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Grocery distributor Spar Group had grown its market share over the last year, with the strongest gains coming from rural areas and townships, it said.

May 18, 2007By Tom Robbins

Cape Town – Grocery distributor Spar Group had grown its market share over the last year, with the strongest gains coming from rural areas and townships, it said.

Yesterday Spar chief executive Wayne Hook ascribed the growth in rural areas and townships to the expanding middle class and, to a lesser extent, to higher government social grants. Hook said rural areas benefited from urban employment growth, as workers sent more cash home to their families.

While the company opened as many as 42 Tops bottle stores in the half-year to March, to provide a total of 258, it said it had also experienced “above market organic growth” across the group.

Hook said Spar, which does not own stores, had been busy ensuring that stores were customised for target markets.

In rural areas this included offering bulk goods such as maize and dry beans alongside products available in suburban stores.

While the company added only 17 Spar stores for a total of 649, it upgraded as many as 50 and extended 11 in a move to improve its offering in cities and the countryside.

Barbara Price-Hughes, a research analyst at BoE Private Clients, said it appeared that Spar had gained market share across the board, adding that consumers simply wanted decent supermarkets no matter where they lived.

Despite the reported market share gains, profit grew slightly slower than sales.

Net profit over the half-year was up 26.9 percent to R262 million from a year ago, and revenue climbed 31 percent to R10.78 billion.

Hook ascribed the difference to a higher component of low-margin products in the sales mix, such as staple foods in supermarkets and cement in the Build It chain.

As in many other sectors, Spar said substantial growth was “putting extreme pressure on all distribution facilities”.

The company said it was addressing these long-term capacity constraints and was looking to acquire further property in KwaZulu-Natal and Gauteng to extend warehousing.

Spar said it would pay a dividend of 72.5c, up 51 percent. Shares in Spar gained 3.37 percent to R52 yesterday.