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Woolworths joins stand-alone liquor retailing with WCellar

The rollout of stand-alone liquor stores is an obvious area of potential growth for Woolworths, as its competitors’ success experiences have shown.

While major retailers have expanded their liquor presence aggressively in the past decade, Woolworths is a latecomer to the party.

While it sells wine at its food stores, it only opened its first stand-alone liquor store, WCellar, next to its Nicolway branch in Bryanston, Johannesburg, on May 27, 2021.

Most major retailers have shied away from providing separate figures for their liquor businesses, which have proved to show significantly higher turnover growth than their core supermarket businesses.

But the past year was an exception as they were shut for extensive periods due to lockdown alcohol bans and restrictions.

Spar had 842 Tops at Spar stores at its 2020 year-end, while Pick n Pay had 508 liquor stores (company-owned and franchised) by its February year-end. It had opened 23 in the last financial year and planned to open 47 in the next year.

Shoprite had 500 stand-alone liquor stores at its June 2020 year-end, with 32 opening during the year.

As the only one of these retailers to publish financial details on the contribution of liquor, Shoprite provided some indication of the effect liquor stores have had on its sales: while liquor sales were 3.3% down in the past financial year due to the lockdown, liquor stores’ first-half sales growth of 20.5%, and sales growth of 25.1% in the previous year, against its local Supermarket RSA sales growth of just 4.9%, provide some measure of the growth in liquor sales vs a basket of groceries.

WCellar can only be a winner for Woolies

Woolworths has a long way to go, but its loyal customer base and the availability of retail space may provide the impetus for it to grow in this already established market, analysts say.

Woolworths has kept expansion targets close to its chest. It said it would open another store in Gauteng (at an unspecified date) and roll out nationally in future, without giving any further details other than to say that Gauteng would be prioritised to facilitate “critical mass and optimal distribution”.

A senior wine buyer for Woolworths, Rebecca Constable, said the group has “opportunities to adapt existing real estate to accommodate this new proposition adjacent to existing stores, as was the case with our Nicolway store”.

As the sector is highly fragmented, there should be room for Woolworths, said Sasfin Wealth senior equity analyst Alec Abraham. With retail space opening up in shopping centres in the wake of the pandemic, “there will be co-location opportunities near existing food stores”, which will help with distribution, costs and efficiencies…. Read the full article here