SOUTH AFRICA – Liquor City, which has about 300 franchised and owned stores across SA, plans to ramp up its franchise portfolio by taking under-pressure independent liquor retailers under its wing.
“After 20 years we have just over 300 stores, and we’re hoping that within five years we will have at least another 150,” Liquor City’s national trade marketing manager Vania Martins-Fouche said last week.
She said many independent outlets were under pressure in a highly competitive and low-margin retail environment, compounded by impending regulations to ban alcohol advertising.
Liquor chains including Norman Goodfellows, Ultra Liquors and Liquor City are contending with competition from major listed retailers such as Shoprite, Pick n Pay and Spar. These retailers are growing the number of liquor stores in their portfolios, and have strong buying power given their size.
Ms Martins-Fouche said unlike large chains, independent retailers were not able to negotiate cost-competitive deals with suppliers.
This, together with a difficult retail environment, meant “the situation is such that the big guys are getting bigger and the smaller guys are dying out”.
Liquor City was looking to grow its franchise presence particularly in the Eastern Cape where it had a relatively small footprint, as well as in the Western Cape and KwaZulu-Natal. It had a large focus on townships and community outlets.
The chain offered small independent retailers its favourable supplier deals and guidance on how to grow and improve their business “to become a fully-fledged franchise”.
Meanwhile, Liquor City was adapting its product mix in line with changing consumer preferences, Ms Martins-Fouche said.
The domestic beer market is dominated by the likes of Brandhouse and South African Breweries (SAB), which on its own commands about a 90% share of the market.
However, the fledgling craft beer segment has grown in the past few years, albeit off a low base. A growing number of bars and restaurants stock craft beers, and the products are being given more shelf space at the expense of mainstream brands by retailers including Liquor City.
Ms Martins-Fouche said “the issue with craft beer is that often the shelf life is very short — sometimes a month or two”.
Together with industry experts, Liquor City had identified several popular craft beer brands which had lengthier shelf lives and could be refrigerated, warmed and refrigerated again without losing flavour.
With the belief that the craft beer niche promotes the beer category as a whole, SAB has supported microbreweries by sponsoring festivals, supplying ingredients at cost price and offering its expertise.
Two weeks ago SAB launched a new small-batch seasonal beer brand, called No3 Fransen Street, which it is distributing to about 70 outlets in Gauteng.