In the July issue of The SA-Mag, we took a detailed look at the development of Massmart in South Africa. The business is enjoying rapid growth throughout the retail sector, with its Masscash division providing fierce competition in the supermarket sector. Central to Masscash’s success, is the rapidly-expanding Cambridge Food.
To make a real impact on a market dominated by well-established, major brands, takes endeavour but also real ambition, capital and fast expansion. With the backing of Massmart, Cambridge Food is well on the way to establishing itself in double quick time.
Cambridge Food was launched in 2008, as part of the Masscash Retail Division. The supermarket chain has targeted food customers in living standards measurement two to seven, who depend on public transport and shop for dry groceries and perishable products several times a week.
The company says that its customers are characterised by high levels of unemployment, reliance on social grants as a primary source of income, and heavy dependence on taxis, trains and busses to travel between work and home.
Consequently, the location and accessibility of each store sets Cambridge Food apart from its competition, with stores strategically located conveniently on or nearby high traffic commuter nodes and densely populated residential areas in South Africa’s city centres and townships.
Each store provides fresh service departments, consisting of an on-site bakery, butchery and fresh fruit and vegetable offerings, central to the Cambridge Food brand.
Shortly after the launch of the business, Masscash stated its intention to expand its operating division through its food business, targeting Cambridge Food’s customer demographics.
“Food retailing is a resilient side of the retail market. We will expand our food business through Cambridge Food stores situated in KwaZulu-Natal, the Free State, North West and Gauteng. These will be focused on the bottom end of the market as this is where growth lies,” Masscash retail director, Jay Currie, said at the time.
The composition of Cambridge Food stores back then, saw 50 per cent of the floor space taken up by perishable goods, with dry goods accounting for the other half.
Currie indicated that the business’s competitors tended to dedicate less than 30 per cent of trading space to perishable goods and the balance to dry groceries and hard goods – giving Cambridge Food a clear advantage in fresh produce.
“We provide a butchery, bakery, fruit, vegetables and take away. We believe that these are important opportunities to encourage customers to visit our store several times a week,” Currie added.
By June 2012, the growth of Cambridge Food was continuing to gain momentum, with the company’s reputation for fresh meat, an important source of success.
The Massmart News letter for that month, included some insight into how the business operates its meat supplies:
“Fresh meat is one of Cambridge Food’s most sought-after categories. In fact, it’s not uncommon for the butchery to contribute a significant amount to overall store sales. As the chain grows, so too does the need for a reliable, safe and efficient route to bring fresh meat to market. This is why Cambridge Food has been operating a specialised meat plant in Gauteng for the last 2 years.
“The meat plant gives us several advantages,” says Nick Catling, Gauteng regional butchery operations manager. “Firstly, food safety is very important. We are a South African Food Safety Inspection Service-audited facility and we have full traceability on all our meat products. Secondly, we also benefit from the economies of scale through our plant. This is mainly as a result of buying meat in bulk, of course, but we also save when we buy spices and other ingredients in bulk.”
“Adding to these advantages is the fact that skills are centralised at the plant, putting less pressure on the stores,” says Catling. In total, the Gauteng meat plant sends out 465 tons of meat to Cambridge Food stores per month. Of this, between 25 and 28 percent is beef, while sausage and boerewors account for another 20 per cent and the balance is made up of chicken.
Mark Barker, KwaZulu-Natal regional butchery operations manager, runs the centralised facility that services the eight stores in that province. He believes centralised operations are important, too. The KZN facility produces fresh products such as sausage and boerewors, for Cambridge Food. All other butchery operations are managed in-store. “Centralised services bring efficiency,” says Barker, “but the personal touch is what really drives the butchery market.”
“We are proud of our meat culture in South Africa,” Barker says.
“We value meat and we spend a significant portion of our grocery spend on it. Many supermarkets come up around us, but the meat section in these supermarkets is often neglected and just disappears into a corner.” Barker says maintaining a strong in-store skills set in butchery is crucial.
The significance of Cambridge Food within the Massmart business, has also been publicly affirmed by Massmart’s CEO, Grant Pattison, last February. Speaking to Moneyweb, Pattison emphasized the role of fresh produce in the group’s strategy:
“Our food and liquor business was historically mostly wholesale. What we’ve been doing over the last few years is building a retail business now, about R10 billion. So that’s moved up to almost 55 per cent of our sales, of which our fresh business is probably about R1.5 billion.
“Four years ago we had no food retail, and we embarked on that new journey. We are now R 10 billion. It was the target I set for us to be able to conclude that “we are in the business”. Up to now we’ve been trying to take the business; now we are in it. Now it’s time to consolidate a bit and then we want to press on to R 20 billion as the next target and we hope to get there within the next five years.”
Indeed, the company’s ambitions are to grow the Cambridge Food brand to 100 stores, across all of South Africa’s provinces, with targeted annual sales of R10 billion by 2015.