South Africans love a drink. This was underlined during the pandemic lockdowns in 2020, when long queues formed outside liquor stores as people tried to stock up before the ban on alcohol sales kicked in.
This love for alcohol was further shown when the ban was lifted and people no longer needed to make pineapple beer but were free to procure booze from their local off-licence.
One young fellow was so happy that he even got a marching band to play behind him as he danced into a Tops bottle store.
Around that time, South Africans realised something: Tops had replaced their local off-licence retailer. Almost unnoticed, for the better part of 20 years, Spar’s Tops stores had steadily replaced local independent liquor stores by buying out mom and pop shops and opening new stores.
According to its latest results, Spar now has 913 Tops stores, a far cry from the 20 it launched with in 2000.
Spar is not the only large retail chain that has opened dedicated liquor stores, as Shoprite and Pick n Pay have also been steadily building their liquor chains.
Shoprite launched its first LiquorShop in 2005, and by December 2023 had grown its network to 725 stores. It has shown no sign of slowing down, increasing this number to 753 for the year to end-June.
The importance of liquor sales to Shoprite is evident in the growth of its liquor stores by 105 branches in 2023. Of the new stores, 42 were bought from rival Massmart.
It’s a similar story for Pick n Pay, which launched its first liquor store in 2004 and now has 683 across the country.
For retail chains, the payoff of having dedicated liquor stores has been immense. In a tricky economy, alcohol sales have been a strong driver of sales revenue.
Spar said Tops revenue was up 12.8% to R6bn, while its core grocery business was up only 4% to R37.72bn for the half-year to end-March 2024.
Pick n Pay echoed this. In a dismal set of results for the year ended February 2024, liquor sales were among the few standouts. Pick n Pay’s revenue was up 5.4% to R112.3bn, but liquor sales grew 8.9% for the period.
Shoprite’s liquor operation is going from strength to strength. LiquorShop sales surged 25.2% to R9.2bn for the half-year to end-December 2023. Excluding the contribution from the liquor stores it bought from Massmart, liquor sales were still up a healthy 17.4%.
Shoprite is not done. It wants to become the dominant liquor retailer in the country.
“We are on a strategic drive to become the largest liquor retailer in South Africa. Over the past six years, we have managed to open, on average, a store a week,” it said in its 2023 annual report.
It also said at the time that it had 102 pending liquor licence applications at the various provincial liquor boards, and was “constantly investigating strategic acquisition opportunities” to extend its reach further.
Large retailers’ moves to expand their liquor sales operations should be seen as part of their strategy to mitigate the country’s stagnant economic growth for the past 10 years, says Sasfin Wealth senior equity analyst Alec Abraham.
“Food retailers have been expanding into alternative retail categories, liquor being one of them. With little growth in the economy, they have to seek growth wherever they can find it.”
Abraham says this can be seen in population growth outgrowing retail sales growth for the period.
“People have become poorer.”
The numbers bear this out. South Africa’s population was estimated to be 54.3-million in 2014 and now sits at 63-million, meaning it has an annual growth rate of 1.55%.
By comparison, the annual growth rate in retail sales between 2013 and 2023 was 1.47%.
Abraham says it makes sense for retailers to move into other categories, as sectors such as baby goods and pet products increase the range of goods sold, and tend to have higher margins.
Large retailers also like having liquor stores close to their supermarkets. They reason that there is a multiplier effect, as people who pop into one might easily decide to pop into the other.
“[It’s] a one-stop shopping experience by locating our LiquorShop stores adjacent to or near Shoprite and Checkers stores, offering a range of local and international alcoholic and nonalcoholic beverages. LiquorShop stores are managed by the adjacent supermarket’s management team,” noted Shoprite in its annual report.
Aside from opening new liquor stores, the retailers are also embracing e-commerce, with Woolworths, Spar, Shoprite/Checkers and Pick n Pay all selling alcohol online.
For retail chains, the payoff of having dedicated liquor stores has been immense
Though South Africans are feeling the economic strain, it has not led them to cut back on liquor consumption. Between 2013 and 2023, the amount of alcohol consumed showed an annual growth rate of 1.65%, higher than the population growth rate for the same period.
In fact, South Africans are drinking marginally more than they did 10 years ago. In 2013, per adult consumption — 15 years and older — in South Africa was 6.95l, but it has since grown to 7.11l in 2023, according to South African Wine Industry Information & Systems.
The increase in alcohol consumption is also reflected in NielsenIQ’s (NIQ’s) third-quarter 2023 “State of the South African Retail Nation” analysis.
NIQ South Africa market lead Zak Haeri said at the time that liquor sales had outperformed ambient food. This marks the first time in three years that total liquor sales exceeded ambient food, with a 21.3% (12-month) increase in value sales and a 28.5% rise in the third quarter vs the same period in 2022.
“This impressive surge in liquor sales can be attributed to the reduced impact of earlier liquor bans and a resurgence in demand,” said Haeri.
Latest results from Spar’s Tops bear this out. In its results for the half-year to end-March 2024, the foot count/number of transactions at the till was up 10.3%, compared with modest 1.3% growth for its supermarkets.
Spar was not alone in experiencing this trend. Shoprite also had healthy growth in liquor sales for the year to end-June, with LiquorShop sales rising more than 20% from R13.93bn to R16.71bn.
The size of the grocery basket may be shrinking, but South Africans always seem to have money for a lager or two.
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