"South Africa\u2019s spar plans acquisitions to boost market share"

" South Africa\u2019s spar plans acquisitions to boost market share \r\n\r\nSpar Group Ltd. is planning to acquire smaller retailers to help South Africa\u2019s second-largest grocer by revenue expand beyond the food segment and win market share in a struggling economy.\r\n\r\nThe company, which is selling its loss-making Polish unit, wants to increase South Africa\u2019s contribution to its revenue to 70% in five years from 60%, Chief Executive Officer Angelo Swartz said. Spar, which also owns a chain of building materials stores, plans to expand into pet shops and two other categories, he said.\r\n\r\nSwartz said the proposed expansion will help take on competition fighting to lure shoppers in Africa\u2019s slowest-growing economy after war-ravaged Sudan, and Equatorial Guinea. Companies including Spar are banking on the nation\u2019s new so-called government of national unity to prioritize economic growth, key to adding jobs and increasing disposable income.\r\n\r\n\u201cThere\u2019s a shift happening in retail in South Africa, particularly among the food retailers who have scale advantage,\u201d Swartz, 42, said in an interview in Bloomberg\u2019s Johannesburg office. The larger grocers are trying to maximize their \u201cadvantage by going into categories that we weren\u2019t involved in before. That naturally leads to growth outside of the core supermarket business,\u201d he said.\r\n\r\nThe Durban-based company expects its non-food business to account for 30% of sales in five years, Swartz said.\r\n\r\nThe company\u2019s shares have dropped 1.2% this year compared with a 7% gain at larger rival, Shoprite Holdings Ltd.\r\n\r\nSpar, which is restructuring its obligations and cutting debt, would consider a purchase that would return about 3 percentage points more than its weighted average cost of capital, which stood at 8.9% as of Friday, according to data compiled by Bloomberg.\r\n\r\nWithdrawing from the Polish unit will free up about 500 million rand ($27.7 million) of earnings a year, according to Spar.\r\n\r\nThe company may also pare or sell its operations in Switzerland, the UK and even Ireland, which is one of its best-performing markets.\r\n\r\n\u201cWe are very happy with our operations in Ireland, but I think we are a South African business and we have to look after our market first,\u201d Swartz said.\r\n\r\nSpar, which supports franchisees trading under its brand through its warehousing and distribution network, may still expand in Sri Lanka where it has partnered with Ceylon Biscuits Ltd., he said.\r\n\r\nSwartz was appointed in October with a mandate to strengthen the retailer after top executives resigned over governance issues. Spar\u2019s profit has dropped for two straight years.\r\n\r\n\u201cRaising the standard of governance within Spar is high on our agenda,\u201d he said. \u201cSpar has grown on the back of exceptionally strong people, but I don\u2019t think we\u2019ve always followed that up with process. So setting up the right processes is becoming the safeguard.\u201d"

"South Africa\u2019s spar plans acquisitions to boost market share"

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