Choppies Enterprises Limited said there are opportunities to expand its footprint outside the country as it aims to stamp authority as leading supermarket in Southern African Development Community.
So far, the Botswana Stock Exchange (BSE) quoted company operates in Botswana, South Africa and Zimbabwe and it is looking to go into other markets.
“There are considerable opportunities for growth in the countries where Choppies has established operations as well as in regions earmarked for future expansion,” Chairman of the group, Festus Mogae said.
“In the year ahead Choppies expects to roll out a further store footprint in South Africa, Zimbabwe and Botswana and initiate our foray into Zambia and other sub-Saharan African countries.”
In its 2014 annual report, the retailer that originates from Lobatse, small towns in the diamond rich Botswana, revealed sites have been confirmed in Zambia and Tanzania while it has set sights in Namibia also.
Choppies said it could commence operations in the second half of the current financial year in Tanzania.
It also told shareholders of a potential for expansion to 30+ stores in Zimbabwe, where it has a presence in Bulawayo with over 15 percent market share.
Choppies acquired 10 stores in Zimbabwe last year and opened two more stores in 2013 and one in 2014 and now it is ‘targeting expanding into north of Bulawayo’, according to the report.
“The Zimbabwe expansion outperformed expectations, with results significantly ahead of the acquisition case despite the current deflationary conditions. All stores are profitable and margin realisation has been positive, despite the challenging economic conditions prevalent in Zimbabwe,” the company Chief Executive Officer, Ramachandran Ottapathu said.
In Botswana, where it has a market share of 35 percent, it said it was pursuing opportunities in semi-urban markets.
During the year South Africa incurred a loss of P19.1 million, primarily due to the impact of the five month strike in the platinum sector which induced a drop in sales at all the stores in the platinum belt.
Ottapathu said in addition, the set-up costs for head office were considerable and the under utilisation of the new distribution centre in Rustenburg further pressured the bottom-line.
“Given that our African expansion must be supported by a good base in South Africa, we view these as critical investments for the future. The current head office infrastructure can support up to 100 stores,” he said.
“Choppies is looking to own a few additional stores in Bulawayo and will explore opportunities to acquire stores in Harare. In the long term Choppies is targeting 60+ stores in Zimbabwe. In terms of logistics a new 6 800m2 warehouse space has been added and is fully functional.”
Choppies topline hit the P5 billion this year with the group’s financial position remains healthy, with long-term debt at P276.4 million compared to total equity of P869.3 million and total assets of P1.7 billion.
However, Ottapathu bemoaned that Botswana’s food retail market weakened in value due to the weakening Rand during the year but is expected to grow at c. 6.5 percent CAGR from 2014 to 2018 with anticipated inflation in food pricing. Choppies extensive infrastructure continues to enable the group to focus on expansion.
In addition the group’s competitive strengths in the country, namely brand loyalty, aggressive pricing, convenience and added value offering, will continue to drive growth.
“In the year ahead the focus in Botswana will be on improving pricing where possible and increasing footfall through promotions and KVI enhancements,” he said.
“We intend to refine our value-added offerings of money transfers and other financial services to drive up margins. A number of new store openings are also planned.”