Advertise with fastmoving.co.za
 
 

Massmart received a major boost after the Competition Commission said Spar, Pick n Pay, Shoprite and Woolworths should be barred from entering into long-term exclusive lease agreements.
Massmart received a major boost after the Competition Commission said Spar, Pick n Pay, Shoprite and Woolworths should be barred from entering into long-term exclusive lease agreements.

Massmart wins grocery store battle

RETAILER NEWS

By Kabelo Khumalo - May 31st, 09:22

Massmart, which owns the Game and Makro chains and other smaller retailers, received a major boost after the Competition Commission said Spar, Pick n Pay, Shoprite and Woolworths should be barred from entering into long-term exclusive lease agreements. 

The regulator’s commissioner, Tembinkosi Bonakele, said current exclusive leases prevented emerging chains from developing to the point that they could suitably play the anchor tenant role in new developments, which means the same four retail chains are the only candidates.

“There appears to be a sustained pattern of behaviour by the national supermarket chains and their counterparts that enables or results in the exercise of market power by them to the exclusion of smaller, independent stores as well as emerging challenger retailers such as OBC, Choppies, Fruit and Veg, and Food Lover’s Market,” Bonakele said.

“As of the date of publication of this report, the incumbent national supermarket chains (Shoprite, Pick n Pay, Woolworths, Spar) including their subsidiaries and their successors must, with immediate effect, cease from enforcing exclusivity provisions, or provisions that have a substantially similar effect in their lease agreements against speciality stores.”

The regulator said the industry was highly concentrated with the big four supermarket chains accounting for a market share of 72 percent.

The commission further recommended that the enforcement of exclusivity by the incumbent national supermarket chains must be phased out within three years. Massmart, which is in the middle of transforming its flagship Game chain from a primarily electronics retailer to one that sells groceries, in 2014 lodged a complaint with competition watchdogs saying its expansion into the fresh grocery sector was being hampered by lease arrangements that restrict malls from renting out space to rival food retailers.

At the heart of Massmart’s argument has been that the exclusivity provisions in the lease agreements gave Pick n Pay, Shoprite, and Spar protection in the supply of groceries and had a negative impact on consumers.

The commission’s recommendations come hot on the heels of the appointment of US veteran Mitchell Slape to the helm of Massmart to turn the troubled business around.

The group’s share price had plunged more than 50 percent under erstwhile chief executive Guy Hayward, who had served in the role since 2014.

In 2011 Walmart, the world’s biggest retailer acquired 51 percent in Massmart for $2.5 billion (R36.48bn).

Brian Leroni, a corporate affairs executive at Massmart, said: “Massmart welcomes this recommendation, which vindicates our long-held view that exclusive lease agreements are intuitively anti-competitive.”

Research from Euromonitor International shows Shoprite has a leading position in the lucrative grocery industry, with a 22 percent market share.

Spar, Pick n Pay and Shoprite did not respond to questions sent to themIOL 

Related News

SA "Black Friday" sales expected to rise 30% year-on-year
18/10/2019 - 12:50
South African businesses have begun preparing for what looks to be another bumper Black Friday trading day, with sales predicted to be up 30 percent from last year, online largest payment service provider PayGate said.

Pick n Pay unveils its revamped "On Nicol" flagship store
18/10/2019 - 10:59
Pick n Pay’s flagship store On Nicol officially welcomed customers after a comprehensive revamp. The refurbished store has an exciting array of new offerings with the very best in retail concepts developed in South Africa and from around the world. Customers can expect an enhanced fresh food experience, a huge focus on product quality, a much-improved range, innovative third-party services, and refreshed customer service.

Consumers are pushing transformation in the retail industry
18/10/2019 - 10:54
Hearing from some of the best speakers in the retail industry, 480 minutes of thought-provoking and relevant insights, amazing networking opportunities and the exchange of ideas. The realisation that the retail sector is rapidly changing and to survive and ensure sustainability, businesses need to evolve – it is no longer a ‘nice to have’ – it’s a necessity – this was the 2019 SACSC Congress.

Marks & Spencer targets new store concept in bid to drive growth
18/10/2019 - 10:18
For a taste of CEO Steve Rowe’s ambitions to transform Marks & Spencer Group (M&S), look no further than its newly refurbished shop in London’s Clapham neighbourhood.

Food garden provides sustenance and jobs in rural community
18/10/2019 - 09:45
Community food gardens are often started to provide fresh vegetables to underprivileged people living in rural areas, but in many cases, these small-scale farms also offer employment in places where jobs are hard to come by.