Battle of the grocery gourmets

The battle is on at the premium end of South Africa’s food retail market, with Spar the latest combatant to sharpen its claws in pursuit of wealthier shoppers.

In a bid to compete with Woolworths Foods and Shoprite’s Checkers, Spar plans to open or convert 30 to 40 stores into Spar Gourmet stores within the next five years. CEO Angelo Swartz says the potential exists to open up to 100 nationwide, targeting affluent hubs such as Sea Point, Sandton, Zimbali, Hermanus and Plettenberg Bay.

Swartz says the gourmet rollout is less a strategic shift than a clearer articulation of what already exists. “We’ve always been in the premium space – we just haven’t always told that story well,” he says. 

Brand clarity, he says, is critical as consumers become more deliberate about where and why they shop.

Spar’s entry underscores how porous the line has become between grocery and food services, with many supermarkets now providing expanded deli and food-to-go offerings – a trend boosted by the post-pandemic return of people to the office.

For years, Woolworths dominated this market, with its private-label ranges and fresh convenience, but rivals have closed in, with Checkers having also expanded aggressively into this area after upgrading its stores. 

While Spar has been inching into this market, Spar Gourmet will make this more explicit. “It is not our intention to replace those stores, it’s a way to tell the story better,” says Swartz.

At Spar stores in wealthier areas, you already find imported breakfasts, such as Cinnabon cereal, premium products such as Dr Pepper, and specialty coffee beans from Ethiopia, Colombia and Guatemala, alongside flavours such as Blue Mountain-style blends.

Spar’s move makes sense: premium products deliver higher margins, with Woolworths Food delivering a gross profit margin of 24.9% last year, slightly ahead of Shoprite’s 24.3%, and far more comfortable than Pick n Pay’s 18.2%.

But this bet on the top end of the market isn’t without risks, warns Jeremy Sampson, chair of Brand Finance Africa. “The real volume is still at the lower and middle end,” he says, pointing out that the retailers are now chasing a shrinking slice of the market. 

This top tier is “increasingly focused on the export market as overseas buyers are used to spending R500-plus per bottle as a matter of course”.

Swartz says that for a store to “qualify” as a gourmet store, it has to meet certain criteria: it must be in a prime location, offer vida-e coffee and the Frozen for You ranges, as well as exclusive products such as imported chocolates and coffee. 

Adrian Short, CEO of catering company By Word of Mouth, which produces the Frozen For You range, says it differs from conventional frozen foods. 

“We come from a background of trained chefs,” he says. “These are not mass-produced meals. We are chefs, not food-manufacturing factories.”

Shifting tastes

What makes it trickier for retailers is that the way people consume food is changing too. 

Swartz says the traditional family meal, like a Sunday lunch, is on the wane, while demand has grown for healthier, high-quality and time-saving options, like pre-prepared meals. 

People want the experience of great food without the effort, he says. 

“We live in this culture where we are bombarded by bespoke entertainment cooking you watch on TV and they show you all these gourmet ingredients, but people are less skilled in the kitchen,” he says. “They want both: they want to be able to have that experience of these beautiful meals without necessarily having the skills to create [them].”

For retailers, this entails no small risk. Premium fresh and prepared foods have shorter shelf lives, demand is volatile and the supply chain is more complex – and poor execution can throttle margins rapidly.

As it is, margins in grocery retail are thin. Weaknesses in cost control and supply-chain execution – such as pricing errors, inefficiency in logistics or excess inventory – lead to more waste, spoilage and lost sales. 

Walk into any store in a relatively wealthy area, and you’ll have a sense of how contested this battleground has become. 

Spar’s store in Sea Point, one of the better performers in the group, reflects this effort to capture the wallets of wealthier consumers. 

Its shelves now include “old fashioned” traditional artisanal breads, the “Gourmet Greek” range of strained yoghurts and cheeses, artisanal cookies from the Cookie Co, alongside a wide range of imported cereals. It also now has an on-site butchery and bakery, and its kosher deli is a major drawcard, complemented by imported Italian olive oils and pasta.

When it comes to health products, the store even employs its own on-site nutritionist, and features an expansive range of superfoods, protein powders and collagen products, alongside grass-fed and free-range meat and poultry.

At the same time, its ready-made range has expanded too. So while you still get basic beef or chicken curries, now there are also poke bowls, sushi and Asian-inspired dishes. A partnership with fish4Africa means fresh fish is available every day.

George Argirakis, who runs the Sea Point store with his brother Chris, says pricing is secondary. “Customers must recognise the value of those products.”

Woolworths, a market leader in ready-made meals, isn’t sitting on its laurels either. 

Its shelves now include new additions such as Quark, a high-protein cultured dairy product, ready-to-eat Shake-It salads and an expanded Italian range. Today, you can buy a single slice of mocha cake or the popular Dijon mustard hand-cooked potato chips. 

Checkers has also been overt in growing its share of the premium market since 2017 through its bet on the Simple Truth range, endorsed by healthy food advocate Jamie Oliver; it now consists of 287 products across 49 categories.

Ready-made bowls include mushroom and pearl barley risotto, and chicken and herb tabbouleh, while its Forage and Feast range, endorsed by Michelin-starred chef Jan Hendrik van der Westhuizen, has products from ready-to-serve meals to indulgent frozen cakes. 

Catering to a healthier generation

Yet as much as the war is hotting up at the top end, it is just as fiercely contested at the lower end.

It might seem somewhat contradictory that Spar is simultaneously revitalising its discount stores, SaveMor, but Swart says this is all about servicing individual market segments better. Shoppers expect brands to be explicit about their value proposition, he says 

So, while Spar Gourmet is similar to Shoprite’s Checkers stores at the top end, its SavMor is similar to Shoprite’s Usave and Pick n Pay’s Boxer at the bottom end.

SavMor’s overhaul will see it offer more than 3,500 products, focusing on cheaper staple products, fresh produce, protein and canned goods. Swartz says at the same time, Spar will create a more concerted wellness concept across its pharmacy and store front shops, reflecting the consumer focus on overall health management rather than just medication.

It’s a strategy of two halves, but it is one amply supported by data.

McKinsey’s 2024 State of Grocery Retail in South Africa report shows strong demand for discount retail, alongside a growing appetite for convenience and premium products among higher-income shoppers.

So who is winning the fight? 

According to Trade Intelligence, Checkers has taken market share from competitors in the broader food category, generating R88bn in turnover versus Woolworths Food’s R51bn by the end of the last financial year. 

Andrea Slabber from Trade Intelligence Insights, says that over the past five years Checkers has opened 92 new stores, compared with Woolworths Food’s 20.

“One thing is clear – South Africans love convenience foods and the availability of hot foods over the counter at supermarket delis. The interest has grown tremendously,” she says.

Slabber says healthy eating is a priority for both poorer and wealthier shoppers, even if it plays out very differently: higher income consumers tend to favour supplements and vitamins, while poorer customers pick healthier ingredients. 

What’s clear is that younger people are prioritising wellness when it comes to eating far more than their parents did. 

Research from McKinsey and Nielsen shows that people under 35 rank mental and physical health as a top discretionary priority, and are more inclined to spend on fitness, mental health, skincare, and healthier food and drink. Celebrity chefs and “wellness-based” cooking programmes are embedded in the youth culture too.

The retailers have cottoned onto this, and are overhauling their products and stores to speak more directly to a more stratified customer base. As Swartz suggests, those with sharply defined propositions are likely to win.

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