🍰 R150bn Big Food Retail Disruption…

Miss us this long weekend? Well, let’s celebrate with ESP (EskomSePush)’s very South African elections-based AI-generated song, masekinners. Lekker enough to kick off your April?

Also, we passed 8’000 subscribers over the weekend. Big welcome to all our new readers!

In this Open Letter:

• Raised stakes: A R150bn food retail market disruption.

• Leading ladies, sneaky Meta spies & that billionaire TV power.

• Inside track: 4 Techniques for keeping your focus as a founder.

• How much inheritance tax you want to pay: The results are in.

• Share this: And get free business tools.

TRENDING NOW

A R150bn Big Food Retail Disruption

Shoprite Holdings Ltd (JSE: SHP) released results recently, and the group has seen 58 weeks of uninterrupted market share gains. 

In fact, 15 years ago they were neck and neck with Pick n Pay, today they are doing almost double PnP’s revenue.

Doing R215bn out of SA’s R650-odd billion FMCG market, means they have around 33% market share, with an enormous retail footprint of over 3’500 stores. 

And with innovations such as Checkers and Shoprite Xtra Savings (the most used loyalty programmes in SA) and on-demand grocery delivery service Checkers Sixty60 doing an estimated R10 billion a year in sales it’s hard to think how anyone can compete, let alone a startup.

But where there’s a niche there’s a way…

Eat where the margins are

One of the keys to Shoprite Group’s success has been to service customers across different income groups. This helps them leverage bulk buying, logistics and operational efficiencies; all while they can then achieve larger margins in the stores targeting higher income groups (Checkers and Sixty60).

Now, SA’s income distribution is very unequal – infact 10% of the working population (roughly 2 million people) earn over 65% of the income and with an average salary of R65k+ per month they are less likely to be price sensitive.

It’s estimated that this income group spends about ±10% of their income on groceries, meaning this segment of the market is likely worth around ±R150bn per year.

What wealthier eaters want

Whilst the problem retailers solve for lower-income consumers is largely connected to price and distribution, the modern wealthier consumers have other needs…

1. Convenience: These consumers have limited time and going to a shop takes time away from work and other leisure activities.

2. Limited time: They have no time (or limited time) to cook. Meaning that planning, shopping and cooking are all things that have a large associated cost to them.

3. Variety: They want ingredients and or dishes that are not common and often can’t be found in local retail stores.

4. Specific: Specific dietary requirements or diets that coincide with their training routines.

5. Environmentally conscious: They want limited food waste and that sourced items are done with minimum or no carbon footprint.

The local plays

Like cooking but hate the planning and waste? Local scale-up UCOOK offers immense convenience and time saved with exact ingredients (down to the teeniest detail) and cooking instructions for up to 24 different pre-planned meals per week – delivered to your door.

And what’s smart about their business model is they offer a weekly subscription model where you select a number of weekly meals, servings and a default menu category — then you either adapt your menu each week or let them choose for you. 

This gives them a degree of predictability in their revenue but, most importantly, semi-automates your weekly purchase — reminding customers to re-order is a major hassle and expense for e-commerce stores (once you forget, you’re out of habit and its expensive to bring someone back in).

Then, with a weekly delivery schedule in place, it also becomes easy to add other items to that order (think fruit, wine, etc). And slowly but surely, they get the chance to grow their basket size.

In time, with more data, scale, smart sourcing and clever menu structuring, they have the power to move basket margin higher than a traditional retailer ever could.

Another play for this market is the online fresh produce store Babylonstoren. Founded by Naspers Chairman, Koos Bekker, and named after his luxury multi-use farm in the Cape Winelands, Babylonstoren sells fresh farm produce and meal kits, delivered to all major metros. Known for the high quality of fresh goods, they have become a popular choice for many households in the higher end of the market. Premium product at premium prices leads to higher margins.

Shoprite’s growth has been phenomenal. However, the adoption of online grocery shopping (partly due to the great work they did with Sixty60) is opening up the door to serve the higher end of the market in new and creative ways. Exciting times for B2C retail startups…we are watching this space.

