Can Pick'n Pay regain its former glory?
The surge in its stock suggests Pick n Pay’s latest turnaround is succeeding, but can it ever recapture the energy of Raymond Ackerman’s early years, asks Adele Shevel
Whisper it softly, but it seems that this time, Pick n Pay’s “turnaround” strategy might actually be working. Richard Brasher, the soft-spoken Englishman recruited shortly after he left UK retail giant Tesco after clashing with the top brass over strategy, seems to have had much more luck in muscling Pick n Pay back onto the right path.
Despite the company’s storied history, success wasn’t inevitable. Not many held out much hope when, in 2013, Brasher was hired to lead a “turnaround” — yet another in a seemingly never-ending cycle of revival plans going all the way back to Nelson Mandela’s presidency.
At the time, Brasher — a dyed-in-the-wool retailer with 26 years at Tesco — said: “We need to give people more reasons to shop with us.” On recent evidence, it appears he has done just that.
Its market share, bleeding for years, has at least now been bandaged (see graph on page 22). Paypoints work faster; there’s a better choice for customers on the shop floor.
And this has translated into its bank accounts.
Last month, Pick n Pay’s full-year results showed its profits had soared 22.3% to top R1bn, while its trading profit margin, a key figure for retailers, had improved to 2.1% from 1.9%. It’s still some way lower than Shoprite’s 5.3%, but hey, it’s progress.
Investors, who had abandoned Pick n Pay for Whitey Basson’s more dynamic Shoprite or the aspiring multinational Woolworths, have begun to trickle back.
Pick n Pay’s share price is up 28% over the past year (see graph on page 23)— outpacing Shoprite (up 4% over that time), Spar (up 10%) and Woolworths (down 8%).
This has revived talk of its glory years when, under Raymond Ackerman, Pick n Pay first wrenched market share away from the likes of Checkers and OK Bazaars.
But here’s the $64bn question: is Brasher’s turnaround for keeps? In other words, can Pick n Pay be truly great again?
It wouldn’t be the first “great” company to have fallen prey to more nimble rivals. US department chain Macy’s, once the poster child for retail, has fallen on such hard times that it lost 60% of its share price over the past decade.
It’s not alone: department stores such as Kohl’s, Dillard’s and Nordstrom posted the worst comparable sales declines since the 2008 recession.
In SA, OK Bazaars was once the leading retailer but failed so spectacularly that it was ultimately bought for R1 by Shoprite.
“Of course it [Pick n Pay] can be great again,” says independent analyst Syd Vianello. “It’s a phenomenal brand. It’s not a brand in terminal decline where the product has become irrelevant: to take a video shop and make it great again because the industry is in near-terminal decline is impossible. But the supermarket industry is not in decline.”
In an interview with the Financial Mail, Brasher is characteristically reluctant to declare victory just yet.
“I’m not claiming some landslide victory here, I’m just saying the market is more competitive and we’re competing in it,” he says. “We are getting our share of the market. We are growing roughly in line with the market so we must be getting our share.”
That’s hard to say, since getting applesfor-apples market-share figures for the retailers is notoriously difficult.
For example, Euromonitor puts Shoprite’s market share at 19.4% and Pick n Pay’s at 14.1%. But Nielsen puts Shoprite’s share of the formal food market at 31.2%.
But under Brasher, there is certainly
‘‘ I’M NOT CLAIMING SOME LANDSLIDE VICTORY, I’M JUST SAYING THE MARKET IS MORE COMPETITIVE AND WE ARE GROWING ROUGHLY IN LINE WITH THE MARKET SO WE MUST BE GETTING OUR SHARE RICHARD BRASHER
new energy. In the past financial year, 175 new stores were opened under its two core brands — Pick n Pay and Boxer — increasing total space by 4.5%.
Of course, it’s one thing to talk of numbers, quite another to see real change on the store floor where, ultimately, Pick n Pay’s success will be judged.
And the new stores reflect this new energy. At Benmore Gardens, a stone’s throw from Africa’s richest mile in Sandton, the refurbished store feels more spacious than ever. Floor tiles are bigger, aisles are wider and the ceilings are higher. The bakery, deli and butchery are all clearly demarcated. There’s even a sushi bar. It’s Pick n Pay — just not like you know it.
Those who believe Pick n Pay can indeed be great again will be heartened by the fact that this new energy echoes the way the business started back in 1967. To understand where it’s going, it’s important to understand where it has come from. Pick n Pay was one of SA’s first truly entrepreneurial success stories. It’s ironic that it has been left in the dust by Shoprite, given how instrumental Raymond Ackerman was in building up Shoprite’s Checkers brand. The story goes back to 1916, when his father Gus, with three friends, started the Ackermans chain in Wynberg, Cape Town, which included Checkers. Ackermans was bought out by Greatermans in 1946, but Raymond ended up running their retail division, extending the Checkers chain to 89 stores.
In 1966, he had a famous row with Greatermans chairman Norman Herber over the “future development” of the retailer.
They told him to pack up and leave.
“They said I was too difficult. It was terrible; I was petrified. I had four kids . . . I had no Business capital, just my income,” he told Times
a few years ago. So, a year later, he scrounged together R620,000 to buy a small chain of four Cape Town supermarkets and one credit-based grocery store called Pick ’n Pay. The seller was Jack Goldin, who was launching a chain called Clicks.
Ackerman set out as if he had a point to prove. From its Cape Town base, Pick ’n Pay mushroomed across SA, boasting 39 supermarkets and three “hypermarkets” within a decade. It was high-octane stuff, reflecting a dynamism and energy that its harshest critics say is more evident in the 21st-century incarnations of Shoprite and Woolworths than it is of Ackerman’s company.
He courted the media and became known as the “housewives’ friend”, a title reflecting the gender dynamics of the day.
But Ackerman had seen the future and wasn’t about to slow down.
Back in February 1969, he penned an Sunday Times, article in the setting out his vision of a brave new retail world.
“Supermarket growth in SA has been phenomenal since 1956, but we are still in our early stages of development . . . survival will depend on who successfully interprets consumers’ needs and who realises and implements the best from America, and discards wasters born in an affluent American society,” he wrote.
It was a call to arms for a new form of retail Darwinism, where the fittest survive and the weak are gradually suffocated by their own inefficiency.
“We must be ruthless with out-of-date methods. We cannot afford men trapped behind counters, selling mass-produced toothpaste or canned peas. Should a messenger cycle three miles to deliver one pound of butter?” he asked.
On the face of it, Ackerman’s strategy worked. By the time he stepped down as chairman in 2009, Pick n Pay had a market value of R20.5bn and 780 stores. And yet, all was not going as well as it seemed.
Pick n Pay had been incrementally losing market share to Shoprite Checkers, the company chaired by Christo Wiese and run by Whitey Basson, which had been leaner and meaner than its rival.
Twenty years ago Pick n Pay’s market value exceeded Shoprite’s; today, its R35bn value is nearly a third of Shoprite’s R96bn — reflecting their different paths.
Pick n Pay had become the lumbering brontosaurus of SA retail’s golden age and Shoprite was the ravenous tyrannosaurus. So where did it go wrong? Simply put, Pick n Pay lost touch with its customers. And when the market changed and the black middle class became a big factor, Pick n Pay didn’t see it coming.
Vianello says companies need to identify shifts in the market — and adapt quickly.
“In SA, the market is shifting to convenience shopping because people don’t want to travel long distances to shop. Woolworths captured a big slug of that market. And Pick n Pay hasn’t yet presented itself as a viable alternative — not because they’re not trying but because changing your business midstream takes a long time.”