THIS ISSUE: 18 Feb - 24 Feb
YOUR NUMBERS THIS WEEK
RETAILERS AND WHOLESALERS
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Shoprite Heart of Whiteyness
You will by now have received our sober and comprehensive review of Shoprite’s interims. For those few who didn’t, here’s the lazy, irresponsible man’s version: Turnover up +8.8% to R62.52bn, solid, but substantially behind the 12.5% reported for the same period last year; operating profit up 15.3% to R3.38bn and operating margin up from 5.1% to 5.4%; liquor stores the star performer with sales growth of 31.6%; 217 new stores of which 52 were South African supermarkets. And at this point it’s over to you Mr James Wellwood “Whitey” Basson: “Shoprite has done very well in my view, in a very depressed and difficult economic climate. Sales growth for the second quarter was substantially better than the first quarter.”
Comment: On sales growth, we ourselves prefer not to opine. But the profit numbers suggest efficiencies observed and costs curtailed, always critical at a juncture like this.
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Woolworths Another byte of the cherry
Some revealing stuff this week from The Dapper One about how they intend to continue to totally crush it for the forseeable future: they’re going to use those computer gadgets we’ve been seeing more and more of these days. That’s right: it’s all about data-driven strategy, apparently, and in this regard Aussie businesses Witchery and Country Road are the leading lights in the group. Feeding the need for this data is an increasingly wired shopper base, with online now accounting for 20% of sales at Country Road, for example, and growing at 55% per annum; and the large number of punters with Woolies’ plastic in their wallets – 73% of shoppers now carry a WRewards, MySchool or Woolworths credit card, and these represent a rich seam of data and insights. That’s not the only change coming down the pike: in ten years, black shoppers have gone from 20% to over half of the total in the South African business, and this is likely to continue. On the downside, Woolies expect competition from international retailers to be a growing feature of the SA retail landscape.
Comment: Fascinating stuff from a retailer which is adept at keeping up with the challenges and opportunities of the day.
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Fruit & Veg City Love your work!
Food Lover’s Market had a “problem”. It had grown too large for the competition authorities to approve its acquisition by another of the retailers, yet not large enough, perhaps, to raise money through a listing on the JSE. But it needed to grow. Enter private equity outfit Actis, which has acquired three South African business over the past 18 months – Coricraft, Tekkietown and credit bureau CSH and which has just been given the nod for its purchase of 30% of Food Lover’s. Actis has investments in various emerging economies, including China and India, and countries across Africa, Latin America and south-east Asia. Its expertise in Africa is a particular drawcard for the retailer, which is keen to expand on the continent but is understandably leery of the logistical and bureaucratic complications this involves.
Comment: Stories like this – of growth and dynamism – give lie to the prevailing narratives of gloom and despair on Facebook walls and in living rooms across the Beloved Country.
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Pick n Pay Jammy!
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.
MANUFACTURERS AND SERVICE PROVIDERS
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Distell Stop wining!
Nice work from wine and spirits crew Distell who have not graced these columns with their classiness for far too long. They’ve grown revenue 11.2% to R12.2billion on the back of 7.7% volume growth. Operating profit was up 16.5% to R1.7billion, and that is by no means it, not by a long chalk. The business has plans to double in size by 2020, through organic growth on the thirsty continent of Africa and a partnership in the US with the Terlato Wine Group, which is enabling Distell to distribute its products more widely in that promising geography. Terlato has combined its Artisan Spirits division with Distell's US spirits division, in a JV that will bring brands like Bisquit and Bunnahabhain to an appreciative American market.
Comment: And why not, eh? Not easy being a Yank these days.
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Supergroup Wheels within wheels
To paraphrase a popular internet meme: “Damn, Supergroup! Back at it again with the profitable vans!” Revenue up 40% to R12.2bn for the first half, with profit increasing 22% to R601.2m, on the back of recent acquisitions – R4bn for Aussie vehicle finance crowd NCL and 75% of German logistics firm IN tIME, and most significantly for the current results, UK Ford dealer Allen Ford for R606m in 2014. Sadly, operating profit from the local supply chain business was down 9.6%, although fleet operations boosted operating profit by 62.6% in South Africa and destinations north.
Comment: All things considered, the pursuit of foreign income streams remains a good strategy for South African businesses in this time of low growth at home and a weak rand carrying our tattered banner abroad.
TRADE ENVIRONMENT
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Food Prices A hungry man is an angry man
Grain SA has suggested that food riots could result from an expected hike in food prices on the back of the worst drought in recent years and the weakness of the rand at a time when we need to import 3.8million tons of maize to keep the people fed. They have suggested that it’s time government and business, together with farmers, sat down to discuss how best to keep people fed, both as the immediate effects of the drought play themselves out and down the line, when embattled farmers might not have enough cash to replant in the event that the rains return.
Comment: There seems to be a rising willingness for government and business to see themselves as part of the same ecosystem, with similar responsibilities to the South African consumer/citizen. It’s unfortunate that it takes crisis to bring us to this.
IN BRIEF
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Beiersdorf Smooth!
Our friends Beiersdorf have done very well for themselves this year, with full year profit up 15% to $748.7million globally as thirsty skins everywhere demand their daily draught of Nivea and Eucerin, particularly in the torrid climes of Latin America.
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Mondelez Creamy!
Word on the street is that snack giant Mondelez could be selling its cheese and grocery division, which includes Philadelphia Cream Cheese. Kraft-Heinz has been mentioned as a potential buyer (since it still has the American rights to the creamy stuff, and therefore the option to buy back the European portion), although various other businesses are also reportedly keen. Philadelphia has been absolutely massive since the mid-1990s, when someone discovered you could slather a block of the stuff in some sweet chili sauce, surround it with little crackers and present it triumphantly as your own work at the PTA bring-and-share.
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