South African discount supermarkets fighting a fierce battle

South Africa’s discount supermarkets are fighting a fierce battle, with Shoprite and Usave fighting for market share against Pick n Pay’s Boxer.

Boxer, which is owned by Pick n Pay, has formally announced its intention to list on the main board of the JSE on 28 November 2024.

This is the most exciting new listing on the JSE for a long time, which created tremendous hype around Boxer.

It also created more interest in the lower end of the South African retail market, where Boxer competes.

According to Pick n Pay, Boxer has a market share of 68% of the discount grocery retail market and an estimated share of 4.2% of the formal grocery market.

Boxer has added an average of one new store weekly for the last three financial years and expects to add 65 new stores by the end of this financial year.

In the medium to long term, it aims to double its store footprint by opening 60 to 70 stores yearly for the next six to seven years.

Boxer is clearly an excellent business with strong growth. However, it is up against the best retailer in Africa.

Ricus Reeders from PSG Hole In One Ruimsig described Boxer as a middleweight champion who faces the heavyweight champion, Shoprite.

Shoprite has two brands competing against Boxer in the discount supermarket segment – Shoprite and Usave.

Shoprite and USave cover a significant portion of this market and currently own 75% of the value market share. Boxer holds the remaining 25% of the value food market space.

Shoprite and USave’s combined turnover experienced an average annual growth rate of 12% per annum measured on a 6-monthly basis.

Boxer’s turnover grew at a compound annual growth rate (CAGR) of 18.6% between FY2022 and FY2024, with like-for-like growth of 7.7%.

In their latest reports, USave and Shoprite reported having 1,252 retail store outlets. This is significantly greater than the number of Boxer stores, which stands at 489.

Calculating each company’s revenue per store shows that USave and Shoprite currently generate a higher average revenue per store than Boxer.

USave and Shoprite generate an average of R95 million in annual revenue per store, compared to Boxer’s average annual revenue per store of R82 million.

The chart below compares Shoprite and Usave’s revenue versus that of Boxer.