THIS ISSUE: 24 Jul - 31 Jul
RETAILERS AND WHOLESALERS
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Pick n Pay You don’t say!
And so this round of interims and trading updates goes on, a heady combination of bragging and innuendo, like grannies at tea. “Young Richard’s done beautifully at Pick n Pay this term. Trading profit was up 21.8%, on turnover that increased 6.8% to R32.1 billion, fancy!” “Ooh, that’s nice dear, but how was his like-store growth?” “Lovely thank you, 4%. Mind you, he says the customers are shopping around a bit for better prices. Things have got very dear these days.” “I saw his lovely Brand Match advertisement in The Mercury the other day.” “Yes wasn’t it nice? And he says their supply chain, distribution and store replenishment systems are improving. He’s making determined progress on his strategy to centralise all products except for live fish and newspapers.” “That’s what I’ve always said: you should never centralise your live fish and newspapers.”Comment: He’s a lovely young man, that Mr Brasher. And very handsome!
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UMS A declaration of independents
Strength to strength there, UMS. Having started out in life as a fairly straight-forward wholesale buying group, the business formerly known as Unitrade has evolved into a complex, value-driven voluntary trading association designed to provide the independent trade and suppliers with all the value found in any large corporate chain. They’ve provided their stakeholders with business to business campaigns; group marketing strategies; supplier partnership programmes; and sales and merchandising teams, and established SA’s first training academy specialising in the development of independent wholesalers and retailers. And now they’re launching Best Buy Foods, a new direct purchasing service that allows members to buy directly from suppliers while accessing all of the benefits of the UMS universe. The chief criteria for participation is scale – generally, larger independents will participate – and a progressive mind-set.
Comment: What we in the industry call a win-win.
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Shoprite Wasamatta you?
Executing a strategic withdrawal from Uganda this week would be one Shoprite, which has sold its remaining two stores in that once-troubled East African nation to Nakumatt of Kenya. Nakumatt has eight stores in Uganda already; Shoprite recently closed one in Kampala citing under-performance and a bad location. You may recall that Shoprite closed shop in Tanzania by selling its three stores there to Nakumatt; this sale marks the end of The Big Red One’s East African presence. And lest you question their staying power, Shoprite have been in Uganda for 15 hard years.Comment: The sophistication and maturity of East African retailers has made entry into those markets difficult for South African businesses. And as Massmart has recently shown, acquisitions and JV’s there are not without their challenges either.
MANUFACTURERS AND SERVICE PROVIDERS
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Johnson and Johnson Innovation nation
Go on, have a guess. Which business do you reckon invested most in research last year? What? Ah yes. The headline. We see what you mean. Ok then: guess what they spent? Eh? Wrong! It was in fact $8.5billion, American, or more than four times that of nearest rival P&G and 11% of sales. But before you nod sagely and tell that hoary old story about 3M from the 90s, remember that Johnson & Johnson has massive exposure in healthcare and pharmaceuticals, and that this is where the bulk of that spend went. Although some of the innovation, to be fair, spilt over into its consumer arm. A canny strategy, anyway: products rolled out over the past five years accounted for 25% of total sales last year.Comment: There is a line of reasoning which goes that much R&D in pharma goes into the discovery of conditions for which existing products turn out to be the answer. But, as you know, we at The Tatler are not so cynical as to subscribe to such a view.
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SABMiller The groundless rumour department
It’s been weeks since we indulged in reckless speculation about a possible SABMiller transaction. Days, even. So here goes: could it be that in order to drive their price up for a putative acquisition by Anheuser-Busch InBev, and also to get on the right side of the regulators, SABMiller might sell its stake in MillerCoors LLC, their JV with Canadian outfit Molson Coors? Since MillerCoors is the second largest brewer in the US, and transaction involving it and number one AB would in all likelihood be frowned upon by the competition authorities. AB would be forced to sell the business in the event of a transaction, retrospectively reducing the value of the deal. Hence the idea that SABMiller could pre-emptively cash in with a sale.Comment: And might it not also be possible that in order to sweeten the deal, SABMiller might throw in the map to President Kruger’s Gold?
TRADE ENVIRONMENT
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The Interest Rate Prime Evil
And so, once more, it has come to this: a repo rate hike of 25 basis points in order to curb the profligate consumer spending which has seen inflation hit ….erm, a surprisingly low 4.7% for the month of June, although the outlook for the year remains highish at 5%. And it was not brought thither by profligacy, either, but by people buying necessaries like fuel and electricity which have become more expensive through scarcity and incompetence respectively. Anyway, the repo rate has now hit 6%, and prime 9.5%, and the outlook for economic growth continues to be poor, with both supply and demand constrained against a backdrop of poor business and consumer confidence.Comment: Look, we’re a bit thick; economists, so they assure us, are emphatically not. But there must be a better way of getting an ailing economy going than by making everyone immediately a little bit poorer.
IN BRIEF
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Red Bull Jumping the shark
Not a business to ignore an occasion for guerrilla marketing opportunism, surf sponsors Red Bull made sure last week that the surviving contestants of the Red Bull J-Bay Original, Mick Fanning and Julian Wilson, had Red Bulls in their hands during the press conference after the shark-ridden final. Because a nice soothing can of Red Bull is exactly what we always grab after moments of nerve-jangling terror. -
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Coca Cola Zero to hero
In line with the regrettable trend that sees rugby players sporting frosted tips and toned buttocks, Coca-Cola will for the first time lead a sports sponsorship campaign with a sugar free product as Coke Zero’s sponsorship of the Rugby World Cup kicks off, to employ an anachronistically butch sporting metaphor. One imagines that Dr Craven is reaching for another celestial Klippies and Coke to calm his nerves. -
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Aldi and Lidl They’re a dangerous breed
Like the common rabbit (Oryctolagus cuniculus) before them, Aldi and Lidl are proliferating in Australia, threatening the more delicate of the native retailers. Lidl is negotiating with the government of the state of Victoria for a smoother entry into that great state, while Aldi appears to be benefiting handsomely from the new willingness of consumers to switch retailers in search of value.
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