THIS ISSUE: 03 Feb - 08 Feb
YOUR NUMBERS THIS WEEK
RETAILERS AND WHOLESALERS
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Clicks Healthy numbers
From Clicks, for those of you who missed our one page update last week, a cracker of a trading update: turnover up 8.6% to R10bn, for the 20 weeks to 15 January, with retail sales increasing 12.2% – or 8.5% in comparable stores – and internal inflation averaging 5.3%. Pharmaceutical distributor UPD also grew nicely, thanks very much, with sales up 6.4% against internal inflation of 4.3%. Mr Kneale modestly attributes the results on the punter’s propensity to buy lipstick and sunscreen even when she isn’t buying toasters, kettles or Hello magazines, and to shop enthusiastically for Click’s 3-for-2 promotions, which shielded the business from having to discount elsewhere during a tricky economic ambit. Sales were also helped along nicely by the opening of 15 new pharmacies, joined in December by 37 converted Medicrosses and soon to be swelled by front shops in 40 Netcare hospitals.
Comment: All of which puts the business in a strong position in pharmacy, rumblings from analysts about the threat from Dis-Chem notwithstanding.
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FreshStop Fresh perspectives
Eight years ago, Fruit & Veg City were visited with the inspiration that weary travelers needed more for their sustenance than a bag of slap chips, a pack of Chesterfields and a Coke. And thus was FreshStop born: an oasis of crunchy (where applicable), fresh (across the board), and freshly-baked (in the relevant section) goodness, feeding not just the body but also the soul. Now it has opened its 250th store, at Caltex Croydon on the corner of Brabazon and Isando Roads. The store is jam-packed with features, including Crispy Chicken, Grill to Go and Seattle Coffee outlets and a slap-up, sit-down experience at the Pit Stop Café. And if that’s not enough, how’s this? An Aramex courier service, Glocell offering for all networks, airtime and electricity, and a Pargo pick-up point. FreshStop, you may recall, was named International Convenience Retailer of the Year 2013.
Comment: And for very good reason, we might add.
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Shoprite It Lives!
Turns out that the Shoprite/Steinhoff merger (to which, with apologies to Mary Shelley, we will henceforth refer to as Shopstein) was first conceived over a decade ago, when the years still had a zero in them and so did the winters. And having waited so long, and surviving the exit of Whitey Basson no less, the deal may yet have to wait a little longer. A renewed cautionary, you see, suggests that some of the main majority shareholders remain to be convinced of the merits of the transaction, notably – perhaps, the cautionary doesn’t provide much detail – the price at which they’ll offload their stocks if they so choose. The two biggest Steinhoff shareholders, Oom Christo’s Titan Premier Investments Proprietary and the Public Investment Corporation are all for the deal, Oom Christo having a documented liking for big things.
Comment: So not a done deal, then. Interesting to see how – and whether – the smaller investors might be appeased.
MANUFACTURERS AND SERVICE PROVIDERS
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RCL FOODS Somewhere over the rainbow
The business previously (and for increasingly good reason) known as Rainbow Chicken faces some testing times, but all is not lost. In a trading update, RCL FOODS anticipated that its headline earnings per share – a reliable measure of profitability – would lose somewhere between 37% and 54% for the six months through December, after competition from cut-price imports forced them to retrench half the staff in their Hammarsdale plant and cut a portion of uncompetitive IQF product. The silver lining is that the business’ well-established strategy of diversification into other foods is paying off, with categories like sugar, baking and groceries seeing an increase in profit for the period. Currently, the poultry industry is engaging government productively on the issues it faces, and this too may pay off.
Comment: Still, tough times over at a business we have long admired.
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Clover Well all white!
Clover are doing something fiendishly clever about the price at which they purchase milk: they’ve set up something called Dairy Farmers SA (DFSA), a purchasing vehicle which will initially be owned outright by Clover but which will eventually be owned 74% by milk producers. It will set the price of milk, where previously Clover had, ensuring that producers get fair market value. DFSA will be Clover’s preferred raw-milk supplier, and will also set the price at which it buys raw milk from farmers. The arrangement will see Clover losing about R1.75bn a year in turnover, which monies will be made up in fees from DFSA to Clover, and perhaps by the addition of more value-added lines to Clover’s portfolio to replace the non-value add of the raw milk business.
Comment: Still following? Us neither.
TRADE ENVIRONMENT
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Inflation Basket case
Last week, we reported on the reweighting of the CPI food basket. Now we are told that another basket, the Pacsa basket compiled by the Pietermaritzburg Agency for Community Social Action to measure food costs for the poor, adds around R300 more to the household expenditure of South Africa’s poorest than it did a year ago. 31 of the 36 items which make up the basket have increased in price in January, with the prices of staple foods like samp, mealie meal and chicken pieces among the hardest hit. This means poor households must make tradeoffs in what they consume, cutting out foods with high nutritional value like meats, fish and eggs, dairy and vegetables in order just to make ends meet. The basket cost around R1,800 in January 2016 and now costs as much as R2,100.
Comment: All of which makes last week’s talk of video games and pay TV subscriptions in StatsSA’s basket ring a little frivolous.
IN BRIEF
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Retailers Too big to fail?
An interesting read over here on the difficulties smaller businesses have competing with – or supplying – the handful of large retailers which dominate the South African consumer goods landscape. A warning to readers: this story is not for the fainthearted, and contains several instances of the use of the “M” word.
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Spazas Dynamite, small packages
And an equally fascinating bit here on the travails of the spaza owner from our friends over at BizCommunity. The informal trade contributes about 300,000 jobs and R9billion to the South African economy every year. It is a vibrant and dynamic part of our business culture, and deserves all the support it can get. Want to find out more about how to reach this market? Book for the annual Trade Intelligence Independent Trade Forum on the 23 February 2017. Click here for more.
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