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Spar wants a bigger slice of Ireland's €15bn grocery market
South African headquartered Spar group, in releasing its half-year reporting last week, announced its plan to withdraw from its extensive operations in Switzerland and the UK, but in a surprising move, declared its intention to double down on its investment in Ireland.
The group's decision to offload its Swiss and UK retail businesses is part of a strategic realignment towards a more profitable international presence. Spar group chief executive Angelo Swartz stated the group experienced a tough operating environment, particularly in its European operations, while the South African consumer remains under pressure as well.
Spar group, which operates the eponymous business in Ireland, England, and Switzerland, as well as in its native South Africa, has reported a marginal decline in turnover, to R66.1bn (€3.26bn), in the first half of its financial year to March 28.
In disposing of its Swiss operations, it will cut off €800m in sales, and a further €300m in its British operations. By comparison, Spar Ireland achieved record retail sales of €1.3bn in 2024.
Spar's withdrawal from its Swiss and UK divisions highlights a broader trend of reevaluating European retail strategies amid uncertain market conditions. Spar's new business strategy, being unveiled, aims to build on the current momentum of the brand in Ireland. The strategy includes plans for new store openings, upgrading existing sites, and a new design for EuroSpar supermarkets.
'There's a cost-of-living crisis in Europe that's made those markets tougher than I can remember. And in South Africa, we've had an economy that's been struggling to grow for some time and consumers are under real financial pressure with relatively high interest rates, albeit coming down,' according to Angelo Swartz, Spar group chief executive.
Commenting on Spar's apparent loss of upper-income shoppers, Swartz acknowledges the extremely competitive environment in the retail space.
'There's certainly truth in the observation that growth in our stores that cater to the lower end of the market has been more robust than at the top end,' Mr Swartz said. 'It's been more competitive at the higher end of the market, most certainly for us.'
To prevent its Irish operations from following the same downward trend as its discontinued European ventures, the retailer plans to expand its private-label range, emphasising its value proposition to customers.
They also plan to go further by ensuring a diverse product range that aligns with changing consumer preferences. This range must include more organic and healthier options, which will help it compete with major players like SuperValu and Centra in the Irish market.
Spar operates with its local partner BWG group, as a leading convenience brand in Ireland and holds a relatively small share of the Irish grocery market, less than 1% according to Bord Bia. While this may appear minor compared to other large players, Spar have a significant presence as one of the largest convenience retail groups in the country, with more than 60 years of history and a network of 463 stores across every county in Ireland and providing employment for 14,000 people locally.
Spar group's strategy for Ireland was positively impacted by gross margin increase in recent years, with local performance boosted by lower gearing and cost savings, partially offset by increased labour costs, due to the minimum wage increase.
Bord Bia conservatively estimates that the Irish grocery retail market is currently valued at €15bn. The quality of food on offer is of the highest standard. However, as in the world over, current global dynamics are driving up cost of living inflation, which will impact how consumers shop and how retailers respond over the coming months.
Relatively speaking, the Irish grocery retail market is quite sophisticated in terms of store design and merchandising, remaining predominantly physical, with online a very small percentage of total sales (5.8%, 12 weeks ending January 26) but it is growing according to Kantar market consultancy.
Much like Spar, who plan to open 50 more stores in 2025, other retailers in Ireland are still expanding store numbers to find growth. The Irish retail market is highly competitive, with three retailers: Dunnes Stores, Tesco, and SuperValu (part of Musgrave Group) holding 67.7% of the market between them.
Getting a bigger slice of the €15bn Irish market, is clearly a key strategic goal of the Spar group management, but the 'big three' supermarkets won't give up market share without a fight.
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