Shoprite’s R45 billion white-label juggernaut

Shoprite’s private-label business generated R45 billion in revenue in the last financial year, nearly a quarter of the entire company’s revenue of R215 billion. 

This was revealed by Shoprite CEO Pieter Engelbrecht in an interview with the SABC after presenting the company’s results for the past financial year. 

Group merchandise sales increased by 16.9% to R215.0 billion, while local merchandise sales increased by 17.8% to R173.6 billion.

This saw the company’s earnings significantly increase, as headline earnings per share rose 9.6% and basic earnings per share rose 10%. EBITDA increased by 13.0% to R18.8 billion.

The retailer’s trading profit increased by 5.7% from R11.28 billion in 2022 to R11.92 billion.

Engelbrecht hailed this as “an incredible performance by team Shoprite, with ordinary people delivering the extraordinary”.

“In conditions where there has definitely been no tailwinds from a macroeconomic point of view, this performance is even better.”

A key part of this performance was the company’s private label business, which grew faster than the rest of the company. 

A private label product is one that a retailer gets produced by a third party but sells under its own brand name. The retailer controls everything about the product or products, including the product’s specs, how it’s packaged, and everything else. 

Private-label products are then delivered to the retailer to sell. As far as consumers are concerned, they’re the company’s ‘own brand’ products.

This enables the retailer to absorb rising costs and not pass them on to consumers, which is vital for a business like Shoprite that targets low-income consumers and the middle class through Checkers. 

Engelbrecht said Shoprite has seen the basket participation of its private-label products increase from 13% to 21% in less than five years. 

This means that the private-label business generated R45 billion worth of revenue for the company. 

Furthermore, Shoprite’s private-label business is growing at nearly 20%, while the company’s South African supermarkets as a whole reported revenue growth of 17.8%. 

Engelbrecht said it is clear that customers are buying more into private-label products as they are looking for value in the tough economic environment. 

He also said the company has seen a substantial uptick in promotional item participation in customers’ baskets. 

Shoprite’s Xtra Savings loyalty programme also played its part, with customers spending R26 billion more compared to a year ago but saving over R13.5 billion.