Africa’s largest retailer, Shoprite said it is looking at entering Europe.
Shoprite new Chief Executive Pieter Engelbrecht, told Reuters News Agency that hopes to use knowledge gleaned from former suitor Steinhoff International to leverage its way into the Eastern Europe market.
Its move will bring it into collision with bigger players in the continent such as Tesco, Carrefour, Lidl and Aldi.
Engelbrecht, who took over from 37-year veteran Whitey Basson in January, said the company wants to enter markets in Eastern Europe that either “have low competition or high economic growth”.
The growth story of Shoprite has taken it from South Africa to Lagos NIgeria, a city where it currently controls the largest market share of modern grocery retailing.
Pieter Engelbrecht said “We will look at other developing countries. That is also something that came out with our Steinhoff discussions and they’ve got good presence there, so we would like to leverage off that knowledge and definitely have a look at the East Bloc countries,”
It would be recalled that Steinhoff in February called off a plan to merge its African clothing and furniture assets with Shoprite’s stores, a deal bankers had said could create a giant valued at more than 180 billion rand ($13 billion).
“The two types of entry countries that you look at is either one with low competition or you look at one with high economic growth,” he said, adding that a trip to the region was planned although he did not say which countries he was considering.
“We will go slow. We are not going to over commit ourselves to learn if the market accepts us. So we will first establish a couple of stores and make sure the market likes us, and if we find acceptance then one can look at a merger or acquisition.”
“So whatever ratings uplift one can expect from reducing South African exposure, might well be given up on lower profit margins and execution risk from such an acquisition,” said Unathi Loos, an Investec Asset Management retail analyst.
But Shoprite’s experience in selling to low income earners in far-flung cities across Africa could help it mount a strong challenge.
Shoprite said it is also considering a move into the South American market.