Shoprite and Pick n Pay’s next power moves

As the battle amongst South Africa’s biggest retailers continues to rage on, the tug of war for dominance in the low-cost segment is shaping up.

This is particularly prevalent in the discount supermarket war between Shoprite’s Usave, and Pick n Pay’s Boxer.

In the last financial year, Usave increased sales by 13.2% to approximately R11 billion in FY2024, while Boxer Superstores saw an annual turnover of R37.4 billion and trading profit of R2.1 billion (FY2024)

With these ventures proving lucrative, these big brands are pursuing ways to turbocharge their expansion.

Boxer on the JSE

Boxer started as more of a rural or smaller-town operator, however, it has boomed since then.

According to Pick n Pay, Boxer has a market share of 68% of the discount grocery retail market and an estimated share of 4.2% of the formal grocery market.

As of October 2024, there are 308 Superstores, 162 Liquor Stores and 30 Build Stores across South Africa.

Boxer has on average added a new store every week for the last 3 financial years and has experienced a 14% CAGR in store numbers over the same period.

It grew its turnover at a South African market-leading CAGR of 18.6% between FY2022 and FY2024, with like-for-like growth of 7.7%.

Its lean model, with fewer stock-keeping units (3,000 vs. 18,000 at Pick n Pay), helps keep costs low, allowing Boxer to negotiate favourable supplier prices and has deep penetration in under-serviced markets.

By the end of this financial year, it expects to add 65 new stores and its aim in the medium-to-long-term is to double its store footprint by opening 60 to 70 stores a year for the next six to seven years.

To address operational challenges at the Pick n Pay group, raise capital, and make these goals a reality, Pick n Pay is spinning off Boxer and listing it separately on the JSE.

On 11 November 2024, Pick n Pay announced plans to raise between R8.0 billion and R8.5 billion through Boxer’s initial public offering (IPO).

This would offer up to 202.4 million shares, or 40% of its total capital, priced between R42 and R54 per share, giving the company a market capitalisation of R21.1 billion to R24.7 billion.

Usave – you got commercial land?

Shoprite has two brands competing against Boxer in the discount supermarket segment – Shoprite and Usave.

Analysis from Daily Investor shows that Shoprite and Usave’s combined turnover grows at 12% annually, while Boxer’s turnover grew at 18.6% CAGR from FY2022 to FY2024.

Shoprite and Usave are now increasingly looking to gain market share in this segment against Pick n Pay’s Boxer.

Currently sitting with 463 stores across South Africa (of which 44 were eKasi container-store formats), the retailer has a long-term store target of 1,000 stores within five years.

A line posted on the Usave website offers some key insights into how it planes to do that.

“Whether it’s a property or an existing building, if you own commercial land, then we’d like to work with you.”

According to Shoprite’s website, “as part of its growth strategy, our Property division focuses on securing new trading opportunities to accommodate the group’s ever-expanding retail offering.”

“This task involves identifying and securing new premises through leases, as well as acquiring land for development should the property industry be unable to do so.”

Looking ahead, Usave plans to add 36 new stores in the 2025 financial year.

Usave “has over many years successfully advertised for existing buildings and/or commercial land which can provide retail opportunities for the following formats: Usave (450m² – 750m²) and Usave eKasi container stores (180m² – 250m²),” said the retailer.

Looking at Usave and Usave eKasi, the retailer said that these property partnerships will help “grow its footprint in previously underserved and mostly rural areas of South Africa where formal trading is not yet established.”

Shoprite said that by “bringing a limited range of essential consumer products closer to customers, they save on the transport costs typically incurred when frequenting larger-format supermarkets.”

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