End of independent era

IS the era of the independent retailer over in the Western Cape?

A few years ago Metro Cash & Carry bought out – or rather salvaged - the remnants of the 7-Eleven convenience store empire which had floundered under the control of the Hadjidakis family.

In April last year Shoprite bought out the 13 strong Foodworlds supermarket chain (as well as four wholesale outlets under Saveworld), which operated mainly on and around the Cape Flats.

Now the latest news is that Pick ‘n Pay has acquired the promising fresh produce retailing chain, Fruit & Veg City (F&VC).

Both Foodworld and F&VC have featured on the pages of CBN as promising Cape companies in the last two years.

While 7-Eleven’s position is more clear cut because of the financial itch the company was facing, CBN wonders why promising independent retailers like Foodworld and F&VC opted for being tucked away in the ample flanks of large retail corporates. In both instances the purchase price was not disclosed. Naturally seeing what Shoprite and Pick ‘n Pay forked out for their respective acquisitions would provide a big hint at whether the deal was a desperate measure or a divine deal.

In both cases neither Foodworld or F&VC will add yonks of market share to their new parent companies – although some observers believe success in the retail market is the effective servicing of all niches.

More than a few observers believed that Foodworld had effectively run its course as a ‘mom and pop’ business, and no longer had the capacity to expand the store base to generate revenue in excess of the R500 million turnover mark.

While lots of people would have loved to have seen a real black owned contender in the supermarket sector, it probably made sense for the Parker family to make a profitable exit and hand over a niche to Shoprite.

If anything there were hints that the deal was one that Foodworld wanted more dearly than Shoprite.

Shoprite financial director Carel Goosen was reported as saying Foodworld had approached Shoprite about the possibility of taking over its operations. He also said the stores would all immediately be converted to the Shoprite brand upon conclusion of the transaction.

The F&VC situation is even more fascinating. When we profiled the owners – the Coppin brothers – in CBN last year the impression we got was of a business that had just started hitting its straps.

If anything F&VC looked like breaking out of a niche, and indeed operated about 60 outlets (two-thirds franchised) countrywide.

Turnover had grown to in excess of R1 billion, and more store openings were planned. Of course the giddy expansion should be seen against the humble beginnings of F&VC, which launched its first store in Access Park near Kenilworth in 1993.

When CBN spoke to Brian Coppin last year, he said there were plans to expand further into Africa and that the company aimed to reach 100 outlets in SA in the short to medium term.

Perhaps prophe-tically our article noted that with Fruit & Veg City making its mark on the map of South Africa’s specialised retail sector, it’s not surprising that a few entities have shown interest in the group. We continued: “Naturally it would not be difficult to guess which price sensitive retail groupings may be keen to corner this lucrative niche.”

But at that point the Coppins said it was unlikely that any offers from potential equity partners for Fruit & Veg City would be entertained - especially as working capital expansion was being provided by operational cash flows.

We wonder what changed the Coppins’ minds. Hopefully it was an offer they could not refuse because the business held such superb prospects, rather than a refusal they could not offer because capital constraints had hamstrung the expansion process.

Source: Cape Business News - www.cbn.co.za

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