
THIS ISSUE: 24 Mar - 30 Mar
RETAILERS AND WHOLESALERS
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Pick n Pay War of Words
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.
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SPAR Nigeria Arteeful dodgers
While business is challenging at the best of times (understatement? Ed.) in the oily waters of Nigeria, SPAR is there, and doing rather well by all accounts. The Nigerian operation is run under the usual licence by the Artee Group, which has seven stores across Lagos, Abuja and Port Harcourt, aggregating over 20,000m2 of retail space. The plan is to open up in three further cities by the end of 2016, upping the number of stores to 12 and adding another 9,000m2 of retail space. The latest store is particularly worth noting: it’s located in the Murtala Muhammed Airport Domestic Terminal in Lagos, offering groceries and fast food to passengers and terminal staff alike.
Comment: Local knowledge is a key ingredient for any business wishing to succeed in Nigeria.
MANUFACTURERS AND SERVICE PROVIDERS
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Coca-Cola Coke and mirrors
Coke has missed profit targets for two years in a row, which you’d know if you’d followed Oracle of Omaha Warren Buffett into the stock, as many have. It’s this new “health” craze, which is proving a little more robust than previous teenage fads like the jitterbug and roller-skates, and well, Coke itself, and has led Big Red down strange paths – for example, hawking tiny cans and bottles of the brown beverage on the understanding that less is more, and investing in super-healthy juice businesses. But it all may prove too little, too late, and word on the street is that Coke might just be up for grabs in the next couple of years, and that the habitually acquisitive Anheuser-Busch InBev might be buying.
Comment: Hell of a world we live in, when the honest purveyor of a brown, fizzy, caffeinated lifestyle accessory can’t even make a buck. Perhaps we are living in the long-rumoured Twilight of the Brands™, after all.
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Unilever Completely bonkers
“It would be very insane to continue like this for months and months,” says Unilever’s Africa President Bruno Witvoet of Nigeria’s looming currency crisis, although to be honest he could have been speaking of the Lagos traffic or the national costume or pretty much anything Nigerian as far as we can tell. What you have, basically, is monetary policy which has led to a record gap between the official and the black-market rates of the Naira, creating an environment in which it is nearly impossible for businesses to make rational (or presumably legal) decisions. In order to prop up the Naira, you see, the government has placed crazy restrictions on various imports and this has led to a shortage of foreign currency, sending businesses like Nestlé and Unilever scurrying from bank to bank to meet their daily financial needs.
Comment: Unilever remain bullish about their prospects there, in all fairness, having invested $150million in the local operation in recent years.
TRADE ENVIRONMENT
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Inflation If I had a hammer…
If, like the Reserve Bank, you prefer your inflation to stay within a nice, even 3-6% band, this would have been a disappointing week for you – the CPI rose 7% year-on-year for the month of February, after January’s 6.2%, leading the hoary sages over at Nedbank to predict another rate hike in the not-too-distant future. Although given the recessionary tendencies of our current economy, such hikes should not be too high – another 25 basis points, perhaps, in the next two meetings. Unsurprisingly, food inflation at 8.8% was the main driver of the increase, with bread and cereals up 10.6%, oils and fats up by 17.8%, fruits up 13.2%, and vegetables up 21.6%.
Comment: If the only tool you have is a rate hike, every problem looks like profligate spending by irresponsible consumers who need to be penalised.
IN BRIEF
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Pick n Pay Freedom’s just another word for “nothing left to lose”
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.

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