THIS ISSUE: 17 Sep - 23 Sep
YOUR NUMBERS THIS WEEK
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Pick n Pay Summers’ back
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.
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Woolworths The rebirth of cool
The Woolworths turnaround strategy for Aussie acquisition David Jones is showing early signs of succeeding, with sales for the 11 months through June growing 6.4% to $Aus1,9bn, and operating profit rising a bushwacking 28.8% to $161m. Even more encouragingly, sales rose 10.7% in the second half of the FY, lifted thither in part by the disciplines Woolies has introduced into the business. The Dapper One has cut 180 underperforming brands from the racks, adopted a new pricing architecture, and banished the spreadsheets by which the once-creaky retailer kept track of things. Next up, getting more customer data out of the loyalty programme and perhaps venturing into food, with WCafé’s and perhaps gourmet standalone stores coming into the mix to bolster the efforts of the four underperforming food halls.
Comment: Touch of class, eh. That should do the job.
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Labour The Langalibalele Rebellion
In Pietermaritzburg, which nestles into the green, green hills of Natal under a comfortable blanket of smog, the EFF have fired the first metaphorical shots in what might be a brief and opportunistic skirmish, or may be a long war of the sort that all too often plagues this bucolic province: it is too soon to tell. Anyway, long story short, last Saturday afternoon, an EFF crowd stormed the Langalibalele Street Pick n Pay in an effort to convince management to employ staff permanently rather than temporarily. The EFF accuse The Big Blue not only of employing temporary workers but also of rotating them in order to pay them less, and maintain that up to 60% of staff are casuals. And lest Pick n Pay feel unfairly singled out, EFF have promised further action against Checkers and other chains for similar labour practices.
Comment: Casualisation is a problem in the large retail workforce, where demand for labour is seasonal and margins are slim. And the EFF are proving themselves masters of finding a grievance and making of it a bandstand.
MANUFACTURERS AND SERVICE PROVIDERS
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SABMiller Oh, it is on!
SABMiller, which had modest beginnings as South Africa’s monopoly producer of the gold and fizzy, might well end its career as part of the world’s biggest beer business. In the lumbering dance of the giants that is the story so far, Anheuser Busch InBev has now formally told SABMiller that it will soon be tabling a proposal regarding a merger, although the specific terms have not as yet been revealed. For its part, SABMiller has coyly stated that it will “review and respond as appropriate to any proposal which might be made.” In the meantime, doubts have been raised about the future of a significant asset: CE Snow Breweries, brewer of the world’s biggest beer by volume, which SABMiller co-owns with China Resources Enterprises (CRE). The change of ownership implied by an AB deal would probably give CRE the right to purchase SAB’s stake, or failing that, the Chinese competition authorities might step in, wielding a hammer or indeed a sickle, to take Snow out of the equation.
Comment: The markets are still pretty excited by the news though, with SAB’s share jumping a fifth straight away.
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Clover Growing the culture
Joining the great Hedging of Bets that is the rush into Africa is, this week, Clover, which have announced that they will be shortly making an announcement (announcements about forthcoming announcement being all the thing right now) about strategic acquisitions it will shortly be making in the exciting geographies of Angola, Nigeria and east Africa for a total cost of R470million. And also, putting down deeper roots into the fertile soil of their home province, Kwazulu-Natal, where they’re considering an R890million mega-factory in Estcourt. This would produce powdered and long-life products of the sort able to weather the stretched supply chains of a continent where milk does not stay fresh for very long. This in a year in which operating profit rose 80.3% to R509.1million off sales which climbed 8.6% to R9.3billion. While the economic climate has proved something of a drag on sales, punters have apparently enjoyed the new lines of yoghurt and custard introduced since the expiry of the Danone restraint and the acquisition of the Dairybelle yoghurt and UHT businesses.
Comment: Canny moves from the business which brought you Project Cielo Blue, how many years ago now?
TRADE ENVIRONMENT
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Economic Freedom Voodoo Economics?
Another week, another grim milestone. This time, South Africa dropped from 89th to 96th in the Fraser Institute’s ‘Economic Freedom of the World’ rankings. These rankings rest on the existence, expressed by Adam Smith in The Wealth of Nations, of “basic institutions that protect the liberty of individuals to pursue their own economic interests result in greater prosperity for the larger society”. Economic freedom is good for nations – those in the top quartile have per capita GDP of $39,000 compared with $7,000 for those in the bottom quartile – and it’s good for the poorest members of any given society, too, with the poorest 10% in the freest countries earning six times as much as their counterparts in the least free nations. The good news? The Fraser Institute has a competitor in the form of The Heritage Foundation, and by their measure we’ve actually hit the bottom of the curve and are already on the way up.
Comment: Cracker of a read, that Wealth of Nations. We couldn’t put it down, us.
IN BRIEF
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Tesco A vote of nonfidence
If you had had a bit of a flutter on Tesco stock, wouldn’t you be disconcerted to discover that the entire board only held 350,000 quid’s worth of stock in the grocery chain, and that the makhulu boss, David Lewis, hasn’t bought any in the time since he took the job? In April, Tesco posted a humongous loss of £6.4bn, amid sinking sales and an accounting scandal. If the architects of the turnaround plan aren’t backing it financially, goes the thinking, should anyone?
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Poultry Chickenhawk Down!
That nasty chicken war we were having with the USA, that you thought was all settled? It isn’t. Having agreed like gentlemen on a quota for imports, we’ve been blocking them on rumours of avian flu in the States, once again threatening our participation in AGOA. This has led US Senators Chris Coons and Johnny Isakson to write letters to no less a personage than our president, Jacob G. Zuma, urging him to sort things out “expeditiously”. Or, like that guy in Apocalypse Now might have said, “with extreme prejudice.”
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