IN SHORT

🧼 Winner Winner CleanTech Dinner. Local SaaS utility management solution Smartview Technology was crowned the overall winner of the Global CleanTech Innovation Programme for SMMEs in South Africa (GCIP-SA).

🏆 Leading Ladies. Samantha Rosenberg, the South African co-founder of investing platform Belong has raised the biggest pre-seed round in Europe by female founders raising £2.95 million in capital.

🔋 Charging Up. EV Infrastructure and energy platform Zimi has announced that investment firm Anza Capital will be the lead investor in their pre-seed round.

🥸 Spybook. In some court docs that were recently unsealed, it would seem that Meta used man-in-the-middle attacks to spy on encrypted analytics data for Snapchat, YouTube and Amazon between 2016 and 2019.

👨‍⚖️ Sam Bankman-Jailed. Sam Bankman-Fried has been handed a 25-year sentence for defrauding the customers and investors of the now-defunct crypto exchange FTX he started. Must be some kind of record.

📺 Motsepe Power. SA Billionaire Patrice Motsepe is in talks with Canal+ to join their multi-billion-dollar bid for local pay-TV group MultiChoice. Canal+ is expected to make a formal offer for MultiChoice at R125 a share, valuing the company at about R55 billion.

BUILDER’S CORNER

How to Keep Your Focus as a Founder

Startup founders are often ideas people.

But this idea-generating superpower can also become your kryptonite – you constantly get distracted by new shiny ideas leading to a lack of focus and painfully a lack of execution.

So how do you keep your focus on the main objective long enough to give it a good shot at making it?

Here are 4 things you can do to maintain focus as you build out your startup:

1. The Envelope Technique

The technique involves writing down the startup's main focus, goal, or value proposition on an envelope (or a paper the size of an envelope which forces you to go lean with the statement). This could be a statement of what problem the startup is solving, who the primary customer is, and how it plans to deliver its solution uniquely and effectively. 

Put that envelope in a prominent place where the whole team can see it — perhaps stuck to a wall or where planning and brainstorming takes place.

Whenever someone proposes a new feature, project or strategic direction let the team involved ask themselves: 

• Does this new idea align with what's written down? 

• Will it help us serve our core mission, or is it a distraction? 

If the idea doesn't align, modify it until it does or just set aside. End of story.

2. Data-Driven Decision Making

To form ideas, we naturally make a tonne of assumptions and take many shortcuts to get to a conclusion. That’s a dangerous amount of uncertainty to base strategic decisions on. 

Rather create a habit of only introducing new ideas based on research or customer feedback. Rigorously reject any idea that is not introduced with some form of validation (such as 3 customer interviews or user reviews etc.)

Even then, scrutinise ideas to find underlying assumptions and test those in micro-experiments or customer interviews.

3. Say No 

One of the biggest temptations in product development is to add features to cover all kinds of users and use cases. But the drawback is its impossible to cover every single nuanced use case or scenario well.

So get in the habit of saying no or “not now” for most ideas that come up and laser focus on the core features that will satisfy your target market’s specific problem well.

4. Accountability and Social Pressure

Simple trick: If you tell people what you’re busy building and what you would consider success in it, you’re activating a natural element of pressure and social accountability to see it through – you don’t want your friends to think you’re a quitter, right?

You can do it within the team or even by building in public. 

Another neat trick along this thinking is to build an email list of stakeholders, potential investors or people backing your product, and email them monthly with your goals, updates and progress. This is sure to keep your thinking aligned with your goals and prevent drifting.

Got a startup hack to share? Hit reply and let us know (and maybe you get featured here, too).

THE RESULTS

We asked how much inheritance tax South Africans should pay, and, well, people got strong feelings about this one…

🟩🟩🟩🟩🟩🟩 🚫 Zero. (64%)

🟨⬜️⬜️⬜️⬜️⬜️ ✌️ It's fine at 10%. (19%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🏗️ 90%, then use it to build infrastructure. (0)

⬜️⬜️⬜️⬜️⬜️⬜️ 👑 They should pay me when someone dies. (0)

🟨⬜️⬜️⬜️⬜️⬜️ 😳 Wait, you pay tax on inheritance? (17%)

Your 2 cents…

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