Massmart announces intention to buy Fruitspot

"We can confirm that an application relating to the potential acquisition of Fruitspot by Massmart was lodged with the Competition Commission," Massmart's spokesman, Brian Leroni, told I-Net Bride/BusinessLIVE.

The acquisition is in line with Massmart's ambitious food retail strategy - 100 stores within the next three years, and a target of a 20 billion rand food retail business within five years.

Fruitspot will be housed in the group's Masswarehouse division if the transaction is approved by competition authorities.

The division operates 14 warehouse stores branded as Makro, whose big-box warehouse club format with its no-frills approach sells food, liquor and general merchandise to retail and wholesale customers.

The Fruitspot was established in 1989 by three brothers, Charles, Johnny and Lino Ferreira, in Johannesburg.

The company, which doubled in size every three years, moved into a 12,000sqm facility in Marlboro in 2008, representing an investment of 60 million rand.

The Fruitspot serves retailers including Spar (SPP) and Famous Brands (FSB), as well as the catering industry. It buys much of its produce directly from farmers.

Last month, Massmart CE Grant Pattison said the group had made a number of acquisitions in SA in the food sector, including that of Jumbo Cash & Carry. He said the company would announce any further acquisitions, noting that its targets were "obvious".

The world's largest retailer, Wal-Mart, completed its purchase of 51% of Massmart in June, after winning approval from the Competition Tribunal with minimal conditions.

One of the conditions was the set-up of a 100 million rand development fund to boost local suppliers. It will be spent on establishing farms to help rural farmers grow and supply fresh produce to Massmart stores, and farmers will also be trained to assist in the company's fresh food strategy.

Massmart's foray into food retailing has mainly been aimed at commuting shoppers in inner-city areas like taxi ranks, through its Cambridge Food stores.

The group aims to open 20 Cambridge stores a year for the next three years and will also expand Makro's existing fresh food offering and Foodco, a concept store and supermarket within Game stores.

Doug McMillon, CE of Wal-Mart International, said the group fully supported Massmart's objective of dramatic growth in its food business.