Dawn of a New Era

Click to view in E-Magazine | Click to view Brochure

-By John Boley

If you are a European, it is hardly likely you will not know the SPAR brand. It has been a leader of independent food and fresh goods retailing since its founding in the Netherlands in 1932. These days it is the world’s largest independent supermarket chain, linking independent wholesalers and retailers in a collaboration designed to use collective purchasing power to offer the best deal to consumers.

In Australia, says Lou Jardin, the brand is not as well known. This, however, is set to change fairly rapidly if Lou, Managing Director of SPAR Australia, has his way, for the fast-talking entrepreneur has plans to make up for lost time and spread the SPAR gospel as quickly as possible throughout the independent supermarket and convenience store sectors.

He says there are a number of different business models that work in different countries. In central Europe – countries such as Italy, Austria, Germany and up into Denmark – the brand has a substantial share of the market. In Lou’s native South Africa (we diplomatically avoided any mention of rugby) SPAR is one of the Big Three players and has “I think about 28 per cent of the market, while the market leader has 33 per cent.” The brand is well on the way in the new developing markets of China and India where SPAR is building hypermarkets at breakneck speed.

At present, SPAR supplies grocery products and marketing, as well as retail support services, to approximately 300 independent retail supermarkets including the SPAR and 5 STAR banner groups located in Queensland, New South Wales, Australian Capital Territory, Northern Territory and Pacific Island areas.

But the Australian market differs from many others. Here, SPAR is one of only two major suppliers to independent supermarket operators throughout the eastern seaboard. It operates a distribution centre of some 40,000 square metres from premises located at Acacia Ridge on the southern side of Brisbane. The other player is Metcash which, Lou points out, has “98.5 per cent of the market and essentially we are the only last broad-based wholesaler that exists in the country now that Franklins has been acquired by Metcash.

“So I saw a huge opportunity to develop the SPAR brand within Australia to further the group’s ideas and to promote independent retailing.” Lou has a long association with the brand: his father owned a shop within the group in South Africa. “I was involved with the SPAR culture going back to the late 1960s in South Africa and it was a philosophy that I embraced totally. Essentially, it’s a partnership between retailers and warehouse and we obviously have a key stake in assisting and helping each other’s businesses.”

He acquired the Australian business on June 30, 2010 but it was effectively last December before he could get his teeth into the challenge due to a legal wrangle. “When the opportunity to acquire SPAR came along I did not hesitate, even understanding that there might be some complexities around it. But I acquired the business on the basis that the Australian market needs another effective competitor in this sector.”

He knew he was picking up a business that was on the ropes, losing money and having “gone through a fairly bad period.” The business was “fairly terminal at that point. So its whole culture had to be modified, we had to go back to the grass roots from which SPAR’s philosophy comes and part of that process was obviously introducing a new management team from various backgrounds. We were able to do that quite swiftly after I got the business.” Lou has a new management team on board in all the key disciplines: marketing, merchandising, distribution, logistics and IT. “I was fortunate in that the CFO in place was of a good calibre and he had only been with the business a short time, so he was kept on board and has been with us ever since.”

After putting the new team in place it was time to fix a strategy “in terms of how quickly we could go forward.” He believed the traditional SPAR outlet – single-owner, suburban or country location – would be “fundamental” as a platform for the business going forward.” There are in the region of 3,500 mainstream supermarkets in the independent sector around Australia “and I needed to develop a brand that could resonate with the community.” SPAR has a very strong reputation internationally, particularly in Europe, but obviously it has been a struggle to gain traction in this country since it was established in 1994.

At present, says Lou, SPAR members are the smaller kind of store – historically, the bigger stores have tended to move to the competitor because of the offer that was presented to them. “My intention is to reverse that over a period of time, and as we scale our business in terms of logistics, IT and buying infrastructure we will obviously be in a better position to provide solutions for those larger independent operators as well.” As the words of one of the company’s mantras has it, “if you’re not meeting the needs of your local community, what’s the point?”

Independent retailers of all sizes have been suffering throughout the country as they find it harder and harder to compete head-on with the biggest chains – especially worthy competitors such as Woolworths. Lou says he is certain many of the top-end retailers are finding it almost impossible to compete directly on price, especially on packaged generic goods. “In a nutshell, I want to provide a model that does enable us to compete long term and as we gain a bigger share I believe we have the infrastructure, knowledge and know-how to do that.”

To enhance the competitiveness, SPAR has introduced a third brand, Jardin Fresh Life, which is essentially a big box store majoring in the fresh departments. This gives the company the ability to explore new markets within the independent sector and expand the product range. The simple format enables the stores to be highly competitive and offers SPAR Australia the opportunity to go for volume in that sector.

SPAR’s third interrelated strategy is to develop a flexible distribution network that can adequately service outlying areas – always a problem area for retailing in Australia.

At present, the company has stores all the way from north Queensland to the Victorian border and Lou says it will soon be time to find a solution to the logistic problems of supply to places such as Cairns. To the west, he says, there are also difficulties in places like Perth; it is currently expensive to source goods from capital cities and SPAR is concerned at the possibility that if answers are not found to the industry-wide (i.e. not confined to SPAR) issue, a lot of stores in remote areas – which are vital to the continuing existence of rural communities – could become an endangered species. “The cost of doing business in these stores is not far off prohibitive and if we don’t find a solution, there is a distinct chance they could disappear, as they have in Darwin because none of the providers have been able to find a solution to support the independent retailers in the Northern Territory.”

However, Lou is sure a solution can be found and he’s hard at work on it. “Working with our supply partners developing cost effective supply chains and solutions is going to be absolutely critical. Most of the majors that we compete against are operating out of the major capital cities with huge distribution networks which require a lot of volume to maintain their reliability. So we at SPAR have a mission in the market that we can actually explore.”

One might assume that the bigger the chain of stores, the harder the bargain that could be struck with suppliers, but Lou says that is often not the case. Volume is not everything and a smaller chain of outlets is in many instances a more manageable proposition – the very large chains require a substantial level of investment and commitment to provide both the service and the products they need and the supplier may not want that exposure in the investment sphere. “We are in a unique situation at the moment because we are a small player and the investment required to support us is not too daunting from a supplier’s perspective. It’s mostly a confidence game,” he explains.

He is sure he can compete on an equal footing with SPAR’s major competitors. For instance with generic products, SPAR’s price is lower on average, than that of its major rival, which has a far larger distribution at present. “So you have to ask yourself whether they are poor buyers, or are they making too large a margin?” That, he says, is where SPAR can position itself and he remains “very confident that we have the supplier support we need in order to be extremely competitive in the marketplace.” Generally, one senses, Lou is not short on confidence. But “when you have a good story to tell it’s quite easy, actually – and I have got a very good story to tell.”

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

September 19, 2018, 2:07 PM AEST