PART ONE: The History of Shoprite, South Africa and Africa’s biggest food retail.
When you think of Shoprite food retail, probably the first that comes to your mind is the lowest price. Shoprite store is dubbed the cheapest food retailer in South Africa and Africa. The store’s modus operandi was built around the idea of saving customers money while providing a world-class store experience.
Let’s look at the history of Shoprite in South Africa. Shoprite was founded as a family business, in Cape Town, South Africa. It was later bought by the PEP store, which would later become PEPkor. Wellwood “Whitey” Basson, who at the time was working for Pep Store as an accountant wanted Shoprite to emulate Pep.
Therefore, Shoprite would become the store that sells frozen chicken and beans at the lowest price. The idea was to save customers some money even if it’s 10 cents or even 50 cents compared to other stores such as Pick n Pay, Checkers and OK stores. At this stage, Checker was not part of Shoprite. Later Shoprite acquired Checkers to become Shoprite Checkers.
In the beginning, after the acquisition, it was difficult for them to integrate Checkers into the Shoprite chain of stores as Checkers was not positioned the same as Shoprite. Some of their challenges were the locations of Checkers stores. Later on, some stores were converted into Shoprite stores. The main reason for Shoprite acquiring Checkers was because it was struggling financially but they were the biggest store at that time. Soon after the acquisition was completed, they realised that Checker’s financial woes were bigger and deeper than what they understood. So the urgent action plan was to stabilise the balance sheet. They had to also close some stores while others were converted to Shoprite.
A similar situation happened when Shoprite decided to acquire OK chains of stores which included OK Furniture. And Shoprite’s experience has been in the retail, not furniture space. Thus it made sense for them to unbundle OK into separate entities. The same module operandi was used to convert some stores into Shoprite instead of keeping them as OK. Some issues for OK stemmed from the location such as CBD and upmarkets.
OK stores’ financial problems were deeper than Checkers’. At the time, South African Brewery’s major shareholder after spending more than 3 billion rands trying to rescue the company.
Things were so bad. Apparently Shoprire, through its Chief Executive, at the time, Whitey Basson paid 1 rand for OK. That’s how much OK was worth at the time.
When asked if it is true that Shoprite paid 1 rand to acquire OK, Whitey Basson would jokingly say a very sound person would have paid 99 cents.
Later, Shoprite launched a litigation against SAB saying they were misled in the deal negotiation.
