SOUTH AFRICA – Tiger Brands, one of South Africa’s largest food manufacturer companies has launched a strategy to capture the cash-flush informal economy by servicing spaza shops, an informal convenience shop business, directly.
According to the company, the strategy aims to drive demand at the lower end of the market as it tries to grab a greater share of the informal economy and grow its business through partnerships with 150,000 spaza stores in five years.
The move follows that, the informal economy is cash-heavy and poorly understood but has been getting more traction as the middle-class economy stagnates
“With the local informal market remaining largely untapped and statistics showing that it is growing at a faster rate than the modern trade, we see exponential room for growth in this segment and are engaging closely to support our traders and better present our brands to consumers at the point of purchase,” said Luigi Ferrini, Tiger Brands’ chief customer officer.
However, the company statute that it will continue to use large and small wholesalers while driving demand for goods with advertising and a trader loyalty program.
According to Tiger, many consumers still use local spaza shops to top up their shopping, especially as these outlets offer credit and often repackage products in small quantities.
Ferrini said spaza shops have “highly competitive” pricing and are not always more expensive than bigger chains.
The company has been planning to expand into the sector since 2020, with research indicating that, at times, only about 27% of its products are available at the lower end of the market.
In addition, Tiger wants to tap into the emerging trend following the Township Consumer report, compiled by market research agency Survey 54 and digital agency Rogerwilco, which found the number of people who shopped at spaza stores had risen to 51% in 2023 from the 44% recorded in 2022.
CEO of Survey54 Stephan Eyeson said its data shows the frequent visits were partly a result of consumers buying perishable items on the day they need them because of load-shedding.
Tiger Brands is also looking to employ people from the local community to stimulate the immediate economy while also localizing production and transportation to increase the affordability of its products.
So far, the company has employed 200 people with plans to have at least 270 employees within local communities by the end of September this year.
The key, said Fraser, is for Tiger Brands’ products to be readily available for shoppers in the informal sector while also getting people to resonate with their brands.