Pick n Pay results out this week, with turnover up +3.7% to R56.1bn for HY2025, supported (as is usually the case these days) by a strong performance by Boxer, and the clothing and online divisions. The bottom line was unfortunately flat at R10.0bn, while margin was down by 0.6 percentage points (pp) to 17.9%, on the back of increased promotional sales participation, lower supplier incentives earned, price investment in PnP and Boxer, the once-off costs of the move to the Eastport DC and a shift in the franchise model. And digging into the striking contrast between Pick n Pay and Boxer: Boxer’s turnover grew a barnstorming +12% to R19.8bn, with trading profit up +16.0% to R801.4m, while Pick n Pay registered a trading loss of R719m. “There is still an enormous amount of work to be done, but the worst is behind us,” says once and current CEO Sean Summers, pointing to a +2.6% rise in the number of customers as a sign that the business is on the right track. A major priority in the near term is the reconfiguring of the store mix, with 30 stores closing, some being converted to franchise stores or Boxers, and the reduction of the footprint of the Faerie Glen Hyper to 1,600m2 serving as a trial for a broader overhaul in that division.

Comment: For much more detail on the Pick n Pay results, check out this <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/196026/241028 Pick n Pay HY2025 Results Summary.pdf" target="_blank"><strong>excellent summary from the analysts at Trade Intelligence</strong></a>.

Next week Gareth Ackerman steps down as chair of the Pick n Pay board, with the founding family now still holding a substantial 49% of the shares. Any regrets? “I think one of the fingers that could probably be pointed at me was that maybe I was too supportive over the years with not enough questioning, and the board not questioning decisions enough,” says Chairman Ackerman the Younger. He also notes that “local is often best” in the appointment of senior management – a dig perhaps at Pieter Boone, who attempted to implement the Ekuseni strategy of splitting the legacy brand in two – Pick n Pay, and QualiSave for the mid-to-lower end of the market. Although he has nothing but kind words for Richard Brasher, who came to the business from the UK and for Sean Summers, who originally left the business after a dust-up about the need for centralised distribution – he was pro, the Ackermen were anti. Let bygones be bygones: “We’re on a multi-year transformational journey, but there’s a plan that has been put forward, and it has been shared with the market, and we’re on plan, and it’s actually working well,” says Ackerman.

Comment: Time for the KAMs among our readers to dust off the playbook from the Summers years.

Taking it to the enemy this week (and by the enemy, to be clear, we mean Checkers) is Pick n Pay, whose asap! delivery service last week ran a ‘live shopping show event’ (their words) on its own pnp.co.za site and various social media platforms including Facebook, Instagram and TikTok. Hosted by some of South Africa’s favourite influencers – including the formidable Mbali Nhlapo and The Funny Chef – the live event showcased products, from quality cleaning supplies to budget-friendly meal options, throughout the broadcast. The event quickly gained traction, trending on X and resulting in an overnight order increase of over +200% on the asap! app, with an average watch time of 10 minutes per 15-minute segment. “This is our fresh approach to online grocery shopping, tailored to today’s customers who want to shop conveniently from home while being entertained and informed,” says co-head of Omnichannel, Vincent Viviers.

Comment: Good work – fast, cheap and effective, and aimed at tomorrow’s shoppers.

The clock is ticking down inexorably on the Ackerman family’s control of Pick n Pay as the founders reduced their voting rights from 52.00% before the recent Rights Offer to 49.00%. This was achieved, as far as we can tell, through a hopelessly complex interchange of B shares and ordinary shares – B shares being superpowered shares which allow the holder extra voting rights. “The 3.00% reduction in voting rights has been undertaken to support Pick n Pay in its transformation,” noted Pick n Pay in a statement. Though unusual, the dominance of the Ackermans is not unique – Meta’s Mark Zuckerberg and the founders of Google all hold disproportionate sway over their companies’ fortunes. “The problem with control structures is it allows pretty much one person to make the important calls,” notes famously forthright Shane Watkins of All Weather Capital, “and if they get it wrong, there can be very serious consequences.”

Comment: The end of an era, and we sincerely hope the start of something better for Pick n Pay.

If Pick n Pay had been selling cans of beans and what have you at the rate it has sold out its rights offer, well it wouldn’t have needed a rights offer in the first place. The offer was 106% oversubscribed, with total subscriptions of over R8bn against a target of R4bn. Unfortunately, it can’t pocket the excess, but in addition to the cash in hand, it also has the undeniable confidence of shareholders in the way ahead. “The successful conclusion of the Rights Offer demonstrates the market’s strong confidence in our iconic brand and in our turnaround strategy,” said a visibly chuffed Sean Summers. “We can now intensify our focus on our core Pick n Pay retail business.” The dosh will be deployed to pay down debt, stabilise the balance sheet, and invest in the vaunted strategy. With another R6bn expected to come in from Boxer’s forthcoming IPO on the JSE, Pick n Pay will soon be fairly rolling in the stuff.

Comment: Some months back, when the offer was mooted, it was held by some to be a sign of weakness. It’s looking a little different now.

Mysterious markets savant The Finance Ghost has dug around in Pick n Pay’s long-awaited rights offer circular letter and emerged with some insights over what the offer will mean for the business. For starters he – or indeed she, or they – point out that a fair old chunk of the R4bn Pick n Pay are looking to raise will go towards financing day-to-day operations, not just reducing debt or implementing the turnaround strategy. The document also reveals that the business will be divided into six operational divisions rather than the existing three, which gels with Sean Summers’ desire that his senior managers get out into the stores more. The Ghost also notes that Pick n Pay has placed 7,000 employees on a “frontline multi-skilling programme”, which will no doubt go some way to answer perennial shopper concerns about service. He also draws attention to the fact that Pick n Pay notes that franchise stores achieve a better trading density than corporate stores – and thus sees more franchises as the solution rather than better trading densities all round.

Comment: Illuminating stuff. The real proof of the rights issue’s impact will be in the bottom line a year or so from now.

The retirement of Whitey Basson, the warrior-poet of retail, and a reliable source of pithy and revealing quotations, left a massive gap in this great industry we call home. Pick n Pay’s Sean Summers has put his hand up as a strong contender for the role, saying the unthinkable and revealing the visions he saw during his years in the wilderness.
On People: “The things that make the companies get their North Star are not purely by what is in a number but by actually putting in long-term real strengths that keep companies sustainable for the long term. The only way to achieve that is by genuinely and sincerely putting back into your people more than you want out, it’s not a commercial transaction.”
On Spreading the Message: “If we have a look at where we were before, we had a national marketing team who sat in Cape Town with scant regard for the geographic exigencies in the rest of the regions. Now we have more national input and targeted marketing which has already seen an improvement in the recent sales.”
On Beauty: “When closing or repurposing stores, we may get a little bit smaller in the beginning now as we become more beautiful again.”
On History: “We need to be upfront about our shortcomings and if we’ve let our customers down in some areas and need to excavate the basic principles on which Pick n Pay was built.”

Comment: If it works, Summers 2.0 is shaping up to be something quite remarkable.

Last week we reported on those worrying Pick n Pay results but did note that Sean Summers has a plan. A bit more on that: one of the six legs of the turnaround strategy is ‘Leadership and People’ – but looking at the rest of the strategy, most of the other components seem to have a bit of this too. Every operating region now has a regional buying team and store management team in place, and they’re increasing staff training and productivity for an overall improved store experience. To drive sales, stores will improve customer service with strengthened store management teams and staff training, including using multi-skilling to redeploy staff to customer-facing roles during busier operational periods. To improve their relationships with franchisees and drive sales in those stores, they will conduct regular engagement and training with staff to deliver on the plan successfully.

Comment: Customer service is the heart of any exceptional retail experience. The new ground-up approach to bringing shoppers back to this icon of SA retail is promising.

The bad news? Well, there is the small matter of an -87.4% decline in trading profit to R385m on an increase in revenue of +5.4% to R112.3bn. And the trading loss reported by Pick n Pay stores, where South African sales fell -0.2%, has triggered a R2.8bn non-cash impairment, resulting in an overall after-tax loss for the period of R3.2bn. Then there’s the departure of the founding family from leadership: with the recent R4bn rights offer, the Ackermans’ share of the business has dropped below the controlling stake of 50%, Gareth Ackerman has stepped down as Chair, and the family will no longer appoint the business’ leaders. The good news? Sales at Boxer (making up 33% of Group sales) and Pick n Pay Clothing both rose by over +17%, and online sales through Mr. D and the newly revitalised asap! app grew +74.4%. Returning CEO Sean Summers has a plan to turn things around, based on six strategic priorities: leadership and people; resetting the store estate; improving the offer to drive sales; optimising the operating model; recapitalisation; and leveraging the strength of partnerships. “This is a three-year turnaround programme,” he says. “We will work with vigour, energy and passion to get it right. We have a strong operational leadership team to help us set the business on a path of long-term sustainability.”

Comment: This thing is going to go one of two ways. And we’re hoping for a phoenix-like return, to maintain the balance and vibrancy of the FMCG retail sector. For more on these results, have a look at <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/195027/240527%20Pick%20n%20Pay%20FY2024%20Results%20Summary.pdf" target="_blank"><strong>our summary here</strong></a>.

Serial Pick n Pay CEO Sean Summers has thoughts about the store of the future, which, he avers, is going to be smaller rather than larger (see Makro’s take on this here). This on the demise of the direct-to-store delivery model, which demanded that 40% of floor space be reserved for stock dropped off by suppliers. Centralised distribution has put paid to this approach, freeing up space. The rise of home delivery – particularly for bulky items like toilet paper – will free up more square meterage. So what, then, are stores for? There will be more emphasis on specialist areas like bakeries, fish shops, cheese bars, and delicatessens. “You have to be on your game in these areas,” says Mr S. “That is ultimately where the art of retail will be. It is about having good coffee and baristas and good quality food to consume in the stores.” He points to the flagship On Nicol store as an avatar of what’s to come.

Comment: Shoppertainment, or the ‘art of retail’ as coined by Summers, has long been a must-have for stores in affluent areas. It’s going to be interesting to see what else Pick n Pay will do to differentiate itself from competitors.

Last week, Pick n Pay announced that it would be seeking to raise up to R4bn in a rights offer by the middle of the year, to stabilise the business with a rapid injection of cash into its coffers. It also announced that it would be unbundling the successful Boxer business in a new listing on the JSE, although Pick n Pay will retain the majority stake. This will enable Boxer to continue opening new stores to meet consumer demand, while CEO Sean Summers has placed a moratorium on the opening of any new Pick n Pay stores. Also of note is that to retain control of the Group, the Ackerman family will have to invest at least R1bn of their own in the rights issue, something they may be unwilling to do. A rights issue, you will recall, is an offer to existing shareholders to purchase additional new shares in the company at a discount to the market price on a stated future date. Pick n Pay’s stock price experienced its biggest drop in over 25 years on this flurry of announcements.

Comment: Tough times, tough measures. One thing CEO Sean Summers is not afraid to do is to make difficult decisions.

We normally try to keep ourselves above the rough and tumble of disputes between the big retailers and their franchisees. It often comes down to a hopelessly tangled “he said/she said” scenario and as neutral documenters of the state of play in the industry, we can’t pick sides. And to be clear, we’re not in this instance, but the numbers involved are significant, so we thought you should know that Pick n Pay is bringing an urgent application in the Johannesburg High Court against J.A. Baladakis, whose family has a thirty-year history with the Group, to appropriate his stores over nearly R200m debt he allegedly owes them. Baladakis says the debt has resulted from Pick n Pay's implementation of a bulk discounting model six years ago; Pick n Pay notes that under the model other, larger franchise groups have managed to stay “both profitable and fully paid up without any outstanding debt."

Comment: That is a chunk of change, and not one that we can see PnP letting slip through its fingers.

Putting a stake in the ground this week is Pick n Pay’s Sean Summers, who has appointed a leadership team that hints at the strategic priorities of the business under his tenure. Assuming the new position of Managing Executive of the Pick n Pay Retail Division is PnP veteran Dallas Langman, who most recently served as Managing Executive of the Rest of Africa division, now under the care of Johan Grobler who will also oversee Value-Added Services. Marek Masojada stays in place as Managing Executive of Boxer, which has continued to thrive and grow under his care. The remaining three positions on the team are held by women – Lerena Olivier as Group CFO, Chief People Officer Thembi Mbengashe, and Managing Executive for Clothing Hazel Pillay. “These changes will allow us to focus with clarity on the job at hand,” explains Summers. “This includes creating a new, dedicated head of Retail, regionalising our Retail division to allow a much sharper focus on our customers, and the creation of a dedicated Commercial section to focus on our products across the retail spectrum.”

Comment: An experienced team with a direct line to the boss but apparently a great deal of carriage over their own portfolios.

The Pick n Pay interims are in, and oooh boy. Group turnover was up +5.4% to R54.1bn, declining at the core supermarkets with growth of only +0.3%, and buoyed as usual by Boxer, which grew +16.1%. And – here’s the kicker – the business posted a trading loss of -97.1%. The Group has already announced a leadership change; something else that might be headed for the chopping block is the Ekuseni strategy, by which numerous Pick n Pay stores were converted to QualiSaves. “To be honest, the execution of that strategy needs to be revisited and we need to have a look at what is actually going on that we're not getting the return we set about getting,” said incoming CEO Sean Summers. “So yes, those Ekuseni numbers and targets are going to be revisited.” This might involve converting some QualiSave stores back to Pick n Pays or into Boxers.

Comment: Some unkind commentators have suggested that the return of Summers means that Pick n Pay is out of any other ideas. For more on those alarming results, have a look at <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/193698/231018_Pick%20n%20Pay%20HY2024%20Results%20Summary.pdf"><strong>our excellent summary</strong></a>.

Bit of a reload this week for Pick n Pay’s excitingly punctuated asap! delivery app, which now boasts over 25,000 easily searchable products brought to you courtesy of AI search technology and product alternatives, which are chosen upfront in case of any ‘out-of-stocks’. The AI tech enables you – and this is important – to find what you are looking for even when you’ve made a typo. It also offers live order tracking, ensuring an accurate delivery time. And the best part is that incoming CEO Sean Summers will deliver it to your front stoep on his Harley… ok, not really. Perhaps even more exciting, Pick n Pay has launched its first zero-waste supermarket pilot in Cape Town testing a net-zero waste model by diverting food waste to local farmers, composters or waste-to-energy facilities. All edible surplus food is already donated to FoodForward SA, which feeds almost a million people daily through 2,750 beneficiary organisations. The model is predicted to save 600kg of food waste per week from landfills, and 1,500 kilograms of carbon emissions weekly.

Comment: Is the South African consumer clamouring for zero-waste stores? Not yet, but that’s certainly no reason not to do it.

Last week, in a trading update they probably didn’t want to issue, Pick n Pay gave notice that it was expecting a -184% to -204% decline in earnings per share for the six months through August – news which heralded an immediate -13% decline in the share price. This has been attributed to a highly promotional trading environment, which impacted both sales growth and gross margin, and continued headwinds are expected in the latter half of the year. The update also pointed to unexpected costs associated with the restructuring of the business. “It’s common cause that Pick and Pay is not in a good space at the moment, and it’s lost a lot of its momentum,” says returning CEO Sean Summers. “The first order of business is to make sure that we focus on getting sales back in the stores. Focus on the people in the company. And through that, we’ll be able to focus more clearly on our consumers and get the support back into the business. As we go forward, we will start dealing with the other issues in the organisation.”

Comment: Not an ideal time to be building from the ground up. But Pick n Pay brings a long history and a lot of goodwill to the challenge.

Big news over at Pick n Pay, where Pieter Boone has stepped down abruptly after two-and-a-half troubled years at the helm, which he assumed in the midst of COVID lockdowns and held through the civil unrest of 2021 and the ongoing energy crisis. And while Pick n Pay’s market share declined during his tenure, as Shoprite assumed ascendancy, he did in fairness oversee the continued growth of Boxer, the rise of omnichannel and clothing, and – although the jury is still out on this one – the launch of QualiSave. He is to be replaced by … wait for it … Liam Neeson! (checks notes) … Sean Summers! A man who also has a very particular set of skills, including running the Pick n Pay business at the height of it powers as CEO from 1999 to 2007. Summers has been running the 450-store UK beds and furniture business of Steinhoff, whose disgraced CEO Markus Jooste he famously clashed with. “I always liken retail to hand-to-hand combat,” says Summers. “It is. There are fixed bayonets in the trenches every day, and it’s real warfare.”

Comment: A bold move. Enough to take some ground back from Shoprite? Maybe.

Any online shopper among our readers will have been tempted by the option offered by most purveyors of big (or even small) ticket items, where you can pay in three or four bite-sized instalments for this sneaker or that small appliance. Now Pick n Pay is getting in on the game, with the launch in its hypermarkets of PayJustNow, one of the fastest growing buy-now-pay-later providers in South Africa. PayJustNow allows punters to split payments into three tranches, free of fees and interest, after completing a digital application process. “Our commitment to innovation in retail and our dedication to digital convenience means that customers can now easily access an affordable payment solution should they need to stretch their pocket to buy a more expensive non-food item or clothing,” explains Deven Moodley, Executive of Value-Added Services, Financial Services and Mobile. Significantly, the service will soon be extended to Pick n Pay Clothing stores. In July, you may recall, Pick n Pay became the first retailer to offer Mobicred, allowing customers to access revolving credit within 15 minutes in store and online. The service has seen +70% week-on-week growth since.

Comment: A good move from Pick n Pay, which has always recognised the overlap between financial services and retail.

Last week we paid tribute to Raymond Ackerman, the father of modern grocery retail in South Africa. Today we look at some of the innovations he brought to the industry – although the modest man did not see himself as an innovator. “There wasn’t a lot of original thinking, but I am a good learner. I learned from American supermarkets and Carrefour in France,” he said. But he brought us longer trading hours – including Sunday shopping. The sixty-day payment schedule for suppliers, who moaned a bit even as they grew with the Pick n Pay business, which was able this way to offer better value to punters. Banking services in store. He employed the first black manager of a grocery store, in Rondebosch, and was one of the first business leaders to recognise trade unions. He waged relentless campaigns against monopolies and price fixing, fighting cartels in various sectors, including bread, petrol, and cigarettes. He opened South Africa’s first hypermarket, in Boksburg in 1975. No career of this length is without its mistakes; Ackerman failed twice to enter the Australian market – although he’s hardly alone in that – and passed up the opportunity to buy both Checkers and OK Bazaars. While a lifelong fan of centralised distribution, he was reluctant to commit to investing in it for years, and the business had to play catch up. But on his death Pick n Pay is turning over in excess of R105bn annually, and the Group operates more than 2,200 stores in eight countries.

Comment: At the end of the day, he is remembered as a transformative and principled business leader, a philanthropist, and all-round mensch. Hamba Kahle, Chairman Ackerman.

Chairman Ackerman the Younger – Gareth of that proud line – has been an elder statesman since he grew his first grey hair, commenting more on the economy and politics than the aspects of running a large grocery retailer. And so, it was at this week’s AGM when he weighed in on a number of issues of concern to business.
On affirmative action: “The Act tries to force on business by decree an outcome that most large corporates are already doing their best to achieve.”
On the new provision for race-based water rights: “This could ruin or close many of our farms and undermine the value of all existing farms, thus also creating a banking crisis.”
On the new partnership between government and business: “There is reason to believe that some of the most urgent challenges in energy, logistics and safety and security can be more rapidly turned around.”
On the resolution of our current energy crisis: “The consequences (of independent power projects) will ripple through the economy for years to come.”

Comment: A strong and balanced voice, offering warnings and hope alike.

To Pick n Pay now, with a trading update for the 20 weeks through mid-July. Not a brilliant picture: sales rose just +4.8% YoY, with like-store sales in the domestic market down -0.3%, and sales outside South Africa lifting things somewhat. On top of this, the company incurred diesel costs of R300m for the period. On the upside, online sales grew a handsome +75.3%. This was surely due in part to the deal inked by Pick n Pay last year with Naspers-owned Takealot to allow punters to buy Pick n Pay food, groceries and liquor on Takealot’s Mr D app. As usual, Boxer contributed favourably to the haul, by an unspecified figure. Be this as it may, the markets did not respond favourably to the update, with the share price declining -7.7%, for a total of around -33% over the last year.

Comment: Boxer Superstores remains the jewel in the Pick n Pay crown, and a part of the business in which it would do well to continue investing.

No one’s exactly reinventing the wheel here, but it does seem to us that there’s a bit more vertical integration of the supply chain going on than usual. This week’s example: Pick n Pay, who is looking to buy Western Cape-based meat supplier Tomis for a cool R340m. Tomis runs a 15,000m² lamb feedlot, lamb and beef abattoirs, and a meat packaging plant, all located on a 140-hectare farm. It recorded sales of R720m in FY2022, to both wholesalers and retailers, including Pick n Pay. So what’s the thinking? According to Pick n Pay the deal will “significantly enhance” the Group's fresh meat offer and ability to develop and roll out value-added products. It will enable it to cut costs and offer shoppers greater value while securing reliable supply and achieving synergies with Pick n Pay’s centralised supply chain distribution network. It will also assist with the execution of the Ekuseni strategy, under which meat is a key category.

Comment: Sounds like a smart move. Although there is also advantage to be had in squeezing suppliers for margin when times are tough.

Targeting the shopper of the future this week is Pick n Pay, on the news that it has the exclusive rights to sell Robux in any quantity you like, from R35 up to R3,000. Robux, as you know, are a digital currency used to buy upgrades, outfits, building materials, virtual pets and knick-knacks on the Roblox gaming platform, and if you’re a middle-class parent with kids of a certain age you will no doubt have been nagged for them from time to time. Previously, they were available only in set dollar amounts from Amazon and Apple. “If your tween or teenager is after a Tasmanian Tiger for Adopt Me or a Yuzi Kit for Bed Wars, you can tailor-make the required amount,” says Pick n Pay marketing head Andrew Mills. “This not only provides a safer alternative to purchasing vouchers online with a credit card; it makes an ideal gifting option and is great for budgeting, too.” And to kick off the madness, Pick n Pay is giving away 100 million Robux to lucky Smart Shopper members. In other PnP news, with the departure of Hellmann’s mayo from the Unilever South African portfolio, the retailer will be importing the creamy condiment to the delight of its South African fans.

Comment: It’s all about footfall, both present and future. Two smart moves by Pick n Pay.

Pushing pause this week is Pick n Pay, which has decided not to go ahead with the purchase of 60% of its new R2bn distribution centre in Eastport (Midrand) from developers Fortress. The DC was developed to consolidate the existing Longmeadow facility and three smaller warehouses and will serve a store network in Gauteng, Mpumalanga, the Free State, North West, and Limpopo provinces, as well as selected stores in the Northern Cape. Pick n Pay took occupation of the DC on 1 June. “The distribution centre will help Pick n Pay deliver logistics and supply chain innovations, achieving efficiencies and growing market share at a time when faster and cheaper service of our stores has never been more important,” says Pick n Pay CEO Pieter Boone. Pick n Pay will now rent the DC on a 15-year lease, picking up all its running costs. “The decision to amend the nature of the financing agreement was driven by the company taking a more prudent approach to its capital investment, partly driven by the impact of load shedding costs on the business,” explains Boone. Fortress specialises in the logistics and retail property sectors in South Africa and owns premium logistics assets in Central and Eastern Europe.

Comment: One of many such decisions, one suspects, driven by our currently challenging circumstances.

There has been a veritable storm of commentary on Pick n Pay’s results, released last week, with analysts divided on what they portend, and Pick n Pay fighting a spirited rear-guard action against the critics. For example, the oft-quoted Casparus Treurnicht of Gryphon Asset Management, says Pick n Pay is not making enough progress with its Ekuseni strategy, and is failing to win back market share lost to Shoprite. Nedbankers Paul Steegers and Shaun Chauke say that Ekuseni, is a “credible” rebranding and store rollout strategy, and Pick n Pay points to the fact that shoppers are buying bigger baskets than last year, as well as bigger baskets in QualiSaves than in non-converted stores. “It’s confirming we’re on the right track,” says new(ish) CEO Pieter Boone. “A certain level of patience is required but there are enough green shoots to show we’re on the right path. You need to be agile and pragmatic to deal with a higher level of load shedding than when we approved the plan. We’ve said this is a transition year, we don’t expect a meaningful improvement in earnings.”

Comment: Clothing and Boxer were bright spots in the results, which did indeed point to a core Pick n Pay brand that needs to up its margins to deal with externalities like load shedding.

After marching through the endless, uncertain desert of interims and trading updates, here’s the fresh green oasis of actual results from Pick n Pay for the year through February. Group turnover up +8.9%, with sales through South African supermarkets growing a more modest +4.3%, partially because of the disruption related to the Ekuseni restructuring currently underway. However, the stores converted to Pick n Pay QualiSaves have already achieved an uplift of more than +10% in sales growth post-conversion. The fact that there is growth at the lower-to-middle income end of the market is borne out by the results of Boxer Superstores, which grew sales a rambunctious +20.2%, with 60 new stores opening this FY. Clothing was also a crowd-pleaser, growing +15.3%. And online came positively screeching through at +72%. What’s the bottom line? Profit before tax declined -15.1% to R1.67bn in the face of a worsening energy crisis, with around half a billion going in diesel for the FY in question. The share price declined -9% as the reality of retailing under impossible conditions dawned on punters. For more on the numbers, have a look at our summary here.

Comment: Our retailers can hold their own among the best in the world, trading as they do under already difficult circumstances. How any of them will survive the present unscathed remains to be seen.

Pick n Pay has embarked on its great reshuffle, announced in May last year, that will see the eponymous supermarkets business spilt into two distinct brands – Pick n Pay, and Pick n Pay QualiSave, the latter focused on more budget-conscious shoppers. Around 40% of stores are expected to trade under the QualiSave brand and the restructuring will necessarily involve some fallout, which is coming more sharply into focus: around 1,000 junior management roles have been eliminated in stores. However, the equivalent number of positions are also being created, so the net loss of jobs – if not careers – is likely to be slight. In other PnP news, the business has implemented the SAP Customer Activity Repository, built on the apparently powerful SAP S/4HANA platform, to help manage the 30 billion+ transactions handled in its stores every year. “We needed more efficient and accurate inventory management as well as simplified financial and administrative reporting to ensure our decision makers have a real-time view over the business,” says IT Supply Senior Manger Elize de Klerk.

Comment: Busy times over at the Big Blue.

(Sigh.) The garment industry. We of the consumer goods sector have long preferred not to sully our thoughts with this trade, beset as it is with sweatshops, cancelled orders, and middle-aged men in skinny jeans. But it seems as if our major retailers are going all in on clothing, so we have no choice but to follow. Take Pick n Pay Clothing, for example, which is keen in the face of Shoprite’s UNIQ launch to double its footprint to 650+ over the next five to eight years. But competition for good sites is stiff, and the brand faces additional headwinds like the arrival of fast-fashion demogorgon Shein on these shores. To cut lead times and do the right thing by the economy, Pick n Pay is hoping to source as much as 60% of clothing from local producers. The business has recently become the first clothing retailer to be awarded a 4-Star Green Star Interiors v1 rating by the Green Building Council of SA, for their efforts in building with recycled materials, and their efficient use of lighting and water.

Comment: Actually some pretty cool stuff in this sector. But you’re not getting us back in those skinnies.

In the past four years, Pick n Pay has reduced the volume of food waste in its operations by 28%, with a target of 50% by 2030. Thus far, the business has also successfully donated over 880 tons of edible surplus food with a value of over R35m to NGO FoodForward SA. While donations and recoveries account for much of the saving, none of this is possible without data. The business has also invested in an innovative waste management dashboard which provides a consolidated view of its waste activities. “This has dramatically assisted in improving recycling, increasing waste resource donations and reducing waste to landfill,” says Vaughan Pierce, Executive: ESG. “We have set ambitious targets to reduce food losses at our operations and along production and supply chains. This helps us lessen our impact on the environment, but also contributes to business efficiencies.”

Comment: Waste reduction – whether in food that’s past its best or empty trucks on our overburdened freeways, is the first frontier of sustainable business.

Pick n Pay is looking for a way to mediate the long, uneasy reconciliation between bricks and clicks, attempting to efficiently monetise the twin trends of ‘showrooming’ (try in store, buy online) and ‘webrooming’ (research online, buy in store). The business is making the latter easier for punters, with more options to research and purchase products across multiple channels. Last year, for example, it launched the online store Pick n Pay Home, and is also selling selected products in the Takealot marketplace. These platforms are supplemented by an in-store experience that allows customers to physically review products. “The results were remarkable,” says the splendidly named Ansgar Pabst, Head of GM: Omnichannel. “The increase in sales shows that customers really love the ease and convenience of this omnichannel approach.” He also notes that most shoppers have not made a full transition to a single mode of shopping, preferring to use both before deciding where and how to spend their hard earned.

Comment: This hybrid approach meets shoppers where they are, at a time when online is burgeoning – according to World Wide Worx, sales were up +35% last year across the country, and competition is heating up.

We are sure that there are rules for when you should release trading updates. But we are equally sure that we are too old to learn them. So here goes: In Pick n Pay’s trading update for the 43 weeks through December 25, it revealed that it had spent R346m YoY on diesel, which is fast becoming the leading indicator for financial reporting. It also mentioned that Group sales were up a not-inconsiderable +9.3%, with growth here at home of +9%, Pick n Pay itself up +4.5% and – here’s the real story – Boxer storming through at +20.7%, a number unbeaten as far as we can tell by any supermarket brand this FY. Of the approximately R4.5bn CAPEX specified under Pick n Pay’s Ekuseni strategic plan, R1.4bn is set aside to accelerate the Boxer business. Boxer has added 44 stores to its haul this financial year.

Comment: What is it with Boxer? Pricing, obviously. A narrower, easier-to-shop range? A compelling mix of products and services? Great branding and execution? All of the above, perhaps.

Congrats, we suppose, to Pick n Pay, which now allows punters to pay for their groceries using Bitcoin at 1,500 stores around South Africa, using the Lightning network. We don’t pretend to fully understand how these things work, but it seems to be a partnership of some sort with CryptoConvert, whose CryptoQR platform will enable the transactions. Regular transactions on the Bitcoin blockchain can take between 30 minutes and an hour to settle, depending on how sure the receiver wants to be that it is legitimate; the Lightning Network is something known as a scaling layer for Bitcoin that offers near-instant transactions and lower network fees. Shoppers will also be able to buy airtime, electricity, flight and bus tickets, and pay municipal bills with Bitcoin. And the point of it all? “Increasingly, cryptocurrency is being used by those under-served by traditional banking systems, or by those wanting to pay and exchange money in a cheaper and really convenient way,” says Pick n Pay, who also points out that Bitcoin transactions are cheaper than using a credit card, and cheaper for the business than handling cash.

Comment: Bitcoin has captured the imagination of South African punters in a way that it hasn’t in many other countries. Nice one PnP for the first-mover advantage.

The week before Christmas, Shoprite CEO Pieter Engelbrecht sold R20m in the company’s shares, apparently as part of the “annual rebalancing of his investment portfolio”. And presumably to free up some cash for last-minute stocking stuffers. Shoprite shares went up 13% last year, as did Pick n Pay’s (13%), but the two were well behind Woolies (29%). In the same week, but otherwise unrelated, Pick n Pay trialled a new pick-up counter for Takealot customers in its Table Bay Mall store, reaching collection capacity within two days, strongly suggesting the potential of the concept in a country where home delivery isn’t what it might be for some punters. Woolies is also stepping up its online game, announcing a partnership with logistics outfit Pargo, enabling punters to pick up their fashion, beauty and homeware orders at nearby Pargo click-and-collect pickup points. Finally, Nielsen reveals that Checkers enjoys some 47.1% of SA’s vegan and plant-based market with 49.9% of all frozen, plant-based and vegan sales and 44% of ambient.

Comment: Some interesting initiatives from our major retailers as we enter this brave new year.

In the hurly-burly of the holiday season, we somehow neglected to tell you that Shoprite is seeking parity with Pick n Pay in the eyes of the Competition Commission, in the matter of exclusive lease agreements. In 2019, you will recall, the commission released a report to the effect that exclusivity lease agreements were prevalent, anti-competitive, and harmful to consumers and smaller retailers. Shoprite has to remove exclusivity in its lease agreements by 17 December 2024; Pick n Pay has until 31 December 2026. The reason for the disparity, says the Commission, is that Pick n Pay is smaller and less profitable than Shoprite, which has to sting if your name starts with “Ack” and ends in “erman.” Disputing the disparity, Shoprite advocate Margaretha Engelbrecht said the ruling was aimed at enabling smaller retailers and historically disadvantaged stores to open in the same shopping centres, not to protect Pick n Pay from Checkers. The commission for its part has pushed back, pointing out that Pick n Pay is located more in urban areas whereas Shoprite’s has greater rural footprint.

Comment: The relevance of this last point escapes us. And we suspect that Shoprite will not let this one go until it’s had another day in court.

It’s worth reporting on a new promo at Pick n Pay, which will no doubt be of interest to the suppliers among our readers. Pick n Pay Fresh Creations, a new promotional platform in selected stores, combines popular fresh produce items with nationally listed grocery brands to give shoppers access to quick and easy meal solutions. The promo is aimed at giving punters inspiration for quick and easy recipes, taking away the hassle of thinking of meal ideas while shopping. “At the same time, it provides our suppliers visibility outside of their respective categories,” says Head of Fresh Liz van Niekerk. Shoppers can scan point-of-sale and on-pack QR codes that link them directly to the recipe and shopping list on Pick and Pay’s website, then pick up the fresh produce and grocery items at a promotional stand positioned front and centre in stores and move through the store to shop for the rest of the recipe items.

Comment: Smart shopping, indeed, that will shift produce, get brands on board, and even drive footfall in less-frequented areas of the store.

Extending the brand this week is Pick n Pay, with the launch of its online Pick n Pay Home store, a side-hustle offering the value-conscious punter over 5,000 products from homeware to appliances, with the added bonus that Smart Shopper members get 10% of their purchase back to spend in Pick n Pay stores – ensuring that the online offering drives footfall to other categories rather than cannibalising in-store sales. One of the categories is baby, the subject of something of an arms race right now, as we’ve observed before. In other news from The Big Blue, 39 of its stores are now accepting payment in Bitcoin, with every till point shortly to follow, provided you have the right software on your phone, Louis Vuitton loafers and a Versace tracksuit. Payments, once notoriously slow, take a mere 30 seconds using the Bitcoin Lightning system. Pick n Pay has been personally invested in the currency since 2017, when it trialled crypto payments at its head office canteen.

Comment: It may be a little tech-bro, but crypto is definitely a thing now, and should be treated accordingly.

Interims from Pick n Pay this week, with the big news that for the first time ever they’ve whipped back the curtain to reveal Boxer’s performance in all its admitted glory. But taking a leaf out of the Pick n Pay book, we’ll get to that later. First up: Group sales were up a handsome +11.5% to R51.3bn, while trading profit increased by a more muted +5.8% to just north of a billion. The Pick n Pay brand, including its new mid-market value offering, QualiSave, grew sales +5.4% in a performance the business calls “respectable”. Boxer Superstores now, different story: turnover grew a massive +27.2% with like-store sales up +14.2% from a business which now comprises 30% of SA sales. Group sales in the rest of Africa were up +17.9% to R2.4bn, with a particularly strong performance in Zimbabwe, and online sales grew +82% in a competitive environment, and off a low base. Pick n Pay is going all in on its three-tier Ekuseni strategy, which it believes has started to deliver even in these early stages.

Comment: How about Boxer, eh? Nice to see the results reported separately. For more, please pop over here and have a look at the sterling work of our erstwhile analysts.

In news that might well rattle the competition, Pick n Pay has announced the launch of PnP Groceries on the Mr D Platform. Mr D, as you know, is owned by Takealot, South Africa’s largest online retailer, and we’re surprised the Competition Commission hasn’t weighed in at this point. The service is being piloted in Cape Town and Joburg and will expand to 300 stores nationwide by December. It will allow punters to earn both Smart Shopper rewards and eBucks. “This new dedicated grocery shopping experience with Pick n Pay through the Mr D app allows customers to shop over 10,000 food and grocery products – at the same price as in-store – for delivery in an hour. It really ups the convenience factor for customers,” says Alexander Wörz, Mr D CEO, who we have it on good authority is known by staff as Mr W.

Comment: A competitive boost for Pick n Pay in the online grocery game, and a Hail Mary pass for Takealot as they nervously eye the arrival of Amazon in full force on these shores.

Goodness, is that the time already? A new trading update from Pick n Pay before the last one has even dried on the racks. Anyway, Group sales for the six months through August were up +11.5%, with like-store sales growing +7.4%. This performance, they say, was driven in large part by the ongoing success of the Boxer Superstores brand, although the exact numbers on that remain opaque for just a while longer (or so we’ve been promised). HEPS, a reliable though slightly hysterical measure of profitability, will reportedly storm in at between 55 and 65%. Looking forward, the plan is to sharpen its focus on the three distinct brands that now make up the business – Pick n Pay, Pick n Pay QualiSave and Boxer – offering tailored choices for different socioeconomic classes. “In hindsight, we over-centralised the business and lost proximity to communities,” admits Group CEO Pieter Boone, speaking of the wilderness years. The plan is ultimately to convert around 40% of existing Pick n Pay stores to Pick n Pay QualiSaves.

Comment: The ongoing growth of the Boxer brand has been one of the most remarkable stories of the last ten years. Hopefully the success can be repeated with the new brand.

A couple weeks back, Pick n Pay launched its new Crafted Collection premium private label range, which focused on food and groceries, with 70 products live and another 100 expected by the end of the year. 90% of the range will be locally produced. At launch, we of the press all compared the range to Checkers’ more established Forage and Feast offering – it currently offers 216 products across 34 categories – and Shoprite has been quick to pick up on the threat. Both ranges have a deep and classy blue in the logo, a fact to which Shoprite has objected. Pick n Pay has pointed out that blue has long been part of its identity, that the Pick n Pay logo appears on its range while there is no retailer branding on the Forage and Feast range, and that in any case, the two ranges are hardly likely to appear side by side on any shelf in the foreseeable future. Shoprite has agreed to hit pause on any legal action while discussions are underway. Still, a strongly identifiable premium private label range can be a powerful differentiator: a recent study by Forbes indicates that 87% of punters are considering private label these days – and shopping across retailers to get better value.

Comment: Glowering at each other across the flatlands of the fairest Cape, Shoprite and Pick n Pay give us a rivalry for the ages.

After a suitably cryptic announcement and a reasonable period of spinning out the suspense, Pick n Pay is ready to reveal its new trading brand – which it first introduced to us as Project Red – and it’s … Pick n Pay QualiSave! An admirably literal name for a brand that appeals to South Africa’s price and quality sensitive middle classes, QualiSave will account for around 40% of Pick n Pay stores once the conversions have been completed, offering punters a hand-selected range of 8,000 products, including meat, fresh produce, bakery goods, and essential commodities, focused on the brands and products the target market wants. “We have done an enormous amount of research to understand exactly what customers want and need,” says CEO Pieter Boone. “We are very attuned to the fact that the cost of living is increasing sharply, and Pick n Pay QualiSave will be on the side of customers in providing great everyday value and deals.” Six stores have already received the treatment, and the programme will accelerate from September.

Comment: All of this and super-snappy branding in the unmistakable red and blue Pick n Pay livery.

