Re­tail­ers sell­ing to the poor get poorer

The min­ers’ strike and poor econ­omy hit min­ing com­pa­nies and mi­crolen­ders first. The ef­fects of th­ese chal­leges, as well as cheap im­ports and high in­put costs, are now no­tice­able across the econ­omy and re­sults from SA’S ma­jor re­tail­ers this week bore this

CityPress - - Business -

WOOL­WORTHS

WRool­worths’ cloth­ing and gen­eral mer­chan­dise sales grew 9% and food sales by 14% as it con­tin­ued to in­crease its mar­ket share in the sec­tor.

It has been fo­cus­ing on pro­mo­tions and prices. CEO Ian Moir said Wool­worths had out­per­formed the mar­ket as it had made a con­certed ef­fort to at­tract more cus­tomers.

“As my friend Whitey [Bas­son, Sho­prite CEO] tells me, the only rea­son we grow is be­cause we are so small and it’s eas­ier for a small busi­ness to grow than a big busi­ness – we are only the size of his [Sho­prite’s] north­ern di­vi­sion,” joked Moir.

“I will take that be­cause if we keep outgrowing the mar­ket as we have in the past four years to the ex­tent we have done, small be­comes large quite quickly. So Whitey, we’ll get there.”

But Moir said he ex­pected the lo­cal econ­omy to con­tinue to be con­strained and the mar­ket to be tough for the next few years.

RCL FOODS

CL Foods, which owns Food­corp, Rain­bow Chicken and TSB Sugar, makes many of the prod­ucts that make their way on to the shelves of re­tail­ers.

While RCL Foods plunged into losses (of R276 mil­lion) in the year to June, CEO Miles Dally said it was due to greater cor­po­rate ac­tiv­ity, in­clud­ing the ac­qui­si­tion of TSB Sugar and the re­main­ing in­ter­est in Food­corp.

RCL Foods showed it was not only con­sumers who were un­der pres­sure, but sup­pli­ers who faced high in­put costs and were af­fected by the pol­i­tics be­hind the scenes in the food in­dus­try.

Rain­bow Chicken, which sup­plies re­tail­ers and restau­rants, faced sig­nif­i­cant in­dus­try­wide chal­lenges.

“The first one is im­ports. It’s a fact that im­ports are be­ing dumped in South Africa and that’s why the gov­ern­ment ap­plied the

SHO­PRITE

Sho­prite, which re­leased its an­nual re­sults ear­lier this month, man­aged to in­crease its sales by 10%, but its earn­ings were just 3.3% up.

Its 21.7 mil­lion reg­u­lar shop­pers were af­fected by high un­em­ploy­ment and the lack of dis­pos­able in­come.

CEO Whitey Bas­son said costs, es­pe­cially elec­tric­ity and en­ergy, con­tin­ued to rise and con­sumers suf­fered from a lack of dis­pos­able in­come.

In­ter­est­ingly, the prob­lem is spe­cific to South Africa. Sho­prite has a sig­nif­i­cant pres­ence in Africa where it opened 16 new su­per­mar­kets in the past year.

Sales in the rest of Africa in­creased by 26.8% (16.2% in con­stant cur­ren­cies), the bas­ket size was up by 16.8% and the num­ber of cus­tomers in­creased by 7.8%. tar­iff,” said Dally.

Anti-dump­ing du­ties on im­ports of frozen chicken have been im­posed on the UK, the Nether­lands and Ger­many.

“Those anti-dump­ing du­ties have been put there on an in­terim ba­sis un­til Jan­uary next year, when we an­tic­i­pate they will be­come per­ma­nent.

“That was only ap­plied in July. We saw record im­ports in May and June in an­tic­i­pa­tion of this, and we haven’t seen those ben­e­fits yet,” said Dally.

MASS­MART

Mass­mart, which owns chain stores such as Game, Makro and DionWired, in­di­cated that Game stores had been par­tic­u­lary hard­hit. It only man­aged to grow sales by 0.4%. Builders Ware­house and Makro, which have a higher-in­come fo­cus ac­cord­ing to Mass­mart, fared bet­ter.

Makro in­creased sales by 12.3% and Builders Ware­house by 14.5%.

Mass­mart CEO Guy Hayward said the five-month strike in the min­ing sec­tor, which had re­sulted in a sig­nif­i­cant sales de­cline in stores close to the af­fected re­gions, might have had a greater knockon ef­fect on the econ­omy than was gen­er­ally un­der­stood.

“The grad­u­ally tight­en­ing in­ter­est rate cy­cle will make things more dif­fi­cult for mid­dle-in­come cus­tomers and pos­si­bly those in the up­per-in­come brack­ets.

“How­ever, in the mean­time, up­per­in­come cus­tomers ap­pear re­silient.”

He also said the ris­ing prices of maize and soya had af­fected feed costs.

“This year, our feed costs were up 10%. How­ever, the prog­no­sis go­ing for­ward is very good. The world stocks and the crop es­ti­mates are very pos­i­tive.”

RCL’s con­sumer-fac­ing brands have also traded be­low ex­pec­ta­tions. Food­corp, which owns brands such as Nola may­on­naise, Ouma rusks and Yum Yum peanut but­ter re­ported an in­crease of rev­enue of only 6% to R7.8 bil­lion.

“Yes, we are con­cerned. The con­sumer re­ally is un­der pres­sure and for us it’s go­ing to con­tinue. Food­corp is not im­mune to that,” said Dally.

“We are now en­ter­ing a cy­cle of in­creased in­ter­est rates and if you look at it in sim­ple terms, con­sumers are pay­ing more for wa­ter and elec­tric­ity. Fuel has gone up so they pay more for their fares and e-tolls. So, wher­ever you look, there is an ex­tra bur­den on con­sumers.”

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