Woolworths South Africa invests US$45.7m in food price reduction fostering affordability

SOUTH AFRICA – South African retail giant Woolworths is seeking to invest R1bn (US$60.9m) in its prices over the next two to three years to ensure its products are accessible to more consumers, committing 75% of the investment to lowering food prices.

The move has been triggered by the supermarket chain eyeing a bigger share of South Africa’s lucrative fresh food and grocery market and seeking to offset the pandemic impact on consumer’s income.

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“Over the last few years, we have been on a journey to invest in the prices of key product lines and categories to ensure we continue to provide our customers with the value they have come to expect from us.

“The Covid-19 pandemic has emphasised this need and therefore accelerated our price journey, because of the significant impact it has had on our economy and on the lives of our customers and their families,” Woolworths SA CEO, Zyda Rylands, said.

According to reports by Bizcommunity, the first phase of the journey begins with a R250m (US$15.2m) price investment planned in the food business and R250m (US$15.2m) in the fashion business for this financial year.

In foods, the investment will cover the entire fresh chicken range such as all whole and portion chicken packs, excluding Easy to Cook, crumbed and marinated chicken.

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“While this investment will initially be most visible in our poultry products, we have also applied more promotions on everyday basics across groceries, household and personal care to be more affordable to more customers,” explained Rylands.

Its food business expansion is likely to also be watched closely by Shoprite Group, which has been investing heavily in its upper market Checkers chain to take on both Woolworths Food and Pick n Pay over recent years.

“Over the last few years, we have been on a journey to invest in the prices of key product lines and categories to ensure we continue to provide our customers with the value they have come to expect from us.”

Woolworths SA CEO – Zyda Rylands

Meanwhile, Shoprite recently entered into a consent agreement with Competition Commission to immediately stop enforcing exclusivity provisions in its long-term lease agreements with its landlords against small, medium and micro enterprises (SMMEs) and speciality and limited line stores.

Long-term exclusive lease agreements, entered into between property developers and supermarkets, include provisions that restrict the landlord from letting premises in the same shopping centre to potentially competing grocery retailers and specialty stores.

The consent agreement follows the release of the Grocery Retail Market Inquiry (GRMI) report in November 2019 which found, among others, that long-term exclusive lease agreements were widely prevalent in the grocery retail sector and impeded competition in the sector.

It also found that the agreements gave rise to customer harm as they limit consumer choice within shopping centres.

Under the agreement, the retailer will waive exclusivity against other chains in all non-urban shopping centres with immediate effect.

However, Shoprite stores located in urban areas will face the same restrictions, except that they will be permitted to phase out the enforcement of exclusivity provisions against other supermarket chains within five years.

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