18-week trading updates are all the rage these days, so here’s one from Pick n Pay, through the beginning of July. Sales, they say, were up +10.7% YoY for the period, with internal inflation running at a brisk +5%. The big story – as we mentioned last week – was that clothing sales were up +17.1%. The Group has also released some pretty illuminating market share numbers – it estimates that it currently controls 16% of an R628bn formal grocery market, with a 23% share of the spend of more affluent shoppers, 27% of the middle-income market and 11% of South Africa’s less affluent. It’s at the upper and lower end it’s concentrating its current efforts. Its new Crafted Collection private brand and the in-store innovations highlighted in flagship stores are aimed squarely at the market currently claimed by Woolies and Checkers FreshX, while Boxer Superstores is planning to open 61 new stores in the current FY.

Comment: In a consolidated market like this, it is inevitable that the retailers hone their competitive efforts in the segments where they see growth potential.

In May, Pick n Pay announced its ‘Ekuseni: A New Dawn’ strategy, by which the business would offer three distinct customer value propositions: one for the high-end market, another for the middle (Project Red), and the third for emerging consumers under the Boxer brand. Now, the revamp to the flagship store On Nicol has shown just what the higher-end offering might look like: an enhanced fresh food experience, a huge focus on product quality, a much-improved range, innovative third-party services, and refreshed customer service, bigger and better deli and prepared meal counters, a chocolatier, a dedicated coffee station, a revamped sushi counter, a new Teppanyaki grill bar, and for beer lovers, a Growler bar. And a new Wellness Zone boasts a PnP pharmacy and offers a full range of clinic services from the MyLife Healthcare Centre. And speaking of wellness, albeit obliquely, its new gourmet ‘Crafted Collection’ private label range seems designed to go head-to-head with Forage and Feast over at Checkers.

Comment: Opportunities now abound for suppliers wishing to cater to South Africa’s still-thriving spenders.

Once a perk, now increasingly a necessity, petrol points are hard currency for members of Pick n Pay’s Smart Shopper loyalty programme. Penny pinching punters have put down R50m worth of points at the pumps over the last couple of years, indicating both that they need the bucks and are apprised of the value of a meaningful benefit. Smart Shopper has been around for ten years (can you believe it? They grow up so fast…) and paired up with the thrillingly lower-cased bp ten years ago to provide members with over R20 in points on their card to spend it on petrol. Currently, you will be shocked to know, over 3.7 million members have over R20 unspent. “Pick n Pay’s Smart Shopper programme now has over 9.5 million active customers and the company has noticed an increase in the number of customers redeeming their rewards both in-store and at the pump during the pandemic as the economic crisis hit,” says Pick n Pay’s head of marketing Melissa Hanley. Pick n Pay is not alone in this: according to the Q1 2022 Global Loyalty and Rewards Market Survey, more consumers have joined loyalty programmes during COVID compared to the previously; almost 75% of consumers used loyalty programmes in 2021.

Comment: As a relatively early adopter of loyalty programmes, Pick n Pay is well-positioned to both receive and dispense the benefits in these tough times.

A solid set of results from Pick n Pay, which reported turnover growth of +5.2% to just shy of R98bn for the terribly difficulty 12 months through February, with trading profit up a solid +12% to R3.0 bn. So much for the numbers. The exciting news at the results presentation was twofold. One, Pick n Pay has entered into a commercial agreement with Takealot that will see its food, groceries, and liquor products added in a dedicated section to the Mr D app this August, with delivery available nationwide by the end of the financial year. And B: a big overhaul in the structure and focus of the core Pick n Pay business, to better distinguish between its offerings and compete across different consumer segments. The main Pick n Pay trading brand will be positioned as an upmarket retailer, offering the current 18,000 SKUs and competing more directly with Checkers and Woolworths. And then there will be something currently operating under the intriguing nom de guerre ‘Pick n Pay Project Red’ – a mid-range brand serving shoppers that will cover consumers between the high-end and Boxer’s low-income heartland, carrying around 8,000 SKUs with an emphasis on both quality and price.

Comment: For a more detailed take on those results, have a look at this <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/169574/220517_Pick n Pay FY2022 Results Summary.pdf" target="_target"">excellent summary from our analysts</a>.

There was a time when the most pressing question for the FMCG industry was “when the heck is Pick n Pay going to do something about centralised distribution?” Fortunately for that retail giant it saw the light, opened Longmeadow, sorted out its on-shelf issues and arrested its decline in market share. So pivotal to the business has the move been that Longmeadow is now running out of space, and Pick n Pay and partner Fortress Reit are developing a new DC, in Gauteng, Eastport, to consolidate Longmeadow with three smaller facilities. Scheduled for completion in 2023, Eastport will cost around R2bn, of which Pick n Pay’s tab will be R1.2bn. The DC will bring all groceries, perishables and fresh produce, general merchandise and imported goods under one roof, and will serve stores in Gauteng, Mpumalanga, the Free State, North West and Limpopo, and some stores in the Northern Cape.

Comment: Any thoughts, (Pick n Pay CEO) Mr (Pieter) Boone? “It will also have capacity to support Pick n Pay’s store expansion plans and will cater for future customer demand.”

There was a time when if you wanted a pair of Levi’s 501s you’d have to go down to Grey Street on a Friday after school and drive a hard bargain with the sharp-eyed sales assistant at Kalidas Extension and still pay twice what you would for the equivalent pair of Lees. Now you can get those still sought-after trousers at Woolies, in an increasing number of locations. This is called progress. Where were we? Ah, yes. Massmart has joined up with credit solutions provider and BNP Paribas subsidiary RCS to offer further benefits to punters using store-branded credit cards to shop either online or in store at Builders, Makro and Game. And finally, in news of the monstrous, Pick n Pay is now offering something called Pink Tiger lemons, which are exactly what they sound like – striped, pink fleshed, sweeter and with exciting floral notes that will make them the darlings of dessert-makers and pourers of gin everywhere. Sourced from Spain, they will be slightly more expensive than your run of the mill, sour, yellow variety.

Comment: Truly, we live in a time of wonders, if we’re prepared to stretch our supply chain a touch.

In further news of sustainable retail, Pick n Pay is launching two new vertical in-store farms this month at its Constantia and On Nichol locations, in partnership with CAN-Agri. Using Controlled Environment Agriculture (CEA) technology, the farms will use hydroponics for irrigation and nutrition, and metal reflectors and artificial lighting to augment natural sunlight. Vertical farming uses 95% less water, less fertiliser and zero pesticides when compared to growing the same quantity of plants on a piece of land. Incidentally, Walmart has recently pioneered the use of vertical farming directly in retail to sustainably boost its produce offering and to shorten the length of its supply chains. And unrelated, Pick n Pay has just announced the retirement of Debra Muller as company secretary, to be replaced by Penny Gerber who has worked with PnP’s numbers for 20 something years, most recently in developing and leading Pick n Pay’s investor relations programme.

Comment: At this point, in-store farming is probably not going to make a big dent. But it’s a great way of bringing consumers aboard with the sustainability agenda, and trialling methods which might one day be brought to more meaningful scale.

A dustup between Pick n Pay and some of its spaza owners highlights some of the challenges faced by small businesses and their backers in the current trading environment. At issue are insurance claims paid out after last year’s outbreak of unrest and looting: some owners have objected to their agreement with Pick n Pay for the retailer to receive its claim for goods provided before the rest of the payout was made to stores. Pick n Pay is not having it. “The Market Store owners remain independent traders. Most have seen their sales and profitability increase significantly as a result of their participation,” says spokesperson, Janine Caradonna. “Unfortunately, however, for different reasons, not every participant will succeed. In such an instance, we have detailed discussions with the respective owners to explore options available to both them and us.” The programme was originally a collab between Pick n Pay and the Gauteng Department of Economic Development; the MOU has since lapsed, although the Western Cape Department of Economic Development seems to have stepped in to pick up the slack.

Comment: There is always going to be some attrition among small businesses. Last year’s unrest accelerated its pace for some.

What’s up with Pick n Pay in Zimbabwe? Let’s ask Meikles, which jointly runs TM Supermarkets with Pick n Pay. “Sales volumes at the supermarkets segment increased by 32% and 29% for the quarter and nine months to December, respectively, relative to the same period of the previous financial year,” says the Group, which recently listed a separate agro-processing unit on the Zimbabwe Stock Exchange. The Zimbabwe chain is continuing to invest in store openings and upgrades, with a couple of new supers opening towards the end of last year and more apparently to come in the next six months. And the development of new malls in Harare and elsewhere is creating fresh opportunities for growth. Back home, in the meantime, Pick n Pay’s market share holds steady at 16% in the face of stiffening competition from Shoprite.

Comment: The emergence of Zimbabwe from the basket case years, and its potential reinstatement as a regional breadbasket will surely hearten Pick n Pay, which has hung on admirably.

The numbers from Black Friday are not yet in, but we have some early intel from Pick n Pay for you. While televisions, they say, remain a sought-after item (with sales enough to keep a small suburb glued to Uzalo of an evening), grocery items were the big sellers, with staples like rice and instant coffee flying off the shelves, and enough UHT milk sold, they claim, “to pave a path from Gqeberha to East London” (although the efficacy of UHT against potholes remains untested). “Shoppers are increasingly using the massive savings to stock up for the festive season or restock their pantry with everyday non-perishable items,” says marketing group exec Andrew Mills. Ahead of the event, 29% of Smart Shopper loyalty members said they’d focus on grocery deals while 27% were looking for appliance and electronics deals. In other news from The Big Blue, Pick n Pay has partnered with Clickatell, a leader in mobile communications and chat commerce, to introduce a WhatsApp communication channel offering its 9 million Smart Shopper members instant and easy customer support.

Comment: Black Friday is here to stay: a clearing house for the gadgets of yesteryear and a bellwether for the holiday season to come.

Pick n Pay’s interim results for the six months through August turned out very much to be a game of two halves, Naas. First quarter turnover came roaring in at +9%, while the second quarter, punctuated as it was by civil unrest and looting in key provinces, fell -0.7%. This resulted in turnover growth of +4.1% for the half, with some divisions doing better than others: clothing grew +26% while food and grocery sales were flat. Growth in the “Rest of Africa” which for Pick n Pay, like all retailers, is a shrinking proposition, was pleasing, at +12.9%. Trading profit for the Group romped home too, at a billion ront South African. Group darling Boxer – which alas does not release numbers – grew market share in key categories. Pick n Pay has said it will be growing Boxer’s footprint to over 500 stores in the next three years to tackle Shoprite in the growing lower end of the market. It also announced that it will be opening new Select stores to go after Woolies among the affluent.

Comment: More on those results in this excellent summary from <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/167751/201021_Pick%20n%20Pay%20HY2022%20Results%20Summary_final.pdf" target="_blank">Trade Intelligence</a>.

Tailending it somewhat in the recent slew of results and interims and trading updates is Pick n Pay, which this week released its interim trading update for the 26 weeks through August. The business, they tell us, has “delivered a resilient and positive performance, maintaining underlying momentum on sales and earnings growth.” Sales were indeed up, to the tune of +4.1%, or +8% on a normalised basis and excluding the impact of the civil unrest in July. This success it attributes to ongoing delivery on a number of strategic priorities – including the rise and rise of Boxer, a solid value proposition, and progress in the growing omnichannel offer. Regarding the profitability of the business, Pick n Pay assured punters that the numbers would reflect the continued success of the Project Future modernisation programme – a more efficient supply chain, more cost-effective store and support office operations, and better management of working capital and capital investment.

Comment: Remember when Pick n Pay was flailing somewhat? We barely do either as everything since the inception of centralised distribution seems to be working out

Women’s month, so what better time to break the news that Pick n Pay has spent R5.4bn on black women-owned small businesses this year, significantly up from the R2bn spent in the 2019 FY. The Big Blue has more than 2,000 black-owned small, medium and micro enterprises (SMMEs) in its supply chain, and over 50% of these are women-owned. Its Enterprise and Supplier Development programme provides a holistic package of support for SMMEs, including opportunities to sell goods and services to the business. And it’s by no means all just about doing the right thing. “Women-owned businesses are a really important part of our supply chain. They help us provide an excellent service and some of the best-loved products to happy customers,” explains head of enterprise development Mishinga Seyuba-Kombo. “It’s a real privilege to stand behind them and support them all the way.”

Comment: It’s important that businesses in our industry empower their women-owned suppliers in this way. It’s almost as important that they communicate progress, to inspire the rest of us. Nice job, Pick n Pay.

In the midst of the chaos of the last week, the COVID crisis and the level four lockdown continued, putting additional pressures on the businesses delivering essential goods and services to the citizens of the Beloved Country. Pick n Pay is meeting demand by upping its online delivery capacity, increasing slots by 65% on the Bottles platform, which just this week has officially been renamed to Pick n Pay ASAP! and has seen demand spike in recent weeks, with triple the number of users from last year. Cape Town and Gauteng have been particularly busy. In other Pick n Pay news, animal lovers can assist charities caring for lost, abandoned, and neglected animals when they purchase the retailer’s new 100% recycled RPET bags, which have been especially designed for a drive to help raise funds in aid of the work done by NPO, Project 18, which supports these charities.

Comment: A timely reminder that our industry faces many challenges, and still has the capacity to meet them while extending a charitable hand to other needy sectors.

In what … seems like a good idea? we suppose? Pick n Pay will soon become the first retailer in South Africa to sell wine to South African motorists. Or rather, to sell wine to people frequenting its Pick n Pay Express stores in BP forecourts – BP being the first petroleum company in South Africa to be granted a liquor licence. “As a brand that emphasises safety and convenience, we are excited to offer wine takeaway sales through Pick n Pay Express for customers looking to pop in an out… to go pop the cork at home,” says BPSA head of convenience, Belinda Petersen, roguishly. In April last year, you may recall, BP launched a delivery service to COVID-besieged punters through a partnership with Mr D. And if you have a hankering for more info on the changing forecourt convenience retail space, take a look at our insightful report here.

Comment: As petroleum meets its inevitable and timely end, businesses like BP would indeed do well to explore further avenues for diversification – although renewable energy might have been a more logical starting point.

There was a time when the words “centralised distribution” and “Pick n Pay” did not appear in the same sentence, unless also accompanied by the words “does not do”. This, as you know, is now a thing of the past as the focus over the last 15 years has been increasingly on improving supply chain efficiency. Now it’s joining forces in a 60/40 partnership with logistics development fund Fortress REIT to develop a 36-hectare facility in Fortress’ Eastport Logistics Park in Gauteng. The warehouse will be one of the largest FMCG distribution centres in Africa, with the capacity to grow further. “Fortress’s Eastport facility will help us deliver key logistics and supply chain innovations achieving efficiencies and growing market share at a time when faster and cheaper service of our stores has never been more important to deliver on our customer promise of low prices and reliable service,” says new Pick n Pay CEO Pieter Boone. It will also be a shot in the arm for the broader R21 area.

Comment: The turnaround of Pick n Pay began with centralised distribution. Apt that its ongoing reinvention encompasses more of the same.

Pick n Pay would like you to know that they have R200m waiting for you in Smart Shopper points, and they would like you to come and spend it. This largesse, in unclaimed points from the past year of shopping, work out at around R20 per member of the loyalty programme, which now boasts over 8.5 million active members. And a pretty ripped bunch they’re going to be, if Pick n Pay have anything to do with it: the retailer’s LIVEFIT range of exercise equipment consists of over 75 products, ranging from yoga mats, bands, balls, and dumbbell sets to exercise bikes and weightlifting benches, and home gyms, all of which have been selling hand over fist as COVID drives people out of the gym and into the spare room. Now PnP are offering Smart Shoppers who buy any of these 12 free online fitness classes with a local fitness enthusiast, trainer and LIVEFIT Brand Ambassador, Samantha Matos.

Comment: Wellness and loyalty are highly contested spaces in South Africa’s retail landscape. Pick n Pay are ticking boxes and taking names.

Those Pick n Pay results they’ve been hinting broadly at for the past couple weeks: turnover up +4.3% to R93.1bn for the year through Feb, but +10.8% in core food and groceries over the last six months of the 2020 calendar year, and +10% for the year if you take out tobacco, liquor and clothing which all took a hit during the various lockdowns and prohibitions. Trading profit, unfortunately, was down -8.4% to R2.9bn (excl. once-off compensation costs). Bright spots include Boxer, which opened stores like gangbusters this year, and retail in the Rest of Africa, where Pick n Pay’s unhurried approach seems to be paying off, and where segmented profit grew +64.4% to R148m despite a slight decline in sales. Private label sales grew a whacking +12% in these straitened times. And the Smart Shopper loyalty programme’s up to 8.5 million members, so that’s nice. A last word from Mr Brasher, who seasoned his final results presentation with a couple of jabs at competitors: “If I look at the work that we’ve done to solidify the plan, I think it is clear that our future is bright, it’s long-term and it actually meets the requirements and values of the company.”

Comment: Solid under the circs, but we’d like to see that profit tick back up into the black. To view a few more of the deets, click <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/156081/210421_Pick%20n%20Pay%20FY2021%20Results%20Summary_final.pdf" target="_blank">here</a>.

A trading update from Pick n Pay this week, in which they were happy to report an increase in turnover of +4.3% in what they described as a “difficult year”. They seemed particularly chuffed with their performance in the South African grocery division, with sales up +9.9% in the first half and +10.1% in the second. Not so happy, though, were sales of alcohol and tobacco, for obvious reasons, where restrictions cost the business around R4bn. Other areas where COVID-19 hit the business were hot food, bakery, deli, clothing and GM. They also warned that some R200m were added to Group operating expenses as a result of measures relating to the ongoing pandemic.

Comment: No doubt we will have more for you following next week’s full year results preso. In the meantime, though, looking good.

Pick n Pay has announced that it has just taken the bold step of opening its first store in … wait, that can’t be right … Lagos, Nigeria? In partnership with local outfit A.G. Leventis, apparently, even as South African businesses like Shoprite and Mr Price close shop as a result of currency devaluations, logistical challenges and difficulties repatriating profits. “The appeal is that it is a hugely underserved consumer market and is going to grow,” explains Group executive for strategy and corporate affairs David North. “You have to look through the short term and into the long-term potential”. Instead of opening the dambusting flagships that others launched with, PnP will be focusing on smaller neighbourhood stores, with A.G. Leventis providing an understanding of the regulatory process, and smoothing the way with local stakeholders.

Comment: Look, someone is eventually going to crack Nigeria. And the small format approach has the advantage of not only being adapted to local needs, but also a relatively low-risk way to fail, if that were to happen.

With the announcement of Pick n Pay’s new CEO, Pieter Boone, the business is coming under a fair bit of scrutiny in the business press. Generally, pundits have spoken approvingly of the work of outgoing CEO Richard Brasher for his sterling work in growing footprint, getting IT up to date, and sorting out the DCs. Boone’s job, they reckon, will be to spruce up the stores and improve product lines to ensure that Pick n Pay remains competitive with an increasingly upmarket Checkers. Some commentators have mentioned that now might have been the time to bring a woman as CEO onboard, but the fact that they didn’t is not, frankly, a peculiarity of Pick n Pay. Others have pointed to a slap on the wrist Mr Boone received at the hands of the German authorities some years ago after a spot of what appeared to be market manipulation when he and some colleagues bought Metro shares before an announcement that would see the share price tick up nicely – an announcement they apparently did not know was coming.

Comment: Be this all as it may, South African retail has had its fair share of CEOs from beyond our borders in recent years. And it’s high time a woman got the top job too.

Big news from Pick n Pay this week: Richard Brasher, who has helmed the business through seven turbulent years, is handing over to Netherlands-born Pieter Boone. Big shoes, too: under Brasher’s tenure, revenue grew from R50bn to R90bn, while the share price grew +9.84% – modest by SPAR standards (see below), but in the same time competitors Woolies, Massmart and Shoprite saw double-digit declines. So, what of the new guy? Mijnheer Boone comes to us from German discounter Metro, most recently as COO, and having spent time as CEO of wholesale division Metro Cash & Carry. He joined the business in 2011, after it bought out a retailer where he had been working. He is no stranger to tricky geographies, having run Metro’s Russian retail outfit for a spell, with mixed results, and a gig in India expanding Metro’s wholesale operations.

Comment: An interesting pick: does it speak to ambitions at Pick n Pay to grow the already successful Boxer Superstores division?

Some weeks ago, you will recall, Pick n Pay let it be known that its Black Friday strategy would be to celebrate the run up to that happy day by releasing new online-only deals every couple of days from mid-November until the launch of its two-week Black Friday in-store deals, which will also be available online. Delivery of Black Friday online orders is limited to customers in the Western Cape and Gauteng for now, although the retailer has announced that it will for the first time open Click n Collect at all Hypermarkets nationwide for customers to shop ‘big ticket’ Black Friday deals, such as televisions and appliances, and will offer delivery on these deals to punters living within a certain radius of stores. Over the past seven months, Pick n Pay Online has reported a +200% increase in active customers.

Comment: It seems that a combination of Black Friday and COVID-19 is helping retailers achieve critical mass in their respective online offerings, which, we suppose, is some kind of a silver lining.

Pick n Pay is betting big on small, if Chief Technology and Services Officer (CTSO) Richard van Rensburg is to be believed. It’s his view that intelligent digital sourcing and supply chain solutions could enable small retailers – including independents and spazas ‒ to bring a better offer, at a cheaper price, in a location already close to the homes of customers, giving them a competitive advantage over larger supermarket stores. “Small is the new big,” he says. “The fastest growing grocery retail format globally is the small neighbourhood convenience store. Even faster than online.” But how can they compete with the economies of scale available to bigger chains? “In the same way that an Airbnb or Uber business model disrupted the hotel and taxi industries,” argues the aptly named Mr VR, “so will intelligent sourcing, replenishment and gig-economy style logistics solutions radically reduce the cost of distributing small quantities of a wide range of products to multiple locations, frequently.”

Comment: We’re onboard for this. And so, it seems, is PnP, which has made several significant moves into neighbourhood convenience.

Those Pick n Pay interims we’ve been waiting for then: HEPS, a reliable measure of profitability, was down -38.6% for the blighted six months through August 2020. This factors in both the elevated sales from the pre-lockdown buying binge of bogroll, box wine and hand sanitizer, and R150m in COVID-related costs. Turnover grew +4.2% for the core South African grocery business, excluding liquor, tobacco and clothing (or +2.6% including them), impacted by trading restrictions affecting up to 20% of the Group’s revenue resulting in estimated lost sales of R2.8bn. For more on those results, read our snappy summary here. In other PnP news, the business has joined 20 of its largest suppliers in the 10x20x30 initiative, in which ten of the world’s major retailers (including Pick n Pay) commit to reducing food waste in their supply chains by 2030.

Comment: Waste is the lowest hanging of all fruit and offers massive sustainability gains to almost any business.

Talk about boldly going… In the midst of a pandemic, and a recession, and a crackdown, PnP has announced that it is soon to dip a toe – heck, a whole foot – into the turbid waters of the Nigerian grocery market. “The appeal is that it is a hugely underserved consumer market and is going to grow. You have to look through the short term and into the long-term potential,” says Group Executive for Strategy and Corporate Affairs, David North. Pick n Pay believes it has a winning formula though – a partnership with local pros AG Leventis, who know the people and the laws, and a smaller neighbourhood store format. In other PnP news, the business has rather cryptically announced that it will be launching a new “virtual mobile network operator” soon, with a loyalty component, offering shoppers more data for less on the ‘PnP Mobile’ and ‘Boxercom’ platforms.

Comment: Some exciting stuff coming from the Big Blue. We’ll be watching their progress in Nigeria with particular interest.

Tough times for PnP, which issued a warning to the effect that first half profits for the 2021 financial year are likely to halve as a result of the fallout of COVID-19 – fallout which as you are aware includes restrictions on the sales of liquor and tobacco. 1,400 staff have taken a voluntary severance package since March as the Group cuts costs. “We have prudently and carefully preserved our cash through tight working capital management and a keen focus on critical capital and operational spend,” said CEO Richard Brasher, who was set to retire when the virus struck. He probably figured he was going to spend a lot of time stuck at home, getting in the way of the wife and kids and noodling around on the computer anyway, so might as well draw a pay check. And speaking of which, around a quarter of the punters at the recent shareholders’ Zoom jamboree voted against PnP’s executive pay policy. A couple more, and they would have triggered a JSE rule compelling the business to tackle their concerns.

Comment: Still – prudent moves it seems, in times which call for caution.

In the future, retailer loyalty programmes will be able to send you customised discounts based on your purchasing history via some sort of personal communications device. Oh wait, that’s now. Here’s how it works: Using machine learning, which we totally understand, PnP gives each SmartShopper eight personalised discounts every two weeks, unique to each customer and offering cash-off savings, discounts or boosted points for products they buy most often. From the customers’ perspective, punters who have opted in will notice the discounts automatically applied and visible on their till slip when they swipe their card. According to retail executive of marketing, John Bradshaw, the future of loyalty programmes lies in offering real value in the most seamless way possible. Previously, shoppers were not enjoying everything SmartShopper had to offer. “This improvement will instantly help put money back in customers’ pockets at a time when budgets are under pressure,” he explains.

Comment: The extent to which PnP have wrung value out of SmartShopper – for both the business and its customers – has been instructive.

Amidst the crisis, Pick n Pay has released a tidy set of numbers, with turnover up +4.7% to R89.2bn and trading profit +8% to R3.1bn. This they attribute, inter alia, to greater operating efficiency, which mitigated operating challenges and escalating cost inflation, and also to a strong performance back home, which relieved the pressure from tough conditions elsewhere in Africa, notably Zimbabwe and Zambia. Among those efficiencies, if you’d like a peak under the operational bonnet, are better buying, range optimisation, less waste, supply chain efficiency, and cost discipline. Strategically, SmartShopper continues to deliver, as do Pick n Pay’s value-added services and their new focus on convenience formats and franchise stores. And Boxer Superstores remains a bright star in the Group firmament, with 12 new supermarkets, 15 new liquor stores, and major growth in private label.

Comment: For a more detailed look at these numbers and what they mean, have a look at our results summary <a href="https://www.tradeintelligence.co.za/App/Uploads/File/0/0/152103/200512_Pick%20n%20Pay%20FY2020%20Results%20Summary.pdf"> here </a>.

For the super-organised among us (or more accurately, among you), Pick n Pay is introducing a new grocery delivery service that enables punters to set up an automatic, weekly or monthly, delivery of items that are purchased regularly. The way it works is you fill an online trolley with what you need on a regular basis, then press go and carry on with what you were doing. ‘Grocery Genius’, as the service is called, will see that you get what you need, bang on schedule, and Pick n Pay will remind you that the order is on its way, three days in advance. And if you forget to remove the items you don’t need for that order, just hand them back to the driver or return them to your favourite PnP store.

Comment: Smart. Quiet innovation is in Pick n Pay’s DNA, and it seems to be enjoying a new day under Mr Brasher’s team.

In a very smart move, Pick n Pay is launching an exclusive range with healthy food takeout crew Kauai. The range includes frozen ready-to-eat meals, sides and smoothies, and will be available nationwide. The ‘Pick n Pay powered by Kauai’ range includes Kauai’s top-selling smoothies. Customers need only blend the contents at home to enjoy the same smoothie they’d buy at Kauai. Among the smoothies are Kauai favourites Strawberry Stinger, Tropical Greens, See Monster and Plant Power, the ingredients of which need only be run through your Nutribullet to be ready to eat. A range of frozen meals includes Butta Chicken Bowl and the Moroccan Chicken & Chickpea Bowl, and vegan options such as a Thai Veg Curry Bowl and Mexi Veggie Bowl.

Comment: The Kauai brand – despite the fact that it’s been trading for over twenty years – retains its youth and freshness. With this move, Pick n Pay is capturing some of that cool kid cache for itself.

Keeping up with the Shoprites this week are Pick n Pay, who are adding to their family of value-added services the ability for punters to book airline and bus tickets. The Big Blue are working with online travel business Travelstart, which digitally reaches millions of consumers every year. The Pick n Pay offering gives them one more channel for what they provide. For Pick n Pay, the drawcard is apparently more convenience for their customers and one more reason to pace the gleaming aisles. While Shoprite may have been quicker off the mark with some of the services they offer, Pick n Pay has been no slouch in this arena either, and in fact has been something of a pioneer in the field of financial services. Remember those Nedbank kiosks? The till point transaction? Then last year, their collab with Tymebank, to which a million punters have already signed up.

Comment: There has long been a school of thought that all retailers, with their payment terms of 90 days to suppliers, effectively function as banks.

Pick n Pay are taking their supplier development programme to the next level with the launch of an app that will connect its small supplier to experts in disciplines like procurement, merchandising, compliance, supply chain, financial management, marketing and human resources across the Pick n Pay business. The Big Blue has already been offering mentorship informally to members of its Enterprise and Supplier Development (ESD) programme, helping to prepare them for the hurly burly of listing with a major retailer, with some notable successes; now, 150 staff have been verified on the app, which was launched internally in November. On the app, catchily called “The Mentorship app”, suppliers, who must be part of the Enterprise and Supplier Development, will be able to search for the expertise they need to help them navigate a thorny business problem, then request a meeting at the click of a button.

Comment: The rise of supplier development programmes is a uniquely South African solution to a particularly South African challenge: how to channel the enormous entrepreneurial energy of businesses that otherwise lack resources and exposure.

Hopping back on the healthy living train this week is Pick n Pay, which is re-launching its Livewell range with the introduction in January of 150 new products that join the 330 already on shelf, ranging across fresh, pantry items and frozen options, which follow strict criteria based on government guidelines for fat, saturated fat, added sugar and salt. The relaunch incorporates new packaging with easy-to-read labels for smarter, healthier food choices In the sort of collab which gets sneakerheads all excited about what Lil Nas X is doing with Vans, Pick n Pay is pairing up with hippie juice business Kauai to offer a special range of healthy frozen ready-to-eat meals, sides and smoothies under the Livewell brand. The range also includes options for punters with dietary restrictions, with labelling for low carb items and those free from gluten and lactose, as well as vegetarian or vegan options.

Comment: An extremely sharp approach to private label, adding value beyond the usual low prices.

A very tidy set of interims from Pick n Pay, with turnover up +6% and trading profit +12.5% for the six months through September, a success they attribute to the centralisation of their distribution facilities – so long resisted! – and to the use of data analytics to monitor shopper trends. This latter has helped them shape a targeted approach to stock purchasing, helping them optimize their range in a challenging trading climate. “It enables us to eliminate more waste and ensure we’re providing more of what the customers want,” explains Mr. Brasher. This is in part reflected in the trading margins, which has inched northward to 2.7% from 2.6% for the comparable period last year – solid stuff, although rival Shoprite manages 5%. Like-for-like volumes were up +1.3% – very good for a difficult period. Under Brasher, punters have seen their shares increase in value to the tune of +39%, second only to SPAR at +64%. During the period in question, Pick n Pay added 63 stores to its bag, spending R750m plus on refurbs, expansions, supply chain capability and infrastructure, with a further R1bn+ planned for the rest of the year.

Comment: A South African institution hitting its stride once more. Great to see.

“Performance matters and points count”, were some of the closing words by PnP CEO Mr Richard Brasher, commenting not only on what we hope to see on the rugby field come Sunday, but also on the Group’s interims to 1 September just gone by. The numbers were strong – turnover +6%, gross profit margin increasing a full percentage point to 19.8% and just about 2.5 stores opened every week, bringing the total to 1,858 stores. The only speck in the eye seemed to be business in Zambia and Zim, the latter experiencing hyperinflation right now and the former… well you know… the usual mix of forex losses and complex trading conditions. As for new CFO Lerena Olivier? Well she did a smashing job delivering her maiden results, explaining the ‘ins and outs’ of IFRS and various accounting complexities in terms that even our copywriter could understand. For our snappy summary of the figures, click here

Comment: Formidable stuff in a tough environment. We can’t wait to see what the rest of the FY brings.

Nice work from Pick n Pay Namibia, a subsidiary of the Ohlthaver & List (O&L) Group, which has just signed a three-year wage agreement with the Namibia Food and Allied Workers Union (Nafau), both parties demonstrating that it doesn’t always have to be anger and recriminations between labour and capital. The agreement will see increases of 6%, 6.5% and 7% over the next three years, with the additional payment of a transport allowance for all staff, a housing allowance for permanent staff, and a guaranteed thirteenth cheque. The business is rolling out a medical aid scheme, fully paid by the company, which covers all employees in the bargaining unit. “In support of our purpose, 'creating a future and enhancing life', PnP believes that it can only be a great place to shop for our customers if we are a great place to work for our employees,” says O&L Group manager for human capital Johannes Kangandjera.

Comment: Where do we sign up?

A basket of minor news items from The Big Blue this week. First up, to ensure that Everything Goes Smoothly on the Day, and, presumably, to make a buck, they trialled their Black Friday deals for one day only last week, stress testing their systems for a bigger and better consumer jamboree this year. This will no doubt spark an arms race among competitors, which will result in Black Friday being held every year the day after Valentine’s, instead of the day after that great South African holiday of Thanksgiving. Secondly – and don’t be alarmed now, it’s just an accounting thingamajig, not real money – Pick n Pay will be restating their debt from R1.6bn to a slightly more unwieldy R17bn in the 53 weeks to 3 March 2019, making it one of the first businesses to adopt the IFRS 16 standard that our money boys have been slavering over how long now. And finally, the Small Enterprise Finance Agency (sefa) is super stoked with its Pick n Pay collab, by which they split the bill for financing certain PnP Market stores in SA’s under-served townships. Financing for 15 sefa-funded stores has been approved, three of which are already open.

Comment: The Market project is one to watch in the years and even decades ahead.

Pick n Pay does not often grace these pages at the moment, for all the right reasons. The Big Blue, it seems, is just quietly getting on with the business – and part of that is launching new “next-generation” stores, like the 4,300m² one it has just opened at the Mall of Africa. Like others of its kind, it places an emphasis on fresh – a third of the store is dedicated to fresh produce and perishables. Other mod cons include specialist counters punting sushi, cheese and biltong, and in-store liquor and clothing departments. Next-generation stores also offer expanded private label ranges and improved money counters for event and travel ticketing, Lotto, gift cards and financial services. Equally important is the stuff you can’t see, like the dedicated store Wi-Fi and mobile smart devices which enable staff to determine the quantity and location of stock on hand, order directly to the shop floor, and print shelf-edge labels. And then there are the wide aisles and the massive gondola ends, we could go on.

Comment: Head on down. You know you want to.

If the twitter spat between Pick n Pay and Nando’s was the worst we had to worry about, we’d be a happier country indeed. Not even a spat really, but slow news week, so here goes. Do you remember the Rainbow Nation School of Advertising, circa 1995? Hearty, mixed-race posses in Teesav shorts and Springbok jerseys toasting Charles Glass at an Earl’s Court braai, that sort of thing? Pick n Pay had a stab at it this week with a moderately cheesy ad in which they attempted to re-brand chicken as Inkhukhu, which as you know … well obvs. A couple of the characters featured in fact attempted to rebrand it as eenkookoo, but enough. Nando’s, clearly feeling that Pick n Pay were heading into their territory at the nexus of poultry and humour, tweeted an essentially unanswerable put down: Yuh, kwaze kwa'awks. (Jeez that’s awkward). Various eminences of advertising weighed in, and the internet lit up.

Comment: Stick with it though, PnP. Our national bird does deserve a local name after all.

If the twitter spat between Pick n Pay and Nando’s was the worst we had to worry about, we’d be a happier country indeed. Not even a spat really, but slow news week, so here goes. Do you remember the Rainbow Nation School of Advertising, circa 1995? Hearty, mixed-race posses in Teesav shorts and Springbok jerseys toasting Charles Glass at an Earl’s Court braai, that sort of thing? Pick n Pay had a stab at it this week with a moderately cheesy ad in which they attempted to re-brand chicken as Inkhukhu, which as you know … well obvs. A couple of the characters featured in fact attempted to rebrand it as eenkookoo, but enough. Nando’s, clearly feeling that Pick n Pay were heading into their territory at the nexus of poultry and humour, tweeted an essentially unanswerable put down: Yuh, kwaze kwa'awks. (Jeez that’s awkward). Various eminences of advertising weighed in, and the internet lit up.

Comment: Stick with it though, PnP. Our national bird does deserve a local name after all.

As with centralised distribution, Pick n Pay were not exactly early adopters when it came to loyalty programmes. However, their Smart Shopper programme, despite one unfortunate hiccup when they realised how much shoppers actually loved it and were forced to devalue the Smart Pula, has been a howling success. And now they’re stepping it up: Should you be fortunate enough to possess R75 or more in Smart Shopper points, you can use it to pay for your petrol at select BP stations, where you will also earn Smart Shopper points at the pump, in a sort of virtuous circle of shopper loyalty. The programme launched last November, so this news is not exactly hot off the presses, but according to BP it has been a winner at a time when SA’s cash-strapped punters are welcoming any little thing that will make a difference.

Comment: Solid stuff from a retailer that’s really getting back into the game.

As with centralised distribution, Pick n Pay were not exactly early adopters when it came to loyalty programmes. However, their Smart Shopper programme, despite one unfortunate hiccup when they realised how much shoppers actually loved it and were forced to devalue the Smart Pula, has been a howling success. And now they’re stepping it up: Should you be fortunate enough to possess R75 or more in Smart Shopper points, you can use it to pay for your petrol at select BP stations, where you will also earn Smart Shopper points at the pump, in a sort of virtuous circle of shopper loyalty. The programme launched last November, so this news is not exactly hot off the presses, but according to BP it has been a winner at a time when SA’s cash-strapped punters are welcoming any little thing that will make a difference.

Comment: Solid stuff from a retailer that’s really getting back into the game.

Another retailer entering into a promising partnership this week is Pick n Pay, which has just announced a tripartite agreement with Absa and card provider UnionPay International (UPI), which will enable the use of UPI cards at 1,800 stores across South Africa. For Pick n Pay the deal will add one more smooth and secure payment option to the portfolio, and perhaps a chance to grab some more of those plentiful tourist bucks; for UnionPay it’s another notch on the belt: the business currently works with 2,000-odd institutions globally, and another couple are not going to hurt. Pick n Pay is their first big South African retailer; doubtless others will follow.

Comment: Nuts and bolts stuff. Or, if you’d prefer, the glue that holds retailers and their customers together.

Pick n Pay’s Chairman Ackerman the Younger has always been something of a (youthful) elder statesman of the industry, a spokesman on pressing matters of common concern, a liaiser with government, an appealer to the better angels of our aisles and DCs. And good on him for it: that’s one of the reasons we have chairpeople. So it was on taking the podium at the AGM last week he had some stern, if tactful, words for the government on the issue of competition in the industry and reporting standards. On the former: “We were concerned to read in late May of the findings of the Competition Commission inquiry into the retail sector. We have engaged extensively and constructively with the Inquiry team and will continue to do so. This includes areas where we believe that their findings are based on errors of fact or interpretation, and where their draft recommendations would damage the interests of consumers.” On the latter: “An increasing amount of management focus — which could be better deployed elsewhere — has now to be diverted to satisfying an excessively detailed approach by the regulators to the reporting of financial and performance metrics.”

Comment: A measured response and one which may see the industry gain some traction in these areas.

A few items of interest from Pick n Pay this week: firstly, the Big Blue have joined MetPac-SA, a producer responsibility organisation representing the (shuffles papers) ah yes, metal packaging recycling industry in South Africa. The organisation aims to increase the collection and recovery rates of aluminium cold drink cans, canned food packaging made from aluminium and stainless steel, as well as aluminium foil products, aerosol canisters, metal caps and closures, and just generally establish something as close to a circular economy as we can get. Secondly, Pick n Pay’s Fresh Living magazine is now available in braille, to be trialled in selected stores over the next two months. Fresh Living now has a truly impressive circulation of 500,000. Finally, the Pick n Pay Enterprise and Supplier Development programme has spawned another business, Happy Earth People, who produce super-healthy pasta from legumes and sell it as the real thing to unsuspecting Pick n Pay shoppers.

