Choppies sees room for 100 more stores across the region

• 30 in Namibia and Zimbabwe each, 40 in Zambia
• Says reliance on Botswana revenue will fall below 50 percent

Speaking recently at the JSE Small Caps Investment Forum, Ottapathu displayed great relish at the sight of potential growth of its market share, especially in Zambia, Namibia and Zimbabwe.

The Choppies Group currently has 159 stores across the region. “Our brand is growing significantly in countries like Zambia, Zimbabwe and Namibia,” Ottapathu said. “The potential is immense in these regions, especially in Namibia. We can add another 30 stores to make our footprint in Namibia close to 50.”

He says there is room to add another 40 stores in Zambia in three to four years while “in Zimbabwe we can add another 30 stores”.  In Botswana, the CEO said they will be adding only a small number of stores because it is a market already closer to maturity and that Choppies reliance on the country of its origin for revenue will come down to below 50 percent in the medium-term.

In the six months ended 31 December 2021, Botswana revenue was P4.1 billion, contributing about 78 percent, according to the CEO’s slide presentation. Botswana currently has 92 stores as at February 2022, employing 6 109 people. Namibia’s revenue contribution to the group sits at 3 percent with the eight stores generating P155 million during the reporting period. Zimbabwe accounted for 10 percent of revenue at P537 million while Zambia constituted 9 percent after amassing P495 million.

Ottapathu expects the business to grow and show a better and balanced return, bearing in mind that going forward every investor will be looking for a dividend after investment. Choppies’ previous poor performance impeded it from declaring dividends. The group has returned to profitability after exiting loss making markets.

In the six months ending 31 December 2021, Choppies reported a 184.2 percent growth in profit after tax (PAT) from its total operations despite operating in a very challenging and competitive environment. PAT increased to P108 million from P38 million. “We are also planning to look at our cashflows and other opportunities of growth to make a dividend declaration as quickly as possible,” Ottapathu said.

A question seeking to know where Choppies sees growth in the existing markets was raised from the floor. Is it the fact that they are underserved that creates demand? “Most of these markets are underserved, especially Zambia and Namibia,” the CEO responded. “It’s the new brand which people are accepting wholeheartedly.”

He reminded the forum that Choppies is a one-stop shop for all services, including financial services. The journey that started well in Botswana is being replicated in other countries. “We are well poised to get decent revenue from the financial services,” Ottapathu said. “This is also an opportunity for consumers to become partners with us doing financial services through a Choppies outlet.” He observed that a shift in consumer patterns. “If you look at essential commodities, they are not dropping but where consumers can avoid buying, they will,” he noted.

Regarding inflationary pressures, the Choppies CEO said they strive to deliver stock at better prices despite the current dynamics at play. “We are in a constant battle with suppliers not to increase the prices,” he said. He estimated that inflation of the group’s food basket in Botswana is between 7 percent and 8 percent, Zambia is stable between 8 percent and 10 percent, Namibia in the same range while Zimbabwe is experiences the highest inflationary pressures because of shortage of cash and volatile exchange rates.

Asked how the group is dealing with the situation in Zimbabwe, Ottapathu responded|: “We try to commit weekly prices to consumers and we try to book stock in advance based on exchange rates and balance it on a week-to-week basis, not on a month-to-month basis.”