The desire for formal retail is growing in Nigeria as consumers have gotten a taste for the more comfortable environment and ambience this type of shopping offers, says Ade Sun-Basorun, CEO of multi-channel retailer FoodCo Nigeria Limited.
But Sun-Basorun doesn’t believe retailers need to be in a large modern shopping mall to offer this. Other models – such as smaller centres and strip malls – are coming to market, offering both proximity and variety to shoppers, he explains.
FoodCo’s model involves purpose-built one-stop convenience centres that include a supermarket, restaurant and entertainment area. More recently, the company also introduced Quick Shops, scaled-down grocery stores offering everyday essentials.
FoodCo, headquartered in the city of Ibadan, situated 130km from central Lagos, started as a supermarket business and has expanded into quick-service restaurants, entertainment and manufacturing. Its shopping centres, typically located in middle-class residential areas, offer convenience in their proximity to consumers.
“We are starting to see business scale within the retail sector and formats are changing. Eight years ago, we saw a proliferation of 30,000m² Grade A malls.” But few retailers can profit at the price point of the international malls, he explains.
“It is a credible format and an exciting development, but we need diversity. You can build your own centre with financing, land and structures that meet your needs.”
The chain has 11 stores, currently, with another three under development. Most are in Ibadan, a city of more than six million people, and it opened its first outlet in Lagos in 2019.
Sun-Basorun says the penetration of modern retail in Nigeria is still small – less than 10% of the total market. The majority of sales are through informal and semi-formal channels.
“However, there is a sizeable gulf between demand for more formal shopping and supply. The industry will respond to this in the coming years and competition will grow. It creates significant opportunities for retailers like us.”
FoodCo is the oldest of the top 10 retail companies still in Nigeria, with 38 years in the business, and counting. It began as a fresh food outlet but as it was strategically located in a growing Ibadan suburb with an emerging middle-class that wanted an alternative to shopping in the city’s open markets, it made sense to diversify into a wider basket of groceries.
The convenient location in an expanding suburb was key to its rapid growth. “In just a few years, FoodCo evolved into a full-line supermarket and for 20 years it has been the retail leader in south-west Nigeria outside Lagos,” notes Sun-Basorun.
The company has worked hard to build a brand that gives customers comfort about the quality of their purchases, and it has a history of driving innovation and setting the standard in the retail sector, he adds.
Sun-Basorun’s family has had a significant ownership stake in the company from inception, and he helped out in the stores as a young boy. After graduating, he worked for global multinational companies such as GE and consulting firm McKinsey & Company based in the US and South Africa, where he gained valuable experience in corporate strategy, operations and digital transformation.
He returned to Nigeria to help McKinsey expand its presence there. As CEO of FoodCo, the company has doubled its staff strength and presently averages over five million transactions yearly.
“This was an opportunity to put my experience into action and take on the challenge of helping a small but exciting company scale in an industry that has great potential.”
Moving with the times
FoodCo recently expanded into online shopping and home delivery, which is proving to be a winner, he says. “Today, we are one of only two chains in Nigeria that have a credible online retail offering.” (The other is Spar).
The launch of the online shopping and home delivery business earlier this year was accelerated by the Covid-19 pandemic. “We have had an omnichannel service plan in place for a while and had intended to roll it out later this year. But with Covid, we knew we couldn’t wait.”
Online sales are built on trust and the company has benefitted from its reputation in the market. “People know the brand, the products and the quality we offer, and they know where to find us. This creates a heightened level of trust.”
The new business is not without its challenges. One is dealing with last-mile logistics in the quest for rapid delivery. “Customers hold us to our promise and are not interested in the logistics. They assume the goods are coming from the nearby store. So, we are working on how to improve that last-mile delivery.”
Securing the relevant technical skills is another challenge. Sun-Basorun says the talent pool is still shallow, so assembling a team with the right skills set requires sizeable effort.
“We rolled out the FoodCo Fellowship, a capacity-building programme designed to train talents for modern retail in Nigeria. We are already on-boarding a new set of fellows while the first batch are about to wrap up the programme,” he says.
Expansion in Lagos – both in online retail and brick and mortar stores – is the future. In Nigeria’s commercial capital, traffic congestion is helping to drive growth in online businesses.
Sun-Basorun says the market in Lagos is slightly different from Ibadan. “In Lagos, there is a significant difference in brand preference. There we sell also twice as much fresh product.”
The company has also moved into manufacturing. Its Sunfresh bread was last year awarded Africa’s best premium quality bread by the African Bread Congress. It also produces its own ice-cream and other confectionery products under the Sunfresh label.
The supply chain has been fine-tuned over the 38 years of existence, he says, and the company has learned the most efficient way to source goods and built a network of distributors. Sun-Basorun says there has been meaningful growth in local manufacturing and farming which has increased the range and quality of local goods.
The infrastructural challenges of operating in Nigeria remain considerable but Sun-Basorun is not fazed by this. “We see these things less as challenges and more as being part of the business context. Things are not perfect, so we find ways to work around them.”
The challenge occupying his mind now is how the Covid-19 pandemic will play out. “The big unknown is what the depth and length of the recession will be on the back of the pandemic. The contraction in the economy is likely to create pain for the next few years.
“We are privileged to be in a business that is essential, and we take it very seriously. We will do what we can to make customers’ lives easier. But we have been able to weather previous recessions with some level of stability and feel we can do so again.”