Comment: And that’s a wrap. Which are also pretty healthy, if you make them from legumes.

Big up to Pick n Pay, which has launched monthly People n Planet Beach Clean-Ups, which will see the retailer partner with local organisations across the country to drive public awareness for plastic waste and action for responsible disposal. And to Woolies, partnering with WILDLANDS in a trial that will upgrade two existing WILDLANDS recycling villages and open three additional recycling villages in popular KwaZulu-Natal shopping centres where there are Woolworths’ stores. WILDLANDS recycling villages, which are at the forefront of recycling and the recycling circular economy in South Africa, are part of a well-established WILDTRUST programme.

Comment: Yes, we’re in an awful mess, globally. But initiatives like these do their little bit to tidy things up, and they do a lot to conscientise the rest of us and change our consumer culture.

While we wait in anticipation for the arrival of the Pick n Pay results, a story that will leave Woolies relieved that its turn in the fish-shooting barrel appears to be over: Flamco owner, Rajan Naicker, has petitioned the KZN High Court to sanction Pick n Pay for using a trademark similar to his Braaitime brand, which is applied to his range of charcoal, briquettes and firelighters. The Big Blue had applied the name Braai Time to their own range of 30 similar products. Naicker argues that since he’s a long-time supplier to the retailer, they must have known better. PnP for their part have taken the name off the next batch of products.

Comment: For a period in our inglorious past we worked as a copywriter in the advertising industry. And trust us when we say, it doesn’t take a genius, or even two, to come up with a name like that. We call minor coincidence and suggest everyone wind their necks back in. And in fact – well played Pick n Pay.

Big up to Pick n Pay, which got the jump on April Fool’s prankage this year by offering punters the following: “Today, we’re bringing you the future of shopping. Our new TasteTech technology uses your phone’s feedback to generate in-app tasting – an African first! Try it out now on the Pick n Pay app.” They backed it up with some waffle about how the technology had taken two years to develop, and finished it off with a classic launch video featuring great deadpan delivery by HO Staff. Classic.

Comment:

A whole bunch of store openings this past week, each with something to teach us about the strategies of the respective retailers. First up, Boxer Superstores, still on the march to dominance as a national discount supermarket, bringing the value, enjoyment and dignity of modern retail to all South Africans, with the opening of its latest store in Mamelodi. Makro, sticking to its knitting whilst introducing impressive big box store operations and shopper experience innovation, opened their state-of-the-art Makro Cornubia store in the densely-populated outskirts of Durban today. Look out for the photo feature which Trade Intelligence research team will be publishing, Shoprite, still expanding strategically in the motherland despite setbacks here at home, opened its second store in Kenya, in Nairobi’s Garden City Mall. And Pick n Pay continues to grow the franchise division beyond our borders, with the opening of its 22nd Namibia store operated by the Ohlthaver & List group, in Ondangwa.

Comment: Despite the difficult trading conditions, this is not an industry in disarray.

We’re pretty sure the copywriter really, really wanted the client to go with “Meet Your Maker”, but slightly wiser heads prevailed, and what we have is a slightly less fatalistic “Meet The Maker”, an otherwise extremely commendable initiative by Pick n Pay, which is in the midst of a major small-supplier development drive at the moment. “Meet the Maker” involves store space being set aside in an initial eight locations nationwide for the showcasing of small ‘Pick Local’ suppliers and their products, which range from table salt, through cookies to household cleaning products.  Pick n Pay, you will recall, launched its Enterprise and Supplier Development (ESD) programme last year with 100 suppliers, whom it supported through enterprise development and training to the tune of R170m.

Comment: A win for the business, a win for small suppliers and a third, special win for the Beloved Country, which needs all the good news it can get right now.

Larging it on the loyalty front this week are Pick n Pay, who are doubling up on their Smart Shopper Just for You discounts every Thursday through to the 7th of April. Over 520 million cash-off discounts will be loaded onto shoppers accounts, based on their shopping histories. And, presumably, bringing them rushing into the stores to redeem these. Nice work.

Comment:

A couple of weeks ago, we reported on the launch of the TymeBank offering in Boxer Superstores around the country. Of course, TymeBank is being launched across the Group, and PnP have rather savvily tied it onto their Smart Shopper programme, which needs some love after they slashed the value of the points a couple years ago now. So from hereon in, punters using their TymeBank debit card will double their haul of Smart Shopper points, getting a point for every ront spent rather than for two, and will even earn a point for every R3 spent when paying with their TymeBank card at any vendor in South Africa. In the run-up to the official launch, the business had already signed up 80,000 account holders. In other PnP news, residents of Windhoek may now order their groceries online from the Big Blue at www.buyonline.com.na, with an initial offering of 1,300 lines. Buyonline is an independent business established by four starry-eyed young Namibian tech entrepreneurs; Pick n Pay is its first major retailer.

Comment: Pick n Pay are starting to join some pretty significant dots in positioning the business for the 21st century.

Here’s a story that probably belongs down yonder among the suppliers, but then again maybe not. Pick n Pay’s Enterprise and Supplier Development programme has named its 2019 Small Supplier of the Year, and the name of that small supplier is Tropical Mushrooms. Tropical, owned by Magaliesberg farmer Peter Nyathi, got in on the programme in 2007, and sold the Big Blue a relatively modest R2.5m worth of mushrooms, although admittedly that sounds like a lot of shroomage to us. Last year, they bought over R11m of the flavoursome fungi off him, stocking over 330 stores in the hinterland. The case of Tropical highlights perhaps the most important way in which a business like Pick n Pay can empower smaller suppliers: not through skills transfer or business support, but in cold hard cash. Says Suzanne Ackerman-Berman, Transformation Director, quoted here for the second time in as many weeks: “(Peter) knew his business well, but needed financial support to expand his business to build a sustainable future. Through our commitment to fulfil orders, he secured the funding he needed to grow.”

Comment: Orders. That’s the ticket.

It’s a bit of a slow news week, to be honest, so news of shopping bags:  to their existing reusable offering, Pick n Pay are adding a line of reusable, netted fruit and veggie bags, and a new lower-cost shopping bag made of recycled plastic bottles. This from Suzanne Ackerman-Berman, Director of Transformation: “Our customers have told us they want an alternative to plastic bags and would like to “refuse the bag”. We know that there are many considerations, such as size, durability and price, so we are working closely with our customers to trial various options.” In other PnP news, their Market Store Partnership is going strong, with the opening of the Matlala Market in Thokoza near Durban, adding to the haul of 21 independently-owned converted spazas that Pick n Pay, together with partners like the National Empowerment Fund’s iMbewu Fund, are helping to open around the Beloved Country.

Comment: Nice examples of social responsibility in action there PnP. We’ll take a couple of those produce bags, thanks.

So the Deloitte’s (grandiosely titled) ‘Global Powers of Retail’ 2019 report is out, and good news for Shoprite, in a bittersweet way, is that with the collapse of Steinhoff into scandal and penury, the Big Red One was our globalest power of retailness back in FY2017, in a solid 86th place. SPAR made it into 140th place, with Pick n Pay in third at 160th and Woolies at 179th. Number one was Walmart, with turnover of half a trillion dollars, followed by club-discounter Costco at $160bn. While our retailers are relatively small globally, Africa looks promising, second only to Latin America in regional growth in that FY. And retail itself seems a good space in which to operate: the top 250 cumulatively grew revenue +83% over FY2017, for total global value of $4.5trillion.

Comment: A bit of perspective there. SA retail is relatively small, globally, but has lots of potential, while in terms of shopper in-store experience and ranges on offer – it can be argued – sits alongside those at the top of the log.

News from Zimbabwe – a rare commodity these days, to be sure – is that shares of Meikles, which runs Pick n Pay and TM supermarkets in that troubled neighbour of ours, are to be put on public auction for the settlement of debts and obligations derived from trying to run a business amid chaos. Meikles is not the first business to be thus afflicted, and it will not be the last.

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Three new Gauteng-based independent retailers have joined Pick n Pay’s Market Store Partnership. Their respective stories are instructive. The BVN Market in Mohlakeng is owned by entrepreneur Vusi Ndhlovu, who re-opened his father’s successful store in 2003, and has doubled its size in this new partnership. Summore Market in Tembisa is owned by mechanical engineer Pilane Kwakwa, who runs it in tandem with his successful enterprise resource planning business. Finally, Dinny's Market in Sebokeng is run by ex-Pick n Pay branch manager Johannes Letswalo, who fell in love with the Market concept after visiting one of the stores in early ’18. Through the programme, Pick n Pay and its suppliers fit each store with new refrigeration and IT systems, expanding the range, with specialist departments like butchery and bakery, and services like money transfer, ticketing, airtime.

Comment: An initiative moving slower than ideal, and one which comes with many challenges. But the potential of what it could be – the power of a big brand with the agility and drive of emerging independent retailers – is noteworthy.

Thirsty denizens of Berea verandahs and Camps Bay balconies alike will be delighted to know that Pick n Pay is dropping the price on its “Citrus for Gin” bags – known by some wags as “Gin Lemons” to distinguish them from, we don’t know, the other kind? That you don’t put in gin? The bag, which trades on SA’s newfound enthusiasm for artisanal variants of the acerbic liquor, contains a grapefruit, two limes, and two lemons, and goes for R39.99, down from its cynical pre-festive high of R44.99.

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Storied billionaire Patrice Motsepe has, as you may or may not know, has just launched Africa’s first digital-only bank, as a wholly-owned subsidiary of African Rainbow Capital. What you may not fathom, just yet, is the Pick n Pay connection. Over to you, TymeBank CEO Sandile Tshabalala: “We have partnered with 33 Pick n Pay and Boxer stores, which offer a point-of-presence for customers to interact with the bank and we will continue to roll out kiosks throughout the country.” Thank you sir. The kiosks will serve as the only locations for cash deposits; punters may withdraw at other participating retailers, and will also be able to earn discounts and rewards if they shop at partner retailers with their debit cards.

Comment: Another great stride in reducing the ranks of the unbanked, and kudos to PnP and Boxer for getting in on the ground floor.

Upping the loyalty game this week are Pick n Pay, who will give you 20 Smart Shopper points for every litre of petrol you buy from over 500 BPs across SA until the end of March, and ten points per litre after that. There will also be as yet unspecified “additional benefits at the pump”. The points may only be used at Pick n Pays right now, but BPs will apparently be added in the fullness of time. In the meantime, Pick n Pay’s 119 franchise BP Express Stores will rejoice in the upside. The deal has been over three years in the making, or over forty if you count the efforts made by Chairman Ackerman the Elder in the 1970s to sell discounted fuel. In other news from the Big Blue, online travel agency Travelstart now allows punters to pay for flights at Pick n Pay stores nationwide, having launched a similar initiative with Pep in June.

Comment: Good work on the petrol points front, and on the online/offline hybrid approach to air tickets, a model which South African punters seem most comfortable with.

Pick n Pay are gearing up for their biggest Black Friday Event ever, to ensure that punters get the best possible prices on items across a variety of categories, including last year’s hot tickets: big screen TVs for the lapha, cellphones and “household products” which is something of a catchall, and is stocking up accordingly. Black Friday, you will recall, is a recent and cynical adoption of an American invention which retailers use to spread the risk of holiday sales over two months and get rid of deservedly slow-moving stock before the Christmas rush.

Comment: Although retailers typically see a doubling of sales on that enervating day, make no mistake – there is little to no margin in Black Friday. And with a trading profit of 2.2%, unless very carefully managed, should it really be on Pick n Pay’, or anyone’s, agenda right now?

Those Pick n Pay half year results then, how they do roll around. Turnover up 6.4%, or 3.8% on a like-store basis, with profit before tax positively jumping 19.1% to R670.2m, driven thither, they say, by the price cuts which brought shoppers flocking. And these being interims, they come wrapped up in a whole bunch of other goodies that management throws in to amuse and delight the punters, like this: Smart Shoppers will soon be able to earn points while filling up at BP’s nationwide, and on purchases made at forecourt stores, where they’ll also be able to redeem those points. And also this: the Group is planning on reducing by up to 20% the amount of food waste that goes into landfills, by the simple but brilliant method of turning it into compost then flogging it back to you, the shopper, or indeed us. The share price dropped on the day reflecting the concerns of the financial community. For more info, take a look at our snappy little summary here.

Comment: Despite positive communication from Pick n Pay around performance, it is a business which sits with a 1.5% trading profit margin – a fact, among others, which did not gone unnoticed in the share price.

Congrats to Pick n Pay, celebrating their 50th anniversary on the Johannesburg Securities Exchange (JSE), one of only 10% of businesses which have ever managed to stick it out so long. Chairman Ackerman The Elder listed the Group when it only had three stores. Well does he deserve the privilege of that ceremonial blast upon the horn of the mighty kudu.

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A trading update from Pick n Pay, and one not accompanied by the shuffling of feet from the board and low rumbling sounds from the analysts, like they used to be back in the day. No: this time the Big Blue has let it be known that due to staff layoffs and not necessarily to any prodigious feat of retailing, headline earnings per share – HEPS, if you will – are likely to come through at +85% or thereabout for the year to June. And turnover up by +6.4%.

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After the suspiciously small number of winning scratch cards in Pick n Pay’s recent promotion, last week the Big Blue dished out a R20 voucher with every R200 worth of merchandise purchased. They underestimated, apparently, the high esteem in which South Africa holds its scratch cards, particularly winning ones, and you don’t mess with a national institution, as outpouring of grief and rage on twitter testified.

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Good work to all those who participated in the Madiba Day activities, particularly our friends at Pick n Pay, in a partnership with FoodForward SA, whom we joined in helping package some of the 540,000 meals they put together for South Africans in need. The event has become a global festival of meaningful service and generosity, and South Africans invented it. Love.

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Pick n Pay is migrating its data from three separate legacy systems to Amazon Web Services (AWS), which in its own words offers a broad set of global compute, storage, database, analytics, application, and deployment services that help organisations move faster, lower IT costs, and scale applications. The Big Blue is reportedly 80% along the way (which in actual migration is where the wildebeest teeter nervously on the crocodile-lined shores of the Mara River) and is pushing for 100% by the end of the year, once all the old platforms – chief among them SAP’s BW for HANA – have been dismantled. The thinking? All three existing platforms have been running into constraints, Pick n Pay is wanting to future-ready itself in an age of big data and machine learning, and the cloud solution provided by Amazon enables the business to get the most of the hardware it currently has. From a business perspective, says Andrew Mayes, Pick n Pay’s GM for Business Intelligence and Data Science, “Towards the backend of last year we were faced with a number of challenges that we arguably see as opportunities. They entailed quite a few things from [a] business perspective that we simply could not do in that previous environment.”

Comment: Excellent use of the word backend, that IT guy.

We normally don’t fill these precious column inches with news about director’s dealings, as they’re often dense and arcane. Sometimes, though, they offer rare insights into the health and strategic imperatives of a business, and thus it is with the long-term share option scheme Pick n Pay has extended to CEO Richard “Mr.” Brasher. Despite certain targets vis-à-vis the share price not having been met, you see, Pick n Pay’s remuneration committee has extended the terms of his original arrangement with the business, on the grounds that like everyone else, Mr. B was blindsided by the harsh economic realities of recent years and has taken some decisions which might be injurious to the share price on the short term, but good for the long-range success of the business – for e.g., the Voluntary Severance Programme (VSP) undertaken to get the payroll under control, but which the markets didn’t initially like.

Comment: Lots to get one’s head around. But at the end of the day, a vote of confidence from the board in the status quo.

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And still PnP related… If it was an Ultra Luxury Motor Vehicle, it would be a Lamborghini, although we’re not saying that the retailer is overpriced, overpowered and boxy. We’re merely comparing where they came in their respective categories in the Sunday Times Generation Next Brand Survey, which was first. Pick n Pay was followed, in this order in the ‘Coolest Grocery Stores’ category, by Woolies, Checkers, SPAR, Game and Shoprite, with Shoprite and Game trading places from last year, but the rest holding steady.

Comment:

Both Woolies and Pick n Pay have taken small but significant steps down the long, uncertain road which may lead us to a more sustainable future, with the announcement by the former that they will be phasing out single-use shopping bags by 2020, and by the latter that they will start introducing 100% recyclable bags. Woolies have a vision for a value chain of “zero packaging waste to landfill”. This as we learn that only 10% of all plastic ever made has been recycled. SPAR in the Eastern Cape, and various other SPARs around the country are either in the process of, or have already switched, plastic bags for paper, and Pick n Pay’s green range features all-recyclable packaging.

Comment: These are nice initiatives. But frankly, they represent a drop in the ocean, which as you know is currently being choked by plastic. Even better would be if the government banned all single use plastics by 2022, as the government of India has announced it will do.

Rather than vague promises of “winning in fresh”, as virtually every retailer has said it was going to do for the last decade and more, Pick n Pay has come up with a fresh produce strategy, and it’s a corker: a three-tiered offering (based on global private label best practice) of the good stuff, at three different price points, packaged so that punters know exactly what they are getting for their hard-earned buck. So the produce in the Own Brand range may be slightly flawed to the eye but otherwise nutritious and tasty, and will be cheaper, the mid-tier- range will give you what you see on the packaging, while the premium range will offer shoppers that little bit extra – easy-to-peel naartjies, for example, or perfectly-aged free-range steak. To date, 80 product lines have been repositioned and 28 new product lines have been introduced across fruit and vegetable and butchery, with more in development.

Comment: We’ve been trundling this missive out for the last ten years and more, and by golly it’s good to have something truly fresh to report on every once in a while.

Pick n Pay and Mastercard have teamed up to feed the hungry while promoting Mastercard’s “Tap & Go” payment option. Between now and mid-July, all punters availing themselves of the service at a Pick n Pay tillpoint will trigger a meal donation from Mastercard as part of their global 100-Million Meals programme, by which they are hoping to help reverse the spiral of poverty, eliminating hunger, driving inclusion, and enabling and empowering those in need. The meals in question will be distributed to vulnerable women and children by FoodForward SA, one of Pick n Pay’s key CSR partners, through its network of non-profit organisations.

Comment:

PnP’s articulation of its strategy hasn’t changed in these four years gone by and with the recent publication of the FY2018 results, we reckon it’s a good time to take stock of how the business has progressed against this strategy, and what its short to medium term plan looks like. 1) Two phases have been tackled thus far, with a phase of stabilisation taking two years followed by a phase of growth trajectory marked by an improvement of the estate, with the rollout of next-gen stores and refurbs. 2) There has been major growth in the corporate store footprint (including Boxer), going from 643 to 928 stores in just three years, with franchise numbers rising from 433 to 630. 3) Central distribution is a key pillar of the strategy, with product volume throughput climbing from 56% to 60% in 2017 alone, and a target of an “optimal” 80%. 4) Private label is a major push, now accounting for approximately 20% of sales, with 700 new products launched in the past year alone. 5) Mr B has big plans for the Boxer brand, which now has 152 supermarkets, and is benefitting from a major investment of Brasher’s time and Pick n Pay’s money.

Comment: Pick n Pay’s ‘Rocky-like’ resurrection is one of the most thrilling stories we’re seeing in our 13 years before the trusty old Remington in the clamorous newsroom here at Tatler Towers.

There was a time, not so very long ago, that the arrival of the Pick n Pay results would be greeted with dread or with self-righteous derision by the analysts, depending on where they had been advising their clients to stash the old family silver. Those days are happily behind the Big Blue, which released another set of results this week that tell a story of steady recovery in challenging times. Turnover was up +5.3% to R81.6bn, with trading profit up +4.9% to R1.82bn and HEPS +7.1%, with a net total of 124 new stores excluding Zimbabwe. The business had a great fourth quarter, with South African stores growing turnover +8% for the period. Interestingly, sales ex-DC rose 8 percentage points to 68% of volumes, causing Mr Brasher to talk up the prospects of a new DC north of Joburg in the next 18 months. Punters rewarded Pick n Pay with a handsome +8.9% bump in the share price last Friday afternoon. In more strategic news: more smaller stores and more private label are coming our way. For more info, have a look at the Trade Intelligence 1-page summary here.

Comment: They fought them on the beaches and it’s now way past the end of the beginning, as Mr Churchill might have observed.

Look we didn’t want to go there, but it’s news and has had a material if slight impact on the Pick n Pay share price this week. Sure you’ve all read the stories, but suffice it to say, it’s just never a good idea to store foodstuffs in any kind of proximity to dead people. Even if you’re a franchisee just trying to get by. And especially if it’s going to damage the brand of a great South African business that deserves better.

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One day the world will acknowledge the home-grown genius of the stokvel, and financial institutions everywhere will scramble to get on board. In the meantime, there’s Pick n Pay, which together with Absa has just launched the Grocery Stokvel Account. This financial instrument (ahem) will enable stokvels to earn an attractive rate of interest on their savings, provided they go on to spend these savings at Pick n Pay, where they will also receive further attractive discounts for their patronage. Stokvels, as any number of PowerPoint presentations will tell you, generate an annual economy of R49bn in South Africa, and also many, many lively parties: there are 800,000 stokvels operating at any one time, and it’s never only about the money.

Comment: The challenge is to harness the power of the stokvel without attempting to co-opt it. It’s a South African gem which we should treasure and preserve.

Pick n Pay is making a determined push into rolling out its spiffy Next Generation store format, (re)opening 26 new-look stores in 2017 alone. The new format brings together improvements in store design, space allocation, product range, store operations, labour efficiency, technology and customer service, all of which Trade Intelligence had the pleasure of experiencing themselves at the PnP franchise store in KZN’s upmarket town of Kloof (ed. English pronunciation please). “This is no longer the supermarket of the future, but the supermarket for today,” says PnP on its new blueprint. But don’t just take their word for it, or even ours. Let the store speak for itself here.

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What to expect from Pick n Pay in 2018: loads of innovation in convenience food, including ready-to-eat meals. Their research has indicated that South Africans are looking to save by cutting back on eating out; ready-prepared food is an affordable option, especially when you’re entertaining at home. Some areas to watch out for: convenience meals in their Carb Sharp range, read-to-serve side dishes for the braai, and convenience desserts. If you want to know more about convenience as a growing consumer goods retail trend in SA, read here… or if you want a more detailed deep-dive into grocery retail trends as we see them (and why on earth wouldn’t you), click here… But back to us, erm, them… What not to expect from Pick n Pay in 2018: a return to the glory days of the Smart Shopper programme. Points are still worth half of what they were when the scheme launched, and must be redeemed within a year of being earned, a move about which some shoppers are still niggling. 

Comment: But about those trends of ours… alright fine, we’ll stop.

Not to single any business out, but Pick n Pay in Cape Town have embarked on a rigorous programme of water wisdom against Day Zero working with landlords and customers alike, and putting measures in place which include gaining access to groundwater, and desalination. Some stores have boreholes and grey water equipment, as well as water tanks which will be filled from non-water-stressed areas in the event of Day Zero.

Comment:

Adding muscle to the Pick n Pay management team this week is Pedro Da Silva, who joins the business as retail MD. It’s an important appointment for Pick n Pay, and an interesting one given the span of Da Silva’s career in such geographies as Portugal, Columbia and significantly, in Poland, where he was instrumental in the turnaround and ensuing success of the Biedronka business. Why interesting? Because Biedronka has been a retailer of interest for a few of our South African retailers recently, partly as a result of the success that Boxer has enjoyed with the adoption of some of Biedronka’s operating principles into the Boxer business.

Comment: Will we see a move to a more limited range, soft discounter positioning at Pick n Pay supermarkets, similar to that we have seen in Boxer’s next generation discount stores?

Last year, you will recall, Pick n Pay piloted a spaza modernisation programme in Gauteng, partnering with spaza owners to upgrade their stores and better meet the needs of their customers and communities. Now they’re launching this endeavour in Cape Town, in partnership with the Old Mutual Foundation, Masisizane Fund, Brimstone, the Western Cape Department of Economic Development and Tourism and the City of Cape Town. The first store opened was Nozinga’s Market, in Gugulethu last October; next up is the Ndwamba Market in Nyanga, where the expanded staff complement has received training in IT systems, customer service, hygiene and more traditional retailing skills like baking and butchery. Like the others in the programme, Ndwamba has been outfitted with new refrigeration and IT systems and it will stock more than 1,000 lines of non-edible and edible groceries, including fresh produce and perishables. It will also provide services like money transfer, ticketing, airtime and data, bill payments, lottery tickets and prepaid electricity to its shoppers.

Comment: An interesting model, though still in its infancy. We look forward to following its developments.

Big up to Makro, who have opened their 21st store, strategically located in Riversands, between the affluent shoppers of Dainfern and the value-driven customers of Diespsloot. The latest addition to Massmart’s flagship trading brand is a 21st century masterpiece of sustainability, connectivity and value, with innovations too numerous to list here – for a closer look, click over here instead. Pick n Pay, meanwhile, has reopened its iconic Hyper by the Sea in Durban North as the first of its next-generation Hypermarkets. It’s cleanly designed, colourful and easy to navigate, and offers shoppers a full basket of value-added services, with ultra-modern next gen alcoves.

Comment: Fabulous stuff from the big-store formats last week. Enough excitement to make us think we need a new TV.

Despite notable absences – Woolies among them – the third Black Friday delivered on its promise of long lines and selective discounts for South Africa’s cash-strapped shoppers. Interestingly, while the number of participating retailers was up, the number of discounted items was anecdotally down this year. The biggest winners appeared to be online retailers like Takealot and Superbalist, both of whose sites crashed under the pressure of insomniac shoppers in the wee hours of Friday morning, while Pick n Pay, buoyed by the enthusiasm of shoppers for its great deals on such quotidian items as coffee, nappies, detergent and toilet paper, extended the promotion to Saturday. Shoprite’s offering was also a hit, with shoppers queuing for hours for better than usual deals on basics like cooking oil, household sugar and confectionery. 

Comment: An interesting experiment, here in SA, where the tastes of upper income consumers tends to track those of their counterparts in developed countries, while the mid to lower LSMs have in their inimitable way made this retail fest very much their own.

Retailing and financial services go hand in hand, and what Pick n Pay have dabbled in recently merely confirms this notion. Take their recent Bitcoin experiment, where for a short while punters at their head office campus store could use Bitcoin to pay by scanning a QR code using a wallet app on their smartphone. Or the more recent announcement that they’ve introduced something they’re calling Chop-Chop Checkout to facilitate online shopping which enables punters to make single click payments for orders once their card details have been stored using a 3D Secure process. This is going to drive online sales big time once people have twigged onto its convenience. And the Bitcoin experiment, while ahead of its time, has had the welcome if unintended consequence of making Pick n Pay an employer of choice for those tech-savvy youngsters everyone seems to so keen on these days.

Comment: Pick n Pay is making a long and interesting play to dominate the clicks and mortar space. We can’t wait to see where this all takes us.

Extending its brand into underserved areas while giving a hand up to local entrepreneurs this week is Pick n Pay, whose first spaza modernisation store in the Western Cape opened in Gugulethu. Like its sisters in Gauteng, Nozinga’s Market offers punters an expanded range of products at supermarket prices, with all the convenience of a local spaza, as well as value-added services including money transfer, ticketing, airtime and data, bill payments, lottery tickets and the sale of prepaid electricity. Oh, and booze. And the programme offers owners like Pumla Rudah the training and resources she needed to bring her dream of starting a business to a reality employing 15 people. In other Pick n Pay news, the Big Blue has fired the first salvo in the pre-Christmas price wars, slashing the tags on 500 essential items and launching a veritable battalion of promotions and deals against its competitors.

Comment: Oh, it’s on, as out teenage son is often heard to remark as he girds himself for battle with the denizen of the Xbox. Pick n Pay is indeed throwing it down.

Pick n Pay is beating Woolworths, Clicks and Game, any number of cute cat/llama combos and your last Mauritian holiday on Facebook, reporting over 1.7 million likes in the last three months. Elsewhere, Woolies is beating all comers with 400,000 twitter followers, 250,000 Instagram followers and 9 million views on YouTube. This according to research by Ornico, anyway. Our research indicates that they’re all pretty much even when it comes to mentions in a certain influential weekly e-newsletter though.

Comment:

Pick n Pay began the implementation of its turnaround strategy at the end of 2014, after a period of declining market share and a rocky start to the belated kick-off of centralised distribution. How’s the strategy working? Pretty well, if you look at sentiment around the interims: turnover up +5.1% to R39.3bn, and profit up +14.9% to R438.8m. And this as the cap on nine straight periods of growth, which, says Mr Brasher, demonstrates that Pick n Pay has the right plan to modernise the business, reduce costs and deliver better value for customers. Over the past six months, they’ve opened 63 new stores, 40 company-owned outlets and 23 franchise stores. Beyond our borders, they’re picking up steam, too, with 142 stores now trading, turnover up +12.6% to R2.3bn and profit before tax up +22.3% to R126.8m.

Comment: Pick n Pay is one of the main poles of our great retail tent. It’s good to see the business sentiment shifting, although much of this success will depend on the ability to land the supply chain efficiencies required.

A handsome new Pick n Pay flagship in the leafy environs of Constantia, where the coiffed and tweeded locals will have full run of the comprehensive product ranges, open, easy-to-navigate spaces, and a host of value-add services. One of the several jewels in this crown is the fresh department, where, they tell us, you will encounter “cauliflowers … as colourful as carrots and potatoes the colour of peonies.” Not to mention the poke bowls in the sushi bar. Yes, we said sushi bar.

Comment:

A grab-bag of news from the Big Blue this week, just to keep things interesting. So Pick n Pay and Absa are celebrating their Golden Wedding this week. Like all old couples, they have their secrets, like the size of the overdraft, or how they managed to move on after Pick n Pay had that midlife dalliance with those racy young Nedbank kiosks. Also, PnP have relaunched their online shopping portal and probably shoved a “2.0” in there somewhere as well. The new machine will apparently work handily alongside the recently relaunched mobile app, and allow punters to collect their groceries, free of charge, from selected stores. And finally, Pick n Pay has let it be known that despite April’s retrenchments – in fact as a direct result of the costs incurred – headline earnings per share (HEPS) will be down by a greater than anticipated margin when the results are announced next week. 

Comment: Which we await with baited breath, kind of like when we used to camp out by the post box waiting for that school report to arrive.

Sometimes the story is the story. After Pick n Pay reported last week that it would be launching a credit offering to qualified Smart Shopper members, there was an absolute slew of stories in the local press warning of the pitfalls of easy credit for food purchases – some of whom pointed out, correctly, that Woolies was already doing it. Pick n Pay Deputy CEO, Richard van Rensburg on Monday said that the retailer is following the National Credit Act strictly, and has suggested that it’s not a good idea to buy food on interest-bearing credit. 

Comment:

Pick n Pay is joining Woolies in allowing its shoppers to buy groceries on tick. What? No, not tik. Credit. Using their Smart Shopper cards, with up to 55 days’ interest-free credit, budget payment options for big-ticket items and monthly store account fees of only R10 for active users. Smart Shopper now has an active membership of 7million South Africans, at least some of whom will need a helping hand through the last worrying days of each month, so this launch is timely. Pick n Pay anticipates – perhaps correctly – that the facility will drive both footfall and basket sizes. The move is not universally supported, with debt counsellors suggesting that it could backfire, as many desperate shoppers default on their accounts.

Comment: It will be interesting to see whether this move sparks an arms race. While Shoprite could at a push have decided not to dip its toe into the waters of full-blown loyalty marketing, offering credit to an increasingly cash-strapped shopper base is another story altogether.

We always feared this day would come, and now it is upon us. One of the retailers has got involved in Bitcoin, and now we’re going to have to try to understand it – and, what’s worse, explain it. Doubtless as a way of potentially capturing a slice of the valuable hoodie-wearing misanthrope market, Pick n Pay has tested the use of crypto-currency Bitcoin for purchases in its head office canteen store, using a Bitcoin wallet app on the shopper’s phone to scan a QR code, upload the transaction onto a server in Macau, shoot it over for approval to a holding company in Nassau, then back via an encrypted darknet… where were we?

Comment: Bitcoin, and what it represents, is a heated debate amongst those in the know at the moment. It’s good PR to have cryptocurrency capabilities, but whether it is good business when there’s no gold standard and fluctuating currency, remains to be seen.

Pick n Pay has just released its new smartphone app, and it’s a scorcher. Downloaded 10,000 times within the first 24 hours of release of the Android version, the app includes such innovations as a barcode scanner which will automatically add items to your shopping list, new recipes every month with the functionality to add ingredients to your list and an online record of your shopping history – again, with the ability to add repeat purchases to your list. You getting the swing of this? It’s all about the list! And of course about Smart Shopper, with points added to your card where relevant, and with the ability to buy data, electricity and airtime on your Smart Shopper account. The app also sends you personal discounts, which you can redeem in store, and expedites not just your shopping but your checkout process. 

Comment: Is this integration of Smart Shopper – in which PnP have invested heavily – one of their tickets back to the glory days? Certainly, they’re ahead of the competition as things stand; the only issue is scale.

Last week, we mentioned in passing that Pick n Pay was adding a second online DC to the one already up and running in Cape Town, where click-happy customers have been treated to increased product availability and range, special online promotions and improved delivery times. In Gauteng, where online orders have previously been serviced out of stores, demand for similar services has grown to the extent that a dedicated warehouse is now viable. Pick n Pay launched home-delivery shopping in 2001; it has grown to become SA’s pre-eminent online grocery retailer although this is not yet saying too much given the low portion of online grocery sales in SA. While poor bandwidth and a deep-seated distrust of the security of online payment initially depressed performance, Pick n Pay’s online offering has been growing in double digits since 2012.

Comment: South Africa is not – yet– the ideal market for this form of retail. But Pick n Pay’s competitors ignore the format at their peril.

Pick n Pay has given the market notice that job cuts to the tune of 10% of its workforce – or 3,500 souls – will weigh on its first-half results. The cuts, which take the form of voluntary retrenchments at head office, in the regional structures, store operations and supply chain, will cost the business in the short term, but the savings should make themselves felt in the second half, all things being equal. The positions are “no longer required due to improvements in organisation, planning and technology,” says Pick n Pay, putting a positive spin on things. “The reduction in employee numbers will have a significant positive impact on the operating costs of the group, creating additional headroom to reduce prices and improve value for customers,” they continue, waxing positively Pollyana-ish. 

Comment: The market rewarded this grim news with an initial uptick in the share price. Bring on the triple bottom line.

Pick n Pay has just opened its second online DC, this one in Gauteng, in advance of the launch a new online shopping website and an upgraded version of the Pick n Pay mobile app later this year. “It is the next step in our journey to build an advanced, convenient and simple omnichannel shopping experience for our clients,” says Deputy CEO Richard van Rensburg.

Comment:

Pick n Pay’s remuneration committee has taken the bold and refreshing step of penalising top management for poor turnover growth and, we quote, “failure to meet working capital targets”. So, taking things from the top, CEO Richard Brasher received just R10million for his efforts this year, with no bonus, while last year, his short-term annual bonus of R15million took his take-home up to R24.4million. However, the committee decided to award discretionary bonuses to key players at lower management levels, to reward them for progress delivered in tricky trading conditions. The Big Blue has recorded a decline in sales volumes for two years in a row, and failed to meet the stretch target of 20-25% of profit before tax and exceptional items. 

Comment: From the analysts’ gallery, our Uncle Sydney comments that Pick n Pay may have “reset the norm” for incentive policies in our historically more generous sector.

Some snippets from Pick n Pay this week, which while embattled in the bricks and mortar space, is making strides in the more ephemeral realms of loyalty and technology. It turns out that The Big Blue is leveraging cloud computing to offer customer-specific pricing through its popular, six million-strong Smart Shopper loyalty programme. And the love is not reserved just for the man, or indeed woman on the street. On Pick n Pay’s B2B platform, the retailer is able to offer specific pricing to businesses like B&Bs and office parks, including Amazon’s developer centre in Cape Town, which is one of their biggest customers. And in a bit of not-unexpected symbiosis, Pick n Pay is exploring using Amazon Web Services (AWS) to clear its data centre by moving its entire digital platform to the cloud in the next couple of years, in order to improve the business’ speed and agility.

Comment: Initiatives like this will play an important role in driving growth in a retailer still struggling to find its way back to the top of the retail hierarchy.

This story was made using SAP, so prepare yourself for terms like “enterprise-wide” and “integration issues”, plus serious people in dark suits could pop up without a moment’s warning and charge you millions of bucks for something that you can’t actually clap eyes on.  Anyway, cut to the chase: thanks to SAP, Pick n Pay has become the first retailer in the world to implement realtime processing for the central earning and redemption of loyalty points. This as it rejigs its Smart Shopper Loyalty Programme. This is laying the groundwork for driving integrated realtime campaigns and more personalised offers, while adding new clubs to the loyalty programme – without adding infrastructure or additional expense to the business. Practically this means that each member will receive a personalised message each week, with special offers targeted at the individual. 

Comment: A – dare we say – smart move at a time when Pick n Pay has rejigged its rewards system.

Doing the right thing by both communities and the planet this week are Pick n Pay which have invested R2m in a social enterprise vermiculture project, whereby organic waste from 15 Pick n Pay stores is being diverted to the Waste to Food project in Philippi for composting via a process eventually using earthworms, and sale by the community. Nice one.

Comment:

What do you give the man, or indeed woman, who has everything? Why, an Uber gift card, of course, now obtainable, along with UberEATS vouchers, from Pick n Pay. More evidence, if more were needed, of the ubiquity of the Disruptor™ du jour.

Comment:

A quick recap of the Pick n Pay strategy, over which you have no doubt been poring in our Trade Profiles. Here goes: 1. Maximise the existing estate with a focus on next generation stores and non-food; 2. Put the customer first, delivering value through price and private label; 3. High product availability through further centralisation and improved forecasting and replenishment; 4. Make Boxer a national brand, which is a great idea and Pick n Pay’s best hope of going after Shoprite’s main market shoppers; and 5. Growth outside the home market – especially in Zimbabwe and Zambia, then in Ghana and Nigeria with a couple more geographies to follow in due course. Of concern to analysts is that Pick n Pay’s top-line sales growth continues to lag that of Shoprite, a situation this strategy seems well-placed to remedy. 

Comment: Pick n Pay’s recovery was unfortunately timed to hit the headwinds of our current economic slump. But it is becoming evident that the measures they have put in place during this difficult ambit is positioning them for more robust growth in years to come.

So those Pick n Pay results, then: turnover up 7% to R77.5bn, with after tax profit up 17% to R1.2bn. The former they attribute to "disruption to trade" due to refurbs on 62 stores and the closure of 12 underperformers, while the latter, they say, is a result of greater operating efficiency, cost discipline, a more centralised supply chain and higher productivity in stores, all of which have been critical to its slow and steady recovery. A nice clutch of new stores: 68 new Pick n Pay company-owned stores and 25 new Boxer stores, across all formats, while on the franchise front the business now has 111 Express stores, having doubled the haul in two years. All this, however, as the competition makes its own adjustments with reality – Woolies by experimenting with price cuts, SPAR by going offshore, Checkers by focusing on fresh.

Comment: Perhaps getting back to basics is the magic formula?

What can this mean? Pick n Pay is cutting in half the generosity of its vaunted Smart Shopper programme, meaning that where once you could spend R100 and get a ront back, you now have to spend R200. Put another way, this halves the cashback rate to customers from 1% to 0.5%. According to Pick n Pay, however, this is not the case at all: the change is aimed at making the programme “more rewarding and more personal” by giving you “personal discounts every week, based on… actual shopping habits.” Smart Shopper is widely surveyed as the most popular rewards programme in the country – or has been up to now, but word in the street is that while it has done good things for Pick n Pay’s sales, it hasn’t performed as well at the bottom line, skimming those already razor-thin margins to an unsustainable degree.

