Food giant Premier holds fast to spaza shop strategy despite closures - TimesLIVE

Fast-moving consumer goods (FMCG) giant Premier maintains the booming township and informal retail market remains a big growth opportunity, despite unrest-related closures of more than 400 spaza shops in KwaZulu-Natal denting bread sales volumes.

The group told Business Day on Tuesday it had no plans to alter its informal market strategy, with more than 70% of its bread volumes sold through this channel.

The food producer said it could not yet assess the full effect of the closures. Premier CEO Kobus Gertenbach said the group had seen a reduction in sales volumes after the closures but could not yet establish how many shops would reopen or how much business it would recover.

Hundreds of spaza shops in KwaZulu-Natal have closed after the March and March unrest and protest action, making the province the area most affected by the disruption, said Gertenbach. The shops remained closed at the time of the group’s results presentation, and the extent to which their owners would return to trading was still unclear.

“What it did do was cut down a lot on sales volumes in that core market,” he said.

Gertenbach said it was unknown whether some shop owners, including foreign nationals, had left the country or were waiting for tensions to ease before reopening. Premier is monitoring developments after last week’s local government elections and expects to have a clearer picture of the situation between now and Christmas, he said.

Despite the disruption, Premier does not intend to change its distribution strategy. Gertenbach said the informal retail market was fluid, with some shops closing while others opened in different locations. The group expects demand to continue being served, even if the businesses and distribution routes through which it reaches customers change.

He said consumers in some communities did not have easy access to formal retail stores, making informal shops an important part of the supply chain. Premier therefore intends to maintain its focus on township and informal markets.

“It will always be a very big focus and a very important part of our business,” Gertenbach said.

Premier has a direct relationship with spaza shops through its daily bread deliveries and says it wants to help businesses that resume trading. The company said it could provide free stock when shops reopen, giving owners products to sell and some working capital as they restart their operations.

The group has provided similar support to spaza shops after previous unrest in KwaZulu-Natal. However, it has not quantified the sales lost due to the latest closures or their effect on earnings.

Gertenbach said the company would have a better understanding of the recovery in the next month or two, as it monitors how many businesses reopen and how its distribution network adjusts.

He also warned further unrest on the scale experienced in June and July could have wider consequences for businesses and communities, saying recurring disruptions highlighted the need for stronger economic growth.

“We need economic growth in this country to solve this problem,” he said.