Growth and Strategies of Large, Lead Firms-Supermarkets

Abstract

Supermarkets are a key route to market for suppliers of food and household consumable products in South Africa. The growth, performance and strategies of the retail industry driven by JSE-listed supermarket chains therefore has important implications for suppliers and, in turn, for the development trajectory of agro-processing and light manufacturing industries. However, costly trading terms and stringent requirements limit the participation of suppliers in supermarket supply chains. This paper tracks the performance, investment and growth strategies of supermarket chains in South Africa between 2010 and 2016. Key findings reveal that although the formal supermarket industry has grown significantly over the past six years (measured by investments in assets and real turnover), it has remained relatively concentrated with only a handful of main players. Local supermarkets are also expanding their investments into the rest of Africa in search of new markets. The paper further evaluates the implications of supermarket procurement strategies on the ability of local suppliers to participate in supermarket supply chains. It highlights a wide range of constraints that suppliers face in accessing supermarket shelf space. To increase participation of local suppliers, the study recommends better designed and more sustainable supplier development programmes. It also recommends the implementation of a retail code of conduct to curb uneven balances of power and to promote transparency in procurement procedures and trading terms.