Comment: While shoppers, smart or otherwise, might not be happy with the change, investors probably will.

Bit of a minor reshuffle in Swaziland for the Big Blue: four franchise stores previously owned by the Foster family have been bought by a consortium consisting of African Alliance Private Equity (AA) and Greystone Partners, and put under total Swazi ownership. The stores in question – brace yourself for a flock of m’s, flying into the sunset like hadedas – are as follows: one in  the Mbabane Mall, two in Matsapha, at Mahhala and Mashayitafula, and one in the Manzini Hub. Greystone partners is owned by a lot of the local pension funds, so the benefits of the acquisition will filter down. A Mr Peace Mabuza of AA sees the move as part of Swaziland’s transition from a traditional rural economy to something more upmarket. Retail growth there in the last four years has outpaced GDP, which, sadly is more than can be said across the border.

Comment: South African retailers are widely regarded as signifiers of growth and progress across the continent – not a role to be taken lightly.

Since Tesco alum Richard Brasher joined the business, Pick n Pay’s stock has risen steadily by some 54%. However, while it’s tempting to attribute Pick n Pay’s turnaround to Brasher’s steadfast presence, other factors are also at play. Centralised distribution, for one, which kicked off during Nick Badminton’s tenure, a general cost cutting initiative, and the launch of the Smart Shopper loyalty programme, which predates Brasher’s arrival by two years. Tesco’s attempts at cost-cutting yielded patchy result; the South African consumer is more sensitive to value than to other factors like convenience. Brasher himself believes success in retail is a relatively simple matter: "Good quality, great value, attractive stores, effective operations and exceptional customer service. Follow these principles and you will never go far wrong." 

Comment: The match of Richard Brasher and Pick and Pay is one made in a sensible heaven where bells and whistles are only faintly to be heard and where harps and halos are distributed generously to deserving shareholders.

Many happy returns (is that something you’d wish a retailer? Doesn’t sound right) to Pick n Pay, who turned a sprightly 50 last Wednesday amid a flurry of red, white and blue confetti. Pick n Pay, as you know, began life as a chain of stores purchased by a Mr. R. Ackerman plus fifty small investors for R620,000 back in ’67. Click forward a half century and where are we? Good coverage across the republic, a respectable footprint in Africa, centralised distribution at last and the scars from the Aussie venture faded. An Ackerman at the helm, and a couple more behind the scenes, some really nice new generation stores and turnover last year of over R72bn.

Comment: “Winning isn’t everything – it’s the only thing” as Chairman Ackerman the Elder is fond of remarking, but coming in among the best of them is pretty good too. And who knew that Pick n Pay was a Pisces?

Not giving up on Zimbabwe by a long chalk are Pick n Pay, who are busily identifying further TM Supermarkets to be converted into Pick n Pays. This hot on the heels of the opening of a $25million shopping mall in Borrowdale by the TM/Pick n Pay Group. TM Supermarkets still has 56 stores in Zimbabwe with a spread across income brackets and across the country. It is a trusted retailer among Zimbabweans and remains the preferred outlet for many suppliers. All of which is to say that while some TMs will soon be wearing the red, white and blue, not all of them will: TM as a trading brand is rooted deep in the rich red soil of its motherland. Although the technical expertise and South African purchasing power of Pick n Pay hasn’t hurt the business.

Comment: How many years ago did we all write Zim off? Not Pick n Pay.

Pick n Pay’s Smart Shopper programme has been something of a textbook case: big, fast, and popular, driven by meaningful benefits to customers and providing Pick n Pay itself with loyal shoppers and valuable data in heaping measure. Smart Shopper, you will recall, provides punters with points to the value of a cent on every rand spent instore, which may be redeemed on any purchase at the register. Now Pick n Pay are adding a credit facility to the card, which offers shoppers 55 days to pay before the whopping interest rate of 21% kicks in. The rate will also apply on bigger purchases, like fridges or cellphones. The facility, currently being piloted, can be used at Pick n Pay stores, including clothing stores nationally, but you cannot use the associated card at ATMs. The move appears targeted at shoppers who might face a cash flow crunch towards the end of the month. “So, we are developing a new Pick n Pay store account to help customers manage their grocery spend in an environment where the cost of credit can be extremely high,” says Richard van Rensburg, Pick n Pay’s deputy CEO.

Comment: An interesting strategic move that comes with a cautionary to shoppers who are unable to clear their debt before the 55 day grace period expires.

After some derisive reporting (including from ourselves) on Pick n Pay’s low-key and small-scale experiment with self-checkout, the Big Blue has quietly launched something much better: contactless card payments. Tap and go, as the technology is endearingly known, enable shoppers to merely tap their cards against card readers rather than going through the laborious combination of swiping, chipping, signing and PINning that shopping entails in these dark and backward times. Tap and go offers the best of all possible worlds: continued employment for Pick n Pay’s cheerful cashiers, and quicker lines for Mr and Mrs Punter. The service is now live in all stores and at all visa-and-mastercard accepting tillpoints, on transactions up to 200 ront.

Comment:

So the Pick n Pay Group has done OK these last three and a half years, sorting out its supply chain, trimming things back at head office, launching a range of beloved plastic trinkets, launching a second range of beloved plastic trinkets – OK scratch that last one – and generally getting back on a former footing. One area where it believes it can do better though is in customer experience, and to this end it will shortly be forking out R1.55billions, with a b, on new stores and revamps across both PnP and Boxer stores. New generation stores – with such innovations as faster checkouts and a broader product offering in PnPs, including store-in-store clothing, wine and personal-care departments – have been the focus of this spend. It’s an investment which seems to have paid off, yielding double-digit growth from these stores in the interim period through August. Centralised distribution has also been a big winner – where once 40% of a store was given over to storage that number is now down to 5 – 10%.

Comment: The second act turns out to be more thrilling than the first.

So the Stickeez relaunch didn’t go as hoped, with the Two Oceans Aquarium pointing out in a self-righteously Capetonian drawl that it doesn’t have any truck with bits of plastic that could end up in the world’s oceans, much less co-sponsor them. One assumes that they sell no plastic dreck whatsoever in their own gift shop (great, if they don’t.) And in a Trumpworthy bit of trollery, Checkers are launching their own range of collectibles, named – entirely unactionably – Stick ’Ems. In all fairness, proceeds from the sales of these trinkets will go towards The Lunchbox Fund.

Comment:

Something we’re pretty sure you didn’t know (although, obviously, we did) is that Pick n Pay has a warehouse somewhere in the Cape dedicated to supplying online orders, and driving sales in that, to be honest, pampered geography. Now another is planned, in Isando outside Jo’burg. Some percentages to follow, stay alert. 50%+ of online shoppers make more than R20k a month, while 30% earn between R6k and R20k. It is this latter group that Pick n Pay want to target. In addition, 80% of South Africans do not own cars, but do 60% of all grocery shopping, and you can kind of see where this is going. An argument may be made that an opportunity exists for the Group to bring online to its middle-income shoppers, perhaps through the Boxer Superstores chain. What remains to be seen is whether delivering to these shoppers at a time convenient to them may be made profitable.

Comment: Point is Pick n Pay, an early adopter in online grocery retail, is trying. And when the profits do flow, they will be among the first to cash in.

It’s been three years since Richard Brasher took over the wheel at Pick n Pay from a storm-lashed Nick Badminton. How’s he doing? Well, to belabour the metaphor, Capn’ B is steering the ship into calmer waters. Market share – about 10% of which was lost between 2005 and 2013 – has stabilised at least, central distribution is entrenched in a business which once resisted the notion fiercely, and the share price – once the cause of ire for punters and analysts alike – has rebounded rather nicely. How did he do it? An outsider’s perspective, for one. A couple of decades in the rough and tumble of the UK grocery market, which makes our more consolidated space look like the Methodist Ladies’ Companionship Circle (MLCC). Then his forensic approach to the business’ issues, and the methodical manner in which he set about correcting these. Concerns do however remain that the heavy-handed approach Pick n Pay has adopted in dealing with suppliers - at a time where a more collaborative approach is regarded as the means to truly win in the medium to long term - will alienate suppliers in favour of the group’s competitors. Much of this courtesy from a very informative interview with a gentleman who had Mr B’s back right from the get go.

Comment: But don’t take it from us. See for yourselves.

The Big Blue released a trading statement last week regarding its first-half performance, and things are looking pretty tidy, with turnover growing 7.2% and headline earnings per share (the one true measure of profitability these days) expected to rise 20 to 25%. This, point out management, is the seventh such reporting period in a row of meaningful profit growth and is further proof that recovery is well under way. “This result is underpinned by stronger operational and financial discipline, with tight expense control in an inflationary economy,” they aver. It could have been better they said, but for tough conditions in the economy and the disruption created by store refurbs. They expect food inflation to ease up in the next while, which should bring punters flocking back to the aisles.

Comment: Excellent work there from a business quietly executing a solid turnaround strategy.

Self-checkout (which in our experience is a joyless and glitchy endeavour) may well be the way of the future. But not here, not now, say SACCAWU, whose Pick n Pay membership opposes the move. Self-checkout is being trialled at one store in Obs, and will be for the next six months before any decision is taken. The idea for Pick n Pay is to improve the customer experience and get punters moving more rapidly towards the exit. Staff will be required to assist at self-checkout tills, and to provide the additional security which may, ahem, be needed, say PnP, and the business remains committed to adding 5,000 jobs to the dear old SA economy every year.

Comment: Honestly – and we know whereof we speak – self-checkout adds little to the shopper experience. And while it certainly does cut staff overheads, this is perhaps not a solution South Africa needs right now.

You know how you feel when you’re explaining the mail window to your parents over Skype? Prepare to feel how your parents feel, when self-checkout arrives, courtesy, so far, of Pick n Pay, who are trialling the technology at a secret location in Cape Town, as mobs of angry Luddites roam the streets in search of it. Pick n Pay view self-checkout as an added service rather than as a replacement for analogue, and assure us that no job would be lost as a result of an, at this stage, hypothetical rollout. Self-service tills, you see, like sheep and rich people, still require human minders to ensure that they don’t walk off a cliff or try to steal your money. One of the very great benefits of the technology, though, is that self-checkouts don’t judge when you buy a party-size pack of NikNaks or an unusual variant of condom.

Comment: Also, they don’t let the current wage dispute for casual staff get in the way of a friendly interaction with the shopper…

Bit of a shakeup over at The Big Blue. Paolo Peereboom, who has done great things in the commercial division, where Mr Brasher commends him for modernising the gaff, now becomes retail operations and supply chain director. "I now want him to apply his passion and expertise across our retail and supply chain operations as part of our strategy to be a more efficient and customer-focused company,” Mr B. And how’s this? Paula Disberry joins the Group as commercial director. She was headhunted, if that’s the expression, from Woolies, where she did sterling service heading up retail operations, online and real estate. Previously, she had a strong track record of delivering growth and innovation at global retailer Tesco, and had also enjoyed successful stints at Colgate-Palmolive and BP.

Comment: As we may have mentioned before, Pick n Pay is a business proceeding with determination to regain its ascendance in South Africa’s stiffly contested market.

Massmart has taken its fight against Pick n Pay to the highest court in the land: the Idols panel, ok kidding, the Constitutional Court, a body which generally deliberates on weightier matters than who is and is not entitled to sell a pack of Provitas in whose mall. At issue, you will doubtless recall, is whether Pick n Pay can prevent Massmart’s Game outlet from selling food, specifically in the Cape Gate mall. Pick n Pay took the case to the Cape High Court and won, Massmart took an appeal to the Supreme Court and lost. Now they’re trying their luck in the more rarefied halls of the Constitutional Court itself, contesting that a business has no truck enforcing a contract with a mall owner by suing a third party – Massmart – with which it has no contract.

Comment: The irony is that the practice of anchor tenants demanding exclusivity is thankfully becoming less prevalent, smacking – as it does to us – of anti-competitiveness.

As you may have heard, Pick n Pay have entered into a JV with AG Leventis to open retail stores in Nigeria, which is all very exciting, and we wish them all the very best with that. Equally impressive, though somewhat less flashy, is the sterling work they’re doing consolidating their footprint closer to home. Take their progress in Namibia, for example, where they’ve just opened their 23rd store, at the new B1 City Mall in Windhoek. Pick n Pay Namibia is a franchise operation, a subsidiary of the Ohlthaver and List (O&L) Group, and enjoys the enthusiastic support of the Namibian government, whose Harambee Prosperity Plan encourages public-private partnerships for the eradication of poverty in that dusty but magnificent geography. This from Windhoek Mayor Muesee Kazapua: “Not only do we see job opportunities created by PnP, but the involvement of your business in the communities in which you operate makes this company one to be proud of.” 

Comment: There was a time when we compared Pick n Pay’s Africa strategy unfavourably with the bolder efforts of businesses like Shoprite. No more.

How are those Pick n Pay Next Generation stores being received, you ask idly? For an answer, let’s head on over to the once-bucolic suburb of Hillcrest in eThekwini, where the venerable store in Christian’s Village has been given the full treatment. There, today’s modern shopper will encounter a brighter store with bolder colours, clearer signage, more space, dedicated destination areas, ‘hero’ departments where product is king, and a bigger focus on fresh. Says Pick n Pay Group marketing executive Adrian Naude, “Shoppers love the convenience of the new layout, the easy navigation, the innovation in products and the look and feel of the stores as a whole.” But back to the new fresh hall, which is the signature feature of the Next Generation stores. This area offers a greater selection than ever before, with in-store technology that enables faster replenishment, ensuring that punters will always get the freshest possible stuff, whatever time of day they choose to shop.

Comment: Nice one, The Big Blue, as it continues its inexorable return to relevance and innovation.

Not all shareholders greeted the news of the Ackerman family’s proposed restructuring of the business with glad cries. Au contraire, smaller punters seemed to believe that the restructuring replaces an opaque and archaic arrangement (the pyramid-shaped Pikwik holding company) aimed at keeping the business in family hands with a disingenuous contrivance (B-shares, available to family only) aimed at exactly the same thing. Problem is, the larger institutional shareholders, who see value unlocked in shares once trading at a discount, are supportive of the move, so the howls of the smaller punters fell on deaf ears at the AGM earlier this week, with some 17% voting against the restructuring, and the Ackermen retained 52% of the Group’s voting rights. 

Comment: When the sun rose on Pick n Pay the morning after the AGM, it rose upon a Pick n Pay safely in family control. Thus it has ever been.

Notorious rating agency Fitch, which has been known to write off entire countries with a savage few strokes of a gold-trimmed Montblanc Meisterstuck has been surprisingly – that’s the wring word – lenient with one Pick n Pay, which, it believes, will continue to grow its business to the tune of 7% per annum and better, and which it has awarded another A. In its report (thinks: “Pick n Pay, Pick n Pay, which one is he. Ah yes, sits on the middle, second row from the left, fond of cricket. Or is that Clicks?”) Fitch says things like "Pick n Pay continues to sacrifice gross margin improvement in order to restrain selling price inflation” and “to enable this, the group continues to extract operational efficiencies and cost savings through its increasingly centralised logistics and distribution platform.” Which any one of our regular readers could have told you for free.

Comment: Vapid and Vacuous stuff, but nice for Pick n Pay.

In the grand old tradition of finding your cosmic soulmate and then beating them into a shape more suited to taking out the trash and putting three square meals on the table every day, Greenpeace have literally proposed to Pick n Pay, while suggesting, more sooner than is usual, that they mend their fossil-fuel guzzling ways. Greenpeace aver that Pick n Pay has the highest rate of electricity consumption in the formal retail sector, and in its flashy new campaign, delivered a solar ring to Pick n Pay Head Office recently, together with a letter to CEO Richard Brasher suggesting that the group accelerate its move to renewables.  For its part, The Big Blue has renewed its commitment to ongoing discussions with Greenpeace.

Comment: This new approach by Greenpeace is a refreshing departure from the self-righteousness of the past, and Pick n Pay seems to have responded in a similar spirit.

After decades of family control, the Ackerman’s Pick n Pay Holdings Company will be spinning off its 52.7% stake in the Pick n Pay Group. This has caused rejoicing among the punters, who have rewarded the business with a 13% jump in share price, and should make it easier for Pick n Pay to raise the cash to fuel its ongoing and impressive afforest to modernize the business and regain market share from the likes of Woolies and Shoprite. To keep the First Family in the loop and their voting rights intact, the company will create a special category of unlisted B shares, which you’ll only be able to get your hands on if your name starts with “Ack” and ends with “Erman.”

Comment:

Syd Vianello, doyen of SA retail analysts, has identified Pick n Pay’s Boxer chain as being the secret weapon in the Big Blue’s arsenal. “I don’t think people realise what a powerful brand that is and could be," says he. “They are doing the right things in that direction.” He points out that more Boxers are being opened than Pick n Pay corporates. This as part of a broader discussion on the resurgence of Pick n Pay, which is slowly but surely chipping away at Shoprite’s market share. Vianello is confident that the business is on its way back – it’s a great brand in a robust sector, he says, which at least in SA has not been materially affected by the move to online retail. One of Pick n Pay’s big successes has been through the growth in an obscure line item called “other income,” which increased by more than 30% last year, and includes money-spinners such as supplier rebates, marketing contributions, financial service income, franchise fees and the sale of data derived from the Smart Shopper programme to suppliers.

Comment: It’s long been said of Pick n Pay that it is a financial institution as much as it is a retailer. This recent growth seems to bear that out.

In 2012, you may recall, Pick n Pay awarded a five-year managed transport contract to logistics outfit Resolve with the idea that Resolve – part of the IMPERIAL Group - would achieve savings on transport costs as a result of integrated planning of demand and supply transport services. So successful has the partnership proved that Pick n Pay has extended the contract to 2020, with Resolve adding services that include transport planning, management and optimization, and the implementation of an integrated and outbound logistics control tower. Resolve have saved Pick n Pay a reported R600m so far, with a year-on-year increase in throughput of 16%, which is impressive in anyone’s language. Actually in Russian, it’s ????????????.

Comment: We sincerely hope that the control tower is an actual tower, staffed by men and women in razor-sharp shades hopped up on coffee and adrenaline. But it’s probably a clever piece of software.

A slow news week, so what better time for Pick n Pay chair Mr. Ackerman (the Younger) to weigh in on a pressing social issue: “Obesity and diabetes are critical health issues in South Africa,” says Mr. A the Y. “What is required is a concerted effort by the government in partnership with the private sector to promote healthy eating and proper nutrition.” Fair enough, how are we going to do that? In part by following guidelines published by the Consumer Goods Forum on measures to regulate and control marketing material aimed at kids, for consumable goods and products. The good news is that 23 companies have signed the pledge. The bad news is of course that several thousands have not. While children’s diets are influenced by a range of factors including socio-economic circumstances, culture and education, marketing does indeed have its role to play. A final word from Mr. A on the subject: “As retailers, we can make a real contribution to children’s nutrition by encouraging exposure to foods compatible with a balanced diet and healthy lifestyle.”

Comment: True that. Get your Montblancs out people, and sign up.

No we're not, according to Pick n Pay CEO Richard Brasher. But we’re past halfway, insofar as corporate turnarounds can be measured, and insofar as complete turnarounds were actually necessary in the first place. Heretofore, hitherto. But those numbers, now: turnover up 8.2% to R72.4billion, compared with 6.1% last year, with gross profit up 8.6% to R12.9billion, and Headline Earnings Per Share, which we are told is a business’ true measure of profitability, up 26.4%. They added 175 new stores this year, including 14 beyond our borders, and refurbished 40, transforming them into new generation stores. And because no results presentation would be complete without a Big Announcement: Nigeria! Where Shoprite dominates and Woolies foundered, but where Pick n Pay reckon they have a pukkah JV partner in A.G. Leventis, and where the plan is to grow slowly and sustainably, rolling out an initial ten stores in a combo of formats to suit local needs. Another big story for Pick n Pay is forecourts, where they are outperforming everyone except FVC’s Freshstop, growing 74% in 2016.

Comment: Since Mr Brasher’s tenure began, Pick n Pay have been rewarded with a more than 50% bump in the share price. And we can’t say fairer than that.

We know you’re waiting with bated breath for those Pick n Pay results, you naughty scamps.  A few more sleeps, we promise. Although a little bird did mention to us that turnover grew 8.2%, almost 2% higher than expected, which is nice. But while we wait for the full report, some news from the forecourts, where the 24-hour Pick n Pay Express stores at BP’s all over the Beloved Country have installed Pricer Electronic Shelf Labels (ESL’s). The system means there’s no downtime when they need to update the prices on their NikNaks for the post-disco rush, and to more easily tailor the range in each store to local tastes. Apparently the franchisees who own most of the Express stores are absolutely mustard for the system, which costs them R3,000-R4,000 monthly.

Comment: We remember when ESL was just a twinkly slide in our annual trends presentation. It came directly after the one depicting merchandisers on hover boards if our memory serves us correctly.

The Big Blue will be releasing their results later this month, and despite the risky conditions prevailing in retail here, analysts are upbeat about the prospects, sending the share price up for six days in a row last week. Something the sharp-suited ones will be subjecting to particular scrutiny in the company PowerPoint is margin – when PnP went into a mild decline relative to the competition some years ago, margin fell as low as 0.8% from an earlier high of 4%, and analysts will be looking for a recovery here – even as the retailer drops prices in order to belly up to SA’s cash-strapped consumers, and in execution of CE Richard Brasher’s strategy of a sales-led turnaround. There are indications that this strategy has paid off, and that PnP has regained some market share, but competitors Shoprite and Woolies are both trading on healthy margins upwards of 5%, so there’s some catching up to do.

Comment: Turning an eighteen wheeler around is no easy matter, as any of the stalwart men (and indeed women) in the driver’s tea room over at Longmeadow will attest. But Mr B appears to have the determination and the muscular forearms for the job.

A feisty franchisee is taking Pick n Pay on in the High Court in Pietermaritzburg, where the Big Blue is seeking an order to repossess their Ulundi store for failing to settle debts of R10million. The franchisee, National Pride Trading 267, argues that there are, and we quote, “structural and systemic problems with the Pick n Pay franchise arrangement” which put undue pressure on emerging market franchises. To wit: Pick n Pay controls franchisee margins and sets price for stock which may only be ordered through PnP rather than directly from suppliers. Typically, says National Pride and some other store owners who have signed affidavits to this effect, Pick n Pay allows such stores to rack up debt, then repossesses them and sells them on at below market rates. According to Pick n Pay, in the case of National Pride, they are seeking merely to protect their brand and manage the store effectively.

Comment: Thorny.

Is Pick n Pay (and Shoprite and SPAR and Woolworths) sitting on a huge pile of cash, instead of reducing prices for South African consumers? That’s what the EFF thinks. Pick n Pay of course does not, pointing out that it is a proudly South African business, which keeps its prices as low as it can and has a goal of creating 20,000 jobs by 2020. As we’ve frequently noted, our retailers are often an easy and undeserving target for the ire of the dispossessed, whom they number among their valued customers.

Comment:

And especially huge because it’s not, if you see what we mean, which you will soon. Flailing around like other retailers for some space to call their own, Pick n Pay have taken a novel and indeed beautiful approach to the problem, working with a spaza owner in Diepkloof, Soweto, to convert his business into a Pick n Pay franchise store. The store is owned by the Legae family, who have traded in Diepkloof since the early 70s. It carries 800 SKUs, and now under the Pick n Pay umbrella offers social grant payouts, Lotto, bill payments, prepaid electricity and Smart Shopper points, a big plus in a sector which has traditionally struggled with shopper loyalty. The strategy will bring the Pick n Pay brand into under-served areas where rival Shoprite has more traction. It will also bring the business into competition with the canny foreign operators who have shaken up the independent retail sector in recent years.

Comment: A truly heartening story of courage and innovation, and one which could only happen in our Beloved Country.

Pick n Pay has always played fast and loose with the flimsy line between retail and financial services – Nedbank kiosks, tillpoint withdrawals, that sort of thing. So its latest endeavour – as paymaster for microjobbing platform M4JAM – should not completely flabbergast you. For those of our readers unattuned to the brave new world of work, M4JAM allows people with a bit of time on their hands to answer surveys on their smartphones for cash, rather than making in-app Candy Crush purchases. Once you’ve amassed a bit of wedge, is the general idea, you download a wiCode then head on over to your nearest PnP or Boxer and collect the amount owing to you. Not sure how the business model works for PnP, but doubtless some consideration from M4JAM is involved, plus the opportunity to sell small impulse items to the jobbers as they cash in.

Comment: It’s only fair to note that Checkers and Shoprite are also participating in the M4JAM payola scheme too.

The opening of a new store in a far-flung outpost is always a good opportunity to reflect upon a retailer’s progress in that particular geography, and thus it is with the new Pick n Pay in the Ya Toivo Complex in Ondangwa, Namibia, where under a franchise owned by the Ohlthaver & List Group, The Big Blue has established 21 stores since opening for business in 1997, employing over 2,200 locals. Ondangwa appears to be a shrewd move for the retailer, as the town is something of a hub: it has an airport, a railway station and access to Namibia’s network of very long, straight roads. Half of the population of the neighbouring Oshana and Oshikoto regions do their shopping there.

Comment: It is a sign of incredible progress that Ondangwa was until fairly recently known by South Africans only as a place one might have gone to push beat or fix Buffels for a hot and dusty 18 months of one’s National Service.

Pick n Pay’s hypermarket division – not exactly the jewel in the Big Blue crown – is pursuing the stokvel buck as one of the pillars of sustainable growth. For starters, they’ll be offering all stokvel members a 1% discount, to be paid in Smart Shopper points, which they’ll be able to redeem as cash paid for groceries, so a sort of two birds, one stone approach there. The National Stokvel Association of South Africa is on board with the scheme, with CEO Andile Mazwai comparing the hypermarket’s reach (20 stores) favourably with that of Makro (19). His words, not ours: “With Pick n Pay, we are doing it on a much bigger scale […] so there is going to be a big drive towards pushing the Pick n Pay brand and pushing the Pick n Pay offering”. Mazwai believes the stokvel market is worth an annual R50billion.

Comment: Stokvels have always been a force in the independent sector. It’s interesting to see the corporate retailers awakening to their potential at last.

The Big Blue ends this year with no fewer than 12 branded stores in Zimbabwe, where they launched their slow-burning African strategy, and where combined turnover with its local partner TM Supermarkets grew 17% to US$196.7million, with Pick n Pay accounting for 30% of that – at a time, by the way, when chief competitor OK Zimbabwe saw revenue decline 7.9% to $213.6million.

Comment:

M-commerce is still in its infancy in SA, according to Michael Cotterell, the man in charge of, erm, M-Commerce at Pick n Pay. Now, for our less “tech-savvy” readers, M-commerce is Mobile Commerce, which is a sort of shopping you can do using the telephone. Much like your dear old gran used to do when she called the butcher to order a dozen of his best chops and some brisket, really, but also different. The issue, according to Mr C. is that the infrastructure in our region is still insufficiently developed to deliver much more than basic services this way, like electricity and airtime, and for this reason phones are used more for advertising (or “leveraging marketing opportunities” as the experts say) than anything else. This notwithstanding, cellphone usage continues to explode here, with 57% of all internet traffic now screaming down the mobile superhighway.

Comment: One day, we might look back on the cellphone as we do the fax machine, as something once cool and indispensable for which we no longer have any practical use. One happy, happy day.

If you’re a dealer in fish and seafood – and there has to be at least a chance that you are – you will want to read this. In fact, read it anyway, it’s good stuff for our embattled oceans. Basically, Pick n Pay, a great procurer of fish and seafood and a supporter of sustainable fisheries and aquaculture, is upping its game. As of 2016, it will be selling only product which meets its seafood sustainability criteria. Broadly, these criteria involve getting the nod of the Marine Stewardship Council and the WWF-SA’s Southern African Sustainable Seafood Initiative, as well as being involved in some sort of sustainable fisheries or aquaculture project. Recognising that such projects do not always meet the highest criteria of sustainability, PnP has announced its intention to use its buying power as an incentive for it to improve things, by defining its criteria for all the world to see.

Comment: It’s arcane stuff, to be sure. But saving a planet is not all banners and beads.

So those Pick n Pay interims, then for which you have been waiting as the hart pants for the cool waters…oh get on with it! Alright then: sales up 8.5% to R34.9billion, fair enough, we weren’t expecting fireworks in this economy… but wait, what’s this? Headline Earnings Per Share (the signal measure of profitability in South Africa, apparently, which it really wasn’t when we started writing the Tatler late one Tuesday night in ’06) up 24.2% to 32.94 cents. Trading profit, which we find simpler and cleaner, call us old-fashioned, was up a still-respectable 19.7% to R461.6m. How’d they manage that? Don’t ask us, ask them: “Operational improvements include faster checkouts, Wi-Fi connectivity and automatic ordering and replenishment,” say Pick n Pay.  And how are they going to keep things going? Like everyone else, they intend to continue their push into the rest of Africa, where they've opened six stores in the 26 weeks to end-August, three in Namibia, one in Zambia and two in Zimbabwe. More details available here thanks to our merry bunch in research.

Comment: All of which you would have known if you’d had a look at our special report on the results, available above if you didn’t get it.

Another slow news week for our retailers, and we don’t have the appetite for yet another bleeding Choppies story (Botswana Supermarket Makes Good! Alright already, we get it!) so there’s this: Pick n Pay’s share prices declined by 8% at some point last week, the most it has dropped since April, which analysts say is either because retail is tough right now (inflation debt unemployment something something despite lower fuel prices something else Eskom) or that the share has done better than competitors have this year, picking up 18% where, for example, Shoprite has declined 8.4%, so what you’re seeing is happy punters taking profit by flogging a few on the Johannesburg Securities Exchange (or JSE, as we pin-striped insiders call it.)

Comment: So, that happened, as you “millennial hipsters” are inexplicably fond of saying these days.

If you have any interest at all in the area of grocery retail (and let’s face it, you probably do) then you absolutely must go and have a gander at this extraordinary interview with one Sean Summers, the onetime Pick n Pay CEO and Chuck Norris of SA retail. Short story: Mr Summers is settled happily in the UK, where he looks after the Steinhoff-owned Harveys and Bensons chains of furniture stores. Ironically, one of the things he likes best about his new employer is the freedom he says decentralisation brings to the business. Word on the street at the time was that the decentralisation debate became a sticking point at Pick n Pay, with Summers on the side of centralised distribution and the Ackermen on the other. This notwithstanding, it seems that he’s as full of admiration for his old boss as ever.

Comment: One cannot but wonder where Pick n Pay would be today if Sean Summers had stuck around. When he left, the business had a market cap of R25bn compared with Shoprite’s R18bn. Today, Shoprite’s at R93billion, while Pick n Pay has some catching up to do at R33billion.

Pick n Pay seem intent on capturing and holding some of that airy, scenic moral highground even as the poor bloody infantry at Shoprite on the right flank and the dashing cavalry of Woolies on their left chip away at the old market share. Last week, in a powerful statement, CEO Richard Brasher declared a war on waste: the waste of potential among unemployed South Africans, to whom he promised jobs at a rate of 20 a week, organic waste from the stores, which he committed to reducing 20% by 2020; the waste of electricity, which ditto. The campaign – you guessed it! – is being called 20/20 by 2020, and Mr. B, in the spirit of generosity and savvy marketing in which it is being waged, is not claiming it for his own: “We don’t own this war against waste,” he says. “We can all take part and we can all benefit from it.” Your move, Messrs Basson and Moir. 

Comment: Since Chairman Ackerman started the business back in the day, it’s held itself up as a champion for the dear old consumer.

Pick n Pay has fallen unfairly afoul of the mommy bloggerverse. A mommy blog is, as you know, an amateur website written by a woman who pretends hilariously to hate her own children, for the amusement of her friends. Last week, mommy blogger Celeste Barlow wished a case of Chlamydia on the entirety of Pick n Pay for introducing a type of toy you could get for free if you spent R150 at any branch. Another blogger – whom we shall call Blogger B (was she a mommy blogger? We are not certain) tweeted words to the effect that this post was a jolly good read. Then someone at Pick n Pay requested, via twitter, that her tweet be taken down as the story to which it referred was highly inappropriate. Was it inappropriate? We are not sure if calling your youngest daughter an “ungrateful little b*tch” in a public forum is inappropriate, because we are not mommy bloggers. Blogger B sees Pick n Pay’s response as the worst form of corporate cluelessness – “unprofessional and rude and sucky” she professionally calls it. Citing various twitter trolls, she accuses Pick n Pay of perpetrating the worst marketing own goal since Bic’s hideously patronising ad from a week earlier. 

Comment: Pick n Pay responded mildly, and with dignity, to a direct attack on one of their marketing initiatives. Then the internet, famished after a week free of manufactured scandal, went predictably mad. And no one’s brand, Blogger B, was irreparably damaged. Except maybe the youngest daughter’s.

For those of us who like to attend results presentations for fun and profit, the bashing of Pick n Pay by analysts has been an unfortunate part of the scene. “My wife couldn’t find any double ply in your Houghton store last week, do you have a supply chain problem?”, that sort of thing. Now, it appears, the gimlet-eyed crew are prepared to cut Pick n Pay some slack. Part of the reason for this is that Mr Brasher has toned down talk of a recovery. ““I’m not happy,” he said at the recent AGM, where he announced that the first stage of the recovery plan was successfully complete, “but I am satisfied with our performance and know we’re on track against strong headwinds.” One of the indicators of success is the game of catch up they’re playing with centralised distribution. This year, 45% of goods in stores were centrally supplied. The target for the end of 2016 is over 60%. 

Comment: Pick n Pay is a pillar of the local industry. Their continued and lasting strength is good for everyone.

The restoration of Pick n Pay’s market share has been exercising some of the country’s finest minds lately. Certainly, it has the analysts concerned, and reading between the lines, the management of that great business, too. Hence the announcement this week that it wants to up the pace of store openings – from 100 last year to a sensibly unspecified improvement on that this year. They are also eager to up their employment numbers – they employed 3,000 new staff last year, for a total of 49,000, and plan to go another 5,000 this year. Shoprite currently employ 123,000 people, and Woolies 28,000. As much as a third of staff in the industry are employed through labour brokers, which retailers aver is necessary due to high rates of absenteeism. 

Comment: Although it also reduces the load on HR and the payroll, just sayin’…

Comment: He’s a lovely young man, that Mr Brasher. And very handsome!

Comment: So there you have it: talked up a bit, no doubt, but still quietly impressive.

Comment:

Pick n Pay is upping the ante in its efforts to win an ever-greater share of the ever-shrinking consumer wallet. You may recall the launch, ten months ago, of The Big Blue’s Brand Match programme, which goes a little something like this: when a shopper buys ten or more products, and where one or more of those products are brand match items, a search is triggered at the till for prices at competing retailers on those items. If the total on the brand match items comes on at higher than it would have been elsewhere, the shopper in question receives a cash-back coupon on their next shop. Now PnP are doubling the number of their Brand Match items, for a total of 2,000, or well over 50% of branded grocery sales, saving Mrs Punter time on price comparison, saving her money where applicable, and driving repeat visits to Pick n Pay stores.

Comment: Canny stuff, and a handy supplement to the popular Smart Shopper programme.

In the interests of bringing punters in store for A then taking the opportunity to sell them B, Pick n Pay have announced a partnership with budget domestic carrier FlySafair whereby you’ll be able to book your tickets online then pop down to your nearest Pick n Pay to pay. Later this year, you could both book and pay for the tickets at the Pick n Pay Money Counters which will be rolling out in select stores nationwide. You’ll also be able to put your SmartShopper points towards the price of the fare should you so wish. The idea is that South Africans do not fully trust the integrity of online payment arrangements, having been ripped off in so many other areas of their commercial lives, and that this will make them feel much safer. According to the 2015 Effective Measure state of South African eCommerce report, distrust around online payment methods is one of the largest barriers to eCommerce in SA. Also, many South Africans, while flush, lack the necessary credit cards to make online payments.

Comment: Smart move, PnP, which should bring the Big Blue a little closer to Shoprite in its instore-services offering.

Comment: Ah, the humble samoosa: seldom considered until you can’t get it.

Comment: Pick n Pay was never going to drop off the map. But in our tightly contested retail environment, even a small decline can read as catastrophic. Encouraging stuff from The Big Blue.

Last month, in what we can only surmise to be a protective move, the Zambian government suspended licences for the importation of edible oils. Today, according to the fearless journalists of the Sunday Times of Zambia, you will find a veritable torrent of the stuff sloshing down the aisles of South African chain stores in Zambia. This, explains Pick n Pay, is because they had so darned much of the stuff in the first place, and haven’t managed to flog it all. Not so, says a Mr Merchant of local manufacturer, Zamgold cooking oil, which presumably has a bit of skin in the game. He tells lurid stories of conveys of trucks smuggling barrels of the stuff over the border, under the pretext of transiting it through to neighbouring countries. In the meantime, the suspension – which is not a ban, says the Department of Agriculture – remains in place. 

Comment: Who knew that the sunflower oil sector could be such an invigorating place?

Pick n Pay and Massmart have, apparently buried the hatchet vis-à-vis exclusivity clauses in malls, with the former averring, if that's the word, that while exclusivity clauses with landlords were somehow desirable in the past, they might not be so in future, who knows? Last year, you will recall, Massmart was interdicted by the High Court to prevent it from interfering with any contractual obligations of exclusivity there might be between Pick n Pay and mall owners, specifically as it related to the opening of a Foodco department in a CapeGate Game store. This gave rise to rumblings from concerned groups that such clauses were anti-competitive. 

Comment: Which they are. Hence, no doubt, the conciliatory tone now.

Last week, we reported erroneously that Pick n Pay were to spend R5million on store refurbs and openings over the next two years. In fact, they will be going all in and spending R5billion, a more useful sum. We apologise for our uncharacteristic mistake, and assure readers that we have exercised strict discipline upon our team of fact checkers.

Comment:

Those Pick n Pay results then, for which you have been awaiting, breathless with anticipation, liken unto the young shepherdess for her swain upon a midsummer’s eve. What? Oh, yes: turnover up a muted 6.1% to R66.9billion for the year to 1 March, with trading profit rather more pleasingly up 22.7% to R1.24billion. And trading profit margin clawing its way back from the swamp of despair, up 0.3 of a percentage point to 1.9%, although still trailing rival Shoprite by a fair chunk. Like store growth was up 3.6%, and retail space – a priority for The Big Blue this past twelvemonth – grew by 5.2%, despite the closure of 40 underperforming stores in the past two years. And, according to Chairman Ackerman the Younger, they’ll invest R5billion in store refurbs and openings over the next 24 months. Pick n Pay is on a self-confessed road to recovery, with three phases – stabilising the business, changing its trajectory, and achieving sustainable long-term growth. With the return to profitability – achieving growth of 74% since FY2013 – stage 1 seems complete. 

Comment: Admirable grit and focus there, Ackermen. Good luck with Stage 2.

Going large in Namibia this week are Pick n Pay, who have just opened their 20th store in that arid paradise, a Mega Centre store in the Windhoek suburb of Kleine Kruppe. This, Nambian MD Norbert Wurm tells us, in the convoluted way all corporates now have of mixing up the imperative to make profits with doing right by the planet, has something to do with rapid urbanisation, which is not a good thing, but it is a thing, so Pick n Pay have to do their bit in the drive to “effective migration absorption strategies”. Put stores where people are, is, we think, what he is trying to say. In Namibia, Pick n Pay is owned by the Ohlthaver & List (O&L) Group, and this also gels nicely with the Namibian government “growth at home” strategy. 

