The condition of the off-premise channel in South Africa - Market Intel

Tough conditions – The wider alcohol industry in South Africa faces pressure from a stuttering economy, tax hikes, regulatory complexity and illicit trade
Youthful formats and digital growth – RTDs, ‘New Age’ gins and spirits-based cocktails are gaining traction among LDA consumers, supported by an expanding e-commerce footprint via Spar2U and Uber Eats
Dual sales trend – Consumers are both value-seeking and selectively premiumising, driving sales in both RTDs and premium spirits
Inclusivity and innovation – Tops champions local producers, supports Black-owned wineries and is expanding digital platforms

Championing diversity, staying agile and doubling down on its decentralised business model is helping Tops at Spar compete in South Africa’s challenging off-premise.

Tops at Spar, South Africa’s largest independent alcohol retail multiple, is proving that a community-rooted, operator-owned business can thrive in one of the world’s most challenging off-premise markets – as long as it continues to keep a keen eye on changing consumer tastes, stays agile and employs data-driven promotions.

“Despite South Africa’s tough economic climate, Tops at Spar has maintained a resilient performance,” says Thami Silwana (below), national liquor executive at The Spar Group, which was founded in 1963 as a group of independent wholesalers. “The off-trade liquor market surpassed ZAR100bn (US$5.84bn) in annual sales in 2024, and Tops remains a key player with 871 stores nationwide, just above our competitors.

“Our growth is driven by the consistent investment in the brand, strong in-store promotions, a wide product range and our ability to adapt quickly to shifting consumer behaviour through our retailer-owned model,” he adds.

Retail resilience in a fragile economy

For South Africa’s off-premise generally, and for Tops at Spar specifically, current trading conditions for are difficult. The country’s economy is far from healthy. Structural constraints, including electricity shortages and port bottlenecks, as well as high debt-servicing costs and weak public investment, are set to keep South Africa’s GDP growth at around 0.9%, this year, according to Anglo-South African international banking group Investec.

On a brighter note, inflation, which was as high as 7.8% in mid-2022, has fallen back to around 2.7%. That said, consumer confidence remains historically low, affected primarily by weak job creation. South Africa’s unemployment rate remains a stubbornly high 33.2%, with youth employment (defined as people aged 15 to 34) a much higher 46.1%.

The country’s alcohol retailers must also trade within a complicated, fragmented market, overseen by a combination of national oversight and provincial control. While the off-premise is strictly governed by national objectives, the specific requirements and regulations that retailers must navigate are heavily influenced by their location. This makes it crucial for operators in the channel to engage with their specific provincial and municipal rules to ensure full compliance.

Moreover, in March this year, the government increased the excise on alcohol by 6.5%, well above the current level of inflation. In September, there was a private member proposal for a total ban on alcohol advertising, promotion, sponsorships and product placement in an effort to “counter the normalisation of alcohol and liquor usage”.

Another significant challenge across South Africa is illicit alcohol consumption, which, according to Silwani, now accounts for 18% of all the alcohol sold in the country, leading to an annual loss of around ZAR25bn (US$1.46bn) in tax revenue to the government.

The crisis has worsened since the pandemic, with the volume of illegal alcohol totalling 773,000 hectolitres last year, according to the Drinks Federation of South Africa, an increase of 55% since 2017.

Independent ownership – The Tops point of difference

Established in 2000, convenience-focused Tops at Spar, a key retail brand of The Spar Group, competes in this challenging channel against rivals such as Shoprite’s LiquorShop and Pick n Pay Liquor Store. Silwani admits these chains are expanding “aggressively” but insists Tops at Spar is keeping its nose in front through its independent retailer model, which he says offers “unmatched agility”.

“Unlike a franchise model,” he says, “Tops retailers own their own stores outright and purchase directly from Spar’s distribution centres without paying royalties. This interdependent model empowers local entrepreneurs while leveraging national scale.”

The benefits of this decentralised ownership structure are multiple, says Silwani, including the ability to respond to local-market trends, create tailored product ranges, remain agile when staging promotions and, importantly, foster community integration and economic inclusion.

