
THIS ISSUE: 27 Oct - 01 Nov
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Pick n Pay Once more unto the breach
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.
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BP Express And of course, donuts
With big retailers screeching into the forecourts like so many souped-up Camrys, it’s heartening to see that the petroleum boys still know how to run a kaffee. BP have announced a multimillion rand upgrade of its BP Express stores over the next three years, introducing a new range of food rather unimaginatively called Fresh, which will place the emphasis (like FVC’s Freshstops, presumably) on fresh fruit and veg, baked goods, home-meal replacements and grab ‘n go meals for commuters. BP, you will recall, has enjoyed success not just with the rollout of Pick n Pay Express stores at some of its residential stations, but also with Wild Bean Café, which is now to be found in 120 of the 170 BP Express stores across South Africa. Hot meals, beverages and Wi-Fi for consumption in store will continue to be the focus of Wild Bean, while Fresh will cater to the itinerant.
Comment: Exciting stuff. A vibrant and competitive sector where there is still plenty of room for movement and growth.
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Fruit The Society for the Advancement of Badly-fitting Acronyms (SINBAD)
Those legal and regulatory boys like nothing better than beating an acronym until it screams, and so it is with this otherwise rather nifty initiative from Fruit SA. The Sustainability Initiative of South Africa (SIZA) is aimed at replacing a whole bunch of standards and audits for producers with a single, lean and effective one which is both aligned to South African law and internationally recognised. To arrive at this standard, Fruit SA engaged the assistance of the more stodgily-named Global Social Compliance Programme (GSCP), whose role it is to harmonise ethical requirements and avoid duplication of audits while ensuring global standards are adhered to. The Programme enjoys the support of many global retailers, including Tesco, M&S, Walmart, Ahold, Carrefour and a certain Pick n Pay of earlier notoriety. SIZA is open for membership to producers, exporters, and various other stakeholders across the supply chain, and might one day be available to the greater agricultural industry beyond the elysian orchards of the fruit growers.
Comment: It sounds like a step in the right direction to us. But then we’ve always had a bit of a weakness for audits and standards.
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Unilever Hawks and Dove
Le Grand Bleu, speaking from its modernist cliff-top lair above Juan Les Pins, announced that revenue rose 10.3% to 13.36 billion euros for the third quarter of the FY it amuses us to call 13. This just north of the predictions of analysts, and buoyed ever so slightly – to the tune of 4.1% – by a favourable exchange rate. More notable was the performance, once again, of its emerging markets, particularly China, where a new urbanised generation of hygiene-obsessed scrubbers of domestic surfaces can apparently not get enough of either Dove or Cif – this as the Chinese economy begins to slow, and rival Nestlé reports weaker sales there. Russia is also doing rather well under challenging conditions, and across the emerging markets, which account for 55% of sales, growth exceeded 12%.
Comment: Those emerging markets, which Unilever targeted very strategically some years ago, have proven an excellent bet.
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Grain A grain of truth
A big chunk of the world’s grain market is controlled by four major trading houses – ADM, Bunge, Cargill and Louis Dreyfus – along with global commodities trader Glencore and Marubeni of Japan, and with these latter two having made major acquisitions in the last few months and ADM currently attempting to buy Australia’s last independent grain handler GrainCorp, this state of affairs is likely to worsen. With prices being controlled by so limited a group – together they currently own around 75% of the world market – it could put the squeeze on producers while still increasing prices for consumers. This against a backdrop of increasing volatility in the grain markets – corn prices increased 40% in less than a month last summer, with soybeans and wheat also shooting up dramatically. Predictably, the budding monopolists are talking up the “efficiencies” attendant upon consolidation.
Comment: At its end stages, it’s curious how closely capitalism can resemble its philosophical opposite.
IN BRIEF
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Nakumatt Big time rush
Get your skates on, gang, the Kenyans are making a big play for East Africa. Nakumatt have just opened a US$3million store in Mbabrara, West Uganda, their 37th on the continent, and are planning to accelerate growth in Kenya this year. They’re also planning to launch a multi-currency prepaid card to their existing loyalty programme – which sounds devilishly sophisticated to us.
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SPAR Net profit
Here’s what some well-placed sponsorship can do: the SPAR-NMMU Netball Club down in PE, having recently been recognised as Sports Club of the Year, has won the provincial netball league for a seventh consecutive year, sending several players and management to represent South Africa internationally. And naturally, SPAR will be investing for another three years, good on them.

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