A gluten-free bunfight? Well, not quite. But a fierce battle is raging at the premium end of the food retailing market between Woolworths and Checkers. Both supermarket groups are claiming to have the upper hand — though independent observers differ about which one is actually advancing its market share.
Woolworths has long been the leading premium food retailer in the country. It has a reputation for quality, sustainability and top-tier product innovation, from organic to gluten-free and vegan. But its traditional stronghold no longer looks impenetrable.
We believe Woolworths has no major competitors in the high-margin fresh categories
— Darren Cohn
Though Shoprite is aimed at the mass and middle markets, which are more price sensitive, its Checkers brand — along with the revamped Checkers FreshX stores — now unashamedly targets the more affluent shopper.
After annual results released this month, Shoprite CEO Pieter Engelbrecht contends the group is the fastest growing in premium food. Woolworths CEO Roy Bagattini maintains his group is the fastest growing in terms of comparable sales.
Market watchers seem ambivalent.
A report from Absa by senior equities research analyst Darren Cohn says: “We believe Woolworths has no major competitors in the high-margin fresh categories.”
Though consensus in the market is that Checkers has made significant inroads into Woolworths’ top-end market, Cohn does not believe Checkers has taken material market share from Woolworths Food in the fresh category.
But he says the Checkers Sixty60 home delivery service is miles ahead of its competitors. Cohn also believes that upgrades to the Checkers FreshX stores are an underestimated driver of Shoprite’s outperformance and may have more of an impact than Sixty60 in future. But, he says, “consistently matching Woolworths’ quality in the high-margin fresh product range is difficult, and the market is not large enough to justify the investment required to do so”.
Cohn’s report concedes that given the undeniable success of the FreshX format, Shoprite management believes that it is competing with Woolworths at the top end and taking market share.
A report from Nedbank says Woolworths Food continues to show market-leading growth, margins and returns. The report says Woolworths Food underpins the valuation of the group to a large extent, accounting for about 58% of group trading profits and showing attractive growth, with positive volumes and sector-leading margins.
“We value the Woolworths Food division on a financial year 2025 earnings multiple of 20 (similar to Shoprite),” say writers Paul Steegers and Shaun Chauke. They add that Woolworths Food has had revenue growth of 13.3% in the first eight weeks of financial 2025, aided by the recent acquisition of Absolute Pets. Excluding the acquisition, revenue growth was 10.9%, still a solid performance.
Casparus Treurnicht, portfolio manager at Gryphon Asset Management, says Shoprite and Woolworths are both very good operators.
“Woolies Food has surprised me in how well it has managed to hang on to its market share over the past five years,” he says. “Naturally, as South Africa’s GDP growth per capita is underperforming and disposable income is under tremendous pressure, you would expect people to migrate from Woolies to Shoprite, Pick n Pay and Spar. But this hasn’t played out to the extent that I expected.
“The shift was slower than I would have imagined. Woolies has always made sure that quality will be maintained, and it has an exceptionally loyal customer base. Make no mistake, Shoprite has taken market share, but I think more from Pick n Pay, which is a direct competitor, and Spar as well — especially due to its slacking on the delivery service. Shoprite is just the best operator at the moment positioned in the perfect ‘price perception categories’. I think it will continue on this path under Engelbrecht’s leadership.
“Woolies outperformed 10 years ago when we were handing out money under state capture and disposable income was healthier. Shoprite is now performing better since people are looking for value.”
Alec Abraham, senior equity analyst at Sasfin, says Checkers is growing faster than Woolworths, but the adjacent businesses, such as pet and baby, flatter their numbers a little. The pet category is still minuscule in the Woolworths numbers because it has only recently been added, he says. “Woolworths Food stands head and shoulders above all the other South African food retailers, even Checkers, in terms of innovation, shopping experience and — after a R900m multiyear investment in pricing — increasingly value for money.”
He says this is shown by consistently ahead-of the-market sales growth and consistently high margins. Abraham says the further investment in elevating the online delivery capability of Dash presents another fast-growing channel of growth for Woolworths Food, which has been profitable on a fully costed basis for almost two years now.
The numbers stack up intriguingly. Revenue at Checkers and Checkers Hyper stores stands at about R78bn and Woolworths Food is about R47bn. Woolworths’ market capitalisation is roughly R60bn against the R176bn of Shoprite.
Without looking at what competitors do, I can confirm we’ve taken market share from everybody
— Pieter Engelbrecht
Shoprite clearly is the juggernaut — ranking as the country’s largest local retailer in terms of market value, sales, profit and customers. But Woolworths has long been the gold standard in the premium food sector. While in previous years Woolies and Shoprite would have been seen as serving distinct market segments, the two are increasingly coming head-to-head.
