SOUTH AFRICA – South Africa Competition Commission has recommended the Competition Tribunal to approve the sale of Massmart’s Cambridge Food, Rhino and Massfresh to Shoprite for R1.36 billion (US$89m).
The sale businesses consist of wholesale and retail chains that are all focused on high-volume and low-cost distribution and are each reliant on high volumes and operational excellence as the foundation of price leadership, in the distribution of mainly branded consumer goods for cash.
Under the deal, Shoprite is buying Cambridge Food, Rhino Cash and Carry business comprising of 56 grocery stores, including 43 adjacent liquor stores; three Fruitspot business; Massfresh Meat business with a meat processing facility; and 12 Masscash Cash and Carry stores.
Walmart-owned Massmart is currently in the middle of a turnaround that has now moved beyond shutting underperforming stores to divesting from fresh food retail and focus on its better-performing businesses as part of a plan to return to profitability.
The retailer will use the financial proceeds from the sale to pay down debt, invest in e-commerce, and expand its general merchandise, DIY and wholesale food and liquor businesses.
“The sale marks another step in the group’s portfolio optimisation process and will, amongst other benefits, free up management time to enable increased focus on leveraging Massmart’s core merchandise and market strengths,” CEO Mitch Slape said in August last year.
In a trading update, Massmart reported a 0.2% fall in its sales, which came to R30.4 billion.
Both Game and Builders saw declining sales, but Makro saw its sales grow by 6.7% compared to the same period in the previous year.
“Whilst food and liquor sales have performed well, sales relating to general merchandise, specifically in Makro, declined on the prior year period as cash strapped consumers focused their spending more toward non-durable items,” the group said.
Compared to the same period in 2019, sales at Makro increased by 6%.
Sales at Game dropped by 3.7%, impacted by weaker sales of general merchandise, as the pressure on disposable income resulted in consumers shifting their spending in favour of non-discretionary items. Sales of Game stores outside of South Africa dropped 12% – due in part to regional supply chain challenges.
Total sales at its Cambridge stores dropped 19% to R2.2 billion (US$138m), hit by civil unrest in July 2021. Stores impacted and re-opened have not re-introduced all products, the company said.
One Makro store in Pietermaritzburg has not yet re-opened and is currently under re-construction following the significant damage suffered during the July 2021 unrest.