Comment: One day everyone will be doing so much good we’ll be able to dispense with profits altogether.

“Boycotts won’t change my observation that Africa never did&still (sic) doesn’t inspire integration #ArchitectsOfApartheid”. This according to Father of the NationTM Steve Hofmeyr on the news that Pick n Pay and Jaguar Land Rover South Africa will be officially withdrawing their sponsorship of the  execrably-named Afrikaans is Groot festival, after the Hof made comments to the effect that apartheid was all the fault of black folk.

Comment:

It’s not just shoppers who are jumping aboard Pick n Pay’s popular Smart Shopper loyalty programme. Other corporates are getting pretty excited about it, too. Like Momentum for example, who are offering members of their own wellness and rewards programme, Multiply, the opportunity of increasing their Smart Shopper Points by as much as ten times (although in fairness, bronze members only getting to double theirs), always assuming that they are in fact Smart Shopper members. As far as we can tell, this would mean that as a Multiply member you can choose to multiply your Smart Shopper points as a reward, rather than choosing a news skottel braai, say, or a weekend in White River. Momentum gets to offer a popular reward (which just like any other they have obtained at a sizeable discount); PnP gets new Smart Shopper members via Momentum plus any purchases additional to their Smart Shopper buys that that they might make; the punter gets to feel happy and rewarded. Everybody wins. 

Comment: Which is nice.

Pick n Pay’s Smart Shopper programme now boasts over Eight Million Members. Say it. Eight meeeellion members. That’s about 3.7million more members than Clicks’s venerable and pioneering ClubCard programme, and approximately eight million more than Shoprite’s own… oh, hang about…Shoprite don’t… oh. According to The Big Blue itself, 65% of Pick n Pay sales and 43% of baskets come through the programme, which has rewarded shoppers with over R1billion back in points since its launch in March 2011. In the 2014 FY, Smart Shopper accounted for a 3.3% uptick in sales, arresting Pick n Pay’s decline in market share, and adding 25,000 punters to its ranks every week. The big benefit of such programmes is shopper data, which helps retailers optimise their stock levels, which, you may recall, was a challenge for PnP in the bad old days before Longmeadow. 

Comment: The advent of Smart Shopper may be remembered as the lynchpin of Pick n Pay’s long turnaround when the annals are written.

This week Pick n Pay turned 48; and Fruit & Veg City 22 – Happy Birthday to them both. This as you have no doubt noted makes them both artistic, sensitive, dreamy Pisceans, whose horoscopes generally start: Oh dear, Pisces!

Comment:

Pick n Pay Namibia has a new Managing Director, you will be pleased to know, a Mr Norbert Wurm, a CA who served as FD there and who takes over from Henry Ferris, who moves on after 20 years of service. Pick n Pay Namibia is a subsidiary of the Teutonically-named Ohlthaver and List Group of Companies, which also owns Namibian Breweries and Hangana Seafoods. Congrats and best wishes, appropriately distributed.

Comment:

“I think it's going to be another very, very tough year for retailers,” – not us, Chris Gilmour, of Absa Wealth and Investment Management, no less, and he goes on to say that most retailers are “priced for perfection,” whatever that may mean, although (and he gets quite pointed here) Pick n Pay isn’t. While he concedes that the business under Mr Brasher is doing everything right, “clawing its way back is going to be an exceptionally long and difficult process.” SPAR, in the meantime, from their secret lair in the subtropical paradise of Pinetown, KZN, have announced diabolical plans to open not one but 35 new stores in the year we have no choice but to call 2015. They will also renovate 180 stores, and open 45 TOPSes, liquor being a growth industry now for oh, about 8,700 years. Shoprite, now – not much there except are they going to keep all those Wetherly’s open that they bought on the Ellerines fire sale? The Competition Comish approved the deal only on the grounds that no jobs would be lost. Something else that we might have missed in the flurry of last minute trading that was the holiday season was that Massmart are launching a click and collect service by which online Makro punters can buy their groceries online then pick them up from a sturdy locker conveniently located at a Sasol near you, rather than having to go through the mission of schlepping out to the nearest Makro in its windy acres of carpark. And from Woolworths? Not much, except a breezy two line press release, circa mid-December, to the effect that they’d had a productive meeting with BDS re the protests in Woolworths stores. On the wholesale front, some pretty exciting news, and close to home, also: Jad Perreira, CEO and founder of Voluntary trading group Unitrade Management Services will be speaking at the Trade Intelligence Independent Trade Forum, kicking off on 19 February in Jozi. If you haven’t got your tickets yet, there is one very compelling reason to do so.

Comment:

Pick n Pay’s sensible Zambian strategy burns slowly on, with the opening last week of a $2million store in the Copperbelt district of Chingola. The store has created 118 new jobs in the district, of which 90 went to locals. The Big Blue has also committed itself to corporate social responsibility initiatives which include educational support, endearing itself further to the locals who are no doubt happy to have aisles of groceries at their disposal on a scale hitherto unseen in the area, and preventing them from travelling for their essentials to places like Kitwe, by all accounts a risky undertaking. Then there are the opportunities for local suppliers of fresh produce, which will always find a place on the racks.

Comment: Sounds like a win-win to us, as Pick n Pay brings up to 9 the total number of its Zambian stores.

We are all apparently locavores, if you were to believe our retailers, and there’s no compelling reason we shouldn’t. Local produce accounts for about 90% of Pick n Pay’s fresh-food offer; at Woolies it’s about the same, while at Checkers it’s 99%. And this, according to PnP group executive of strategy and corporate affairs, is just how the punters like it. They want to buy local, while maintaining their demand for world-class produce. This, he says, is because they trust something when they know its provenance, and they believe that well-travelled lettuce is bad for the environment. Also, that when the proverbial rutabaga of civilisation hits the rapidly whirling fan blades of history and we’re all sharpening our sticks to fend off the hungry neighbours, an eat-local policy is more viable. South Africa is ahead of the curve in this particular: at 75%, our consumption of local produce beats that of the UK, at a scarily-low 60%. 

Comment: Food security is within our reach, and our retailers are showing the way.

“A multicolored tomato pack is relevant to one group of people, but an extra-large beetroot is relevant to another group.” These are the words of Mr Richard Brasher, musing not upon the religious observances of remote island peoples, but on the need for Pick n Pay to succeed across the economic spectrum in its quest to claw back market share from Woolworths at the top end and Shoprite everywhere else. Now more from Mr B., who brings a refreshingly frank approach to the realities of retailing in The Beloved Country. The poor in South Africa, he says, “have almost no money, they are at best subsistent and at worst hungry. So there’s no point in pretending I’m going to put a fully-fledged Pick n Pay into exactly where they live because the economics of it won’t stack up. But it doesn’t mean I can’t market my brand so should they find an opportunity they would aspire to shop in a Pick n Pay.” 

Comment: Do these rough times call for that sort of pragmatism? We shall see.

Well almost niemand. Although Conrad Koch, handler of beloved plaything Chester Missing, has mentioned Steve Hofmeyr in a column in the Times, calling upon Pick n Pay to refrain from sponsoring the all-white AIG (Afrikaans is Groot) festival which the wispy-haired breker-turned-boer is headlining. Last week, you might remember with a shudder, the Father of the Nation (well a good few of them, anyway) let it be known in a tweet that he considered black people to be the Architects of Apartheid, which they were demonstrably and tragically not. Pick n Pay have pointed out that they are merely sponsoring the festival, not Hofmeyr per se, but that they are in any case reviewing their support for future such events. Hofmeyer, in the meantime, is doing what he does best: playing the red-eyed, quivery-jawed victim and getting injunctions against Koch left, right, right again, and centre. 

Comment: A storm in a teacup, perhaps, however vile the views of Hofmeyr. But there is a trend, it seems, toward all sort of groups demanding accountability from businesses over issues for which they are only marginally responsible at best.

Continuing its ever so slightly mystifying expansion into Africa this week would be Pick n Pay, which has announced that it intends to open stores in Ghana next year. Ghana you see, has an economy that is growing at a walloping 6.9%, unlike some others we can mention (coughsouthafricacough), and presents an attractive target to even the more cautious retailer. Pick n Pay’s like store sales grew 7.8% in Africa beyond our borders for the six months just gone, and Mr Brasher and the team believe there’s more where that came from. Like Zambia, where the Big Blue has enjoyed more than a modicum of success, Ghana is blessed with political stability, solid macroeconomic fundamentals and high commodity prices. In addition, punters there are connected to the global communications matrix and show a healthy willingness to experiment with brands. 

Comment: And it’s just a little closer to that Holy Grail of the intrepid, Nigeria, where an outfit called Shoprite has already set up shop.

As expected – reported in fact, in these pages seven short days ago – Pick n Pay’s half year profit soared like the proverbial by 36.6% to R261million, lifted on the wings of a major cost cutting exercise which saw heads roll and the supply chain tighten up, on the back of a more modest 6.8% increase in sales, because of the industry-wide downswing, electricity prices and consumer debt. More worryingly, market share dipped, suggesting that those perhaps necessary disciplinary measures, while a good start, might not be enough to get The Big Blue back into the game against arch-nemesis Shoprite. Like store sales grew by a muted 4%, while volumes were down 2.5%. One explanation of this might be the loss of upper-end punters to a rampant Woolies, which is broadening its range, promoting more heavily and adding more branded product to its shelves.

Comment: If you’d prefer a more detailed and responsible view, we might suggest that you click <a href=":: http://www.tradeintelligence.co.za/Files/2014/141023_Pick n Pay HY2015 Results Summary.pdf">here</a> and have a squizz at our summary on the results.

Property Owners themselves, who doubtless believe, belatedly it must be said, that the more and the merrier are broadly equivalent. Accordingly, they have made a complaint with the Competition Commission, urging an investigation into a practice they say is detrimental to the economy. Are the retailers having any of this? They are not, with Pick n Pay averring that nobody put a gun to the mall owners’ heads, well not to sign exclusivity clauses anyway. Win win win, says The Big Blue, with landlords enjoying the benefit of footfall attracted by an anchor tenant, punters benefiting from having shops to go to and the retailers? “Some measure of trade to justify their investment,” apparently. 

Comment: What we of the sixth form debate team call a straw man argument. Because of course, malls would benefit more from having two anchor tenants say, and punters from having two shops to go to.

Pick n Pay are pleased to announce – or rather, to hint broadly – that diluted headline earnings per share, which have of late become something the analysts like to call “the main South African profit measure” that strips out certain one-off items, anyway, them, are likely to be up 35% when the great reckoning comes for the first half of this financial year we have no choice but to call ’15. This is obviously good news for The Big Blue, whose recovery seems to be proceeding apace. But hold your horse just a minute there. Sales growth is predicted to come in at only around 7%, in line with what’s going on around the industry in response to the self-inflicted wounds which beset the South African economy. This lesser number suggests that much of PnP’s success comes from certain, shall we say, efficiencies which have been introduced to the business including scaling back dividends, reducing staff and dropping consultants. 

Comment: All very necessary, we are sure. And the punters seem to like it, with a 2.3% rise in the share price.

Just five years after lumbering into action on central distribution, Pick n Pay is nearly finished, they say, with implementation due for completion just around the corner, in 2016. Recent measures have included the opening of a fine picking area and implementing the latest SAP warehouse system in the Longmeadow and Philippi distribution centres. Fine picking is due for rollout across the remaining six DCs. All of this (once completed) will enable The Big Blue to deliver to stores as many as seven times a week with a 24-hour lead time, across 14,000 products. Where already implemented, centralised distribution has enabled PnP to reduce stockholding by 15% and group wide, to reduce distribution costs by 10%.

Comment: The general message here is that centralised distribution is a very good thing, and should put the wind up Pick n Pay’s competitors. Who had finished implementing it by 1973.

Pick n Pay have sunk a further stake into the potentially rich Zimbabwean soil, and this one’s a biggie: A R48million megastore a few clicks east of Harare’s bustling downtown, under the TM Supermarkets umbrella, of which PnP own 49%. Although it’s not an actual umbrella, but rather a fine, if cautious, vehicle to drive their growth in that occasionally promising economy. The store will trade under the strangely ominous-sounding Jaggers Masasa brand and will join TM’s 53 other stores as flagship, leading the battle against competitors SPAR and OK Zimbabwe. Previously a Metcash, the store occupies premises owned by Old Mutual. And more’s to come – new Pick n Pay branded outlets in both Harare and Gweru in the near future.

Comment: Now is a brave time to invest, in the midst of a deflationary cycle where retail margins have fallen to below 5% from their high in recent years of 20%. Still, worth a flutter.

Pick n Pay continue to wax martial in their effort to claw back market share from the compo, this time with the launch of Brand Match, in which they compare the prices of 1,000 items across all the major chains. And what do you get if they find a better price? Pick n Pay vouchers to make up the difference, to be spent at Pick n Pay, as it happens. What we in the industry call a win-win. Here’s how it works: when Mrs Punter buys 10 or more items from the list, a brand match alert is triggered, and the savings (or otherwise) will be revealed on the till slip. The basket which was developed with Nielsen, will be independently monitored by two research businesses. As it stands, Standard Bank have found recently that PnP are currently pricing 5% below Checkers and 6.7% below Game.

Comment: Bold work from Mr Brasher. The bulldog spirit and all that.

While rival Woolies has bought back its franchise stores hand over fist, to the often vocal complaints of the buyees and at a cost of R1.1billions, Pick n Pay’s own franchise programme continues apace, with 450 of its 1,100 outlets nationally still owned by bushy-eyed entrepreneurs. Franchise has been kind to the Ackermen, helping them grow footprint in those tricky, hard to reach areas, and helping them achieve the sorts of economies of scale that stiffen the resolve of the buyers as they go into those awkward price negotiations with Tiger Brands and Unilever. On the downside, of course, is the slim margins that the corporate parent typically gleans from its franchisees, and the merry heck they can play with your brand if you’re not watching.

Comment: The message here, is, franchising’s not for everyone.

First up, a story that reminds us of the dust clouds we used to watch forming out on the field during big break when the boys had a matter or two to settle between them. Pick n Pay, you see, are stepping up their efforts to stop Massmart and specifically, Foodco, from expanding their food offering across SA, which is causing mall owners to go crying to the Competition Commission. The Big Blue is calling for the malls to enforce their exclusivity clauses, clauses that have long been a feature of the SA retail market and that they believe have been breached. While Massmart and the SA Reit Association, representing the property sector, believe that such clauses are to the detriment of Mr Soap who just wants to put food on his family’s table.

Comment: And so we wait upon the Comish.

This one might have slipped by us, and sorry if you’ve heard it before, but apparently Absa and Pick n Pay have cooked up a little scheme which allows Absa Rewards members to exchange Absa points for Smart Shopper points with – get this – 15% extra value. Who’s picking up the tab? Why Absa is, with Pick n Pay snapping up the additional footfall like nobody’s business, and crunching numbers furiously the better to obtain shopper insights. What’s in it for Absa? It’s a straight loyalty deal. Punters have been known to switch banks, you see, and once the savings account goes, the bond and the car loan are never far behind.

Comment: Pick n Pay, having spent R300bar setting up the scheme and having forked over R1billion in rewards (with some assistance, it must be said, from suppliers) will no doubt be loving the arrangement like a long deep drink of (free) mountain water.

Shalom, and Assalamu alaikum to you. There: approximately 0.5% of this story and 0.75% of it are made in Israel and Palestine, respectively, now go ahead and burn your monitor down, whatever your views. Or never open a Tatler again, see if we care. This, readers, is an approximation of the position in which most of our major retailers find themselves, assailed for the support of one side or another by virtue of where they get their avocados or their hummus. While groups like Boycott, Divestment, Sanctions (BDS) are decrying Pick n Pay and Woolworths for their perceived support of Israel in these difficult days, Woolworths point out that less than 0.1% of their product is sourced from Palestine or Israel, with Pick n Pay suggesting similar numbers on their side. As both reasonably aver, all product is labelled with its country of origin and shoppers are free to make their choices, thus informed.

Comment: The conflict in the Middle East seems characterised by a deep and petrified cynicism on both sides, and this cynicism has found a home in the protesters back home.

PnP’s JV in Zim’s TM (and that’s about as many acronyms as we can muster for now) is closing some of its stores, but converting one to a Pick n Pay outlet in October, this after the Big Blue One has already branded two stores in the nation’s capital in a bid to increase its presence up north of our borders. It aims to brand five more stores over the next two years, increasing trading space by 18%, while TM continues to revamp stores so as to compete with OK Zimbabwe, who is doing lots of shaping up of their own. The new PnP store will be located slap-bang in Harare’s CBD.

Comment: Interesting dynamics in a country where margins are low and local stock difficult to source… but don’t let that stop you now.

In a move so brilliant it begs asking, “Why didn’t they think of it before?”, Pick n Pay and MTN have announced a new partnership to bring low-cost banking to SA’s unbanked. Our story really starts all the way back in the summer of 2012, a time when we were young and free, and the two launched the Mobile Money platform, allowing customers to transfer money securely, and buy goods in PnP and Boxer stores using nothing more than their cell phones – no cash or a debit card required. Apparently 2million customers have made use of Mobile Money since then, so that’s 2million souls who will be thrilled to hear that they can now get their very own VISA Mobile Money debit card to use at a host of other retail stores too. But wait, there’s more (just ‘cos they can)… By activating the new Pick n Pay SIM card (powered by MTN of course) and registering for Mobile Money, customers will be able to access their accounts easily, conveniently, securely and cheaply from their mobile phones, as well as get 10% extra airtime when they top up at Pick n Pay and Boxer stores.

Comment: And with 8 million unbanked South Africans out there to reign in, who’s stopping them now?

Last week’s furore concerned the comparison of pig farms to concentration camps in that august publication, the M&G. An ad taken out by anonymous parties decried the use of sow crates – metal boxes in which pregnant sows may be confined (which in the case of factory pigs might be for the entirety of their adult lives) – then called upon Raymond Ackerman to do something about it. Thus unfairly singling out a particular business and offending the Jewish community in one fell swoop – while, it might be said, making a valid moral point. Pick n Pay objected; the M&G retracted and offered the proceeds to charity; pigs had no further say in the matter. While some suppliers have started to phase out the inhumane practice (for inhumane read: something which renders the practitioner less than human) full phase out would take until 2020. After which point, presumably, pig farmers would resume being fully human.

Comment: Is there anyone out there prepared to consider the perhaps insane possibility that all life is equally sacred?

It’s June, the time of year when a brisker wind whistles down the aisles, and the shareholders, stamping their feet and blowing into their hands, begin once more to question Pick n Pay’s family ownership structure. And bang on cue, here’s Opportune Investments CEO Chris Logan, wondering idly if it may be possible to dismantle the Pikwik pyramid control structure while leaving the Ackermen, with 26% of the shares, in effective control. Chairman Ackerman the Younger avers that since the employment of Richard Brasher in his place as CEO, the group has already moved from being "family run" to being ‘family controlled and professionally run", but fails to explain how this differs, for example, from when Sean Summers or Nick Badminton held the top job. He also argues that family control enables long range strategic decision making. To which disgruntled shareholders reply that seven years’ bad luck is quite long range enough, thank you very much.

Comment: Same time next year, then?

Pick n Pay, you will be pleased to know, has spent R800million on goods and services from black-owned companies in the last financial year, R370million of that from businesses owned by women. And some of them were assisted by The Big Blue’s very own business incubator programme, which provides mentorship to small suppliers, helping them manage industry demands and boning them up on buying and negotiation techniques. The Programme has been up and running for six years, although with inconstant success. Now, however, under Mr Brasher, it is apparently reinvigorated, with commitments from every region to buy from small suppliers, and for stores to make themselves more welcoming. The suppliers in question sell Pick n Pay a wide range of products right now – from produce to spices to toilet paper.

Comment: Commendable stuff.

First those numbers: Pick n Pay says it has more than 8million members enrolled in Smart Shopper, and that these worthies swipe their cards 20 times per second at tills across the Big Blue universe. They account for 65% of sales and 43% of baskets, and they’ve received R1billion back in points since the programme kicked off in 2011. We’re not sure what the figure is today, but two years back, they said they’d already invested R140million in the programme, which was aimed at halting the decline of PnP’s market share. And here’s where it gets a bit sticky, with certain curmudgeonly analysts claiming that while market share has indeed not declined further, it hasn’t actually grown, either. But Smart Shopper is, you’ll be pleased to know, adding another 25,000 members per week.

Comment: And the real upside for Pick n Pay might be in the area of efficiency, with 8million shining points of data helping them with stock planning, forecasting and replenishing – weaknesses in which area might have had much to do with the decline in market share in the first place.

The big Blue informs us that their customers are mad for their Smart Shopper mobile app, well, they would be, wouldn’t they. But it is apparently a nifty bit of biz, allowing the tech-savvy punter to do everything on their phone that they would normally have to trundle up to an in-store kiosk to achieve. Smart Shopper has a reputed 7.9million members, having commenced sign-up just three years ago. 115,000 of those have downloaded the app, so it’s not Flappy Bird, but another great example of how a single-minded PnP move on something when they think it’s got legs.

Comment:

More good news from the Big Blue, who last week turned in what passes for a tidy set of results in these straitened times. This time it’s their online food business, where sales are up 27% in the past year, with 2,000 deliveries per week. These numbers outperform those gathered by World Wide Worx, which recorded a 7% increase in online grocery shopping for a similar period. Other news of note to the technically-inclined PnP punter, is their Mobile Money service, launched in 2010, a means of transferring cash securely to your folks back home as well as shopping wallet-free in PnP and Boxer stores. With their deepening partnership with MTN, The Big Blue will now be able to offer a range of new Mobile Money services, including higher-value transactions and daily cash withdrawals, a couple of card options and access to Smart Shopper benefits.

Comment: Impressive, the way that PnP have sailed apparently unperturbed above two solid years of dickering criticism from the pundits and are showing every evidence of emerging on the other side stronger, more innovative and indeed more profitable.

More than a glimmer of hope there from The Big Blue, with sales up 7.7% to R63.1billion on a 52-week comparable basis and trading profit up a handsome 18.5%, after three straight and sorry years of decline. Admittedly, overall growth lags the market, although it outstrips internal inflation which is running at 5.3%, a number they were at pains to emphasise when reporting the results. But the indications are that the turnaround strategy is working, with the investment in centralised distribution starting to pay off, with efficiencies coming on stream and with a more robust store opening regime starting to take effect. Then there is the steady hand of Mr Brasher on the helm, which also seems to be doing its bit in guiding Pick n Pay on a more promising course.

Comment: Welcome back, big guy. It’s been too long.

HEPS, we are told, are a reliable measure of a business’ profitability, which is nice for Pick n Pay, as theirs is up 35-45% for the year which ended on our birthday, on March 2. This on revenues which grew just 7.7%, pointing to The Big Blue’s great success in reducing staff and supply chain overheads and generally tightening things up.

Comment:

The Big Blue have donated R4.5 million to the new Nelson Mandela Children’s Hospital in Gauteng, and R500k from the regional teams to various other children’s charities. These are the proceeds from the trading of their stores on December the 15th, a day most of the other retailers elected to close their stores as the country marked the funeral observance for Madiba. This, says Mr Brasher, is in fulfilment of the opportunity afforded by the retailer for staff and customers “to contribute in a very tangible way to Mr Mandela's legacy.” The donation is all above board and legit, naturally, and was audited by KPMG who have confirmed that this indeed exceeded the profits for the day.

Comment: We report this story as a little reminder of our great loss and the man’s great legacy – both of which seem to have faded in the rush of intervening events.

Singing from the same cracked and venerable hymn-sheet as his father before him, Chairman Ackerman the Younger has again, asserted the importance of the family-owned structure in Pick n Pay’s long-term success. Among his arguments: family businesses are the powerhouses of the US economy, generating 60% of the country’s employment and 78% of all new jobs created; families are in it for the long haul, enabling necessary investments for which shorter-term shareholders might not have the appetite; and the notion that family businesses might have stronger regulatory frameworks in place to avoid any unpleasantness around the dinner table regarding tricky subjects such as succession planning and dividends.

Comment: Of course, if certain families had embraced centralised distribution more quickly than they did, they wouldn’t have had to make such costly, responsible, family-enabled investments down the line…

Look, if you have a narrow obsession with getting your product on shelf, read no further, but the Cape Argus Pick ‘n Pay Cycle Tour, you will be perhaps edified, perhaps enchanted to know, has received hon. mench. in the National Geographic Book "Journey of a Lifetime - 500 of the World's Greatest Trips". Which is nice.

Comment:

Next SA retailer up against it in Zambia is Pick n Pay, who we thought had tapped into the local zeitgeist with greater delicacy than their competition had. But no. Authorities in Lusaka have ordered a Pick n Pay closed which had started trading before building operations were, technically, concluded. And in other news from the frontline states, TM Supermarkets, jointly owned by PnP and Meikles, are bullish about their prospects and contemplating an expansion drive, while in Namibia, in flagrant disregard for the natural order of things, The Big Blue has treated its major suppliers to a handsome sit down dinner.

Comment:

Just to pluck a number out of the ether, Pick n Pay has given itself six years to re-establish itself as SA’s number one retail brand, according to Chairman Ackerman the elder, who by then, we claim with confidence, will be an unusually astute and sprightly 88 years of age. A big ask, yes, with Shoprite rampant and Woolies resplendent right now. But Chairman A the E believes that it can be done by revisiting the four legs of the original table: the consumer on top, sound administration, the right merchandise and social involvement. In this later regard, Pick n Pay has involved itself in the relief efforts in the Philippines typhoon disaster, an event which touched Mr Ackerman deeply.
And in not unrelated news, the Big Blue is sponsoring the annual Wavescape surfing film festival. 

Comment: And if that’s not cool we don’t know what is.

Not that it matters a damn, but ratings agency Fitch has downgraded Pick n Pay from something called an A+ (zaf) to an A (zaf) reflecting the group's “expected slower pace of deleveraging than previously anticipated with funds from operations.” This as Pick n Pay kicks its recovery into gear. And, as we never tire of asking, who rates the ratings agency? Finally, an answer: Fitch, you’re downgraded to a B- (tat), just because!

Comment:

You have to love Chairman Ackerman the younger. Not only is he all elegant and patrician, and seems to know how to get out of the way of management while providing inspiring leadership, but he also likes to Stick it to the Man on a regular basis. In the sights of Occupy Boardroom himself, last week: bank charges. He reckons the fees the banks charge businesses like his for processing credit card transactions are, at 1.7%, over double those charged in places like Europe. At 0.55%, debit charge fees are lower, reflecting the lesser risk to the banks. But neither of these provoke his ire like the fee of 1.09% attached to so-called hybrid cards, which he believes are nothing more than a jumped-up debit card (although trust us, you can use them to put a dent in your overdraft if you really want to). Serendipitously, FNB’s Laurie Dippenaar has used the platform of his annual report to decry the widespread practice of “bank bashing”.

Comment: Does a bank take a greater risk extending credit here than it does in, say, Holland? We have to ask these questions, because it’s our job.

This might be the end of the beginning of Pick n Pay's turnaround. While turnover was up a relatively modest 7.5% to R30.1bn for the six months to September 1, reflecting the consumer slowdown as experienced by all retailers, net profit approached 14%, with gross margin up 0.4% to 18.1% of turnover. This all seems to indicate that Mr Brasher's recovery plan has come into play, and that supply-chain investments are finally kicking in to help control costs. There have been other improvements: the SmartShoppper loyalty programme has become entrenched and continues to evolve in line with shopper preferences (kiosks out, apps in), and on-shelf availability (thank you Longmeadow) is up by 3%, reflecting the efficient new broom sweeping the DC floors. On the downside, market share remains static and trading expenses, up 9.4%, are growing faster than sales as store openings accelerate. But in an excitingly edgy development, online sales are up 24%. And the punters have given the Big Blue a pat on the head too, with the share price up 7.59%, for all this good news.

Comment: Great stuff, PnP. We thought we'd lost you for a minute there, big guy.

One of the rays of light in the dark night of the soul Pick n Pay has been experiencing over the past few years has been its Smart Shopper loyalty programme, which is now six million members strong and rising, outstripping the Clicks ClubCard programme, granddaddy of loyalty in the republic, by two million. Now they’re taking it to the next level offering a Smart Shopper app which will enable punters to manage their points on their mobile device rather than at in-store kiosks, switching and redeeming points at the till, checking their points balance, and finding out what vouchers are available to them. Smart Shopper has been acknowledged by some analysts as SA’s biggest loyalty programme, and even rival Shoprite previously dismissive of such endeavours, has come on board even if obliquely by hooking up with eBucks.

Comment: Visionary stuff, determined execution. That’s how you do it.

The voluntary retrenchments – both willing and otherwise – have commenced over at Pick n Pay, with many retrenched managers leaving the head office building last Friday without ceremony. And according to some analysts, Pick n Pay, with “several hundred” staff being let go - could be the tip of the iceberg as difficult trading conditions continue into the next financial year. And hard-eyed R852million (full year results showed a decline of 33.2%) of profit that they are, some are saying that this is not necessarily a bad thing, whatever the human cost: businesses need periodic restructuring. The problem is, in South Africa, retrenchments are seen as an admission of either failure or culpability in some way, so businesses tend to keep it under their lids, particularly where non-unionised management staff are involved.

Comment: Traumatic times for Pick n Pay, and for the retrenched staff.

Kudos this week to Pick n Pay, which scored gold in the Eco-Logic Awards for the gains their energy efficiency initiatives have made in operational and behavioural changes to achieve an 8.7% improvement in energy usage last year, and for Imperial Logistics who netted a gold and three silver medals at the Logistics Achiever Awards for improving customer competitiveness. Also to Woolies for the tenth anniversary of their smaakvolle Taste mag.

Comment:

After the excesses of Heritage Day, you probably aren’t interested in anything much to do with braaiing, but it’s a slow news week (see “the excesses”, above) so here goes: retailer Pick n Pay and professional boytjie Justin Bonello have launched season 2 of Ultimate Braai Master: The Roads Less Travelled which sees the top 15 braai teams (consisting of a Braai Master and Braai Buddy) travel and braai their way through 13 tough location-based challenges in a bid to win the 2013 title, R500 000 cash, a Renault Koleos and vehicle accessories valued at R15,000. Locations include the bleak Jozini Dam and the lush Tsitsikamma forest, and allow the Big Blue to showcase its offering of fresh, local, sustainable and proudly South African goodies.

Comment: When we grow up, we want to be a Braai Buddy.

And in other slow news, The Big Blue is taking to the great blue yonder with the latest tweak to its Smart Shopper loyalty programme. Pick n Pay has partnered with the Avios Group, which runs the British Airways frequent flyer programme, to offer smart shoppers a chance to take to the air with the red white and blue when the fancy takes them and the points have stacked up sufficiently. Avios is keen to expand its global footprint at a time when frequent flyers are becoming more jaded about the value of such programmes and distributing their loyalty willy nilly depending on who’s got the cheapest flight on any given day. Conversely, supermarket loyalty programmes are doing rather well internationally. Punters will be able to spend their Avios points on purchases using an Avios credit card, and to buy petrol at BP’s. 

Comment: A good fit, albeit one imagines with a rather niche market among PnP shoppers.

Pick n Pay has taken the rough decision to retrench 400 workers at head and regional offices in an effort to cut costs after their 30.8% drop in full-year profit. This number includes the very few employees who opted to take the voluntary retrenchment announced a month or so ago at a weeks pay per annum with the business.

Comment:

This week bears the startling news that Pick n Pay has initiated its next round of job cuts, targeting about 2,000 of its middle management staff both regionally and at Head Office. The analysts are united in their view that

1. This is a good thing

2.This is a bad thing

3.It’s a clear indication that Mr Brasher is being given free rein, because the Ackermen wouldn’t have allowed such a thing

4.Despite having allowed the retrenchment of 3,000 store staff two years ago

Comment: The consensus seems to be, though, that centralisation has created redundancy and in the interests of a leaner, more efficient and eventually more profitable operation, these retrenchments are a necessary evil.

Mr Brasher seems to be taking a firm hand at the Pick n Pay wheel, where changes both of his making (the acquisition, ahem, of Gerhard Ackermann and Gustave Möller from Shoprite) and not (the resignation of Marketing Director, Bronwen Rohland) seem to characterise the new setup. He is of the view that Pick n Pay is not in a bad way, nor does it need the turnaround some of the more excitable analysts have been howling for. He believes it is advantageously positioned in the middle of the market, where the money is, and that it has an admirable and still lively reputation for consumer championship. He is in the process of shaking up general merchandise and is taking a keener interest in marketing than his predecessors, regarding Chairman Ackerman the Elder as the best Marketing Director the business has ever had.

Comment: Interesting times are afoot chez Big Blue, and probably will be for some time.

Entrenching their position in the ranks of South Africa’s serious virtual trenchermen (look it up, look it up) and of course women, and of course the readers who follow them, Pick n Pay is launching South Africa’s first competition for food bloggers, who it turns out love not merely to write about the stuff but also to prepare it. The competition will run from July to September and will set a series of weekly culinary challenges for 40 food bloggers across the digital republic. They will be judged on their efforts by a panel which comprises Fresh Living editor Justine Drake, food editor Anke Roux and Pick n Pay’s food developer Yvonne Short, and the winner will receive the coveted title of ‘Top Blogger’ and of course a whole bunch of goodies as well as exposure in Fresh Living itself.

Comment: This internet thingy really seems to be taking off. Nice one, PnP and way to make your mark with the influential innovators and early adopters of the foodie demographic.

Far, far away, in the high mountains, in the little town of Caledon, Pick n Pay has opened a grocery store. It is 1,680m² in area and has a dedicated liquor store of 193m² for the thirsty citizens of that perennially desiccated region. It will employ 111 members of staff, 41 permanent, of whom 25 will fulfill a management or supervisory role. Otherwise, what do you need to know? A tailored mix of products and services to meet the needs of this unique community, specialty departments that include a butchery, a bakery, a candlestick makery, a deli-ery and a sushi-ery, plus payments which can be made to the usual suspects (like Eskom and the local constabulary) at the tillpoint. Oh, and trolleys with handles in every colour of the rainbow.

Comment: Be sure to pop in when you’re passing through.

Three years ago, you will recall, Pick n Pay signed a memorandum of understanding with BP for the trialling as a JV of Pick n Pay Express stores in BP forecourts. Nine stores later, The Big Blue has decided to make an honest petrol giant out of BP by formalising the arrangement, and agreeing to the rollout of a whole lot more. Predictably, the analysts are not exactly hopping with glee, with no lesser a personage than our Uncle Sydney saying unkind things about the supply chain challenges of the venture. Woolies, who have been at it since the year dot with their Engen Foodstops, seem best able to make money out of their 42 sites by stocking them liberally with private label stuff.

Comment: Still, nothing ventured nothing gained, eh? Or something.

The travails of the Big Blue are well documented by this stage – declining market share, only 15% of new stores where they are wanted by customers, slack growth. What is refreshing this week is the disarming honesty of the man at the top. Instead of the usual bluster and obfuscation one has come to expect of the companies listed on the JSE – even those doing rather better than Pick n Pay – Richard Brasher is telling it like it is, speaking of a management which needs to work together as a team rather than “a loose coalition”, of last year’s undue optimism that green shoots were about to appear, and of a recovery which will not be measured in years but in lots of years. On the upside, Pick n Pay have appointed Mr Delivery to deliver your online shopping orders in a fleet of Tuk Tuks.

Comment: Which sound suspiciously like one of the “new things” Mr Brasher was warning against, which should not be done at the expense of making what they already have work.

Two strategic appointments at The Big Blue, one of which we hinted at obliquely a couple of weeks ago. Joining Pick n Pay from Shoprite, where he was merchandise director, is Gerhard Ackermann, just one consonant away from being part of the family. Mr Ackermann, joining the planning department, will be working with CEO, Richard Brasher and food merchandise director, Peter Arnold on beefing up the old price and promotional strategy, an area where Shoprite has probably held the edge for a while. Gustave Moller, who joins Pick n Pay from – uh, oh – Shoprite, will also be working in the planning department, where he will focus on format development plans, no doubt bringing his hefty experience in emerging markets to bear.

Comment: To lose one is an accident, to lose two is just plain careless...

The results Pick n Pay posted on Tuesday wouldn’t have been the ones they were hoping for. Citing depressed economic growth, waning consumer confidence, high levels of household cost inflation, increasing competition in the marketplace and ongoing investment in the business, they told us of sales which increased 7.1% to R59.3billion, but operating profit which declined 30.9% to R808.9million. Like store sales were up only 3%, with 107 new stores contributing the rest, against inflation of 5.9%. And for punters – they still received their dividend, as is customary from The Big Blue, but it was down 35.8%. A glimmer of silver lining may be seen in the Smart Shopper loyalty programme, which accounts for 60% of sales. In the next FY, they plan to spend a further R1.8billion in growing the business, with 100 new stores and improvements to existing ones planned.

Comment: Mr Brasher has his work cut out for him, and no mistake.

…and we’re not suggesting you do, Pick n Pay will soon be phasing out till slips and smart shopper vouchers which contain Bisphenol A, the carcinogen you thought only occurred in baby’s bottles, but is apparently in every bit of paper on your desk, too. And your kids’ school books. Nice one, PnP, though – and thanks for bringing it to our attention.

Comment:

If it’s a corporate slogan you’re after, here’s one for you: Quietly Chipping Away Since 1893. Solid, respectable, reliable, sensible. Quietly chipping away is what Pick n Pay have been doing since 2010 in Zambia, where they opened their 6th store this week, in the  jacaranda-lined streets of the copperbelt town of Luanshya. The store itself is a moderate 1,250m2 in area carrying 4,500 locally-tailored lines and boasting a butchery, bakery, hot food section, and fruit and vegetable department. When PnP first moved on Zambia they undertook to source 50% of their stock locally; they’re now up to 75% from Zambian manufacturers, agents, and importers. PnP’s strategy on the continent is to grow critical mass where they already have presence while keeping their eye on other geographic opportunities, if that’s a thing.

Comment: This in contrast to the perhaps more gung-ho approach of the competition. Time will tell which one worked best.

In a blow for continuity, which is the dowdy, unsung sibling of chaos and drama, Richard van Rensburg gets to keep his job as Deputy CEO of Pick n Pay, a position he held between Nick Badminton’s resignation and Richard Brasher’s appointment. He will carry on being responsible for IT, supply chain and property, but will also focus on “critical areas that are important” (sic) to increasing efficiencies and finding further opportunities for growth. Which pretty well covers it, we think.

Comment:

A couple years back, when The Big Blue opened their Hurlingham store, the idea seemed to be that it was a bold experiment whose more practical ideas might in time be rolled out. As it turns out, they’re going a little larger than that. As you may recall, they’re opening a couple more of the jolly green giants, in Roodepoort and Chatsworth, and now they’re doing it all over again in the V&A Waterfront. And not only will it be large 6,000m2 compared with the existing 2,600m2, but will also offer much more parking to Capetonians, who for some reason prefer to spend the months of December through February in their steaming hot cars on De Waal drive. 

Comment: A bold and excellent move, sending a confident message to punters and competitors alike about PnP’s designs on retail turf in the Mother City.

Well this can’t be welcome news for the Ackermen. Turns out that Meikles, parent company of Pick n Pay’s Zimbabwean JV partner TM Supermarkets, may have donated a fleet of flashy 4x4s to ruling party Zanu PF for use in their election campaign later this year. Meikles may also be partnering the Zimbabwean government in its diamond mining operations. Tricky stuff, although everyone subject to Zim’s indigenisation policy may in a sense be said to be in a JV with Zanu PF.

