The Little-Known ‘Landlord’ That Bought Shoprite’s Ailing Nigerian Business

It had been mooted for quite some time. Retail Supermarkets Nigeria Limited (what most people in Nigeria know as Shoprite), was long revealed to be exiting the Nigerian market after 16 years.

Over the past year, the question has been: “who is going to take the reins from Shoprite?” And the rumour mills spun and spun, until some facts emerged recently.

On June 2, 2021, the answer to that question was officially revealed. Shoprite Holdings had sold its Nigerian business (for an undisclosed amount) to a local company that ostensibly prefers to keep a very low-profile, at least in the media.

The buyer was revealed to be Ketron Investment. One would struggle to find a dedicated website for this company, and much of what is known is that it is “a Nigerian company owned by a group of local investors led by property firm, Persianas Investment Ltd.,” according to Bloomberg.

Unlike the seemingly unknown and borderline obscure Ketron Investment, Persianas does have a recognisable footprint in Nigeria, mostly in real estate development and property management. But little has been said of the company in the media, at least until recently.

Now, here’s a little-known property firm leading an even lesser-known corporation that has effectively bought Africa’s biggest supermarket chain out of its business in the continent’s most populous country. So, who is this buyer, really?

Retail blues

For what it’s worth, Shoprite’s exit from Nigeria was never going to be a ‘we-got-a-massive-offer-that-we-can’t-refuse’ type of exit. It was always more of: ‘we need to cut our losses and drop this flailing Nigerian business like a hot potato.’

And it had to be. Shoprite prides itself as Africa’s leading supermarket chain for everyday goods – from groceries to certain electronic items. Its haul of over 2,800 stores in 15 countries across Africa is unmatched, besting the likes of Spar, Game, Pick n Pay, and Massmart.

Things have been reasonably steady for Shoprite on the homefront; South Africa accounts for up to 80 percent of Shoprite’s profits and 78 percent of overall sales. However, Shoprite’s business outside of South Africa had been in a bit of a rut for some time.

Indeed, Shoprite Holdings have had to pull out of some countries, including Angola and Kenya, for reasons that can be summed up as: “it’s just not working here.”

When Shoprite launched in Nigeria in 2005, it was following in the footsteps of certain South African businesses like MTN Group which seems to have found a fertile ground in Nigeria.

At the time, Nigeria was, at least on paper, a large consumer market with a sizeable middle class.

With an estimated retail market size of USD 109 Bn with only 5 percent for formal retail, there is opportunity to in moving some of the massive retail that happens in open markets and small stores to large, conducive, and convenient formal retail facilities. And that’s what Shoprite sought to do starting from 2005.

But while ‘Shoprite the brand’ has gained a strong foothold in Nigeria all these years, ‘Shoprite the business’ has struggled. Due to protracted poor performance, caused by declining sales amid soaring business costs (worsened by a stringent FX and tax regime which curtail goods supply and repatriation of funds, and bouts of vandalism in reprisal xenophobic attacks), Shoprite has struggled to prosper in Nigeria.

Evidently, the opportunity that the retailer had sought to take advantage of has proved too much of a headache with little to show for it. For context, only 11 percent of Shoprite’s sales come from outside South Africa despite its significant multi-country outlay.

Little wonder Shoprite, like fellow South African retailers such as Woolworths Holdings Ltd., Truworths International Ltd. and Mr Price Group Ltd., opted out of Nigeria – all under similar circumstances.

The quiet local player that bought Shoprite Nigeria

Formed in 1990, Persianas is currently led by founder, Tayo Amusan, as Chairman and Managing Director. The firm is big on the development and management of spaces; from luxury residential and retail to entertainment and hospitality, as well as commercial developments in Nigeria.

For much of the early-1990s when it first kicked off operations, Persianas was all about “meeting the needs of higher net-worth clients for top quality residential accommodation.” One of its first major breakthroughs was the conceptualisation and construction of The Persianas Palm Courts, an upscale residential property that was built in Victoria Island, Lagos, in 1992.

But by 1999, the company was on the lookout for something more; something less elitist and less exclusive but still of high quality. That was when Persianas began to pay closer attention to the disparity between the local retail offering and the purchasing aspirations of Nigeria’s growing middle and upper classes.

That year, the seeds for their first retail development was laid, and in 2004, Persianas opened up the sprawling and up-scaled Palms’ shopping mall in Lagos. They would go on to open three additional malls along similar lines in other Nigerian cities including Enugu, Kwara, Ota and Ibadan.

Guess who is a flagship occupant in all of those malls? Of course, Retail Supermarkets Nigeria Limited, AKA Shoprite Nigeria. In some ways, the Persianas buyout has the trappings of a landlord absorbing the properties of an embattled tenant.

These days, Persianas Group is an aggregation of interests and investments in retail, residential and commercial environments, as well as global retailing (distributing for brands like Puma, Hugo Boss, and Lacoste), asset management and sports management.

Persianas’ backers include the International Finance Corporation (IFC), and IFC African, Latin American and Caribbean Fund, LP (ALAC) which invested up to USD 74 Mn in equity in 2012. IFC also provided an additional financing of USD 50 Mn to support Persianas.

With the acquisition of Shoprite Nigeria, Persianas transitions from the “landlord of a well-known retailer” to “landlord and well-known retailer” – partly because the terms of the acquisition include a franchise agreement, which secures the Nigerian retailer’s right to continue to use the Shoprite brand.

As reported by Reuters, the acquisition deal also includes an “administration and services agreement which provides the business with administration and technical support from the Shoprite Group for an initial period of five years.” And it does sound like a good start.

By adopting a game plan that involves opening additional stores and introducing more Nigerian-made products, Persianas and the other yet-unmentioned institutional investors behind Ketron Investment would hope to succeed where Shoprite failed.

But they certainly have their work cut out for them pushing formal retail in a Nigerian economy facing strong headwinds and political turmoil.

Featured Image Courtesy: iStock