To illustrate just how Checkers has fortified its position in the premier league table, look no further than it sitting, from this month, alongside Woolworths in a partnership with health insurer Discovery, the country’s largest medical insurer by far. (Pick n Pay was unceremoniously dropped as a partner.) This means both companies offer options for consumers to benefit from discounts for members of the Vitality healthy food programme.
Woolworths, however, had a tough year, in South Africa and Australia. Various businesses in the group are at different phases, but food continues to be the star performer. So, where food had market-leading like-for-like sales growth of almost 7% and improved margins, Australia-based Country Road Group — which had been the biggest contributor to earnings for the past two years — had an 8% drop in sales.
Shoprite, on the other hand, boasts an astounding 64 months of consecutive market share gains. In the 52 weeks to end-June Shoprite opened 292 new stores and group sales were up 12% at R241bn. Another eye-popping statistic is that Shoprite’s increase in sales equates to its core South African supermarket customers spending R21.4bn more.
Shoprite’s Supermarkets RSA segment grew 12.3% to R195bn. Within Supermarkets RSA, Checkers and Checkers Hyper were up 12.3%, Shoprite rose 10.3% and Usave was up 13.2% — which certainly suggests all the group’s brands are resonating with their respective customers.
But it’s not all a race for space. Bagattini says: “We’re not going on a land grab just for the sake of it. We’re not going to cut prices because that will compromise the other side of what we call our ‘holy grail’, which is about delivering the best returns on capital in the sector, and at scale.”
He does see more opportunity to take market share — but it will be “profitable market share so that we are sustainable”. Bagattini concedes that opening stores would provide incremental growth, but emphasises that the extra space needs to convert to profit.
Woolies needs to stick to what it does best, to what it is. That’s critical for us and we know that
— Roy Bagattini
He notes that return on capital for Woolworths Food is between 50% and 60%, adding that the offering remains innovative, presents phenomenal quality and has sustainability credentials as well as above-average staff service levels. “We give our shareholders the best return on capital in this sector by a long way.”
Bagattini stresses that Woolworths is not a price leader. “We don’t grow our business by dropping price. If we dropped our price 10% across the board in Woolworths we would literally grow our business by 50%. But that’s not what this business is about. It’s a premium food retailer ... If we wanted to expand our food business rapidly by going into a different segment of the market, we would buy another brand or build another brand to do that.”
But acquiring or building new brands has never been the Woolworths game. “Woolies needs to stick to what it does best, to what it is. That’s critical for us and we know that.”
Yet Woolworths has now moved (cautiously) into other adjacent businesses through its acquisition of Absolute Pets. The group has a stated intention of being the country’s premier pet destination. Woolworths also continues to roll out WEdit — its smaller-format clothes stores — and liquor through WCellar and food services (the latter through Now Now and WCafe), and has opened its first standalone beauty store.
There are other strategic divergences. Woolworths says Africa is delivering twice the growth rate of the overall South African business and it has plans to expand on the continent.
The growth of private label
Shoprite, by contrast, has pulled back its main grocery business in several other countries across Africa.
It’s not the only area where Shoprite is pulling back; it has also announced its plan to exit furniture. The group has scale in food but needed to redirect capital and project management resources away from the food retailing core to ensure scale was achieved in furniture. This would require substantial investments, so Shoprite is selling this business to Pepkor for about R3bn.
Shoprite is also in advanced discussions around buying out the remaining shares in Pingo, for last-mile delivery, in which it has been a 50% partner until now.
Much of the strategy to win market share in the local food segment has been focused on private-label brands.
Private label is increasingly important for Checkers (and other retailers), with higher margins than branded goods. It constitutes about a fifth of Checkers sales and the group has invested R60m in advertising this segment alone. That it is prepared to protect its turf is evidenced by the fact that it has taken Pick n Pay to court to protect its Forage and Feast range with 34 categories, objecting to the colour of Pick n Pay’s The Crafted Collection, saying it’s too similar to its own brand. Both lines have deep navy-blue packaging.
Checkers Sixty60 is also growing. General merchandise is being added to the delivery basket, but Engelbrecht says there are no plans to be like big players such as Amazon or Alibaba. “We’re not trying to be that and we’re not there in terms of technology either.”
The Checkers Xtra Savings loyalty programme has 31-million members, who have swiped their cards 560-million times, equating to a sales contribution of 85%.
Despite Shoprite’s size, Engelbrecht sees opportunity for further growth locally; Shoprite is opening in areas previously not covered by the group. He tells the FM that the group couldn’t operate in certain areas because exclusivity arrangements were in place. Some of these arrangements were extensive, and would include an entire area, not only a shopping centre. Now that these “exclusions” are disappearing or coming to an end, Shoprite can enter markets where it believes it’s been underrepresented.
