Massmart, which owns Game, Makro and Builders Warehouse, among others, won’t rebrand itself as Walmart anytime soon.
In his first wide-ranging interview since taking over from Grant Pattison, CEO Guy Hayward says this option is now off the table. This appears to contradict expectations from analysts that Massmart will begin "Walmartising" to capitalise on its parent’s global brand recognition in Africa.
"We did research, and Game and Builders Warehouse are better known than Walmart in most of Africa. The west of Africa with links to America — Ghana and Nigeria — has a slightly higher recognition of Walmart," says Hayward.
Six years ago, when Walmart swept into town and nabbed Massmart for R30bn, talk was rife that there would be a prompt rebranding, followed by lower prices for consumers, and a quick assault on the African retail market.
But Walmart has found it much harder than it expected. Massmart’s stock has fallen to R131/share — down 11.4% from the R148/share that the US giant paid for control.
And Massmart’s African expansion has been curiously low-key — something Hayward ascribes to refusing to "slug the Africa Kool-Aid.
Massmart gets only 9% of its sales from outside SA, sharply less than Shoprite, which gets 17% of its turnover from outside the border.
But its prospects at home have brightened in recent weeks, after Massmart won a hotly contested constitutional court fight against Pick n Pay, which gives it the right to operate as a fully fledged supermarket in the Cape Gate shopping centre, where it can now sell fresh foods.
This may yet spark a fierce new retail war in major shopping centres. Large malls — the likes of Sandton City, Eastgate and others — often sign exclusive lease deals with big retailers that prevent rivals from opening stores.
At Cape Gate, Massmart’s Game began selling fresh fruit in 2010, as part of an expansion into food. Pick n Pay complained, saying it had been given the "exclusive rights" to do this.
The constitutional court disagreed — effectively ending the era of exclusivity leases. While the judges only spoke explicitly of Cape Gate, the ruling will be influential in any further discussion on this issue.
Hayward argues that introducing food, and particularly fresh food, is crucial, as it "allows us to make Game a more defensive, more frequently trafficked discounter".
He says: "You’re not (just) going there two or three times a month for a car audio or a kid’s schoolbag — you’re going quite often to get food. And what we’ve seen through customer data is that one in every five visits is now food only."
About 20% of Game’s sales is food, but there is plenty of scope to grow. Of Game’s 139 stores across Africa, including SA, only 82 have food. The stakes are high: Massmart estimated last month that the total fresh food market is worth R84.7bn/year, with 10% annual growth forecast.
The court ruling means it’ll become almost impossible for malls, or retailers, to justify keeping exclusivity deals. In the end, it’s a victory for consumers.
Game and Builders Warehouse are better known than Walmart in most of Africa
Guy Hayward
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