Want to know how to tell when a ship is sinking? People run — and this is even more telling than a business under financial strain. If you have a CEO that retires and not long after the temporary Executive Chairman resigns and the Deputy Chair follows suit, that's a sign that there are leaks that are not being patched.
SPAR is a case and point. The franchise model depends on independent retailers being able to stock their shelves with more freedom compared to owned retailers, giving customers access to their expected products within the store. When the Group implemented a new supply chain management software called SAP at its KwaZulu-Natal distribution center in 2023, their market promise was negatively influenced.
SPAR's retailers struggled to get goods onto shelves and the region is estimated to have lost around R1.6-billion rand in turnover and an estimated R720-million rand loss of profits for that financial year as a result. SPAR is currently facing litigation tied to the SAP system implementation failure, with stores struggling to stay profitable during ongoing supply disruptions.
No marketing campaign can paper over the empty shelves and market promises broken, as customers were experiencing this operational failure at the point of sale.
SPAR's guild of independent store owners had already publicly called for Chairman Mike Bosman's resignation back in May, citing lost confidence in leadership. It was only this week, on Monday, 17 August, that Bosman and Deputy Chair Shirley Zinn stepped down, months after store owners had expressed their discontent with regards to SPAR's management.
The market has also called its judgement. SPAR's share price has fallen more than 50% since the start of this year, erasing close to R10-billion rand off its market capitalisation. The Group's first-half results suggest that SPAR has limited headroom under its debt covenants, leaving little margin for error.
Restoring retailer profitability is a key focus area for the Group as it works to strengthen partnerships and deliver meaningful value to stores. According to the rumour mill, the board is considering two possible candidates to return for a nonexecutive term, being either of SPAR's former CEOs, Wayne Hook or Angelo Swartz. However, as it currently stands, these reports are still unconfirmed.
With proper leadership at the helm, the franchise stands a chance to redirect their focus to a more successful second half of the year.
SPAR's current predicament is a prime example of how marketing can only promise what operations can deliver. When the two drift apart, customers notice, and when franchises operate with independent retailers, store owners are the first to feel it, with operational failures undercutting the brand from within.
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*Image courtesy of Canva
**Information sourced from Business Tech, Daily Investor, Daily Maverick, Financial Mail and Business Tech