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A manager who tells it like it is
Johannes CF Holtzhausen becomes very animated when discussing the retail business. He has spent 28 creative years in the industry, learning the ropes from South Africa’s largest retail chain and he majored in food retail. Fresh foods retail is his forte, which he has more than proved through the success of Spinneys in the UAE.
Jannie, as he is known in industry circles, calls a spade a spade. In the UAE retail market, which thrives on gimmicks and give-aways, Jannie’s is a lone voice. He demystifies many misconceptions and is on the side of the customer, offering value for money as Chief Executive Officer of Spinneys Dubai. In his stewardship, Spinneys has grown to become a chain of 25 shops in the UAE – 17 in Dubai, five in Sharjah, two in Abu Dhabi, and one in Ajman. This has happened in a fiercely competitive market where the retail giants are trying every trick in the book to increase footfall.
“In line with the growth of the economy and the city moving to suburban areas we have developed a new concept of convenience stores [sizes varying from 250 square metres to 500 sqm] named Spinneys Markets,” said Holtzhausen. “We have grown from seven to 25. Plans are afoot to open stores in Ajman, Dubai Festival City, Emaar Residences, Old Town, Mirdif Community Centre, International City China and International City France and Business Bay.” In Abu Dhabi Spinneys Dubai manages the supermarkets in collaboration with Abdulla Masood. Spinneys Dubai is also owner and manager of Al Fair Supermarkets in Oman, numbering eight. In Seychelles, it is called ‘SupaSave’.
A CHILLY START
Spinneys was founded in the Middle East in 1924 in Alexandria, Egypt, by Arthur Rawdon Spinney. In 1942 the chain reached the UAE, at Al Nasr Square, Deira and was originally known as ‘The Frozen Chicken’ because it launched the first chiller van selling frozen chickens.
But there is some confusion about the ownership. “Culturally we are 100 per cent an independent company,” says Holtzhausen. Spinneys Dubai is fully owned by Ali Al Bawardy, who acquired it from the original owner, the Cupola group. What prompted Holtzhausen to say this was a recent report that said Dubai-based buyout firm Abraaj Capital, which controls Spinneys Group, received an $80 million loan (Dh293m) and it planned to sell new shares to finance international expansion. The report also said Spinneys Holding would expand operations to other Middle East countries. “The report created confusion in all of us, our staff, our suppliers, our partners and all,” says Holtzhausen. “So, let me set the record right. We don’t have any ongoing relationship with ‘them’.” Spinneys Dubai has totally independent operations, from financing to systems to branding, to procurement… We have a ‘contemporaneous’ licence agreement with Cupola to use the brand name. But it is not a franchise.” Spinneys Dubai is charting its own course. That’s why Holtzhausen wants to distance himself from Spinneys Holding or other owners. He says: “We are a 100 per cent independent company which has the right to use the name Spinneys in the UAE and not outside.”
THIN MARGIN
Holtzhausen also demystifies a popular belief that super markets make lot of money. “The difference between a successful retail company and a not successful retail company is two per cent. Because supermarkets around the world make between 2.5 and 4 per cent profit. So your margin of error is thin and you can’t absorb even 5 per cent price fluctuation. Then, how can one say supermarkets make 5 per cent profit? No, it is not possible. At the most it is 4 per cent. “There are many challenges, the greatest of which is the rising rents. As it is the margins are thin in retailing. The unpredictable rent increases upset our projections. Those who own the malls have an advantage. MAF [Majid Al Futtaim] and others could identify their target areas well in advance and acquired land at least 10 years before the actual development started. For us, I am glad that we could negotiate and fix longterm rents. But don’t know how long we can hold on.”
But what about the marketing gimmicks and fabulous discounts? “We notice cases of some supermarkets declaring to the world that they have not increased the prices,” says Holtzhausen. “In fact, if you look closely, you will find that they had increased the price and kept it at that level for 12 months and then go to the press to declare that prices have not been increased in the past one or two months.” But, don’t the authorities monitor these prices? “The finance ministry releases a price list of essential commodities every week. People think it is an indicative maximum price. This is not so. In fact, the prices are supplied by a few nominated stores and the ministry compiles and notifies them. Retailers do not even look at it.”
Although competition is hotting up, Jannie is not worried about the possible entry of global giants like Wal-Mart and Tesco. “I don’t think they will come. This market, the catchment area, is too small for them. Wal Mart will not look at a market that has fewer than 10 million people. Even if a director moots the idea of venturing into this market, I don’t think the suggestion will get a board approval. The economy of scale does not allow them even to think of this market.” That’s good news for the existing players, which are small by global standards, except for Carrefour. But it is only a franchising arrangement. Spinneys is the only 100 per cent locally owned brand in the region.
CONSUMER CONFIDENCE
Customers often complain Spinneys prices are higher. Jannie offers an explanation. “Logistically, it is not possible to manipulate prices on some 25,000 items and not losing control of that. If you play around with quality, pricing and gimmicks you will lose confidence of your consumers. As a professional food retailers we understand that truth more than anybody else. We bring fresh products from around the world everyday from as far as from California, Australia, Holland and England. Take the example of grapes. There are quality conscious customers who want the season’s first grapes from the southern hemisphere immediately after picking. We offer them that, say at Dh32 a kilo. We also stock white grapes, seedless from California, which were kept in the cold storage for three months, which I will sell at Dh8 a kilo. Then no one can blame us for the high price. We manage the cold chain from far away places up to the moment the customer takes that product from our stores. We always say the biggest risk any fresh product runs in its lifecycle is not from the time we pick it from the tree but it from the time you put it in your car until you reach your home at 50 degree centigrade. We believe in three aspects to excel in retailing. Freshness of products, whether it is meat, fish or vegetables; assured quality and conservation. We spend a lot of money on conservation, because I have to offer great products for my customers.”
So how does Spinneys differentiate itself from retailers who claim similar USPs? “We don’t call ourselves hypermarket, we are convenient stores. I don’t expect my customers to come from far away places. So I take my stores to customers where they live and then we can ensure quality, freshness and service.” But isn’t the market driven by gimmicks like freebies, end of season sales and discounts? “No, I don’t do that. I always take exception to the notion that customers can be misled or fooled. There may be irresponsible companies who manipulate prices up and down without any regard. It is a far more sophisticated industry. You can’t do that. Customers are smart enough.You will go out of business eventually. Ours was the first supermarket that published market share and prices. And we were the first ones to work with AC Neilsen for price surveys and consumer spending patterns. We believe in transparency.”
