When SPAR South Africa recently announced a staggering R5 billion loss—approximately $279 million—following its withdrawal from multiple European markets, the retail giant delivered a masterclass in what can go wrong when expansion ambitions collide with operational reality.
For South African businesses eyeing international growth, SPAR’s painful European retreat offers lessons too valuable to ignore.
The Anatomy of a Costly Retreat
SPAR’s European adventure unraveled across three countries, each exit more expensive than the last.
The company sold its Polish operations for a mere R185 million in September 2024, but the real cost came in the form of R2.7 billion paid to recapitalize the business before handing it over to local buyer Specjal.
The deal included approximately 200 retail stores, three distribution centers, and one production facility—all of which had been hemorrhaging money for years.
Switzerland proved even more painful. SPAR sold its Swiss business for a total equity value of CHF 46.5 million (approximately R1,025 million) in September, but the sale resulted in a cash outflow of CHF 31 million (approximately R683 million), including CHF 11.5 million to the Swiss Competition Commission. In other words, SPAR paid nearly R700 million just to exit a market where it was supposed to be making money.
The United Kingdom business remains classified as a discontinued operation, with disposal plans underway. Combined, the Swiss and British businesses recorded aggregated post-tax losses of R4.4 billion over the period, which included impairments of R4.2 billion.
When Growth Becomes a Burden
SPAR’s European misadventure highlights a fundamental tension in corporate strategy: the allure of international expansion versus the brutal economics of making it work.
For years, the company operated across 11 countries, with South Africa accounting for roughly 60% of group sales. On paper, geographic diversification sounds prudent.
In practice, those European operations became anchors dragging down the entire business.
CEO Angelo Swartz, who took the helm in October 2023 with a mandate to clean up the mess, was refreshingly blunt about past failures.
He acknowledged that SPAR hadn’t been disciplined about capital allocation—a polite way of saying the company threw good money after bad for far too long. The Polish operation alone was losing the company an estimated R500 million annually in earnings before its sale.
The Hidden Costs of Being Everywhere
What makes SPAR’s story particularly instructive is how it illustrates the hidden costs of maintaining international operations. Beyond the obvious operational losses, there were currency risks (much of SPAR’s R10 billion debt was euro-denominated), regulatory burdens (including the unexpected R253 million payment to Swiss competition authorities), and the constant management distraction of trying to fix underperforming businesses thousands of kilometers away.
These challenges were compounded by SPAR’s franchise-based business model.
While the company operates successfully through independent retailers in South Africa and Ireland, replicating this model across diverse European markets with different regulatory environments, consumer preferences, and competitive landscapes proved far more complex than anticipated.
The Opportunity Cost of Persistence
Perhaps the most painful lesson is about opportunity cost. While SPAR was pouring billions into recapitalizing Polish stores and managing Swiss losses, its South African operations were actually performing well.
Despite tough economic conditions, the core Southern Africa business remained profitable and showed resilience.
By 2024, the company’s focus on its home market was finally showing results, with comparable revenue increasing by 1.6% overall and accelerating to 3.5% growth in the second half of the year.
Had those billions spent on European operations been invested in strengthening the South African business earlier—expanding into adjacent categories like the promising SPAR Health division or the newly launched Pet Storey concept—shareholders might be celebrating growth rather than absorbing massive losses.
When to Exit: Reading the Warning Signs
SPAR’s experience offers clear signals that should trigger a strategic review of international operations:
Persistent losses despite multiple turnaround attempts.
If a market continues bleeding money year after year despite management attention and capital injections, the problem may be structural rather than operational.
Disproportionate management attention.
When executives spend more time managing 20% of revenue than the 80% that’s actually working, something is fundamentally misaligned.
Debt burden tied to underperforming assets.
SPAR’s euro-denominated debt created currency risk that amplified losses, particularly as the rand fluctuated.
Market-specific challenges that can’t be solved with capital alone.
Sometimes the competitive dynamics, regulatory environment, or consumer preferences in a market simply don’t align with your business model.
The Reset: A Stronger Foundation
The silver lining in SPAR’s painful European exit is the financial reset it enabled.
The group’s net debt reduced by 40% to R5.4 billion from R9.1 billion, and leverage improved to 1.74x, primarily due to the strategic disposals and improved working capital management.
Cash generation increased to R5.4 billion, up from R4.8 billion in the prior period.
This isn’t just about cleaning up the balance sheet—it’s about creating strategic clarity.
SPAR can now focus investment on its proven strengths: the Southern African market where it understands consumers, the BWG group in Ireland which delivers above-3% operating margins, and promising growth adjacencies like health and pet retail.
Lessons for South African Businesses
For other South African companies considering international expansion, SPAR’s experience suggests several critical questions to answer honestly before making the leap:
Do you have genuine competitive advantages that translate across borders?
SPAR’s franchise model works brilliantly in some markets but struggled in others. Understanding why is crucial before expanding.
Can you afford to be wrong?The cost of exiting bad markets can exceed the initial investment by multiples. SPAR paid over R3.3 billion just to leave Poland and Switzerland.
Is international growth distracting from domestic opportunities? South Africa’s retail market, while competitive, offered SPAR more growth potential than its European operations ever delivered.
Do you have the management depth to run multi-country operations effectively? Geographic diversification multiplies complexity exponentially.
The Road Ahead
CEO Angelo Swartz framed 2024-2025 as a reset year for SPAR, and the numbers support that narrative.
The momentum in the second half of 2024, combined with improved cash generation and lower leverage, suggests the strategy of consolidation and domestic focus is working.
SPAR’s European exit isn’t a story of failure—it’s a story of difficult but necessary strategic correction.
The real failure would have been continuing to fund underperforming operations out of pride or stubbornness, letting them drain resources from the profitable core business indefinitely.
For ambitious South African companies, the lesson isn’t to avoid international expansion entirely.
It’s to approach it with clear-eyed realism about the risks, a honest assessment of competitive advantages, and most importantly, the courage to exit quickly when things aren’t working.
Because in business as in life, knowing when to quit can be just as important as knowing when to persevere.
The $279 million question isn’t why SPAR’s European expansion failed. It’s why it took so long—and cost so much—to admit it wasn’t working and move on.