“Part of that is our own doing. About 10 years ago we were not that clear in our positioning of Checkers vis-à-vis Shoprite. Today I don’t think there’s any confusion where Checkers stands in terms of the consumer profile ... The base of Shoprite is much bigger than Checkers, almost double. And therefore we are opening more Checkers stores a year than Shoprite stores.”
In areas where demand outstrips capacity, the group is also opening “dark stores”, where the purpose is purely to deliver to Sixty60 customers. (Woolworths has done the same where there is excess demand.)
Shoprite is taking over several Pick n Pay stores where the lease has been cancelled or expired, or where the franchise or landlord has elected to shift brands. “I do believe we have critical mass in the food business, we’re very clear in our formats who we serve, with a laser focus on the consumer need in that segment,” says Engelbrecht.
He is adamant that Checkers is the fastest-growing supermarket in the premium segment. “Without looking at what competitors do, I can confirm we’ve taken market share from everybody. I don’t have any target on anybody. It’s the consumers’ choice that gives us market share growth. We’ve grown customers by 4.5% this year, we have a total customer base of more than 30-million. So, to grow on that is quite hard.
“I can only say that whatever offer we give them physically and digitally has allowed us to grow our customers and the number of customer transactions. That is what we set out to do — to look at the customer promise, not to look at our competitors.”
He adds: “It’s almost as if we’re currently in a scenario where Checkers and Shoprite is a South Africa Inc hedge between people who have more discretionary income and giving people who are very price-sensitive what they need at the absolute best prices.”
All major brands from Checkers to Shoprite and Usave put in a strong performance.
Checkers and Checkers Hyper had 12.3% sales growth to R77.9bn. Shoprite and Usave just missed the R100bn sales mark (at R99.6bn). The group wants to open 1,000 Usave stores over the next five years, and plans to open 265 other stores this year, spending about R8bn on new stores and upgrades. Engelbrecht says food inflation has come down and the business community is feeling some optimism over a consumer recovery.
Shoprite and Woolworths say prospects are more positive after the formation of the government of national unity (GNU) and the suspension of load-shedding. But they agree that the trading environment remains constrained. Significantly, Shoprite’s full-year dividend was up 7.4%, whereas Woolworths delivered a reduced dividend, though it maintained a 70% dividend payout ratio.
Woolies Dash flourishes
Woolworths reported a significant decline in its annual earnings for financial 2024. The group reported a 16.8% drop in headline earnings, which is effectively down 29.2% when including the previous year’s David Jones contribution and a 53-week reporting period. Food sales grew 9% through organic growth with a 52.8% jump in online sales, mostly from Woolies Dash — which was up 71.2%, helped by extended trading hours and more available slots.
“We’re not happy with our bottom-line results,” says Bagattini. He admits the year was more challenging than expected, largely as a result of a difficult macroeconomic environment, which worsened through the year and was evident in both South Africa and Australia, though more pronounced in the latter.
On a 52-week comparable basis, Woolworths’ turnover was up 4% to almost R77bn, but operating profit dropped 14% from R6.6bn to R5.8bn. Headline earnings dropped 14% to 364.2c a share. The reported results were not directly comparable because last year’s results included David Jones for nine months; it has since been sold.
Bagattini says the food business delivered an excellent result, demonstrating its strength, resilience and the trust customers place in the Woolies brand. “Woolies has the strongest organic growth in the sector, driven by more transactions and increased basket values.”
Bagattini maintains Woolworths has taken market share over the period and expanded margins. This happened notwithstanding investment in price and other strategic initiatives. He says Woolworths will continue to focus on what’s under management’s control, from inventory to gross profit margins and cost containment to driving cash conversion and executing on strategies.
The group has invested nearly R900m in pricing in Woolworths Foods in the past few years — which Bagattini reckons has “fundamentally shifted market perception”. But he says it’s not just about price but rather “trusted value”, stressing ongoing product innovation and convenience. In a dig at his rival, Bagattini said in the recent investor presentation that Checkers could not deliver to the same level “even if you gave them 60 minutes”.
While Woolworths has been slow off the mark, its Dash on-demand delivery service is now growing well; sales increased 70% over the period. The group also continues to raise the bar with premium food retail in “next-generation stores”, of which six have already been rolled out.
With the GNU steadily making progress and the economy — aided by a lack of load-shedding and now by the initial cut in interest rates — showing sparks of growth, both Checkers and Woolworths look nicely poised to catch an upward swing in consumer spending. The next 12 to 18 months will then be critical in taking the high ground in the higher-margin premium food groceries segment. We’ll know soon enough who the clear leader is ... but only after what might be some telling, and perhaps costly, skirmishes.
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