A range of in-house produced goods remain popular with the Choppies customers across the region, group CEO Ramachandran Ottapathu says in the latest Choppies annual report.
The in-house brands popularity have grown to the extent of contributing 18.6 percent of total revenues in Botswana with expectations of similar margins in other markets in the long term.
“We have grown the share of our private label goods and expect margins upside as we unlock further scale benefits through sheer scale volume and a broader logistical network to better tap into the manufacturing value chain,” Ottapathu said. Expansion into the East African market also provides new sourcing opportunities, according to the group CEO.
Choppies has over 50 in-house brands that range from food and beverages to cleaning products and cosmetics.
According to the report, Choppies brands account for 20 percent of sales in Botswana, 10 percent in South Africa and 4 percent in Zimbabwe. It is stated that the Choppies brand delivers gross margins higher than those generated by branded products.
The group intends to use the popularity of the in-house brands to drive sales by increasing the private label offering to over 200 products and aims to generate 25 percent revenue from their sales.
Value added services such as money transfers and other financial services are also reported to have become a big attraction, improving customer shopping experience and led to increased footfall.
Choppies which so far operates in Botswana, South Africa and Zimbabwe has embarked on an ambitious growth trajectory and has put East Africa in its developmental plans with countries such as Tanzania and Kenya earmarked. Choppies which leads the Fast Moving Consumer Goods (FMCG) market in Botswana also intends to commence retail operations in Zambia sometime this month with Mozambique and Namibia also under the Choppies radar.
Ottapathu says the African opportunity is supported by the rapid demand for quality, branded convenience offering across the continent.
“Our performance over the past year was very satisfying and we are confident of continuing on this growth trajectory,” Ottapathu is quoted as saying in the report.
Even when the market conditions remain challenging, Ottapathu is confident the retail group will be able to preserve the margins. After posting a gross profit of P1.29 billion in 2015, the CEO says they expect strong growth in 2016 financial year and beyond that will be backed by robust growth in East Africa and further efficiency gains in existing markets.
The roll-out plans are said to be going as anticipated barring few delays in Zambia and Tanzania. Choppies plans to roll-out a total of 35 new stores, excluding acquisitions in the coming financial year in line with the target to have 200 stores by the end of 2016 calendar year. The group had 134 stores by end of the 2015 financial year.
Ottapathu acknowledges that there will be some pressure on sales; however there are sufficient measures in place to protect profit margins.
“Our expanding in-house range and cost control, and improved logistical efficiencies, will support margins across the region in the event of a weakening in consumer income,” he says, adding that expansion into Kenya will also help to spread the Choppies’ risk further and drive group-level sales volume growth.