Consumers looking for value but still willing to spend

In the current trading environment, Silwani says Tops has noticed a “dual trend” among consumers, with noticeable “value-seeking behaviour” on display, resulting in growth for economy wines, bag-in-box formats and private labels as the country’s drinkers shift from high-margin spirits and wines to lower-margin categories such as beer and RTDs.

At the same time, the retailer’s customers are also choosing premium wines and spirits, most notably cognac and tequila, to celebrate special occasions, a trend Silwani describes as “selective premiumisation”.

“Our product mix reflects this [dual trend] by balancing affordability with aspirational offerings, and promotional depth with margin protection,” he says.

Within spirits, whisky and cognac are the top performers, with seasonal occasions such as World Whisky Day (27 March), World Cognac Day (4 June) and Father’s Day (the third Sunday of June) helping to drive sales. “New Age gins and RTD spirits also continue to gain traction, especially among younger, urban shoppers,” Silwani notes.

In line with global trends, RTDs are growing fast for Tops, with consumers drawn to their convenience, flavour innovation and youth appeal. “In the RTD category, there’s expansion through innovation, with spirits-based cocktails, hard seltzers and wine spritzers continually triggering interest from shoppers,” says Silwani. “We’re enhancing visibility with digital activations, gamification and integration with [e-commerce platform] Spar2U for seamless purchase and delivery.”

Embracing e-commerce

Over the past decade, e-commerce has boomed across South Africa, with e-commerce turnover expected to exceed ZAR130bn (US$7.4bn) by the end of 2025, capturing almost 10% of the country’s retail market, according to a new report by World Wide Worx in collaboration with Mastercard and Peach Payments.

Spar2U and Tops2U, the company’s omnichannel platforms, have proven very successful in driving online sales of alcohol, which, according to Silwana, now accounts for almost 20% of total delivery sales, with the service particularly popular in rural and township areas.

“We have also strategically partnered with [online food and delivery platform] Uber Eats to give shoppers more storefront options, particularly on e-commerce platforms they may already use for their shopping,” he says, referring to the partnership agreed between the two companies in July.

The deal will extend the retailer’s reach considerably: In South Africa, Uber Eats has 52,000 drivers in 40 towns and cities and 2.1m active users.

Championing local producers

South Africa’s wine industry faces a myriad of challenges, from a costly and unstable electricity supply to logistical headaches and hefty US tariffs, but Tops is doing its best to boost local demand. “We proudly support local producers like Bruce Jack Wines, whose lifestyle range is exclusive to Tops,” says Silwani.

“Our biannual ‘Tops Wine Kulcha’ campaign, supported by an extensive leaflet spread, is positioning Tops as the wine destination in South Africa.

“Growth in premium and regional wines is supported by curated promotions and partnerships with local producers,” he continues. “The Tops brand is investing in tasting experiences and digital storytelling to elevate wine engagement, with several of our stores investing in dedicated permanent wine-tasting zones and in-store sommeliers.”

On the ESG front, Tops prides itself on promoting Black-owned wineries and distilleries. One example is Mzansi Craft Wine, a Paarl-based boutique winery founded during the pandemic and focused on providing a platform and mentorship for Black South African winemakers.

“The Tops at Spar private label initiative also supports small business development in spirits and ‘LADs’ [long alcoholic drinks, such as beers and RTDs],” says Silwani.

Facing challenges head-on

Looking to the short- and medium-term future, Silwani says the retailer’s main challenges will likely be regulatory shifts and compliance pressures, especially around trading hours and advertising restrictions; the spiralling problem of illicit alcohol; economic volatility and rising costs, and omnichannel competition.

Tops plans to address these challenges through responsible retailing and compliance, data-led pricing and promotions, strengthening supply chain resilience and diversifying its product assortment.

“By remaining agile, investing in responsible retailing and strengthening our local partnerships, Tops at Spar is confident in its ability to overcome these challenges and continue delivering value to customers,” Silwani concludes.