THIS ISSUE: 01 Sep - 07 Sep
YOUR NUMBERS THIS WEEK
RETAILERS AND WHOLESALERS
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Pick n Pay/Massmart Cut it out you two!
Massmart has taken its fight against Pick n Pay to the highest court in the land: the Idols panel, ok kidding, the Constitutional Court, a body which generally deliberates on weightier matters than who is and is not entitled to sell a pack of Provitas in whose mall. At issue, you will doubtless recall, is whether Pick n Pay can prevent Massmart’s Game outlet from selling food, specifically in the Cape Gate mall. Pick n Pay took the case to the Cape High Court and won, Massmart took an appeal to the Supreme Court and lost. Now they’re trying their luck in the more rarefied halls of the Constitutional Court itself, contesting that a business has no truck enforcing a contract with a mall owner by suing a third party – Massmart – with which it has no contract.
Comment: The irony is that the practice of anchor tenants demanding exclusivity is thankfully becoming less prevalent, smacking – as it does to us – of anti-competitiveness.
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Woolworths Strewth
We say Woolworths (see section header above) but what we’re really talking about here is their execrably-named Antipodean acquisition Brad Murray. Erm, Les Forsyth. Jonty “Ripper” Randall. Something like that. David Jones? Nah, that couldn’t have been it. What kind of name is that for a retailer? Anyway, you know the one. Turns out that D. Jones has something Woolies is very, very good at: getting the posher punter to part with their pecuniary possessions, even when times are tough. And as Jones roll out their upmarket food stores with their premium private-label goodies in Melbourne and Sydney, competitors Woolworths (not that Woolworths, another one) and Coles are getting antsy, as their shoppers tend to be more price sensitive. Still, together they control over 60% of the Aussie food market, and Jones is unlikely to achieve the sort of scale that would become threatening to their very existence.
Comment: Seems as if Australian retail is even more stultifyingly consolidated than our own market. Why are we not surprised.
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Cashbuild Build it and they will come
Look, normally we wouldn’t do this, but slow news week on the retail front, and Cashbuild does compete with both SPAR and Massmart, so here goes. Those Cashbuild results you never even knew you were curious about: Group revenue up 13% to R8.7bn in the year through June, with operating profit up an even-more-giddy 33% to R612m. Cashbuild is Southern Africa’s biggest retailer of building materials and the like, with 284 stores in SA, Namibia, Lesotho, Botswana, Swaziland, and Malawi – a number bolstered of late with the addition of 10 DIY stores and the purchase of 42 P&L hardware shops. Over half of Cashbuild’s sales come from townships and rural areas, where, apparently, people are beginning to enjoy the benefits of plastic – about 45% of sales are now on debit or credit cards, a fact that Cashbuild attribute to the efforts of Capitec to get people to make the move from cash.
Comment: Cashbuild’s resilience in the retail downturn can be attributed to the fact that the building activity for which they provide the wherewithal is substantially paid for by social grants.
MANUFACTURERS AND SERVICE PROVIDERS
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Hanjin The ship’s hit the fan
“Who on earth,” you enquire mildly, glancing up from your fluttery, peach tinted copy of the FT you’ve been reading, in the oxblood leather wingback, after a rather good lunch, “are Hanjin?” Allow us to elucidate. Hanjin are a South Korean shipping outfit – the seventh largest in the world – until they went bankrupt last Wednesday. This has left a sizeable dent in the world’s logistics infrastructure, particularly as Hanjin were in some sort of alliance with six other businesses, and the shipping cost per container has escalated rapidly, from $1,700 before things went sideways to $2,300 today. Over 540,000 containers will be affected by delays, say freight brokers in Asia, and many third parties – including port operators and trucking companies – are leery of touching anything with Hanjin written on the side. Retailers in the US and Europe are naturally concerned, particularly as things begin to ramp up for Christmas.
Comment: An interesting object lesson in the interconnectedness of all things in a globalised world. Or something.
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Coca-Cola Bottle rockets
A couple weeks back, you will recall, Coca-Cola Beverages Africa (CCBA) was voicing concern that should the government’s sugar tax go ahead they might be unable to meet their job creation commitments, and we wouldn’t want that to happen now, would we? Anyway, this week Coca-Cola Beverages South Africa have announced that they’ll be overhauling their old ABI bottling plant in Phoenix in Durban to the tune of R205millions, with a view to increasing their output from 13,000 bottles per hour to 33,000 bottles per hour and speeding turnaround times to meet the (unfortunately) burgeoning demand for their plastic bottled products. The upgrade will enhance Phoenix’s already impressive reputation for sustainability – even in its current form the plant has the best water ratio usage in the global Coca-Cola system using just 1.13l of water for every 1l of Coke produced.
Comment: Welcome news, suggesting a certain bullishness independent of any putative tax…
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RCL FOODS Free as a bird. Well, cheap, anyway.
RCL FOODS announced its results last week, and they tell the story of a great company struggling against hurricane-force headwinds. While turnover grew 6.8% to R25billion, headline earnings per share (considered by some the One True Measure of Profitability) were down 12.2% to 98.5c. EBITDA were down 12.8% to R1.8billion; taking the embattled chicken and sugar businesses out of the picture, they would have been up 12.4% to R1.5billion. This has led the diversified business to announce that it is looking at overhauling its poultry operations – for example, by selling more chicken to fast-food businesses.
Comment: RCL has not put a foot wrong – diversifying ahead of the flood of cheap imports, for example – but it has been wrong-footed by climate and geopolitics. If any business can rise above these challenges, it is this one.
TRADE ENVIRONMENT
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Food Prices A hungry man is an angry man
Low income South Africans are now paying some 20% more for a basket of basic foodstuffs than they were a year ago, according to the astute and dedicated Pietermaritzburg Agency for Community Social Action (Pacsa). This equates to a R318 rise to R1,942 for a basket calculated to equate to the consumption patterns observed in actual households. The main culprit here was the price of maize, up 40% over last year, with sugar up 26% and samp, maas and eggs also making significant contributions. Providing some relief (for all but the producers) was chicken, which dropped 7% in the same period. Pacsa have also calculated that the average low-income family of 7 is underspending on the food it needs to meet its basic nutritional requirements to the tune of 55%.
Comment: These bland numbers tell an urgent and horrifying story of failure and need.
IN BRIEF
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Walmart Meeters and greeters
Meanwhile, over in Trumpistan, Walmart are looking to cut 7,000 jobs in accounting and invoicing in order to get more staff into stores, where by presenting a human face to the punter they will enable the Big Feller to regain its competitive advantage over Amazon. Because nothing says ”customer service” on the sales floor like a disgruntled invoice clerk who has just lost her cushy desk job and coffee machine privileges.
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FreshStop Big meals keep on turnin’
FreshStop, which as you know is South Africa’s largest and fastest growing convenience retail brand, has introduced three new fast food lines to the business, to wit: Hooked On fish and chips, Mr Brown's smoked BBQ and Grill to Go, a burger/mixed grill concept. Great news for hungry travelers on SA’s lonely highways.
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