Retail chain Spar has confirmed being hit with a R168.7 million lawsuit by one of its largest franchisees, the Giannacopoulos family, over failures in the SAP system rollout at its flagship KwaZulu-Natal distribution centre.
This, after BusinessDay this week reported that the Giannacopoulos family, in papers filed with the Durban High Court, alleges that Spar’s failed SAP system rollout triggered major supply chain disruptions, resulting in empty shelves, lost customers and hundreds of millions of rand in damages.
It adds that the family is claiming R142.9 million, plus interest, for losses in gross profit and gross profit margin over the 2023 to 2025 financial years.
According to the court documents, the losses were calculated by comparing historical growth trends and expected margins with actual performance following the SAP implementation.
The publication adds that the family owns and operates 46 retail stores, consisting of Spar, SuperSpar and Tops shops.
In a statement to ITWeb yesterday, the retailer says: “The Spar Group has today [Thursday] been formally served with legal documents in relation to the matter referenced and is currently reviewing these with its legal team.
“As the matter is now subject to legal process, Spar is, unfortunately, unable to engage on the specifics and will respond through the appropriate legal channels.”
At present, Spar says it is not engaged in any other legal action related to the SAP implementation, nor is it pursuing legal action against the technology provider.
In 2023, Spar says it proactively engaged with all retailers affected by the SAP implementation, which resulted in the successful resolution of all issues raised at the time, with the exception of the Giannacopoulos Group.
“The latest status of the SAP system, as outlined in the group’s most recent results, reflect a revised approach that prioritises stability over speed, with the kick-off scheduled for H1 2026. Notably, for the past 18 months, the Spar KZN distribution centre service levels have been comparable with industry norms.
“The Spar Group remains focused on delivering reliable service to retailers and customers, while maintaining transparency, integrity and sound governance across its operations.”
Spar Group encountered multiple obstacles during the rollout of the SAP software, particularly at its KZN distribution centre, which was the first to adopt the new system in February 2023.
The transition resulted in various go-live and integration issues, significantly impacting distribution operations in the region.
These challenges disrupted stock deliveries to retailers’ stores, leading to reduced service levels and a decline in retailer loyalty.
According to Spar, in or around October 2021, a member of the company’s board received a whistleblower’s letter containing allegations in relation to the SAP implementation project.
It revealed that three directors, who have since left the company, ignored the whistleblower’s concerns about the botched rollout.
Disclosing the losses it incurred, the retailer tells ITWeb via e-mail that as previously disclosed in the group’s 2023 annual results, the SAP implementation challenges had an estimated R1.6 billion impact on sales.
On the lessons learnt from the bungled implementation, Spar says: “We have reset our approach to systems transformation and integration, prioritising operational stability and service continuity.
“We are applying a measured and phased approach, and the prior implementation has reinforced the importance of close engagement with our retailers during periods of operational change. This phased approach will ensure our investments build a strong foundation for future growth.”
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