Comment:

Joining the prestigious list of CEOs who have flaunted their manly – and of course womanly – lycra-clad thighs in the name of fitness, competition and good, clean fun is none other than Sir Richard Branson, whose gingery extremities might be viewed toiling manfully during this year’s Pick n Pay Argus Cycle Tour.

Comment:

With the consensus among the stern-jawed men and hard-eyed women of the analyst posse being that The Big Blue has turned a corner but there’s a long way to go yet, Pick n Pay is keeping on keeping on, making some interesting hires and innovating wisely and well. The latest exemplars of this are its new stores in Chatsworth and Little Falls, Roodeport, which find their homes on purpose built “standalone” centres, where Pick n Pay occupies much of the space with its various enterprises (groceries, liquor, clothing, a Thyme restaurant) and a handful of other stores taking up the slack. The non-PnP stores are made up of both “destination” and “convenience” emporia selected by PnP and letting agents Spire Property Management to ensure that the centres offer a one-stop shop. The Little Falls Pick n Pay, by the way, will be further manifestation of the ideas introduced and now tested at the Hurlingham flagship.

Comment: There is something admirable about the coolness Pick n Pay is currently displaying in its fight to get back on top.

In a significant move which has pleased some analysts, and pleased the living heck out of Chairman Ackerman the Younger, The Big Blue has appointed Paul Marsh as Divisional Manager‚ Groceries & Perishables. Mr Marsh, who will be working under Merchandise Director Peter Arnold, comes with absolute yonks worth of retail experience under his belt, having cut his teeth at Massmart, where inter alia he worked as a general manager in the Hyper division, as the merchandise director for food and liquor for Makro SA‚ as group general merchandise director for the Massmart group‚ and as CEO of Shield buying and distribution. A notable achievement for him there was the launch of SA’s first FMCG online trading portal. Then came the wilderness years: five years with Glendinning as director of consulting in Thailand. Here’s what he brings to PnP according to Chairman A the Y: “Effective retailing‚ skills and training‚ operational management‚ sales and marketing strategy‚ organisational structure‚ competency benchmarking‚ negotiating of trading terms and pricing‚ and retail finance.”

Comment: All of which should come in handy as a resurgent blue and white striped tiger prepares itself for the spring.

Pick n Pay has just opened its third Mauritian store, a 3,000m² super in Mont Choisy, near Grand Baie, catering to expats and locals alike. Last October, the World Bank ranked Mauritius as the easiest place to do business in Africa. By a certain definition of “in”, of course.

Comment:

Pick n Pay has opened its first store in Kitwe, the second-largest city in Zambia, for a total of five in that non-basket case, where the exploitation of resources has surprisingly not led to civil war and starvation. This brings up to 94 their number outside SA, with the distribution as follows:

Comment: You’ll be relieved to know that the one shortage Zimbabwe does not have is dangerous lunatics to fill Robert Mugabe’s twinkly little patent leather pumps.

Keeping their eye on the ball this week, or every possible ball in the air at once, depending on which way you prefer to see it, are Pick n Pay who as hinted last week are indeed launching South Africa’s first all-mobile bank. It will be called Mobile Money, is being “provided” (a term which has some special if unspecified significance in the mobile realm) by Tyme Capital, and is modelled on the granddaddy of all mobile money schemes, Kenya’s M-Pesa. Tyme have got around the more stringent local regulations by limiting accounts to a maximum of R25k and daily transactions to a grand. Pick n Pay will cash money in and out of the system, apparently, through their stores, but it will otherwise operate as a full-service mobile bank with the added appeal of punters being able to send cash from one side of the country to the other via those microwaves.

Comment: An interesting move for a business which has so many other major projects underway at present, from the inauguration of a new NGO to the bedding down of centralised distribution.

Rumour has it that Pick n Pay, which has dipped a periodic toe in the turbid waters of banking, is soon to launch a mobile-only bank with MTN. Boxer are evidently a major part of the deal, which is being launched as a JV under a brand called Tyme, as spotted on a website which popped up and then was mysteriously taken down, like some rare flower that blooms briefly, and is gone with the morning dew. Intriguing, stay posted.

Comment:

As our man Winston remarked during the dark days of the recent unpleasantness, this is not the end, nor yet the beginning of the end. But it is, perhaps, the end of the beginning. PnP having secured no fewer than 225 retail sites are about to embark on one of the biggest store opening sprees in South African history. The sites are located all over the show, in townships, suburbs and rural areas, and 119 of them will be opened by the retail division, with the remaining being Boxers, Boxer Punches and Express forecourt stores. The danger in painting the neighbourhood blue, of course, lies in the cannibalisation of existing stores or coming up short against more established competitors, although by and large the pundits seem to think this strategy, if the execution is sound, is the right way to go.

Comment: It is to be profoundly hoped, if you are a shareholder, that the market share horse has not already bolted from the Pick n Pay stable.

Look we don’t pretend to know what ratings agencies are, what they do, or indeed who rates the ratings agencies. But we know when they downgrade something it’s generally not a good thing for that thing. And that’s exactly what Fitch have done to poor old Pick n Pay this week, downgrading their National Long-term Rating from Stable to Negative. This, says Fitch, because of The Big Blue’s slower pace of deleveraging (which we think means settling up) until 2014. Also the “increased pressure on Pick n Pay’s business profile” in the competitive retail environment. Other issues are delays in the implementation of the transformation programme, as well as their exposure as a business to the vagaries of consumer spending – although in fairness they really do share that with the competition. On the upside, the National Long-term Rating has been affirmed as something known as an “A (zaf)”, reflecting inter alia the existing strength of Pick n Pay’s market position and the positive steps taken towards transforming the business.

Comment: So there, as far as we can tell, you have it.

About the only good thing the analysts have to say about last week’s Pick n Pay interims is that at least the Big Blue knows there’s a problem. And that the share may not be such a bad buy because all PnP have to do is recover to up its value while rivals like Shoprite and Massmart have to actually grow. They weren’t even that kind about Pick n Pay’s signal achievement over the last year, Smart Shopper, with our Uncle Sydney doubting the value of the asset. “5.8 million people signed up to the scheme, yet sales growth was only half that of its competitors,” he avers, adding that this means that Smart Shopper didn’t bring in any incremental sales. Chris Gilmour of Absa doubts that recovery will happen on Pick n Pay’s timeline to 2014 and says that 2016 is a more likely outcome. And don’t ask them about the dividends, which at 60%-70% of net profit after tax have seriously compromised the Big Blue’s ability to spend its way out of trouble, they argue.

Comment: Besieged and assailed on all sides, Pick n Pay have a job of work to do.

The Pick n Pay results, then: at the outset, Chairman Ackerman the younger has expressed intense disappointment with the results, which might go some way to explain the abrupt departure of Nick Badminton, and he promises no miracles in the next six months, but as tradition demands has found both good and bad in the mix. The good: Smartshopper – the biggest loyalty programme in SA with 5.8 million members and climbing, and early indications being that those shoppers are outperforming the others, shopping more frequently and averaging a basket 2.7 times the size of their peers. Then the bad – their words not ours: Space growth behind market – Out of stocks and teething problems in category buying – Costs associated with taking the Longmeadow DC in-house – Investment period in strategic transformation. All this, they say, in a soft market with declining consumer confidence. They are targeting 12% space growth in the next 18 months, however, and are seeing a steady improvement in the efficiencies of their DCs. Suppliers are reportedly feeling feisty as an embattled Pick n Pay takes some of its frustrations out on them.

Comment: Hard times, and no mistake. Too early to say make or break, but Mr Brasher will certainly be feeling the heat from Day 1.

While the dear old Tatler scooped almost everyone on getting a Richard Brasher interview into print last week, he batted a couple of pearlers past our slips and into deep cover, Mr Brasher being as fond of a sporting metaphor as the next man, particularly if the next man is Hugh Bladen, and these we have retrieved from the grubby pages of our competitors and reproduced here:

On Rugger: “Defending a position is not as much fun as creating one.”
On Batting: “Averages are not much use. Appealing to an average might have worked in the past, but the closer you get to how people really live their lives, the better you do as a retailer.”
On Footie: “I will make sure we have the team to make sure it’s the most successful retailer in the country.”
On Aerobatics: “I’m not the kind of manager who floats at 50,000 feet. I will have a clear strategy, and everyone will know what it is.”
On Test Matches: “I played against Walmart in different countries – they’re a good competitor, but a competitor who can be bettered so I’m not concerned on that front.”

Comment:

Tough times over at The Big Blue, which on Friday issued a shocker of a profit warning, saying that headline earnings for the first half will likely drop between 10–20%. This on turnover growth of just 5.9% and like-store growth trundling along at 3.2%, which they attribute to tougher competition, poor stock availability and economic pressure on their core shopper. They confessed that their store opening programme lagged competitors’ in the first half, but said that they would open more in the second, and that operational and cost improvements would start to kick in at Longmeadow, which had got off to a shaky start. The centralising of category buying has also been something of a drag on the business, particularly vis-à-vis availability.

Comment: So. If not a poisoned chalice for Mr Brasher, perhaps not the most illustrious vintage at the table either.

Here’s a biggie: Pick n Pay have just announced the appointment of their new CEO. Richard Brasher joins the Big Blue from Tesco, where he enjoyed 26 illustrious years prior to becoming CEO in March 2011. His departure from the group was announced a year later, after months of rumours of strategic differences with the Group Chief Executive Philip Clarke. Previously, as group commercial director, he created Tesco’s international sourcing operation and was responsible for the company’s entire supply base, transforming Tesco’s non-food operation and taking a lead role in the development of the private label strategy. Significantly, he grew the Tesco Clubcard into the leading supermarket loyalty programme in the UK. He has a reputation for being tough on prices and tough with suppliers.

Comment: A bold appointment by Pick n Pay, at a time when boldness seems to be what’s required.

After weeks and weeks of leaden skies and sarcastic analysts, a silver lining for The Big Blue at last. Shadowy international ratings agency Fitch has given the embattled retailer a national long-term rating of “A”, which means they view its prospects as stable. They cite, inter alia, its “leading market position in the domestic food retail industry and the diverse range of its product mix” as contributing to their hope for the future of the business. They are also impressed with the steps Pick n Pay has taken to right itself, including reduced costs‚ better working capital management and a sharper focus on the old supply chain. They believe that these steps towards transformation of the business will start showing a financial upside by 2014, although they note primly that it has taken the business some time to identify and respond to changes in the market.

Comment: When was the last time Fitch was rated? Eh?

Those talks the Ackermen most emphatically were not having about selling a share of the business to Dutch retail group AHold have been called off, apparently. If such talks existed. Which they didn’t. Subsidiary Albert Heijn had the old Mont Blanc poised tantalisingly above the dotted line, apparently, but then according to a shadowy source close to the non-deal, “some issues cropped up, which caused Albert Heijn to want to adjust the price downwards," something the Ackermen were not willing to do. What they remain willing to do, however, is relook the pyramid structure of the business, which gives the founding family disproportionate swing in the boardroom.

Comment: Trying times for The Big Blue, who see market share continuing to decline and no announcement yet made about the new CEO.

Oh, this is fun. We could go on forever like this. Just watch: “And in breaking news, Pick n Pay is not being bought this week by Tesco, Carrefour, Time Warner Inc. and the folks who bring you Hello Kitty.” Neither, we are informed by the business press, are the Ackermen selling their stake in the business to Dutch firm AHold. However, Chairman Ackerman the Younger has conceded that they are looking at changing the pyramid structure of ownership, which allows the family control of Pick n Pay through their 48.3% share in Pikwik, which holds the majority of Pick n Pay shares. And there is also the small matter of the warm relationship the family enjoy with AHold CEO Dick Boer, and the ongoing chats the businesses have been holding about things like skills transfer and strategy.

Comment: And the last time the Dutch embarked on an adventure in these parts it worked out rather well for them. Until it didn’t, of course.

“How’re Pick n Pay doing up north?” you ask. And we’ll tell you. If you’re Meikles, who own a 51% stake in TM Supermarkets, with our very own Big Blue pocketing the rest, very nicely. Quarterly turnover for the group at the end of June was up 15% to US$89million, with growth reported in retail and in their Tanganda beverages division. One TM store has been converted to a full-blooded Pick n Pay, with three more to follow by the end of the year. A recovery in sentiment is underway among Zimbabwean consumers, who seem to be responding positively to the growing options available to them. In other Pick n Pay news, they’ve gone and listed a new financial instrument on the JSE in the form of a cool R2billion’s worth of something called Senior Unsecured Fixed Rate Notes, as far as we can gather. Whether this means they’re borrowing that in cold hard readies from willing punters for a fixed rate of interest, is anybody’s guess.

Comment: Anybody?

Pick n Pay and Shoprite are apparently under investigation by the National Consumer Commission (NCC) whose agents found expired products on the shelves at one store belonging to each. The National Consumer Commissioner, Mamodupi Mohlala-Mulaudzi, is reputedly shocked (coughgrandstandingcough) and is not ruling out the possibility of a class action, although whether she has the power to rule one in is moot.

Comment:

The business press, in the lull before the storm of various results coming due in the next couple of days, has made much of the idle speculation by overseas analysts that if Pick n Pay were keen to be taken over by Tesco rather than retaining their Ackerman-accented ownership, and if Tesco were keen to take Pick n Pay over rather than focusing on consolidation at home, then it could naturally follow that Tesco might buy a stake in Pick n Pay, as their models and market niches and private label strategies are compatible. But certainly not in the next 18 months. Hedging of the first order, of the sort we may once have indulged in, in our youth, when we remarked idly that were Walmart to come into our market, they would probably come via Massmart, for broadly similar reasons…what? Did they really? You don’t say! Local analysts in the meantime are exercising the grey cells over whether Pick n Pay is currently flat-lining or coiling itself for the leap, with the balance of opinion roughly even.

Comment: Harmless fun, really. Unless you happen to be a Pick n Pay share, in which case it is a matter of life or death.

Shoprite would be a pretty big player in online retail, if it was worth it. And they have the technology and capability to switch it on any time they like. But they believe that “few, if any” of those businesses offering online shopping are profitable. All this emerged in response to research by general internet busybody Arthur Goldstuck of World Wide Worx who believes that growth in online shopping is pretty much guaranteed for the rest of the decade, and that when Massmart come fully onstream they will offer stiff competition to Woolworths, Pick n Pay and whoever else may by then have decided that the water is worth having a toe in. He is also of the view that while Shoprite might believe that its mass-market shopper will not be interested in online shopping anytime soon, it is precisely in this demographic that internet use is starting to soar. The total spent on online retail in South Africa exceeded the R2billion mark for the first time in 2010 with growth maintaining at 30% in 2011, for a total of R2.636billion. Pick n Pay, who with Woolworths have pioneered online grocery retail here, have just announced that they’ve signed up with online payment service provider, PayU, which allows customers to store multiple credit card details for future purchases and speed through checkout. Goldstuck did mention, however, that food sales online are stagnant, with all the growth coming from durables.

Comment: No one will ever listen to their music off a little shiny disc.

In 2011, Pick n Pay won an eta Award from Eskom for their implementation of their energy efficiency strategy in the energy efficiency awareness category. Old news perhaps, but salient. Pick n Pay’s stores, you see, were burning through an average of R150k per month, threatening future margin as they went. But instead of reinventing the windmill or planting grass on every roof from Fourways to Fouriesburg, The Big Blue decided to change the way existing energy was being consumed in the business. They developed a simple E-Board or energy board application, which served as a dashboard for individual store managers, allowing these worthies to identify opportunities for energy saving, like switching off lights, aircon and bakery equipment when these are not in use. Every day, 5,000 of these cunning little bits of code monitor useage and email the relevant bits to suitably chastened managers, who then rev up the staff and get everyone scrambling for the sockets and switches. For a 22% energy saving for the first year, or R1.38millions.

Comment: There is something admirably dogged about the manner in which Pick n Pay are quietly doing the right thing, against the promise of future results.

Our hardbitten hacks down in the Tatler bullpen generally don’t have much truck with feel-good stories. But when it comes to feel-good stories involving the written word, they’re a bunch of dewy-eyed softies. And so it was they drew our attention to Pick n Pay’s Mandela Day book drive, in which from now until 17 July all stores will have collection points for children’s books, which will be handed over to the Nelson Mandela Centre of Memory on 18 July, Mandela Day. The books will find their way to the Mandela Day container library initiative which itself is linked to the 94+ Schools infrastructure project, which commemorates Mandela’s 94th birthday by promoting education. Bronwen Rohland, Pick n Pay’s Director of Marketing and Sustainability, is mustard for the initiative, pointing out that it was reading which in large part sustained the great man during his incarceration.

Comment: With some of their other challenges, the Big Blue’s sustained commitment to building a moral business is commendable, as indeed it is among our other retailers who have learned that doing good is good for the legs of the table, or something.

Chairman Ackerman the Younger has just been named as one of the two co-chairs of global industry body The Consumer Goods Forum. His opposite number, or oppo, is a Mr Muhtar Kent, chairman and CEO of The Coca-Cola Company, and it will be their task to drive cross-industry collaborative action on sustainability, consumer health and wellness, and food safety, inter alia. Mr A. the Y. is likely to have a fairly busy time of it in the months ahead, doing the Chairman and CEO thing as a suitable replacement for Nick Badminton is yet to be found, opening stores all over the show including its first Zimbabwean Pick n Pay branded one in Kamfinsa in eastern Harare, which includes standalone PnP Liquor and Clothing shops also, and explaining to shareholders about the ongoing decline in the shareprice (to the tune of 6% this year) even as rivals Shoprite and Woolies grow in this area.

Comment: A big announcement about a high-profile appointment at the helm might go some distance towards arresting the current slump in sentiment about the Group.

The recently updated Pick n Pay online shopping site demonstrates in crisp, bright colours just how seriously the Big Blue takes both online retail and its Smart Shopper loyalty programme, with each featured special tagged with the number of extra points you’ll get, and the whole thing resembling some super-fun, extra-vibey grocery themed variant of the noble game of Scrabble, with loads more triple word score squares. And it’s not just about points back and appearances: they have also streamlined their delivery processes. This in response to received and anticipated growth in a market which, while starting from a low base, is looking good: 8.5 million South Africans use the internet, 75% of those actively use e-commerce, and 4.5 million are banging their little faces up against the red hot chainlinks of the devil’s playground that is Facebook.

Comment: Delivery is of course where the pedal of consumer demand hits the metal of profitability for aspiring online retailers.

Things are hotting up in Zimbabwe, and no, we are not referring to global warming, which all right-thinking people know is a daft conspiracy theory cooked up, if you’ll excuse the pun, by people who hate big oil companies and the hilariously outmoded internal combustion engines which feed them. We are of course talking about retail, with Pick n Pay opening its first store in Kamfinsa at the end of June and rebranding some of the TM Supermarkets they acquired with their investment in Kingdom Meikles, which by the way is having a toughish year, losing $3.1million US despite the buoying effects of Pick n Pay on their retail offering. Competitor OK Zimbabwe, a listed retailer, is girding its loins in the meantime, having expanded since it raised US$10 million a couple years back for capital projects, with 44 OK stores now trading, seven Bon Marche stores and two OK Mart stores, for a locally grand total of 53 outlets.

Comment: And the shelves beginning to fill up nicely everywhere, we are told.

The Big Blue has cemented and formally announced its partnership with the Nkomamonta Organic Farmers’ Co-operative in Tzaneen in Limpopo. The Collective will be supplying a modest though significant 217 tons of fresh organic veggies to 50 selected stores nationwide, in a Pick n Pay Foundation initiative to get more of the good stuff on shelf while bringing along the small local agronomist. It consists of a group of 16 farmers in the district and is registered as a primary co-operative with a secondary registration to follow later. Reading between the lines, this means that the 16 farmers will be able to outsource their production to yet smaller fellers.

Comment: The development meshes neatly with Pick n Pay’s produce strategy, where their buying teams work closely with the Pick n Pay Foundation and other supporting bodies such as the DTI, IDC and NEF to develop and grow emerging farmers, while giving punters the crispy, wholesome stuff they are increasingly demanding.

Zup, my “neighbros”? Our “homey” Pick n Pay has just been voted “Coolest” Supermarket in the Sunday Times generation Next 8-22 Youth Brands Survey, and further attempts at “youth slang” will serve merely to exhaust us. But “respect”, anyway. Anyone who can get eight year olds to think Saturday morning shopping is cool probably deserves it. Backward “baseball caps” all round.

Comment:

OK, we're confused. Last week, we reported with our characteristic lack of breathlessness that Woolies had won some species of reputation award. This week, we are happily but equally breathfully able to report that Pick n Pay have gone and done something similar. The Big Blue was number one in the retailer’s section of the Mail and Guardian's Top Company reputation Index and number 4 overall, as 26% of punters questioned spontaneously recalled it as a business with a great reputation, and a staggering  98% of them recognised the brand without having to be prompted. The Index incorporates all aspects of reputation – including brand, trust as an employer and corporate citizen, as well as trust as a source of products and services. 80% of the punterati questioned said they would specifically buy from a company that has a good reputation, whereas 51% indicated that they would avoid a company with a bad reputation.

Comment: So there you have it. Until next week.

Once upon a time, aficionados of the advertisers' dark arts may recall, Shoprite ran a campaign obliquely targeted at Pick n Pay, which went something along the lines of “Don't change your lifestyle, change your supermarket”. Then, on the launch of the Smart Shopper campaign, Shoprite led with ‘Be Smart. Always pay low prices”.  Pick n Pay have come right back at them, a year and a half and a recession or two later, with some hard-hitting competitive advertising of their own. They ran an ad for their Smart Shopper programme this week, which posed the naughty rhetorical question “Change my supermarket?” to which the cheeky reply was “That's pointless,” which is a reference to the points you will earn shopping at Pick n Pay, but not at their competition. The problem is, who is aware of these veiled claims and counter claims, apart from such industry insiders as us, you and the figurine-collecting, rarity-sneaker wearing ironists in the respective ad agencies? And what the heck is Whitey going to say about it all come results time?

Comment: Product and price, boys. That's the stuff to give the punters. Leave competitive advertising to the yanks.

Having dragged their heels on centralised distribution, Pick n Pay are flailing away at it now like a retailer possessed, opening the second big RDC at Phillipi in Cape Town. And like Longmeadow before it, Phillipi is greener than thou – daylight harvesting which will reduce the plant’s power consumption during the day by up to 50% and the adoption of various of Pick n Pay’s 12 strategies for the management of energy, water, refrigeration, and the reduction in building materials. Phillipi, which occupies 50,445m² of land formerly belonging to the Indian Ocean, employs about 342 staff and will help the (recently) embattled retailer to operate more cost-effectively, offering punters better on shelf availability while reducing inventory, preventing congestion at the back door and lowering transport costs in the dear old supply chain. By October Phillipi will be moving 400,000 cases of groceries a week in comparison with Longmeadow’s million.

Comment: Pick n Pay has earmarked R2bilion for the move to centralised distribution, with two DCs now down and two to go.

As always, we at Trade Intelligence had a sharp-eyed observer at the Pick n Pay results presentation last week, and more so than usual, the devil was in the details and nuances – accompanied perhaps by a couple of angels, too. First the bad news: profit down 15% year-on-year off an increase in sales of 8.1% to R55-odd billion, attributable say Pick n Pay to their expenditure on tightening the supply chain, establishing the specialist category buying function and getting the Smart Shopper loyalty programme up and running. Smart Shopper, incidentally, is already paying massive dividends in terms of both shopper data and targeted promotions, while the numbers above are less worrying than they look, with a pleasing recovery becoming evident in the second half. And while it has been said more than once that deputy CEO Richard van Rensburg is not in line for the main job, the analysts, a notoriously difficult crowd to please, seem to think his pragmatism is just what the doctor ordered during this tricky ambit for the Group. A couple of the focus areas for growth will be Africa, with 94 stores already on the ground and more planned for the DRC and Malawi, and getting the hypers back up to speed, particularly in the neglected area of GM, which will be stacked high and sold inexpensively.

Comment: Being punters, we might pick up a few extra Pikwik shares in happy anticipation of the recovery of which the Big Blue now seems confident.

Keeping off the subject of profits, supply chains, investments in infrastructure, loyalty programmes and the mysterious resignations of CEOs, Pick n Pay have formalised their relationship with BP, nine of whose forecourts are currently graced by Pick n Pay Express stores. The plan is for another 120 conversions over the next five years, with the focus on sites that will be most relevant to the Pick n Pay customer base. The deal gives PnP a bridgehead into the small store format, which is often a driver of growth, as well as an extension of its offering to potential franchisees. The typical Express store is sized between 150m² and 250m² and offers between 1,500 and 2,500 product lines.

Comment: And speaking of loyalty programmes, which we of course weren’t, you’ll be able to use your Smart Shopper card there too.

So it turns out that no-one has been “asking” ahem, “suggesting” or even “encouraging” pensioners collecting their monthly scrapings from various retailers to fork out any of it whatsoever in-store. As you will have heard, with the cessation of pension payments at places like the Post Office, the South African Social Security Agency (Sassa) has said that they are aware of “unscrupulous retailers”, including some belonging to the major chains, which have been requiring that the recipients of social grants spend 10% of their pension in the store where it has been collected. There’s also the suggestion that some retailers hike the price on the basics on pension day. Not so, say statements from Pick n Pay, Shoprite and SPAR.

Comment: In fairness, collecting in-store is probably the safest, most convenient way to get the job done. And some retailers, whose left hands tell not their right hands what they are doing, go out of their way to in fact provide value for anxious pensioners.

The digital mavens at The Big Blue have noticed a substantial uptick in the number of people accessing their Facebook page from their mobile devices, which we believe is another name for cell phones, and are now tailoring their messaging to meet the zippy demands of this exciting new medium. Does anyone actually do any work anymore?

Comment:

Pick n Pay have begun the pre-results tap-dance which leads to a less than entirely satisfactory set of numbers come opening night, or in this case morning, scheduled for the 18^th of April. Headline Earnings per Shares – or HEPS – from continuing and total operations will decrease by between 10 and 20% for the full year, with the profitable sale of Franklins (to the tune of R438.4 million) pulling things up by the bootstraps somewhat in the second half. Turnover-wise, they’re anticipating growth for the year of 8.1% compared with 8.7% for the six months ended Feb with promising like-store growth, although EBITDA from continuing operations will decrease by up to 10%, driven southward by the upfront launch costs of Smart Shopper, the implementation of specialist category buying and the continued investment in the centralised distribution system.

Comment: All of which, they assure punters, will improve future operating efficiencies and help serve customers better.<br> *Hold On To Your Acronyms!

The Big Blue has once again proved its green credentials by pipping all comers in the Private Sector Retail Category of the Climate Change Leadership Awards held at a reportedly carbon-neutral event in the otherwise carbon-positive town of Johannesburg recently. The award recognised the retailer, inter alia, for its work in climate change education and awareness, through the Pick n Pay Schools Club, which reaches 1.5million learners annually, and at store level.

Comment:

We assumed that Trade and Industry Minister Rob Davies would do his shopping down at the co-op, in solidarity with the old constituency or something. How wrong we were. There he was, in his tailor-made Madiba threads wheeling a trolley with the best of them at Pick n Pay’s Hurlingham flagship. In fairness to Cde Robert, and indeed to Pick n Pay, he was there to lend his support to Pick n Pay’s pioneering initiative to provide dedicated shelf space to organic produce in 50 stores nationwide, as part of its efforts in fostering the small local supplier. To this noble end, its buying teams have been working closely with the Ackerman Pick n Pay Foundation and other bodies such as the IDC, NEF and the confusingly-acronymed Dti itself. The Big Blue has recently embarked on a project with small farmers in Tzaneen to up their capacity, volume being an ongoing challenge in this sector.

Comment: Nice one, that bearded cadre. And you too, PnP.

Amid the sunblasted stone and aloe ferox in rural northern KwaZulu, small farmers are wresting a living from the begrudging soil thanks in no small part to Pick n Pay’s Boxer Superstores Limited, which has been quietly establishing an unassailable presence in these sorts of areas for well over a decade. Part of Boxer’s mission has been to forge strong ties with local communities, through CSI initiatives, the sponsorship of local teams and other big hearted activities. Now it’s getting 10 community gardens with about 150 members onboard to provide fresh produce to Boxer stores in Nkandla, Nqutho, Eshowe, Hluhluwe, Melmoth and Jozini. These gardens have been brought along in part by the Ackerman Pick n Pay Foundation and Siyazisiza Trust, which promotes food security and small enterprise development in marginalised communities, by providing start-up equipment, training and mentorship.

Comment: Good work, that sport-themed rural, urban and peri-urban retailer!

Majestic, graceful yet at the same time hesitant and shy, the transformation manager picks its way through the buffalo thorn thicket, its every sense attuned to possible danger. It lifts its head, tests the breeze with flared nostrils. Yesterday, the Trumps came, but now they are gone. Yesterday, the transformation manager took a stand against hunting. Today it is itself hunted. It cannot see them, but it knows that they are there, 250 000 of them, their manly eyes narrowed and their trigger fingers itchy.

Comment:

And what is this? An old pal with whom we were young midshipmen together, back before Copenhagen and the Nile, is convinced that Woolworths Australia has been holding discussions with Pick n Pay for the acquisition of a largish stake in the Group. The idea would be that the Ackermen retain family control, while the Antipodean retailer would bring some of that international polish to the operation. We shall see.

Comment:

Smarting from its recent defeat at the hands of the Competition Appeal Court, the Department of Economic Development is taking aim at all the other retailers for their allegedly monopolistic practices in the sale of alcoholic beverages, which, it claims, drive the smaller retailers out of business. The instrument with which they are taking this aim is a possible addition to the Gauteng Liquor Act which if amended will stipulate that the Liquor Board may refuse an application if it “may cause a harmful monopolistic condition to arise or be aggravated”, which is a soothing broad expanse of legal scenery as one might like to contemplate of an evening. Pick n Pay, as they do, are taking up cudgels on behalf of everyone, averring that “the four major grocery groups, including Pick n Pay in South Africa, own less than 10% of the total off-consumption liquor sales.” Liquor City are giving it right back: “We deny all the allegations which have been made against Liquor City” while SPAR are pointing out that they own only 11 liquor outlets and ahem, six DCs, and that their members are the very independent retailers that the Department wishes to protect from, well, SPAR.

Comment: Pour yourself a double scotch and settle back into the chesterfield. This is going to be good.

Bytes Managed Solutions has scored big by winning a tender from Pick n Pay to “refresh” the existing point-of-sale (POS) hardware infrastructure at all Pick n Pay stores over a two-year period, POS hardware infrastructure, naturally, being cash registers. This involves the replacement of machinery in 8,000 lanes nationally, with some 4,500 having already been completed and the rest due by the end of the year. The exercise is not simply a question of replacing the twelve-year-old system in place, but providing customers with a better experience and giving the business additional functionality, flexibility and support. The technology, acquired as it so often is from NCR, will use less energy and increase the productivity at the tillpoint.

Comment: But no mention as yet of self-checkout, which in our experience involves one customer, a clever machine thingy, and three staff members to stand around saying “you’re doing it wrong.”

Weighing in on the Walmart discussion in Namibia last week were some of the country’s smaller retailers – and surprisingly, the target of their ire was not Walmart or Massmart, but the Namibian government, which, they feel, has offered them insufficient protection from other international retailers, namely our very own Shoprite, Pick n Pay and SPAR. The march of the majors has played merry hell with the little guy, apparently, with four chains – Punyu, Continental, Elago and Black – having gone out of business since the 90s, and others like Okalindi shrinking dramatically, having gone from 10 stores in Windhoek to just three. The issue, according to Chris Siririka, National Coordinator at the Indigenous People’s Business Forum (IPBF) is simply purchasing power. This has led the IPBF to look into a group purchasing scheme for retailers, and the government to consider an amendment to the Foreign Investment Act.

Comment: Anti-freemarket protectionism? Or the legitimate encouragement of the diversity which when nurtured can be a powerful engine for sustainable economic growth?

It’s a slow news week when we give Bob the Builder a look in, but in this instance the retail developments in question are of some significance, so here goes. First up, Pick n Pay who flushed with the success of Posh Store on Nicol are partnering with Atterbury to open another green supermarket, this time on the site of the driving range on Hendrik Potgieter in Roodepoort. The Falls Pick n Pay will feature exceptional fresh foods, more imported lines than any other Pick n Pay and specialist ranges unique to flagship stores, a restaurant, liquor store, wine boutique and cheese room, you name it. Next up Makro, who are for the first time dipping their toe into the bracing waters of the Free State with a brand new Makro, at the junction of the N1 and the N8 in western Bloemfontein, in partnership with the Moolman Group and Nedbank Corporate Property Finance, which is putting up the R170 large for the project, which when complete will attract shoppers from all over the province and from Lesotho. Finally, Boxer will be the anchor tenant for an eight-store mall being developed by Imperium in Duncan Village, previously unserviced with respect to modern retail, in the Eastern Cape, a Boxer stronghold.

Comment: As we observed recently, if the measure of a nation’s health is the strength of its retail sector...

The dust has barely settled on outgoing (by one definition) Pick n Pay CEO Nick Badminton’s desk, and rumour, hypothesis and innuendo run rampant. He was pushed, says one analyst, in order to accommodate a Foreign Buyer with their own candidate for the position. He jumped, says SACCAWU in a proletarian statement, and we pushed him, or something. He was tired, maintains Chairman Ackerman the Younger, who’s sounding a bit tired himself, of saying it, and we’re still not letting go of the pyramid structure, so there.

Comment:

Oh, and by the way, The Big Blue have gone and got themselves a Retail Specialist, in the form of one Rod Salmon, who has most recently been working, if that’s the word, as a retail analyst in the UK, but who locals might remember as a onetime commercial director over at Massmart. He will be reporting to, or more correctly reporting into the big merchandise guns, Messr’s Hoerz and Arnold of recent Tatler fame, and ...yes, you at the back? No, Jones, he will not be taking over as CEO. See me afterwards.

Comment:

How is the indigenisation programme in Zimbabwe affecting those South African retailers bold enough to operate in that bread basket case to the north? Let them speak for themselves:
SPAR: “All our outlets are owned by the locals. We only have a small stake in distribution of about 35 percent, which is not in retail. The impact is virtually nothing.”
Pick n Pay: “The group has approval for the company’s shareholding in TM Supermarkets from the Zimbabwe Investment Authority, Zimbabwe’s Reserve Bank, and Zimbabwe’s National Indigenisation and Economic Empowerment Board.”
Shoprite: “We have only one Shoprite store in Zimbabwe and we do not report on revenue contributions by country. Furthermore, Shoprite is currently in a closed period until the announcement of our mid-year financial results.”

Comment: So there you have it. Of interest is the fact that Zim is the one market where Shoprite lags PnP to any significant degree.

Apropos the retirement of Nick Badminton as Pick n Pay CEO: Mr B himself said that he was shattered after the long haul and needed a break. Chairman Ackerman the younger corroborated this view. The analysts scratched their expensively coiffed heads, those with hair that is, and said the timing was a little off, given that Nick Badminton had made great strides in arresting the decline which began in the Summers’ years. The punters agreed, and assuming that bad news was coming in the results, dumped the share to the tune of 1.2% the day after the news, with R71million in stock going under the hammer. The one issue which no one has raised – except of course ourselves, obliquely last week – is the role the Ackermen play in the decline – or otherwise – of Pick n Pay’s fortunes, and the difficulty of running the business as CEO under tight family control.

Comment: Anyone?

Say what you like about accountants, they’re not boring. Oh, wait, that’s marine biologists we’re thinking of, and firemen. But when accountants name a survey, they do it with a certain je ne sais quoi. Thus the Deloitte Global Powers of Retailing Survey, in which our big boys have done rather well this year: Shoprite in 92nd position globally, up from 95th last year, and still the biggest in Africa and the ME. Massmart coming strongly in at 126th globally and second in Africa, and Pick n Pay at number 133 and third respectively – having once been the indisputable biggest retailer in the RS of A. SPAR a handsome 179th and 4th, with Woolies in a suitably muted but pleasingly symmetrical 222nd. Africa was the world’s fastest growing region, with 15.4% growth compared with Latin America’s 14.8%, which augurs well for the future.

Comment: Take that, Captain Ackerman! Kerpow!

It’s the kind of thing that probably only really works in a little place like Swaziland, but over the border, Pick n Pay have shown the fist of iron within the velvet glove to some of the region’s biggest brands and manufacturers, including Kellogg’s, Simba, Johnson & Johnson, Listerine, Aquafresh and Pampers by boycotting them on the grounds of pricing. This from food merchandise director Peter Arnold: “Most of our suppliers have responded well and we have negotiated new pricing. (But some) have not responded as well and are sticking to previously decentralised pricing despite the cost savings to them.” It is the Big Blue’s intention to replace affected product until more favourable terms can be reached through negotiation. The development is being spun as a blow for consumer sovereignty by a retailer which seeks to own that position.

Comment: A bold but risky move, where other retailers continue to stock the same popular national brands.

Ten big retailers, including our very own Pick n Pay, have joined forces in a court action to force the South African Music Producers Association (Sampra) to reduce royalties on music played in-store, or “muzak” as it is technically known. The current price is R500 per year on every 50m² where the music will be heard, leaving Pick n Pay, for example, with a bill of R1.2milion annually. The retailers believe that Sampra allows the four major record companies – EMI, Sony, BMG and Gallo – to act as a cartel in setting prices, and have offered to pay their royalties in escrow until the matter is resolved. Judge Phatudi, who is hearing the matter, says that he would be happy to know if music keeps them shopping, something we do not yet have the technology to ascertain.

Comment: For R500k, we’ll sell them a set of tapes of ourselves, reading classics like “Wuthering Heights” and “Bleak House” to keep the punters on their toes.

So Mr Badminton over at Pick n Pay has decided to call it a day while he still has his youthful looks. He has had a torrid time of it these past six years, taking over as rival Shoprite upped the ante and took the fight to the next level, and presiding over a time of dramatic change for the business notably the much-debated switch to centralised distribution. He oversaw the protracted SAP implementation and the merging of three operating regions to form a single inland region, and implemented a category-based buying structure. On his watch, Pick n Pay launched a massive loyalty programme and saw it grow from zero to four million in ten seconds flat. He trod the difficult tightrope that belongs to the CEO of a family-controlled yet publicly-traded company, and did all of this with an air of quiet dignity and unwavering good humour. He had his detractors, who missed perhaps the apparently more swashbuckling spirit of his predecessor, but the last six months will surely have muted if not silenced them – a successful fight with the Australian Competition Authorities and the disposal of Franklins, the emergence at last of a cohesive strategy for Africa, an unprecedented deal with SACCAWU and some major changes at board level to cement the transformation of the business.

Comment: Nick Badminton has served Pick n Pay, man and boy, for 32 years and will now be spending more time in the saddle of what we hope is a very nice bicycle.

Pick n Pay is busily opening stores in Zimbabwe, including a large one in the old Jaggers warehouse (wasn’t that the setting for an episode of Scooby Doo?) and has plans to convert some of its TM Supermarkets there to Pick n Pays pending approval by the Zim Competition Authorities for the increase of its stake in TM from 25% to 49%. TM, you may recall, is the biggest contributor to the coffers of the venerable Meikles group of businesses, which has interests in hotels, retail and agriculture, posting a 36% increase in revenues to $136,6million in the most recent financial year. It is also a champion – possibly a pragmatic one – of the indigenisation regulations, with a $6million staff empowerment plan in place to make it fully compliant with the BEE of Uncle Bob.

