Checkers vs Woolies over the last decade

The battle between Checkers and Woolworths Food for higher-income shoppers has been fierce in recent years.

Checkers announced its decisive entry into the convenience food market in early 2017 after an aggressive push to get ready-meal type products onto its shelves in 2016. For years before that, it had steadily refined its store estate and pricing proposition to ensure sufficient segmentation between the Checkers and Shoprite brands.

A decade ago, the landscape looked very different.

Woolworths was in the midst of converting its local franchise stores to corporate-owned ones as it needed to own these to simplify the offer to its customers and entrench its loyalty programme (and ensure it controlled the margin).

It hadn’t even launched its larger food stores, described rather quaintly at the time by then new CEO Ian Moir as a “superwoolies”.

Its food business in the year to end-June 2011 reported turnover of R13.5 billion from 323 food stores, comprising 150 standalone stores and 173 food departments within larger stores. This excluded its 43 sites at Engen

At that time, Shoprite Holdings did not disclose the performance of Checkers separately, but it had 158 Checkers stores across the country and 26 Checkers Hyper stores (compared with 409 Shoprite stores and 223 U Save outlets).

Total turnover for its local supermarkets in the year to end-June 2011 was R57.2 billion. Assuming that the turnover contribution from Checkers and Checkers Hyper was nowhere near the levels of now (40%), it would’ve likely been around R17 billion to R18 billion for that year.

At that stage, the Checkers and Checkers Hyper business would’ve been no more than a third larger than Woolworths Food. Of course, this is a slightly unfair comparison as there is a certain amount of general merchandise sales in the Checkers and Checkers Hyper figure (perhaps R1 billion to R2 billion). The core food business may have been about 20% larger than Woolies Food in 2011.

Checkers today

Fast-forward a decade, and Checkers (and Checkers Hyper) is now the star of the show for Shoprite Holdings.

Turnover for the unit was R53.8 billion in the 53 weeks to July 4 – that’s almost exactly triple the estimated number in 2011.

In this last financial year, turnover was up 10.9% – significantly faster than the rate of growth in Shoprite and its Liquorshop segments. In the last financial year, Checkers comprised 40% of the group’s South African supermarket turnover.

The group says this higher-income focused segment grew at almost double the rate of the rest of the South African supermarket market in the six months between July and December.

Read: Double-digit growth for Shoprite’s upper-market Checkers chain

For the first six months of this year, the segment grew at more than one-and-a-half times the rate of the rest of the market.

Its strategy of aggressively competing with Woolworths is delivering.

By the end of June, it had 268 Checkers stores in South Africa (inclusive of 38 Checkers Hyper stores). That means it has added 72 supermarkets in the last decade, equating to around seven (net) new stores a year (plus 10 new Hyper stores across the decade).

These seem relatively modest numbers, but the group has expanded the number of Checkers stores by close to half (46%) in 10 years.

It has opened 42 Checkers Fresh X stores which deliver a promise of “fresh food theatre” of a targeted 80.

Read: Checkers FreshX to compete with Woolworths

The group says private labels are 18% of sales in its “RSA supermarkets”; that number is surely higher in the Checkers business, with its focus on fresh and convenience. It says it has gained R204 million in its share of “fresh” (convenience) in the last 12 months.

The launch of its Checkers Xtra Savings loyalty programme has been a success and has helped the group defend its pricing proposition, particularly against rival Pick n Pay (with Smart Shopper).

Arguably, it has been most successful with its launch of the on-demand Checkers Sixty60 delivery service in late 2019.

At the end of June, Sixty60 was live at 233 stores (not far off its total footprint). This service allows Checkers to compete in the convenience space, which its footprint has not historically really allowed it to do (think smaller neighbourhood-focused Woolies Food stores versus traditional Checkers supermarkets).

Yes, it continues to open stores in more areas, allowing it to be closer to communities, but it has not really ventured into the smaller-format, strictly-convenience focused store. Sixty60, with a subset of products (17 000 of the over 25 000 that a typical Checkers supermarket stocks), helps it bridge that gap.

	June 2011	June 2021	Change
Checkers stores	184	268	46%
Woolies Food stores	323	348	8%
– of which standalone Food stores	150	194	29%
Checkers turnover	R18 billion*	R53.8 billion	199%
Woolies Food turnover	R13.5 billion	R38.3 billion	184%

* Estimate

Woolies today

By contrast, Woolworths Food is now a R38.3 billion a year business – almost triple the size it was in 2011.

By the end of June, it had 348 stores in South Africa (excluding its 81 Engen sites). Of this base of 348, 194 are standalone food stores – a 29% increase from a decade ago. These are typically more convenience focused (aside from the large Market standalone stores in certain nodes).

The number of full-line Woolies stores (fashion, beauty, home and food) has actually declined (by 11%) over the past decade.

This makes overall food store growth seem more muted than it has been.

Read: Woolies is cutting space by 11% to turn around ailing clothing business

Its food stores (and food departments within larger stores) occupy 254 000m² of space (vs 157 000m²), which is an increase of around 60% from 2011.

This tells a far better story of the scale of the growth of its food business since 2011. Even in full-line stores (think Sandton City, for example), food has taken a greater share of space.

While Moir will be remembered for the purchase of David Jones in Australia which has underdelivered, his strategy to build a big food business means the group is in far better shape today than it arguably may have been.

It contends it continues to take market share with growth of 3% above the rest of the market in the past year. Private label participation in Woolies is significantly higher than the rest of the market (easily north of 50%).

At its most recent results presentation, new CEO Roy Bagattini highlighted the opportunity that exists to leverage its “food formats in a ‘Food+Home’ concept”.

It intends to expand its leadership position in food and will continue to trial new formats. It was late to the game with on-demand delivery (Woolies Dash launched as a trial late last year) and the service has been somewhat underwhelming, particularly given ongoing teething issues.

But the group says online sales comprise 2.3% of total food sales (around R900 million a year). Is Checkers Sixty60 larger? Likely not just yet.

Because of the shift in the market (accelerated by Covid-19), where new habits of online, on-demand grocery shopping are being formed, this will be a major battleground for these two over the coming decade.