THIS ISSUE: 08 Jul - 16 Jul
B4SA has a bold and far-reaching plan to get us out of the structural and COVID-related hole in which we find ourselves, and we’re on board with that. Some of it is a stretch; none of it is pie in the sky. Some interesting news from Unilever globally, and from Engen, showing that innovation is possible – nay desirable – even in a pandemic. Enjoy the read.
YOUR NUMBERS THIS WEEK
RETAILERS AND WHOLESALERS
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COVID Catch-up Hair today
Dis-Chem has closed its COVID-19 testing facilities for the foreseeable future as the labs deal with a backlog in processing after the recent spike in COVID-19 cases, particularly in Gauteng. The business is also scaling up its hair salon operation – it currently runs nine salons nationwide under its new Hairstrategy brand – as small salons go out of business in the terrible pandemic economy. And they’re challenging last Tuesday’s Competition Tribunal ruling that it had engaged in the excessive pricing of surgical masks at the Competition Appeal Court, on procedural grounds. Shoprite have let it be known that they donated 250 care packages of hygiene essentials and warm blankets to the Western Cape Department of Health last month, to be distributed among patients.
Comment: Dis-Chem is having quite the global pandemic, as is Shoprite, although for different reasons.
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Massmart Game face
Sad news this week from Game, which is in negotiations with organised labour for the cutting of as many as 1,800 staff from the payroll, a measure aimed at improving efficiencies as part of its ongoing efforts to restructure the underperforming unit. Other measures include dropping the fresh and frozen food category, and introducing a line of basic apparel, including t-shirts. Game’s restructuring is part of a broader effort which includes moving Makro into the new wholesale division, the shuttering of all of DionWired’s 23 stores and as-yet-unidentified moves across the business including, apparently, at head office. The process is lent urgency by the COVID-19 crisis, which has seen a decline in sales at the already-troubled retail giant: revenue for the 23 weeks through 7 June fell -10.3% YoY. And the share price is down at levels last seen in 2004.
Comment: Massmart is a vital part of South Africa’s dynamic trading landscape. It is to be hoped that the sometimes difficult restructuring returns them to profitable growth in due course.
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Engen Pilots of the auto highways
News from the forecourts of our Nation of Motorists this week: Engen has announced the launch of their new Engen 1app, offering travellers a safe and contactless way to pay for padkos and wet wipes “as South Africa eases the COVID-19 lockdown restrictions (and) many more motorists are expected on the road” according (perhaps somewhat optimistically) to Seelan Naidoo, Engen General Manager: Retail. Using the app, motorists will no longer need to carry cash or cards to make fuel purchases; and loyalty points will automatically be registered with Engen’s respective loyalty partners, including Clicks ClubCard, FNB eBucks and Edcon Thank U. Other benefits include an interactive Engen service station locator, a virtual logbook, a full record of purchase history, and special promotions.
Comment: COVID-19 has certainly caused everyone in our great sector to up their touchless game, and there’s no reason to suppose we’ll be going back to clammy, well-worn banknotes once it’s all over.
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International Retailers They don’t actually wash their hogs, either
In the post-Brexit wasteland of Borisovnia, Aldi and Waitrose have joined Sainsbury's, The Co-op and M&S in refusing to stock chlorinated chicken brought in under any trade deal with the USA that includes this noxious foodstuff. British retailers see chlorinated chicken as representative of lower food, farming and animal welfare standards in the US, a concern that one US producer diplomatically dismisses as “hogwash”. In the US itself, in the meanwhile, German discounter Lidl is having a major impact, not just on household budgets but also on retailers, which are scrambling to reduce their prices by as much as 15% to keep up. In Long Island, for example, it was found that Lidl’s prices were up to 45% lower than Trader Joe’s and more than 30% lower than other national retailers. And Walmart is doing its bit to shorten the dog days of summer with the launch of an online summer camp jam-packed with fun challenges and activities for bored families, and setting up drive-in movies in its carparks for those hot summer nights.
Comment: Dodgy chicken seems to be the very raison d’être for America’s trade deals: they sure do produce a lot of it, and it has to go somewhere.
MANUFACTURERS AND SERVICE PROVIDERS
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Unilever I’ll put the kettle on…
Unilever, it seems, is having second thoughts about the real value of the soothing cup at times like these. Having gone all in on the disposal of its tea business, it now seems to be backing out of some aspects of any putative deal, particularly in emerging markets like India and Indonesia. It’s also apparently looking at holding onto its shares in a PepsiCo Inc. unit that makes its iconic Lipton iced tea. None of this is set in stone, mind, it’s all unconfirmed insider reports at this stage, and follows a slight decline in their sales of God’s own picker-upper in the first quarter of the year. Whatever the outcome of Unilever’s deliberations, the buyout firms, from Blackstone to KKR, are circling. In other Unilever news, Le Grand Bleu has joined other ethical businesses like Microsoft, Coke, Pepsi and Starbucks in freezing their Facebook advertising while that internet behemoth decides whether or not to continue to profit from hate speech.
Comment: Sounds like a bit of a no-brainer, frankly. But what do we know?
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Liquor A spirited response
Another week, another precipitous and poorly communicated liquor ban. With the relaxation of the last prohibition came a renewed slew of the social problems, injuries and crimes that attend South Africa’s addiction to alcohol. With the 9-week prohibition itself came R18bn in lost revenue and R3.4bn in excise taxes lost to bootleggers, and up to a million industry jobs placed under threat. So yes, it’s a thorny dilemma. While decrying the decision as “deeply troubling”, the booze industry reiterated its commitment to partner with government to create “a social compact that drives behavioural change regarding the use and consumption of alcohol”.
Comment: One thing at a time, surely? Deal with the immediate pandemic, then deal with the perhaps more devastating pandemic of alcohol addiction and abuse. Or perhaps that’s a false dichotomy. Either way, a ban seems counterproductive right now.
TRADE ENVIRONMENT
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The Economy All business
Business for South Africa (B4SA) has, you have by now heard, released a bold new plan requiring the expenditure of R3.4trln in public and private sector money over the next three years, to rebuild South Africa’s infrastructure, replace our useless electricity utility, and place us on the path of green economic growth. How are we going to do it? Easy. Attract a bunch of foreign and local private investment while perhaps also dipping into the state coffers (although not, as the ANC has suggested, by raiding state pensions), implement structural and institutional reforms, apply policy consistency, improve the ease of doing business, address crime and corruption, and restructure SOEs. Among the 12 priority initiatives B4SA has identified are a secure and affordable electricity supply, implementing Transnet's road-to-rail strategy, expanding ports and road infrastructure, and fully exploiting SA's digital spectrum.
Comment: Inspiring stuff. And while inspiration does not put food immediately on the table, at times like this we need as much of it as we can get.
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