Comment: Not the first place one would think of going, PnP. But it is conveniently close to Longmeadow.

Pick n Pay have got into the money-transfer game, partnering with BankservAfrica to enable unbanked customers to transfer money to each other. The Money Transfer System (MTS) was launched in 550 Pick n Pays and Boxers in October and has been growing at 20% every month since. It’s currently the cheapest way of sending money home in the RS of A in keeping with The Big Blue’s present modus of doing it late but doing it well.

Comment:

Still casting about for ways to spend their R1.4billion Aussie windfall, Pick n Pay have gone to Europe on a shopping spree and come back with a shiny new Merchandise Director. Helmut Hoerz, previously inter alia COO at German supermarket co-op Edeka AG, where he was in charge of global sourcing, will also run merchandising in the GM category while imparting of his knowledge to recently-named Food Merchandise Director Peter Arnold and the rest of the team. A major part of the excitement for the usually unflappable Mr Badminton is Herr Hoerz’s experience in the area of Category Management, which is a major focus of The Big Blue’s drive to transform the business. Also salient is his stint at Metro subsidiary Extra, where he successfully merged eight supermarket companies into one successful chain and halted declining sales, centralising administrative functions and standardising IT systems.

Comment: There was a time not so very long ago when ignoring our detractors we said the Pick n Pay share might be worth a flutter...

And in one of those “Legends of African Retailing” stories, The Big Blue has presented cattle carcasses to a number of lucky customers who entered the festive “Win a Cow” promotion in its four Swaziland stores.

Comment:

Starting the new year with another bang, Pick n Pay have been kind enough to mention that they have signed up 0.8 out of every ten South Africans for their Smart Shopper loyalty programme, for a grand total of some 4million card-carrying members, a lot more than the Communist Party in its heyday.

Comment:

They – or more accurately, we – don’t call them the Big Blue for nothing. Pick n Pay, having triumphed over small-mindedness in that benighted land mass due east of us, and made nice with SACCAWU to avoid job losses, has come through with a winner – pioneering the drive to sustainable fisheries in the retail space. It has become the first South African retailer to commit to transform its entire fresh, frozen and canned seafood operations by the end of 2015, by which time all seafood sold at Pick n Pay will be certified by the Marine Stewardship Council (MSC) for wild-caught products; certified by the Aquaculture Stewardship Council for farmed products; and categorised as “green” in terms of the WWF Sassi list. Green fish are considered the most sustainable choices, able to handle current fishing pressure, farmed in an environmentally sustainable manner and bought from fisheries with a good track record.

Comment: Cue uplifting, electronic whale noise music.

In a deal that has been steeping for months – years even – like a pot of Tanganda tea, Pick n Pay’s increase of its stake in TM Supermarkets from 25 to 49% has been given the go ahead by the Zimbabwean Competition Authorities. It is our belief that Competition Authorities are among the only things able to survive a nuclear holocaust, and that in the aftermath, they will prevent the cockroaches and the economists from forming mergers above a certain scale.

Comment:

Pick n Pay’s latest outlet, a US$3million behemoth, relatively speaking – it’s the single biggest shop in Zambia – in the newly opened Makeni Mall in Lusaka. Again, relatively speaking, PnP has embarked on a flurry of activity in that copper-bedecked non-basket case recently: Makeni is the third PnP in eight months and the fourth in total, and Mr B has said that they’ll be looking at six more in the next five years. 65% of the stock instore is locally sourced, and the Big Blue have reaffirmed their commitment to doing the right thing by local SMMEs and commercial farmers, from whom it sources all fresh produce. In addition, the retail chain is a major local employer, with 750 staff across the country. PnP’s investment in Zambia now runs to US$10million, a sum not to be sneezed at unless you have an allergy to Mopane blossoms.

Comment: Nice one, that large blue chap. Not exactly the Red Tide you see elsewhere on the continent, but a start.

Chairman Ackerman the Younger is waxing all Old Testament again – this time weighing in thunderously on the Black Tuesday Bill, which, he feels will create an air of distress and a sense of crisis. But it’s been a big week for the Big Blue generally: the Federal Court of Australia has ruled to dismiss the appeal by the Australian competeetion authoriddies against the sale of Franklins to Metcash, which will place a whacking R1.4billion into the currently cobwebby Pick n Pay coffers, a sum which will be reinvested into the business, at least in part to continue the rollout of centralised distribution. And they’ve also reached agreement with SACCAWU on workforce flexibility which will save the jobs of those 3,000 workers previously under threat of retrenchment.

Comment: Welcome back, big guy. Although, yes, we know, you’d never actually gone away.

Pick n Pay’s recent press has been mixed, as the expression goes if the expressor is in a kindly mood, with trading margin down from 2.8% to 1.8%, territory into which few of our major retailers ever venture, trading profit down 32%, and much trumpeted market share losses to its competitors beyond the quivering folds of the Boerewors curtain. But all is far from lost as one set of significant numbers makes clear: the store numbers. Ever elusive, constantly shifting, they nevertheless tell a powerful story: four new corporate supermarkets opened in the current FY, five franchise supermarkets, 14 corporate liquor stores, six franchise liquor stores and nine clothing stores. Three Family Store franchises were converted to corporate stores, and Boxer opened four new superstores, six Punch stores, a Boxer Build and a liquor store. And according to Mr B, plans are on the worn but sturdy old boardroom table for nine new supermarkets (six corporate and three franchise), a dozen liquor stores, six clothing stores, and nine Boxer superstores as well as three Punch stores.

Comment: Although new DCs are on hold until Longmeadow is ticking along more smoothly...

Back home, Pick n Pay is centralising its buying structure and bedding down its DC and getting its SAP up to speed and spending loads of dosh on something called transformation, but not that transformation, and trying not to retrench 10% of the workforce at the cost of R250 bar, but you knew all of that. So it’s off to Zimbabwe we go, where the Big Blue is fixing to spend a passel of dollars on upping its investment in TM Supermarkets, buoyed no doubt by reports of Uncle Bob’s imminent demise on the Wikileaks. And also by the Zim government giving PnP permission to up its stake in TM from 25% to 49%, to the tune of $21 large (US). Part of this windfall will be spent on POS technology, the absence of which in all but 6 of its 53 stores has led TM to lag OK and SPAR.

Comment: To paraphrase Don Rumsfeld: everyone wants to go to Lusaka. Real retailers want to go to Harare.

More on those results: there seems to be a growing feeling among shrewd, leathery, matchstick-chewing analysts that Pick n Pay might have turned some sort of a corner, with sales up 7.4%, ahead of the market, and a whacking 4.1million cardholders signed up in the spanking new Smart Shopper Programme. On the downside, of course, there’s the small matter of profits down 31.7%, a fact which Pick n Pay have substantially attributed to investments in, erm, the spanking new Smart Shopper Programme, central distribution and an ongoing restructuring of their buying operations. Some of the more gimlet-eyed analysts have pointed out somewhat unkindly, that these measures while impressive, have yet to be proven.

Comment: If you ask us (and you probably shouldn’t) Pick n Pay looks like its squaring up to be a “buy”.

In keeping with its “good, better, best approach to no-name brands, Pick n Pay has just launched “Finest”, a range of sophisticated food products made from premium ingredients, raw materials and flavours sourced from around the world, including Kalamata olives from the Greek Peloponnese and organic coffee from Antigua, where we spent an irresponsible six months aboard a schooner in the declining years of the last century. And we weren’t drinking coffee, we can tell you that for free.

Comment:

Last week’s trading update in which Pick n Pay announced that while sales had grown, profits would halve for the six months to August was accompanied by a somewhat more chipper letter to customers pointing to the investments The Big Blue have made in the supply chain and the Smart Shopper loyalty programme, which just about says it all. Sales are indeed up, but the business is clearly not yet running as lean as it would like, with supply chain efficiencies not yet coming though to the old bottom line, and a further expensive investment in rejigging the buying structure currently underway – something that will have repercussions both within Pick n Pay and among its suppliers. And of course for shareholders: earnings before tax etc will be 10-20% lower, at which news the share price took a 4% hit.

Comment: PnP is deep in the trenches right now. But the successful disposal of Franklins should see the onset of a long slow recovery.

Fitch believe that Pick n Pay’s net lease-adjusted leverage metrics will remain above 2.3x over the medium term, a level previously considered consistent with an A+ rating, but you already knew that. Despite this, the pointy nose nitpickers over at the world’s busiest, bodiest ratings agency have downgraded The Big Blue retailer to an A, on the belief that PnP’s credit profile is going to take longer to recover in 2012/13 than the agency previously anticipated. The business’s ability to “deleverage organically” will be constrained by its weak cashflow generation after dividend due to high capex, and its agenda of transforming the business might similarly be affected not only by the highly competitive sector in which it operates but also the subdued prospects for economic growth which we are all facing in this uncertain year.

Comment: Again, with the dividends...

If you are one of the right-thinking, tech-savvy futuristas who follow us on Twitter, you would already know that the leathery curmudgeons of the Australian competition authorities are appealing the Federal Court’s rejection of their bid to overturn the sale of Franklin’s to Metcash. Metcash in the meantime has notified the authoriddy that after five business days it would consider itself free to agree with Pick n Pay to waive the condition requiring ACCC approval and to complete the acquisition. Tick, tock.

Comment:

Ex PnP CEO Sean Summers is even cooler than we thought: pointy Italian shoes, fast Italian cars, a suite at the Michelangelo and now this: a gorgeous actress/producer daughter who has done some impressive work on screen here and on stages in New York. And just looking at the pics, she’s got maybe a touch of the old when-Summers-says-jump-we-say-how-high magic in her too. We do pity the fool who has to ask Dad for her hand in marriage, though.

Comment:

Unlike generations of pickpockets, spivs, nadgers, card sharps and sheep-stealers before them, Pick n Pay have managed to escape the hard, dry clutches of the penal colony down under and will soon be taking to the shark infested seas around its grim and joyless shores in a rudimentary raft, hope in their heart and US$225million secreted about their person, proceeds of the soon-to-be-concluded sales of Franklin’s to Metcash. They will spend this windfall, we are told, on the rollout of an unspecified number of new DCs. Metcash, in the meantime, will be selling Franklin’s hand over fist to their IGA retail group members, and generating w/s sales out of the deal to the tune of $US500m plus, which is a result by anyone’s standards. In other PnP news, The Big Blue has continued to deny any truth in the rumour that it is in any kind of negotiation with Tesco.

Comment: Should there be a negotiation, and we aren’t saying there would, PnP’s 369 franchise stores, however profitable, would be an unattractively complicating factor.<br><br> <span style="font-size: 10px;">*with apologies to Aretha</span>

The big story this week is that there was a big story last week in the dear old Financial Mail. On the cover, a threatening trolley was juxtaposed with an apocalyptic earnings graph under the header: Pick n Pay – What went wrong? Promising stuff. Inside, however, the story focuses on a couple of well-trodden issues – PnP’s belated investment in centralised distribution, problems with labour and the ongoing control of the Group by the Ackerman family. On all of these, the FM seems to toe the party line: distribution – be patient, it will pay off; labour – they hate us because we are nice to them; Ackerman control – a good thing. On distribution, there was no suggestion of what a massive strategic error Pick n Pay had made by not getting started earlier, nor the role ex-CEO Sean Summers might have played in earlier implementation. In fact, the blame was placed squarely on the shoulders of recalcitrant suppliers who despite Pick n Pay’s then-position as biggest super in SA, were apparently not having any of it.

Comment: So it’s all good, then.

Yay! The Compiteetion Authoriddies in Australia have approved the disposal of Pick n Pay’s Franklin’s “asset” to Metcash, on the grounds that wholesale doesn’t exist as a sector separate from retail there, and a decline in wholesale competition cannot thus be measured, and that the deal will probably strengthen the hand of the embattled independent retail sector in a ludicrously consolidated market which appears to consist of Woolworths, Coles and … er that’s about it, really. The authority’s appeal to the Australian Federal Court was dismissed with costs to both Metcash and Pick n Pay, who are doubtless mopping their brows and downing a cold one in celebration.

Comment: So that’s one box to tick, Big Blue. And the SAP implementation, that’s another.

Patrician, dignified and becoming by now accustomed to thundering like Jeremiah on a range of relevant subjects, Gareth Ackerman has weighed in on South Africa’s lack of flexibility in the labour market, and – get this – on government’s attempt to impose ex post facto conditions on Walmart’s merger with Massmart. On the former, opines Mr A, union intransigence on issues from wages to working hours has caused businesses like Pick n Pay to look at retrenchments, while on the latter, he believes that in a globalising economy, the government’s position on Walmart has investors running for the longboats, a situation we can ill afford. And on Walmart specifically, he believes that the arrival of Walmart forces everyone to up their game on the competition front, to the ultimate befit of Joe Punter and the missus.

Comment: Covering the bases, then.

Cosatu in the Western Cape has called upon Helen Zille to sell her Pick n Pay shares as a sign that she unequivocally does not support, nor will she profit from, the possible retrenchment of 3,000 workers at some indeterminate date in the future. They have also asked Whitey Basson to cancel his annual trip to Oktoberfest in order to clarify for once and for all his position on World War 2.

Comment:

… but Pick n Pay have selected a deputy. CEO, that is, in the form of a Mr Richard van Rensburg, who quietly joined the board last year as a non-exec, fresh from an illustrious early career as a partner at Ernst & Young and founder of Affinity Logic, with some stops along the way on the boards, variously, of Massmart, Woolworths and Wooltru. His technical and financial background will no doubt assist him in the execution of his brief: to accelerate Pick n Pay’s drive to implement global best practices (in areas, presumably like SAP and centralised distribution). Other priority areas for the Transformation Office where he will install his cherry wood desk are buying and administration.

Comment: Another big move at a business which is sending a big turnaround message to the market of late.

In all the excitement last week … what? Oh, there’s always some excitement, of one form or another ... we completely and utterly neglected to report on the tempting item of newsicles that is the Sunday Times Top Brands Survey. So here, in order of meritocratic merit, is a relatively random sampling of categories:

Comment: Nice one, Unilever and Pick n Pay. And Shoprite.

Imagine the surprise of shoppers in the scenic Gauteng hamlet of Olivedale when, popping down to Olivedale Corner in their slippers and comfy old brown jerseys for a litre of milk and the morning paper, they found their local Pick n Pay Family store had disappeared without a trace – signage, fridges, cashiers, the works. There was the small matter, apparently, of a vast whack of cash owed by the franchisee to Pick n Pay, who tiring of the sad old cycle of empty promises and inevitable disappointment, closed the place down.

Comment:

Pick n Pay and SACCAWU are headed to the CCMA in order to find a way of avoiding the retrenchment of 3,200 of Pick n Pay’s staff. One of the thornier issues likely to be tabled is what might jointly be done to reduce the Big Blue’s labour costs, which came in last year at around R4.3bilion and are routinely two percentage points of turnover higher than any other retailer, which goes some way to explain Pick n Pay’s lower margin relative to the like of Shoprite. Some analysts have hailed this acknowledgement and the possible retrenchments themselves as evidence of a new hard-nosed realism in the business, while SACCAWU has taken issue with commentators who believe last year’s strike led to poor performance and thus indirectly to the retrenchments.

Comment: We look forward to an amicable resolution to this challenging situation. And to the advent of porcine aviation.

Yesterday, you will be interested to know, Pick n Pay’s share price ticked up and Shoprite’s ticked down, bearing out the view of some otherwise hatchet-faced analysts that there is nothing fundamentally wrong with The Big Blue, who believes that in terms of consumer perception PnP remains SA’s number one grocery brand, although it has some work to do re expansion, both locally and continentally. But they knew that.

Comment:

Pick n Pay has specifically said that the retrenchment of 8% of its workforce – a move which will affect all echelons in the business, including middle and senior management, and is the first forced retrenchment in Pick n Pay’s 43 year history – has nothing whatsoever to do with competitive pressure from Walmart. Cosatu blames the cuts squarely on the ‘Walmart Invasion’, in blithe and wilful ignorance of the perfect storm of factors which has affected The Big Blue’s performance in recent years.

Comment:

Pick n Pay has announced that its contemplating the retrenchment of 3,137 workers within its non-management bargaining unit due to operational requirements. According to Ops Director Neal Quirk, the decision “was not taken lightly but was required to ensure the viability of our retail business and our employees into the future.” Pick n Pay is looking at possible alternatives that may reduce the number of full-time people affected and these options will be discussed during its no doubt difficult consultation with SACCAWU. The retrenchment, if it goes ahead, will affect 8% of Pick n Pay’s domestic workforce, and is a direct response to the difficulties the business currently faces, including declining profitability and the loss of market share. Pick n Pay was criticised recently in the press for continuing to pay shareholder dividends in the light of its disappointing financial performance.

Comment: A difficult decision to make. Or, indeed, to have made for you.

Pick n Pay has scooped a hatful of awards at the African Access National Business Awards, taking home the Environmental Social Governance (ESG) prize and the Innovation Through Technology award. Boxer Superstores’ Marketing Director Andrew Mills took home the Top Performing Businessman of the Year award. Mills was recognised for his dedication to the brand, the enthusiasm he shows in the way he interacts with all staff and the company’s customers, as well as his business resilience, upright ethics and love for everything he does. One of his recent coups for the brand was the series of Diski Imbizo fan parks Boxer ran during the World Cup last year.

Comment: Nice one, PnP, especially you, Boxer.

Pick n Pay will be opening three new shopping centres in Mauritius namely at Mont Choisy shopping centre in the North, Cascavelle shopping centre in the West and Bagatelle, Mall of Mauritius in the centre of the Island. Of course, over there they call it le Pick n Pay.

Comment:

Pick n Pay has opened its first store in Maputo, a solidly respectable 3,500m² number with clothes and liquor and, as importantly, jobs for 250 locals. The store is a franchise set-up licensed to the retail franchising group Retail Masters with whom PnP have a territorial agreement for Mozambique. This local ownership means that The Big Blue will be able to leverage, as they put it, highly experienced local market knowledge and expertise. Further expansion is on the cards for Pick n Pay on the Continent, with new ground soon to be broken in Mauritius, Malawi and Angola, whose capital Luanda is reputedly the most expensive city in the world for an expat to settle in.

Comment: Our brother in law, who is a brilliant if somewhat intense young man, reckons that where there are maybe 15 formal supermarkets in Mozambique right now, there will be 200 in five years time.

Just stop it! Stop it at once! Stop your irresponsible rumour-mongering about Pick n Pay buying Tesco, because they just aren’t, alright! That’s the message coming through loud and clear from Chairman Ackerman the Younger, who has put the kibosh on that baseless speculation for once and for all, until next week, dismissing the talk as merest conjecture. In unrelated PnP news Chairman A. the Y. has expressed confidence in a favourable outcome when the Aussie authoriddies pass judgement at the end of the month on the sale of Franklins to Metcash.

Comment:

Pick n Pay subsidiary Boxer Superstores are finalists in three categories of the African Access Business Awards, South Africa’s business Oscars. The nominations are for the Customer Focus Award, the Marketing Excellence Award and the Top Performing Businessman of The Year Award, for which Marketing Director Andrew Mills has received the nod. Nice work from a business which leads at the lower-end of the market where others are just beginning to follow.

Comment:

As Walmart battles the local competition boys to get in, Pick n Pay battles the Aussie ones to get out. Reading between the lines, though, there is some light at the end of the tunnel. Metcash (Aus) has received more than 200 expressions of interest for the 80 Franklins supermarkets it has agreed to acquire from the Big Blue, many of these coming from the independent supers PnP would end up selling the stores to should the deal not go through.

Comment:

Just months after the launch of its smart card, Pick n Pay has signed up 3.1 million ‘smart shoppers’ against a target of 3 million for the first year. The cerebral fragments of polyvinyl chloride were used in just over 50% of sales, said Mr Badminton at the Group’s AGM just the other day, and might account for the slight uptick in sales for the first three months of the jolly old FY.

Comment:

Chairman Ackerman the Younger has picked up the family cudgel and is swinging it as liberally as his old man used to back when Helen Suzman was the only prog in parliament. Gareth Ackerman has become the first prominent business leader to slate the new Protection of Information Bill. What, you may ask, does the act have to do with the price of eggs? Or indeed washing powder, rusks, assorted general merchandise and specialist departments? It is Mr A’s contention that without the assurance that information is not being manipulated it is virtually impossible for the private sector to make the long-term, strategic investment decisions essential for its survival. He also believes that the private sector does not lock horns with government enough – although he himself has done so now on a couple of occasions – weighing in sternly against doing anything about the strength of the rand most recently.

Comment: Of course it may be argued that Annual Reports, where information is freely manipulated and routinely hidden, make it pretty darn difficult for the rest of us to make long-term, strategic investment decisions...

Chairman Ackerman the Elder has been awarded an Honorary Doctorate in Education by UNISA, for his efforts in the illumination of young minds through inter alia an annual contribution to the UNISA Foundation and the Ackerman Family Education Trust, which provides around 60 students a year with scholarships.

Comment:

While others are fleeing in terror or reserving their judgement, Pick n Pay is taking a punt on our northern neighbour, looking for a 49% stake in Zim’s TM Supermarkets – but the deal has been held up by the indigenisation regulations, and is awaiting approval by the Minister of Indigenisation, Employment Creation and Development. Pick n Pay already has a 25% shareholding in TM Supermarkets and intends to boost it by another 24% when the deal is finalised. If concluded, the transaction will be worth $13 million. TM Supermarkets is expected to benefit through stocking and supplier arrangements, staff training and technology transfer, and PnP with increased continental footprint.

Comment: In a country which may one day come right.

While we’re sitting here waiting for the Competition Tribunal decision, idly casting about for something to do, let’s engage in a bit of irresponsible speculation about the next Big Deal. Tesco has been doing the rounds, having a word with Sir James over at Shoprite, and a quiet chat with the young Duke of Ackerman at PnP. But there’s nothing in it, insist those worthies. Gareth Ackerman just happens to sit on the board of the global Consumer Goods Forum as do people from Tesco, and this will necessarily involve them speaking from time to time, in the normal course of their duties. Should a deal of some description be on the cards, Kantar Retail believes PnP will be playing the role of Cinderella come glass-slipper time. They believe the Big Blue is the most appropriate business partner for Tesco in terms of store formats, private labels, loyalty marketing, trading style, positioning and potential synergy.

Comment: Another such deal would certainly intensify the competition in the upper echelons of the industry, ahem.

A sad farewell to merchandise director Kevin Korb, who announced his retirement over at the Big Blue last week after 30 years before the mast, man and boy, having started as a spotty trainee manager, and enjoying secondments to Sainsbury’s and Franklins in the course of an illustrious career with SA’s foremost retailer. His ample shoes will be filled in the interim by Peter Arnold, currently head of Fresh Foods and the driving force behind the opening of the Hurlingham flagship, broadly acknowledged to be the business as far as best practice goes. In other PnP news, Bakar Jakoet has officially taken over from Dennis Cope as CFO after a respectable handover period, and Jeff van Rooyen has been appointed as an independent non-executive director on the main board.

Comment: Comment: Regarding Mr Korb, a sad farewell to one of the true gentlemen of the industry from Trade Intelligence – he has been a friend to the business.

In the wake of the less than rosy results Pick n Pay posted a couple weeks back, some investors are taking advantage of the share’s weakness to cement their position in the Pikwik holding company – notably, one Mr R. Ackerman, who recently took a punt to the tune of R4.2millions, his wife Wendy, in for a bar and some change and their two lovely children, Gareth and Suzanne.

Comment:

What’s the opposite of poker face? Whatever, it’s a condition to which Mr Badminton over at the Big Blue, is a martyr:
On Longmeadow: “Last year it cost us R100million more than expected.”
On centralised distribution: “We should have started when Shoprite did.”
On various changes implemented during the 2011 financial year: “Perhaps we bit off more than we could chew.”
Despite Pick n Pay’s current woes, Mr B remains quietly upbeat on prospects down the line aiming at “an organization meeting world best-practice standards” and achieving a more Shopritely margin in the near future. Some of the changes planned to achieve this include a new buying strategy with product specialists in place, and a swifter rollout of stores.

Comment: Yes he can!

Some of the more hatchet-faced analysts are less than amused by Pick n Pay’s results – turnover up a sketchy 5.9%, trading profit down 13.5% and headline earnings down 7%. Of equal concern is the old balance sheet: Pick n Pay’s shareholders’ equity (consisting, as you are aware, of assets minus liabilities) is R2.2bn, with R1.3bn of it tied up in Franklin’s, under threat of being sold off piecemeal for a lot less and, and the other R800million in the SA business, which is currently financing R950m of short-term and R600m long-term debt. Then there’s the trading margin, 2.7% before you factor in the ongoing costs of the Smart Shopper loyalty programme. All is not lost however. While Longmeadow is living up to its name in the time it’s taking to kick in, centralised distribution will inevitably start to deliver, ahem. As will the completion of the Sap rollout, Smart Shopper itself and various other initiatives. Fair enough. But what really stings the analyst is the heart-warming tradition, at a time like this, of paying an annual dividend.

Comment: Shareholders, eh. Can’t live with ‘em, can’t fire ‘em. More <a href="http://www.moneyweb.co.za/mw/view/mw/en/page295165?oid=535703&sn=2009+Detail&pid=287226" target="_blank">here</a> from the excellent Sasha Planting.

Pick n Pay is fighting a war on two fronts against the obergruppenfuehrers and commissars of the Competition Authorities – one in the arid wastes of Australia, where the toothbrush-moustached bureaucrats are mounting a rearguard action against their disposal of the Franklin’s asset to Metcash, and a dirty guerilla affair amid the scrub and boulders of Zimbabwe, where they are attempting to acquire a further 24% of TM Supermarkets. While The Blue One is buoyant about the prospects for the deal, it does not intend investing further in the Zim at the mo, and neither does Shoprite, which has one super in Bulawayo, and decided recently against the acquisition of OK Zim.

Comment: Although we are reliably informed that commercially speaking, things are hotting up as Uncle Bob continues his slow shuffle off the old mortal coil.

Pick n Pay’s stock has taken a knock to the tune of 4.72%, dropping to R46 per share, on the announcement that profit for the year to February will be sharply lower than it was this time last year, and that headline earnings per share would suffer by as much as 25%. This they attribute to the effects of last year’s strike during their peak trading period, to higher operating costs and to the deleterious effects of lower inflation, driven particularly by lower prices in food commodities, which was not compensated for by volume growth. Part of the problem on the costs side is that while initiatives such as Longmeadow have consumed capex, they have not yet delivered in terms of efficiencies, as DC infrastructure is only a third of the way through implementation, and catch-up, when it happens, should be decisive. Some of the less kindly analysts have suggested that the erosion of share by Woolies at the top and Shoprite at the bottom might bear some of the blame.

Comment: Tough times for The Big Blue.

Pick n Pay has opened its second store in Zambia, this one in Ndola, after launching in Lusaka last year. The Big Blue plans another seven in the next four years, buoyed no doubt by the enthusiasm with which the first has been greeted. The store – including opening stock, cost around $3.5million to open, is 800m² bigger than the previous outing and includes a clothing section. Pick n Pay has guaranteed the Zambian government that it will source 50% of its stock by turnover from local suppliers and are in fact ticking along at 65%, from 230 suppliers including agents for imported product. The two stores stock a total of 10,700 lines, and not incidentally, employ 300 something Zambians.

Comment: An impressive stake in some very fertile ground after a slow start.

Pick n Pay, you may or may not have heard, has launched its very own loyalty card, no doubt causing competitors to kick themselves and wonder why they hadn’t thought of it first. Capex to date on the project has been R140million, and The Big Blue confidently expects 3 million punters to sign on in year one, attracted by the points, and then the rands – equivalent to ten bucks per grand – they will get back on purchases. Six inaugural participants – Coke, Kimberley-Clark, Unilever, Tiger, Vodacom and Nestlé – will be able to offer further points on their products in the basket. Pick n Pay’s decision to press the go button now comes after years of research, and a period of waiting for the technology to catch up to the bolder ambitions of the scheme, which will allow shoppers to donate their takings to a person or charity of their choice, and Pick n Pay to identify and target the shopping behaviours of its customers.

Comment: That’s the way, big guy. Keep it on the down low, then boom! And we particularly like the way the programme’s “Smart Shopper” identity plugs into the post-recessionary zeitgeist.

More news for the Big Blue is that it has scratched around behind the cushions on the sofa and come up with R500million in loose change to improve liquidity and fund expansion. Selling off three-month debt in the form of interest-bearing securities, which is apparently something you can do, was also of some assistance in this regard. Investec brokered the deal, with the assistance of Absa Capital, and the excess wedge will be used for a number of worthy purposes – for e.g. to stem the Red Tide on the continent of Africa. Pick n Pay is opening four new stores in Mozambique, where there are only 15 modern retailers, but where, our brother-in-law confidently assures us, there will be a couple hundred in five years time.

Comment: It will also be of some comfort to Pick n Pay as it waits for a nervous six weeks for the Australian Competition Commission to deliberate on the outcome of the Franklins/Metcash saga.

The Big Blue is deep in the trenches of the Aus legal system as we speak, brought thence as you know by the Australian Competition and Consumer Commission (ACCC) who have lodged, if that’s the word, an application to stop the sale of Franklins to Metcash (a R36billion business, it may interest you to know, still run by South Africans 10-odd years after its sale by Metcash SA). It is the concern of the ACCC that the acquisition will substantially lessen competition in New South Wales and the Australian Capital Territory for the wholesale supply of groceries to independent retailers. PnP, in the meantime, contends rather plaintively that as a vertically-integrated retailer Franklins has been outcompeted – so presumably, its purchase by Metcash would have little effect on the competitive landscape.

Comment: If there’s one thing an Australian hates, it’s a South African making a buck on the dry red soil of that benighted land, one way or the other.

Trade Tatler (TT): Hey there, big guy. You’re looking good. Same devilish grin, same pointy shoes. What you been up to?
Sean Summers (SS): Nothing much. The usual. Globetrotting after sporting events. Losing the old shirt on a pyramid scheme. Driving Ferraris. Advising companies in the retail arena … non-competitively obviously. Generally just working out the old restraint, I suppose. Or, more accurately, not.
TT: Anything in the pipeline, at all, that we should know about?
SS: Steinhoff – heard of them? Furniture boys. I’m sort of coordinating their operations in Europe, Africa and the Pacific Rim, including of course Australia, where I have been spending some time overseeing a bit of a management switcheroo. Aus, eh. Great Southern Land. Long, straight roads, just miles and miles of eeeeeeeaaaaooowwrgh! Eeeeeeeaaoowrgh!! Screaming engines! Stampeding kangaroos! The heady, heady smell of unleaded gasoline! The almighty rush of it all!! Sorry, where was I?
TT: Steinhoff, obviously, is a sizeable business, all of whose retail revenue is derived offshore. It has recently gained access to the sizeable French market with the acquisition of Conforama.
SS: Correct. And might I just add that they are as smart as foxes.

Comment: And we might just add: it takes one to know one.

By now, we imagine, the Ackermen are wishing they had never heard of a Lend Dahnunder. The Competition Authoriddies on that benighted land mass are requiring ex-Franklins MD Aubrey Zelinsky to testify against his former employer in a federal court suit to prevent the acquisition of Franklins by Metcash. Pick n Pay reminded Mr Zelinsky of the confidentiality provisions in his employment contract, in the same letter in which they reminded him of monies still owing to him on his retirement package, an error of judgement which has caused certain legalistic eyebrows to tend northward.

Comment:

Late last year, Mr Ackerman the elder launched a new book, and it’s a page turner. Titled “A Sprat to Catch a Mackerel”, the handy tome is aimed at those of entrepreneurial bent who are casting about, if you’ll forgive the pun, for a career change and wish, like Mr A, to start a multinational grocery chain. It’s crammed to the gills with tales of derring-do from the early days of Pick n Pay and sprinkled liberally with sound business advice from the man himself. A particularly illuminating anecdote, for example, is how he borrowed the R610,000 needed for the purchase of his first four stores from Jack Goldin from 60-odd investors drawn from the ranks of friends of friends, all of whom are either now very, very wealthy or died that way.

Comment: We’re rushing off to our nearest independent bookseller to get a copy, and suggest you do the same.

In a project with Eskom, where the electricity provider changes magnetic ballast boxes on fluorescent lighting in 97 stores with electronic ones, the Big Blue, 17% of whose stores’ electricity bill comes from lighting, saved a not unimpressive R1.5million per annum, which is what we call a result.

Comment:

And in other news related to pyramids and dynastic succession, Pick n Pay has mounted its spirited annual defence of the structure by which the Ackerman family controls the business. As you may remember, The Ackermen own more than half of Pick n Pay Holdings Ltd (Pikwik) which in turn owns 51% of Pick n Pay Stores, giving the family an effective 26% stake in that chain of fine emporia. All well and good when the dosh is rolling in. But some investors believe that dismantling this structure would make the board more accountable and able to respond more nimbly to the rapidly shifting challenges and opportunities of a dynamic market environment, quoting Pick n Pay’s tardiness to roll out into Africa and their lateness in adopting central distribution as areas of concern.

Comment: Concerns like this generally pitch up in inverse proportion to the dividend. No one is currently querying the number of sons on the Shoprite board, for example.

Thwarted in its sale of Franklin’s Aus, Pick n Pay appears to be similarly stymied in Zim, where the government is blocking its purchase of another 24% of TM Supermarkets, in which it currently holds a 25% stake. This under the indigenisation law requiring foreign and white-owned firms to relinquish control to black Zimbabweans.

Comment:

According to certain gimlet-eyed analysts over at Investec, South African retail shares have had it way too good for this how long, and it’s time for a cold cup of reality. Investec disparages the argument that South African retailers offer value simply because they trade at lower PEs than their emerging market peers, and that this value will offer little protection when the free money currently finding its way to these shores becomes a little more rational in its quest for returns. Another analyst, lurking behind a veil of anonymity, has fingered Woolies and Pick n Pay as being a touch on the pricey side, the former because of its local clothing strategy, and the latter because of its sticky exit from Aus.

Comment: How did we do there? Did we sound like we knew what we were on about?

Pick n Pay has announced that in under a week they are expecting delivery of a cheque to the value of R1.4 billion, from Metcash Aus, for the purchase of their Franklin’s operations, in defiance of the Australian Competition and Consumer Commission’s ruling on the subject. The ruling has been widely excoriated in the Aussie press, elements of which believe that a strengthened Metcash would begin to provide fair competition for the Woolworths/Coles duopoly that blights that already benighted land. Metcash is playing chicken with the Commission which would then have to take the legal route in opposing the deal.

Comment: Competition authorities the world over, ahem, seem to share a sort of gung ho amateur zeal which leads to some pretty interesting rulings.

The awkward buggers down at the Australian Consumer and Competition Commission (ACCC) have scuppered, for the moment, Pick n Pay’s chances of an easy exit from that apparently pointless continent, by refusing Metcash (Aus) the right to acquire all of its Franklins stores. The transactees, if that is the expression, have extended their cut-off date for the deal and Metcash has told the ACCC in no uncertain terms that in no fewer than five business days it would take further steps to proceed with the deal. The hard men of the analysts penal battalion, in the meantime, have opined that tough as it may get, Pick n Pay should be able to get shot of Franklins piecemeal, no problem – although PnP CFO Mr Cope has said that it probably wouldn’t be at the same attractive price per store. Woolies (Aus) is apparently having a bit of a nibble at some Franklins stores already.

Comment: The whole unfortunate situation reminds us of a racehorse we once owned.

Pick n Pay has just announced a rather dramatic restructuring at the top of the business, viz that the current Exco, Retail Management Board and Group Enterprises Board are to be replaced by a Group Executive consisting of accountabilities in Marketing and Sustainability, Buying, Operations, Supply Chain/IS, Franchise, Group Enterprises, Finance, HR, Transformation and Customer. The changes, according to Ol’ Blue, are necessary in order to streamline the company’s operations with a very firm focus on customer sovereignty, efficiency and area specialisation, and, presumably, to accommodate the changes to the rest of the business which the past three years have wrought: the disbanding of Score, the rise of franchise, the retirement of Chairman Ackerman the Elder, the coming of central distribution, and the forthcoming departure from Aus.

Comment: Epochal stuff over at SA’s biggest retailer. <a href="http://www.tradeintelligence.co.za/Home/FeatureArticlePnPRestructure.aspx">Click here for more detail.</a>

The Sunday Times loves nothing better than to tot things up and then publish supplements jam-packed full of the results. The Top Ten Teapots Survey. The Best Hair in Advertising Report. And, of course, the Top Companies Survey, in which it reveals, in all its naked glory, and neatly ordered, the growth you could expect had you invested in this business or that. Our retailers do surprising well, with all of the big boys represented, as follows:

Shoprite (3); Clicks (5); Spar (18); Massmart (24); Woolworths (37) and Pick n Pay (94).

Had you decided to invest in manufacturing businesses, however, you would have had to do a little more homework. Of the hundreds of businesses available in FMCG, only 8 made the grade:

Illovo (31); Aspen (33); Oceana (38); Rainbow(64); Tongaat-Hulett (74); Astral Foods (76); Tiger Brands (77); SABMiller (81)

Comment: Salient here is that of the suppliers who made the grade, two are from the volatile sugar industry (although one of the two also does golf estates), and two from the embattled poultry sector.

Pick n Pay has announced that it will be opening its first Mozambican store, a 3000m² affair in Maputo, in a franchise territorial agreement with retail franchising group Retail Masters. This, you will recall, follows hot on the heels of their first opening in Zambia, and is slightly suggestive of their JV approach with TM in Zimbabwe. Le Grand Bleu has investigated sites the considerable length and less considerable breadth of Mozambique, and believe the former basket case holds great potential for the group, being under-represented, they say, in the type of retailing PnP does. PnP plan to support local farmers and suppliers in the venture, and to use logistics experts with proven continental experience.

Comment: Pick n Pay seems lighter on its feet, more creative and responsive, as it gets properly going in Africa. Nice one.

Pick n Pay has just announced the appointment of two independent non-execs to the board – Lorato Phalatse and Alex Mathole. The former has been most recently prominent for her position in the strategic and operational management of the Private Office of the President of South Africa, while the latter hails currently from Siemens where she holds the post of Executive Director and General Counsel: Legal and Compliance.

Comment:

As the Australian Competition and Consumer Commission (ACCC) deliberates at the speed of continental drift on the proposed Metcash (Aus) buyout of Pick n Pay’s 77 Franklins stores, the Big Blue is casting about for Plan B. This might come, according to Chairman Ackerman the younger, in the form of a series of acquisitions rather than one major one. The business has accordingly been put out to tender, and this might mean the acquisition of some of the stores by smaller players. Given that PnP are anticipating that either way they’ll get the R1.4billion that was on the table, this works out a steepish price per store of R18bar.

Comment: A determined bid by PnP to rid itself of an underperforming asset and bring a welcome bit of ready cash back home.

Last week we erroneously reported that it would cost you a flat fee of R9.99 to courier a package from 50 selected Pick n Pays to pretty much anywhere, courtesy of their new drop ‘n go courier offering with Berco Express. The correct, and far more reasonable figure, is of course R999.99. Sorry, R99.00.

Comment:

The long-running imbroglio between our two biggest retailers and the Advertising Standards Authority grinds on, with the Authority this time supporting Shoprite in its complaint against Pick n Pay for claiming that it was “consistently cheaper” and/or “consistently cheaper every day.” Given the vast amount of advertising Pick n Pay does, and its promise to never make the same claim again, the sanction applied has been lenient.

