s expansion plans over the next three years. Dlamini has described the company’s outlook for Sub Saharan Africa as “bullish” and outlined plans for new stores in Kenya, Ghana, Mozambique, Swaziland and Zambia.
For the first time, Massmart is seriously considering its options for Francophone West and Central Africa. This almost certainly means Côte d’Ivoire and Cameroon and may also include Senegal and Gabon. Does it include DRC? We doubt it: Shoprite has only managed to open one store and is the only one of the big five South African supermarket brands (Shoprite, Pick n Pay, Massmart, Spar, Woolworths) to operate there.
Massmart has been slow to scale its operations in many countries. The company operates in 13 countries overall, including South Africa. However, in Kenya, Tanzania and Uganda it has only one store. It operates just two stores in Ghana, Malawi and Zambia. In Nigeria there are five stores, compared to Shoprite’s 24.
Entering Francophone West and Central Africa would put Massmart ahead of Shoprite in the region, at least for now. Shoprite has yet to put a single store in any of Côte d’Ivoire, Cameroon, Senegal or Gabon, although it has had its single store in DRC since 2012. Rather, Shoprite’s focus has been Anglophone markets, primarily in Southern Africa. Shoprite is increasingly focused on Nigeria, where it is the market leader, and Kenya, where it is establish seven new stores in 2018. In addition, Shoprite has quietly maintained a small store network in Uganda and is well positioned to re-enter Tanzania.
The challenge for Massmart will be an intense escalation of competition among supermarket retailers in Côte d’Ivoire, Cameroon and Senegal as a result of French chains Carrefour, Casino, Super U and Auchan seeking to carve out market share. In Cameroon, the threat of foreign supermarket retailers has caused a spike in store openings from incumbent chains such as Mahima, Dovv and Santa Lucia. In Côte d’Ivoire, Prosuma, the Casino franchise holder and market leader with its own domestic supermarket chains, is also facing the threat of Spanish supermarket franchise Dia and its Citydia store format.
Massmart’s enthusiasm for expansion reflects a change of heart from August last year, when we noted it was lukewarm about expansion in Africa. Then, CEO Guy Hayward revealed that Massmart’s stores outside South Africa saw a decrease in sales of 11.9% in half yearly sales, or an increase of only 2.6% in constant currency for what are intended to be high growth, emerging markets. Hayward did say that Ghana, Nigeria and Kenya had robust sales, however.
We see this change of heart being driven by three factors. The most obvious factor is concern over the outlook in South Africa over the next five years, when it is clear that the risk of political upheaval impacting the economy is increasing.
The second factor is improving sales: Massmart will be seeing confidence return to shoppers in Nigeria, Ghana and Kenya and it will give it confidence to spread out into West and Central Africa.
The third factor is more strategic: Massmart needs to either scale up in the larger markets like Kenya and Nigeria where it has only a handful of stores or it needs to focus its energies elsewhere. The catalyst is partly Shoprite’s continued expansion – new stores in Nigeria, the big announcement of entry into Kenya – but has really been spurred by the strategic risk of Carrefour’s long awaited entry into Sub Saharan markets.