Comment:

The Times/Sowetan Retail Awards results are out, and the big winner is Shoprite, who took gold in all five categories in the grocery section, viz: overall customer experience, supermarkets and hypermarkets, and stores used for daily, weekly and monthly shopping. Economies of scale did not hurt the Big Red One, which now claims 16 million individuals frequent the stores under the actual Shoprite brand. Second was of course Pick n Pay, third SPAR, forth Checkers, and in a very creditable fifth, Boxer Superstores. TOPS at SPAR won hands down in liquor, pipping Ultra and Pick n Pay for the honour, and claiming that the recession turned out not to apply to them at all. The Awards are run by TNS Research Surveys, who canvas a range of punters for their views on the subject.

Comment: Awards eh. Where would the PR ladies be without them. And the gents, of course.

New in Added Value: Pick n Pay’s new courier service, run by Berco. Basically, Berco has installed drop boxes at 50 Pick n Pays around the country, with more to follow, and the time-strapped punter can dash in, buy a Drop-Box Retail Pack from the kiosk for a flat fee of R99.99, follow the basic instructions, fold, stick and drop, and Bob is your Uncle in van Reenen, whose birthday you had almost forgotten. It’s an overnight service, with delivery before 10.30am the following day in major centres, and is based on a popular model in the US of A, where one popular business has 40,000 drop boxes all over the show, and Tom Hanks in a beard.

Comment: One size, one price, no account: genius on the part of PnP in the drive to offer convenience to customers, and a sweet deal for Berco too, one imagines.

Inspired perhaps by fishing apocumentary® The End of The Line, the Big Blue has signed a partnership agreement with WWF’s Sustainable Fisheries Programme in support of the organisation’s Sustainable Fisheries Programme. The three-year partnership agreement is worth a total R6.1million and aims to restore over-exploited fish stocks to sustainably managed levels, whilst maintaining or improving the state of other stocks, through the application of an Ecosystem Approach to Fisheries (EAF), and reducing the impacts of destructive fishing practices to acceptable levels. It will achieve this in part by assisting its shoppers in making informed purchasing decisions.

Comment: Pick n Pay is the one retailer which can be relied upon to quietly do the right thing, without quite as much brouhaha as some of the others, ahem, seem to generate from simple acts of kindness.

Pick n Pay announced last week that it expected a 10-25% decline in headline earnings per share, citing tough trading conditions, loads of competition and low inflation as factors in the Group’s disappointing performance this year. Analysts, on the other hand, point to a high cost base, resulting largely from Pick n Pay’s belated foray into centralised distribution, which is where businesses like Shoprite and SPAR achieve significant savings through efficiencies. Pick n Pay’s dominant direct-to-store delivery model, they aver, results in too much unprofitable space, and costly staff inefficiencies. Another concern is the R15 bar in ill-advised debt rung up by cash-strapped franchisees.

Comment: A great brand and the first choice for many South African consumers, but with some major problems that have, at least, been clearly identified.

In Australia, where, you might recall, there are, like, two retailers, the Consumer and Competition Commission is busily kicking up dust about Pick n Pay’s sale of Franklins to Metcash Australia. The purchase of 85 Franklins by Metcash might, the Commission feels, have a stultifying effect on the competitive environment in New South Wales. The deal is worth R1.4billion to the Big Blue, which will pretty much break even on its investment. A word on Metcash Aus – having separated from the eponymous South African parent business in a management buyout in ’05, it has gone on to glory, turning over Aus$11beelion last year. One of the problems for the Comish is that with Franklins as a big customer, Metcash will be able to up its prices or reduce its service levels to the independent retailers with which Franklins already competes.

Comment: Tricky stuff, and not great news for PnP, who could use some right now.

Pick n Pay had a rough weekend, with a sharp and nasty industrial action by 27,000 SACCAWU members, who are demanding a perhaps unrealistic 12% increase in talks which have been going on for nine months and which last week became deadlocked. Earlier this month, retailers including Pick n Pay, Woolies and Shoprite differed on the establishment of a sectorial bargaining council which might see disputes such as this settled more easily. Tell that to the Competition Commission...

Comment:

Pick n Pay has recently unveiled a host – a heavenly host, if you will – of interesting and innovative CSI initiatives. Last week, for example, Le Grand Bleu planted 66 trees in Alexandra’s K206 Park, in celebration of arbour month and as a sort of housewarming gift to 14,000 families who have been relocated to formal housing in the historic township. In Cape Town, Pick n Pay has launched a food voucher programme, enabling would-be donors to distribute food vouchers instead of cash to street children and other needy people. Then Danny K’s anti-crime Shout campaign has received a handsome donation of R100,000 from the Pick n Pay war chest. Finally, Mr Ackerman the elder has thrown his tentative weight behind Durban’s Olympic bid, provided wet, windy Cape Town doesn’t make an ill-advised, last minute play.

Comment: Environment? Check. Food? Check. Crime/culture? Check. Sports? Check. Nice one.

Pick n Pay is having a word with Zimbabwe’s TM Supermarkets about increasing their stake from 25% to 49% as that troubled southern African nation begins to emerge from its decade-long recession, which as well-documented was brought about by a lethal combination of drought and lunacy. TM, you will recall, is Zim’s largest retailer, with 50 stores, and around 25% of the market under its belt. According to majority shareholder Meikles, revenue and sales for the group more than doubled to $144million US in the six months to June, although net income was down 44%. The transaction with Pick n Pay, a debt-for-equity arrangement, might help TM raise $21million sorely-needed US.

Comment: With Woolies reopening in Zim, things are hotting up, retail wise, in the little country that could.

In more Clicks news, they’ve just reached the happy milestone of 250 instore pharmacies, which makes them the biggest pharmacy retailer in the country, with pharmaceutical turnover at R1.5billion last year. Distribution arm UPD is also the largest of its kind on these shores, growing turnover 14.9% last year and increasing market share. No time to relax, though: Shoprite is in the unusual position of snapping at Clicks’ heels, with 104 MEDI-Rite pharmacies in selected stores, dispensing 1.9million prescriptions in the year ended June 2010, and growing sales 60%. Pick n Pay with 18 stores and plans for 40, and SPAR who have just rolled out their pilot store at Shelly Beach, have also thrown their hats into the ring, although Woolworths has judiciously removed it with the closure of their three experimental outlets.

Comment: A hotly contested space, where the numbers are not huge but which certainly seems to bring the punters into the shop.

In its drive to target the better-heeled punter with the troubled conscience – and, obviously, in order to do the right thing – Pick n Pay will be stocking an increasing number of Fairtrade products. Fairtrade is of course the Germany-based NGO that certifies products according to how sustainably they’ve been produced, in terms of both the environment and labour practices. While many Fairtrade products hail from South Africa and are sold globally, few – a paltry R5.7million worth out of a global total of $3.4billion – are actually consumed here. In other morally responsible PnP news, Le Grand Bleu is encouraging its Botswanan franchisees to buy more produce from small local farmers.

Comment: Great stuff. If you have an LSM 8–10 heartland to defend, Fairtrade’s the chap to help you do it.

25,000 SACCAWU members employed by Pick n Pay are about to join the general melee in the near future and come out on strike, for higher wages, if Cosatu are to be believed. Saccawu alleges that Pick n Pay management has “unilaterally and unjustifiably” terminated a job security and job flexibility agreement, causing serious tensions on the shop floor, and also that the Big Blue is trying to “frogmarch” it into a multi-year wage agreement. The union is also miffed that Pick n Pay has cancelled its sponsorship of the annual shop steward’s council, where management had a platform, however shaky, to share its hopes and dreams with labour. For its part, Pick n Pay says it has received no notice of the strike, which might also include a consumer boycott.

Comment: There is a better way for both unions and management, and its name is mediation.

Coca Cola, who came first in the Sunday Times Top Brands survey, followed by Nike? No. Castle? Think again. Koo, would you believe, which has been keeping us all in baked beans and apricot jam for how long now. Coke also topped the Community Upliftment section, with Pick n Pay, you will be pleased to know, in third, and Le Grand Bleu also topped the Green section, pipping an understandably downcast Woolies to the post. According to TNS Research Surveys, who pulled the whole shebang together, recessionary punters are still turning to the brands they love and trust in the downturn, and to brands they perceive to have a proudly South African element.

Comment: Fitting, as the entire discipline, if that’s the word, of branding was virtually invented by the manufacturers of the sugary brown stuff with bubbles in.

Last week Mr Ackerman Snr exercised his legendary largesse to the tune of some R850 grands worth of Pikwik shares, which he donated to various long-standing Pick n Pay employees and family members. Pikwik, you will recall, is the investment vehicle by which the Ackerman family exercises its ongoing control over the fortunes of SA’s biggest food retailer, to the dismay of certain shareholders who would like a larger slice of the action and more swing at the AGM. One of the things which gets up shareholders noses is Pick n Pay’s strategic decision to seek higher volume though consumer value at the expense of margin, which hovers around the 2% mark, whereas Shoprite and SPAR trade more robustly at 10%. More of that shareholder trivia: next to the Ackermans, Pikwik’s biggest shareholder is Datatec CEO and teen singing sensation Jens Montanana, whose shareholding rose to just over 7% last week with the purchase of R4.5bar worth of Pikwik’s crispest.

Comment: So there you go. Thanks, Mr A.

Gareth Ackerman has spoken out against the limitations on press freedom which could result from the proposed media appeals tribunal and Protection of Information Bill. While Pick n Pay has had its own battles with the press in the past, he opposed the measures for a range of well-articulated reasons, not the least of which is the potential for damage to SA as an investment destination. Trade Intelligence fully endorses his position, and commends Pick n Pay’s leadership on this important issue. For a full report on his comments click here.

Comment:

Pick n Pay’s reality-based 13 part TV series is currently in post-production as we lumberjack-shirted, bandanna-headed directors of photography like to say. The series, called Fresh Living, after the magazine by the same name, flights from September 6th and showcases a number of scenarios where a team of experts headed up by mean cook and gamine* beauty Justine Drake use their Pick n Pay Powers™ to sort out a range of domestic disasters. “While the show is aimed at providing simple, smart and affordable solutions to the kind of challenges that most South Africans can identify with,” says Mme Drake, “it also features that quintessential feel-good factor that connects us all as human beings.”
*Kind of like a blonde Audrey Tatou

Comment: There was a time when a grocer was a place you bought your veggies, cornflakes and Brasso, not an all-encompassing Multi-media, Lifestyle Brand. Not that we’re moaning or anything.

Pick n Pay Chairman Gareth Ackerman is keeping alive the grand old family tradition of weighing in with an opinion on matters of public and/or economic policy. The target this time is not apartheid, illegitimacy thereof, or fuel prices, desirability of liberating from constraints of government control, but rand strength, patchy advisability of doing anything about which. As SA is a net importer of food and food products, says Mr A., the devaluation of the rand will cause prices to inflate rapidly, hitting the poor where it hurts them most. It might also cause a wage-price spiral, which he believes the economy can ill afford. And don’t get him started on the oil price, which as it rises will lead inevitably to a premium being placed on bio-fuels, to food shortages and ever more rampant food inflation – then add a weakened rand into the mix, and Bob Mugabe could well be your uncle.

Comment: Sage and timely stuff, and good to see a business leader exercising his civic responsibility.

Pick n Pay has just officially opened its 65,000m² Longmeadow Distribution Centre, which will serve the Big Blue’s 284 inland region stores for starters, and is what might be considered a belated but significant first step on the journey to central distribution all over the show. Early successes have seen product availability up 20%, where previously up to 65% of stock was not delivered under the old direct-to-store delivery system, and those in the know say that distribution costs will fall from 6 to 7% of total down to 3% by October. Certain of the leerier analysts believe that when the time comes, PnP should be moving to own rather than rent its distribution space as rentals have a way of reducing your savings on efficiencies, and suggest that this could be a suitable way to spend the Franklin’s windfall. We’ll wait and see, says the patient Mr Badminton. Longmeadow, by the by, is wholly owned by the Big Blue, and cost a whacking R628million to develop.

Comment: A big ship takes a long time to turn around, or so our nautical chums tell us.

Pick n Pay is to be the anchor tenant in a flash new mall on the Isle of Pink Drinks. Cascavelle Shopping Mall will be an elegant lifestyle centre located at Mauritius’ bustling Flic en Flac Junction in Tamarin Bay, and will be developed by locals Medine Property in a JV with Retail Africa inter alia.

Comment:

Pick n Pay has exited Australia with more style, grace and flair than Mel Gibson, oh wait, than Captain Bligh, um, hang on a minute... Nicole Kidman? Anyway, they’ve sold their 77-store Franklins business to Metcash Aus for a more than handsome R1.4billion, to universal acclaim from the steely-eyed subalterns of the Analysts Brigade. In total, the entire venture had cost PnP an only marginally less handsome R1.3billion over the years, including a higher than expected R650million price tag on acquisition and a R275million fee for a refurb in 2007. Metcash, you may recall, was canned by Franklin’s champion and ex Pick n Pay CEO Sean Summers as Franklin’s wholesale distributor back in ’04, in an attempt to cut costs. The deal has freed Pick n Pay from the albatross it has been wearing around its neck for the better part of a decade, and at a very nice price too.

Comment: To quote Monty Python, it’s bloody seabird bloody, bleeding flavour!

Pick n Pay, eyeing a belated but determined expansion into African markets, will become the anchor tenant of Malawi’s first regional shopping centre, under development in the capital, Lilongwe. The mall, which will cover a relatively modest 18,000m² and cost $40m to develop, has been financed by the National Bank of Malawi and two major international financial institutions, and is being put together by an experienced team of South African developers, financiers, designers and contractors. As behoves Malawi’s central position, offering access into markets north east and west, the mall is to be called The Gateway, and will accommodate around 80 tenants, including of course 3,500m² worth of Pick n Pay.

Comment: Africa is retail’s last frontier, and our big boys are waggoning out in commendable droves, before the internationals pull in with their iron horses.

The Boxer Superstores Diski Imbizo’s, Public Viewing Areas (PVAs) developed by the retailer with the support of municipalities around the country, have proved an enormous success, outstripping initial attendance predictions by a whopping 228%. For the Mexico Bafana game which kicked off the cup, 204,485 fans attended the 18 Imbizos in areas around the country where Boxer has stores, with 24,000 people at each of the best-attended events in Sedibeng and Tzaneen. Boxer, which is building a powerful retail brand on its wholehearted involvement with the communities it serves, has been particularly impressed with the participation of local and provincial government, especially in KZN, where ten of the PVAs have been set up. The venues feature vast screens and stonking sound systems, plus performances by local bands and DJs.

Comment: Thanks to initiatives such as this, a feature of the World Cup has been that its magic, pageantry and unity have been available in one way or another to almost every South Africa. Awesome stuff.

Royal Pain in AGM Theo Botha has taken issue once more with Pick n Pay’s family-owned structure, which, says the activist shareholder, is antiquated and in fact illegal in many parts of the civilised world. Mmmhmm, says Pick n Pay, whose founder Mr Ackerman believes that a family-owned structure is the best way to ensure the perpetuation of the founding values, so how do you explain then that 35% of Fortune 500 companies in the US are family-controlled and account for 50% of GDP? Ah, says Botha, but collapsing the pyramid, as it were, would (somehow) put R1billion in the pocket of other shareholders. Pick n Pay’s new chairman, Gareth Ackerman, whose R3million salary bill has caused some eyebrows to tend skyward, reiterated in his inaugural AGM address the family’s commitment to retaining control of the business.

Comment: And there is no arguing with the view that if you had invested R1 with Mr Ackerman in 1967, you could buy yourself a very nice television from one of his hypermarkets today.

Pick n Pay’s electronic shelf labelling (ESL) experiment has been a big success, with positive feedback from customers and management alike. The system, acquired from Swedish technology merchants Pricer, has been trialled in 32 stores and 12 liquor stores in KZN, and implemented in the first Pick n Pay Express stores in the Western Cape. It will be rolled out into the more technologically backward regions of the hinterland based on the success of the Western Cape deployment. The system allows retailers to accurately update as many as 50,000 prices every hour, while reducing labour costs.

Comment: Which is why thousands of little digital displays on shelf end up being more cost effective than their paper equivalent.

Pick n Pay won in the (typically wordy) “Companies and Organisations with Innovative Environmental Strategies that Improve Business Performance” category in the Mail & Guardian’s Greening the Future awards, a milestone along the Big Blue’s five-year sustainability journey upon which it embarked in ’07.

Comment: It’s getting a little crowded on the old PnP mantelpiece these days. Nice one.

Pick n Pay is planning five stores in Lusaka, Zambia, over the next five years, and two in the Copperbelt, where there is apparently a bit of ready cash to be had. Under a deal with the Zambian Development Agency, the Big Blue will be engaging with local SMMEs for the construction and provision of its stores, sourcing 50% of stock from the little guys once up and trading. Pick n Pay will be investing around US$30million in the initial phases of its operation, and will create 1,000 jobs in the process. The ZDA has recorded capital inflows of $1.3billion in the first quarter of the year.

Comment: Canny stuff from PnP, which appears to be building a base in SADC before, perhaps, further expansion on the continent.

Pick n Pay is planning on opening 120 stores in the next two years, including outlets in Zambia, Mauritius and Mozambique, and on increasing its investment in Zimbabwe, where TM Supermarkets needs an injection of around R167millions in fresh capital. PnP currently owns 25% of TM, which has 53 stores across Zim, and was recently reported (in these crisp pages, for starters) as being about to increase its stake there to 49% – an option apparently not finalised but still on the table. Stores in Mauritius and Mozambique are mainly franchised, while the corporate structure in Zambia is mainly locally-staffed, so no worries on the human-power side. The Big Blue will be using Unitrans and Transit for logistics requirements during the rollout.

Comment: Despite recent uncharitable asides from various analysts, Pick n Pay seems to be in active and positive regrouping mode.

Chief finance controller Bakar Jakoet has been selected to replace Dennis Cope, he of the sardonic wit and colourful neck attire, as CFO of PnP at the end of April 2011. Jakoet has been with the Big Blue since 1984, serving in various number-crunching capacities and heading up the Corporate Finance Division since the late 90s. He will spend the intervening months learning the ropes from Mr Cope, as well as signing up for various local and international programmes aimed at maximising his exposure to international best practice. In other wedge-related Pick n Pay news, Gary Lea has been appointed as Retail Finance Director.

Comment: It is understood that in preparation for the challenges of their new positions, both men will spend a couple of hours each day fielding awkward questions in the Syd Vianello simulator.

Boxer Superstores is running a series of fan events to celebrate the World Cup and reward its loyal customers. Customers spending more than R50 over the period will gain access on presentation of their till slip to Public Viewing Areas (PVAs) nationwide, located in close proximity to the stores, and packed to the rafters with big screen TVs and loads of gees. Trade Intelligence has been invited – we’ll be running a special report, so watch this space!

Comment:

Pick n Pay has consistently come out cheapest in a basket of 24 identical items measured over seven weeks by www.myshoppingdeals.co.za, a site that offers punters access to a vast range of coupons and specials, and also measures the performance across this basket of Checkers, Woolies and PnP. Some weeks, PnP is up by as much as R33.00, others, like this week, by only R5.00. It’s a pretty fair basket, all things considered, spread across most categories, though lacking in animal protein. In completely unrelated news, The Big Blue is increasing its stake in Zim’s TM Supermarkets, buying another 26% of the business for a total of 49%, and doing a sort of stocks for stock deal, the latter being the stock PnP has lent TM to keep its shelves full while the farms were being ransacked.

Comment: It would appear that you can continue to live the Pick n Pay “lifestyle” then, even when times are tough.

Trade Intelligence extends its condolences to the Susman family, who lost patriarch David last week at the age of 84. David Susman was a former MD and Chairman of Woolworths, and was instrumental in the 1981 merger which saw the establishment of Wooltru and placed Woolies on the growth trajectory which has seen it dominate the upper end of South African retail pretty much ever since. “He had this vision of a business where quality was paramount,” says former Wooltru MD and nephew John Rabb.

Comment:

Aubrey Zelinsky, head of Pick n Pay’s Antipodean expedition, is retiring at the end of June. While the division – consisting entirely of retailer Franklin’s – turned a small profit in ’09, 2010 was not all that, with turnover growing only 1.4%. Franklin’s is currently valued at $350million Oz; Pick n Pay bought it for $139million in ’01, and has invested a total of R1.3billion in the business. Which is not, Bruce, what one would call a result.

Comment:

Pick n Pay, Shoprite and Nielsen have agreed not to talk about market share any more, which is great news for us, because, um, because ... hey wait a minute! Last time anyone checked, Pick n Pay was still the biggest guy in town with 34% (or 33.7% without its now defunct Score stores) while Shoprite had grown 1% to 30%, SPAR was coming in a game third at 25% and Woolies an understated 10%. Together, interestingly, they own only 50% of the South African food market, the rest of which is owned by the independent and the informal sector, who are more concerned with making a living than beating their chests and haggling over percentages which may or may not mean anything.

Comment: But assuming they do, isn’t it in the interests of various stakeholders to know? And isn’t it anti-competitive to collude in the suppression of those numbers? Tweet us <a href="http://twitter.com/TradeTatler" target="_blank">here</a> if you have a view on this.

Clicks, you will recall, now has 224 in-store dispensaries in its 354 stores. Shoprite, next off the blocks, has 100 and counting, quite rapidly. Pick n Pay has 17 in its Hypers, and despite the fact that Pharmacy doesn’t offer anywhere near the margins but does offer twice the headaches of Liquor, they plan on rolling out another 40 in short order. SPAR is trialling a couple, something Woolworths has not done very well – despite their deal with Netcare who were going to be getting the licenses and running the dispensaries. In 2003 legislation was passed to the effect that pharmacies, once the preserve of actual pharmacists, could now be owned by anyone, which meant open season on the now-struggling independent pharmacy sector. Pharmacy licenses are still only issued by the Department of Health, who apparently do it seldom and at random, to the frustration of the big boys.

Comment: The one advantage privately-owned pharmacy has over the corporate dispensary, is of course the personal care and service on offer – something for which many South Africans still seem willing to pay.

Capitec, who do the back-end for retailers allowing punters to draw cash at the tillpoint, are waiving their R1 withdrawal fee at various retailers for the next three months, including Pick n Pay, Checkers, Shoprite, Pep, Boxer and various SPARs. This to encourage Mrs Shopper to draw cash at the safe, well-lit till rather than the shady ATM, where all manner of muggers and scammers are champing to relieve her of her hard-earned. The upside for retailers here is that they’re able to channel their cash overflows back to the consumer, rather than having loads of the tempting stuff on hand to be filched from them, either by robbers or the banks who charge exorbitant deposit fees.

Comment: A win-win situation, as the expression goes.

Hands-down winner in both the Clicks and Pick n Pay results released last week was private label, which grew 15% at Pick n Pay (including, admittedly, their fresh section) and unspecified but substantial growth at Clicks, where it now makes up 19.2% of group sales. Clicks are targeting an eventual 20 to 25% of sales from private label, which includes such brands currently as Boots No 7, Natural Active and Weetol. No-name all over the show has benefited from punters buying down in the recession and retailers investing in quality in an area where handsome margin is to be made.

Comment: A global trend. In an increasingly fragmented market of national brands, loyalty is harder and harder to come by. Enter the man in the suspiciously plain shirt...

Le grand Bleu is planning on opening 120 stores in the next few years, in order to win customers away from Shoprite and grow market capitalisation by getting a bigger chunk of both local and African markets. It also has plans to take potentially dangerous muscle-building drugs according to Gareth Ackerman, who announced last week that the company had been put “on steroids”. The first push is likely to come in Zambia, where Pick n Pay have negotiated a 13-store, ten-year rollout with the Zambia Development Agency, although sites are also being investigated in Angola, an economy that is being superheated at the moment by the injection of crude petroleum. One thing the Blue One is not doing is handing over any of its Ackerman-owned shares to the man in the street.

Comment: Pick n Pay may have lost the current round on points to Shoprite, but under an invigorated board and with bullish expansion plans, we reckon they’ll go the full twelve.

Pick n Pay reported a slight increase of 33.7% in market share, made up presumably of punters for whom the whole supermarket/lifestyle question is somewhat academic. Turnover was up 9.8% to R54.7billion, but trading profit was down 2.5% to R1.653billion, with margin sliding 0.4% to 3% – a result, suggested Mr Badminton, of Pick n Pay not using food deflation to recover margin, but continuing to pass savings on to shoppers. On the upside, and there is a bit of that, private label grew 15%, or 26% in packaged foods, and now accounts for 15% of value sales in food. The Group also reported 17% growth in Fresh, an area in which, as you know, everyone wants to win. On the down-under side, Franklins profits did not wax neither did they wane for the year, flat lining in rand terms at a time of rand strength. Again on the upside, great achievements on the supply chain efficiency front where, thanks in part to Longmeadow, the Friendly Giant, cost per case was down 15%.

Comment: Solid foundations, or so we hope, for growth when the old silver lining appears along the storm-tattered edges of our economy.

Le Grand Bleu, la Isle Maurice, a match made in tropical heaven. PnP are planning on opening two stores there next year, and are looking at opportunities in Angola. They also intend putting 50 Daily stores into BP petrol stations across SA. Last week, it emerged in these pages, ahem, that they are on a serious medium-term rollout programme in Zambia. While Pick n Pay have been criticised for their sometimes glacial pace of change, when they move, they move.

Comment:

Aptly-named attorneys Bell Dewar have lodged a competitor complaint with the ASA on behalf of Pick n Pay, against a TV commercial flighted by Checkers. In the ad – which is, it must be said, superbly scripted – Checkers claims that 809,127 new shoppers have moved to Checkers, and that the retailer offers “the best lamb in South Africa”, “exotic new cheeses” and “finest wines” – all claims which Mr Pick n Pay requested Mr Checkers to prove were factually correct. Mr Checkers then withdrew the ad, claiming that it had run its course in any case, rather than having been hounded off the airways by Mr Pick n Pay and a bunch of lawyers named after fancy liquor.

Comment: We await a final word on the subject from Checkers’ attorneys, the grand old firm of Cohiba Montecristo.

The Boys in Blue have come up with a different approach to going large in Africa it seems, with the announcement this week that Pick n Pay Zambia (Ltd), incorporated in July 2009, has plans to open seven stores in the first five years of operations, creating an expected 1000 jobs, and an envisaged total of 13 stores in ten years. Pick n Pay have signed a US$27million Investment Promotion and Protection Agreement with the Zambia Development Agency for the opening of the seven phase 1 stores. Pick n Pay, you will remember, currently owns three sites in Zambia, which seems to be on a major drive to attract investment at the moment.

Comment: A drive South Africa might do well to emulate.

Business data boffs McGregor BFA have put together the collected thinking of all the gimlet-eyed analysts we love to meet over tiny little quiches at results presentations, and the sharp-nosed fellers don’t have a kind word to say about retail right now, unless they’re talking about Woolies, which broker consensus rates as a “buy”. Shoprite and Pick n Pay are rated as “sells”, while SPAR cracks the nod as a “hold”. Food retailers – a defensive stock in these treacherous times – are generally held to be overpriced at the Johannesburg Securities Exchange (JSE) where they trade at premium multiples of up to 18 times. However – and here’s the rub for Johnny Foreigner – they’re considered to be underpriced for adventurers relative to retail stocks from other developing countries, currently trading at a 25% discount.

Comment: Arcane stuff, but the lifeblood of this great creaking edifice we call capitalism.

The big chaps are (slightly) at odds about how low food prices will go at the till, and how long they’ll stay there. SPAR’s marketing head Mike Prentice believes that food inflation has bottomed out (StatsSA are calling it 1.6% for Jan) and that it is likely to start picking up again in the next month or so. Pick n Pay food director Kevin Korb is of the view that it will flat line at its current position for the next five or six months. While the availability of agricultural commodities and the price of food itself are of course the major factors driving inflation at the till, others naturally also come into play. Eskom’s hikes will cost Pick n Pay R85million in the first year alone, and while the intention is to absorb as much of the cost as possible, some of it will inevitably come from Mrs Punter’s patent leather purse.

Comment: The good news regarding food inflation is that at the moment, globally, supply outstrips demand.

The eager young beavers of the Young President’s Association (YPO) have recognised Pick n Pay’s new chair, Gareth Ackerman, and head of transformation Suzanne Jones... oh, sorry, mistake there, Suzanne Ackerman, with one of their 2010 Corporate Social Responsibility Awards, for Leadership, in recognition of the Group’s may initiatives in this arena. These include broad-based programmes for the assistance of small farmers, various green initiatives, their franchise model which encourages collaboration between communities, retailers and local food suppliers and their programme which pairs retired executives with farmers to the benefit of the latter.

Comment: Well deserved recognition, and nicely timed too as Gareth Ackerman succeeds his father at the helm.

Punters who have enjoyed a little flutter on retail shares will be clicking their heels and whistling jaunty tunes on the news that their investments have outperformed the index impressively over the past six months. The All Share Index has been trundling along turgidly at 10%, while Woolies shares have shot up 37% since September, and Massmart have gone up by 24%. Clicks, you will be intrigued to know, have positively screeched ahead at 50%. Foreign buyers have been responsible for at least some of the demand, which has also been buoyed by the cautious return to a more supportive shall we say economic environment. On the downside, Pick n Pay has not matched the shares of its competitors, dragged back perhaps by the perception that it is losing market share to retailers which are perceived as cheaper, and by some uncertainty over the future of its Franklin’s operation in Aus.

Comment: But nice that our sector, a yardstick of consumer and business sentiment, is ticking along so handsomely.

Last year, market share, this year, margin. Outgoing PnP Chair Mr Ackerman, who formally retired yesterday, took the opportunity in his final media conference for a sly dig at Shoprite, who recently announced that their trading margin for the six months to December was 5%. "I would not, in today's climate, want to make a trading margin of 5%. I would knock it down," he said. Pick n Pay, which has long built its house on a foundation of avowed consumer championship, showed a trading margin of 2.4% in their last set of results. In his speech, he also advised his successor, a Mr Gareth Ackerman, that business principles never change. He confessed to regrets about the failed Australian adventure but expressed hope for Pick n Pay’s slow-burning Africa campaign.

Comment: A giant, the one true pioneer of the industry in SA, takes his deserved rest, while showing that the old mind is as sharp as ever was.

Boxer is one of several retailers and cash n carrys to benefit from the patronage of the eBuhleni faction of the Nazareth Baptist Church, also known as Shembe. The faction has 5 million members and has lined up a number of businesses which offer discounts ranging from 5-15% to members, who in these difficult times sorely need them. The programme works through membership cards which double as loyalty cards, with – and here’s the cunning part – a percentage of the discount going back to the church. A win-win-win, in other words. Other businesses involved include McCarthy Toyota KZN, Build-It and Browns Cash n Carry.

Comment: A business model which could have been designed in Rome. Nice one.

New Pick n Pay stores which have been converted from the Score trading brand are growing sales at an average of 34%, according to the Big Blue’s Franchise Director, Chris Reed. Since the start of the conversion programme – and the numbers don’t necessarily add up – 52 stores have been converted, 19 to Boxers. 40 have been sold to third parties as franchises, 10 of them in Botswana to a master franchise holder for conversion to Pick n Pays, and 14 have been closed outright. While individual turnover appears to go up when a Score converts to a Pick n Pay, the overall numbers are unclear. Pick n Pay set a target of R2 billion in turnover for Score conversions, but isn’t saying whether the target was met.

Comment: The Score conversions must be a worry for Shoprite, who for a few heady years enjoyed first-mover advantage in previously disadvantaged areas.

SACCAWU have come out guns blazing in a nasty legal strike in which they’re accusing Pick n Pay – in fairly general terms, it must be said – of racist employment practices. These include an alleged tendency to rehire retired white staff, discrepancies between what black and white staff are earning, particularly among junior management, and the perceived fast tracking of white ‘casual’ staff over experienced black employees. More nastily still, workers also allege that CEO Nick Badminton made racist remarks some ten years ago, and SACCAWU is demanding that these must be withdrawn. SACCAWU has persistently turned down or ignored PnP’s invitations to meet and discuss the issues. Strike action involving 20 000 staff took place around the country last week, with more planned in Cape Town on Friday. The Big Blue has taken out full-page ads in influential newspapers repudiating SACCAWU’s claims and rapping the union over the knuckles for this mischief.

Comment: Chairman Ackerman is regarding the whole thing as a hurtful slap in the face, for which given his liberal record, he has some justification.

Last week, we reported in these pages that Shoprite would be importing some yankee apples, to the tune of 3 000 boxes out of a possible 8 million. Seems like Pick n Pay took the issue a little more seriously.

Comment:

Pick n Pay has been dragged into a legal battle it would no doubt have sought to avoid – with the publisher of a 528 page manual for mothers entitled Mighty Mom, with which the Big Blue had apparently entered into a JV of sorts for the distribution of the title. Mighty Mom publisher Philippa Robertson Smith says the project was not supported as it should have been by Pick n Pay, which she says had predicted that 120 000 manuals could be sold through their call centres. In the end, only 2 000 of the books were printed, of which Pick n Pay took delivery of 900-odd. Pick n Pay, in the meantime, say that the publisher had not furnished them with tangible deliverables, after which (reading between the lines here) it had gone lukewarm on the project.

Comment: Not even Spud could sell 120 000 copies, call centre or not.

This grand old industry we call home was more than adequately represented in the Sunday Times Rich List, with Mnr Wiese of Shoprite inter alia and the Ackerman family pitching up at 4th and 5th respectively. Wiese is worth a few bob north of R5 billions, and the Ackermans a more dignified R3 billion odd. So far so loaded. But when it comes to the top earners index, an executive position in the consumer packaged goods industry (if that’s what we’re calling it) is not all that – our main man there is SABMiller’s Graham Mackay at 9th followed by Rainbow’s Miles Dally at 12th.

Comment: The tone of the list this year is censorious rather than congratulatory when it comes to executive remuneration, SA now having outstripped Brazil in income inequality, and chaps like Supergroup’s Larry Lipschitz giving the whole thing a bad name, by being ludicrously overcompensated for presiding over a train smash.

...and Walmart, apparently stalking the otherwise peaceful glades of South African retail, looking for someone to buy. Pick n Pay, which by its own admission has had talks with the elusive beast when its representatives visited in February, has suggested helpfully that they may be interested in Massmart, but would probably wait another five years before making their foray to these shores, with an eye on the potentially lucrative markets of Africa. And by the way, it’s possible that German hard discounter Aldi may have acquired two sites here already – but private label geezers that they are, have not felt obliged to talk to any suppliers about this. Pick n Pay themselves, in the meantime, are sitting on three sites in Zambia, one of which they plan to open for trade in 2010.

Comment: The supposition has been that in the scramble for Africa, it was game over in Shoprite’s favour. But the race is not always to the swift...

It’s that time of year again, when all the little ones start rehearsing their nativity plays, and Pick n Pay and Shoprite dust off the old market share drama:

Scene: A Blasted Conference Venue
Enter Basson and Badminton, a pair of Chief Executives

Basson: Behold, gentlemen, my market share, for it is the finest in all the kingdom.
Badminton: You cad, Sir! Your market share is nothing but hogwash, hogwash I say! Mine is the true market share, vouchsafed me by the great wizard Nielsen, high in his mysterious Tower of Numbers.
Basson: That is indeed a large market share, but is it........profitable?
Badminton: This is too much! Your market share is just plain wrong...

A puff of smoke in a tasteful corporate blue.

The Great Wizard Nielsen: Enough! Enough I say! In my Tower of Numbers, I have divined that the market share of Badminton has ascended mightily this twelve-month to 33.3%, while the Pretender Basson is swift on its tail at 30.8%!

Comment: Of interest, of course, are the numbers for August and September:

Comment:

Last week, you will recall, Shoprite suspended its bid to buy into OK Zim, citing “socio-economic and political uncertainty”, with speculation suggesting that the freezing of the assets of Kingdom Meikles, which owns TM Supermarkets, may have rattled the generally imperturbable one. Another view is that the two parties could simply not agree on price. The freezing of the assets has its origins in a dispute between the Kingdom and Meikles factions of the business, and the two have agreed to split, more or less amicably, and relist separately, under pressure from none other than a Mr RG Mugabe, who is keen to now punt Zim as an investment destination, whence, presumably, the American and the British are no longer obliged to “go to hell”. Pick n Pay, in the meantime, is considering upping its stake in the Meikles-owned TM supermarkets from 25% into something a little more chunky.

Comment: Which would give le Grand Bleu the jump on Shoprite in Africa’s easiest-reached market.

Pick n Pay’s turnover for the six months ended August ’09 increased 12.3% to R26.6 billion, although gross margin was down to 18.6% from 18.8% last year, with trading profit margin down 0.1% to 2.8%. Turnover at Boxer and Pick n Pay stores was up by a pleasing 15.3%, resulting in a market share gain of 0.4%. And in other news, the Chairman has announced that he will retire in March next year, to be replaced in a non-exec capacity by Gareth Ackerman, who has grown up in the business, having served in almost every capacity from store manager to MD most of his life, in addition to running his own business in corporate finance. Raymond Ackerman listed the business in 1968; if you had invested R100 back then, you would be sitting on a tidy R1 million right now.

Comment: A lion of South African business takes a well-earned stretch under a cool acacia. What a career.

Plucky outsider KFC won the Grand Prix in this year’s Sunday Times Top Retail Brands Survey, would you believe it, with Edgars next and Shoprite blustering home in third, and Clicks in fifth, after non-retailer Spur, narrowly pipping Pick n Pay in sixth. In the Overall Grocery Shopping experience, however, it was Pick n Pay in pole, with Shoprite, Checkers, Woolies, Spar and Game screaming up the straight in that order. Game (first), Makro (third) and DionWired (fifth) delivered the goods for Massmart in the Electronics category, while Woolies Food Stops came in at a creditable third in the forecourts division.

Comment: Oddly enough, Pick n Pay came nowhere in the Favourite Family Restaurants category.

There’s a subtle war of words in the media between Clicks and the independent pharmacies with which it competes. Recently, we reported that USAP, a grouping of independent pharmacies, had released results of a survey which suggested that the punters are more interested in convenience and tender words when it came to their pharmaceutical requirements than they were in price. Now Clicks skipper David Kneale has come back with a raking broadside, suggesting that customers may be paying more on their dispensing fees and admin costs than they will at in-store pharmacies and by inference, Clicks itself. Clicks currently owns around 15% share of the prescription market and is facing stiff competition from all sorts – Shoprite, Pick n Pay, Dis-Chem, and the plucky independents themselves.

Comment: Don’t know about you, but we find there’s something unsavoury about the big boys circling the independent sector and licking their chops. Small businesses, even in retail, are the safety net of any economy.

Shoprite CEO Mr James Wellwood Basson received compensation to the tune of R24.1 large for the year to June after scraping by on R16.6 bar last year. This after playing no small part in Shoprite increasing sales by 25% for the year. It’s a tidy sort of sum – three times what Nick Badminton of Pick n Pay pockets, and 70% more than Standard Bank’s Jacko Maree.

Comment:

Men of the African soil Pick n Pay and Shoprite are sizing up for a showdown in the savannah as they eye the newborn Impala and sickly Wildebeest of the Zimbabwean grocery market. While Shoprite is painting Africa red, don’t discount the wily old lion that is Pick n Pay – they’ve been operating in Zim for ten years with a 25% holding in TM Supermarkets, the country’s largest chain with 37 outlets, and are keen to open more outlets under the Pick n Pay and Price Rite brands. And Shoprite, as you know, is going after OK Zim, the second largest chain with a value of US$241million. In the meantime, Morgan Tsvangirai has suggested that rugged South African Investors are the sort our wild and untamed continent needs.

Comment: Her green eyes blazed. “You are most arrogant man I’ve ever met,” she said. Taking her roughly by the wrist...