Pick n Pay Zimbabwe
South African supermarket group Pick n Pay has upped its game in Zimbabwe, where it has a 49% interest in the country’s second-largest supermarket chain, TM Supermarkets, by opening more Pick n Pay branded stores in the country.
Pick n Pay has a partnership in TM Supermarkets with Zimbabwe Stock Exchange (ZSE) listed Meikles Africa Limited, which owns the remaining 51% of the Zimbabwean supermarket chain. Meikles Africa Limited is closing down its department stores in Harare, replacing them with grocery outlets, most of which will carry the Pick n Pay brand name.
The departmental stores have not been performing well, say sources at the company, which has adopted a strategy of expanding its grocery outlets division. TM Supermarkets and the Pick n Pay branded stores compete with ZSE-listed OK Zimbabwe in the Zimbabwean retail sector.
John Moxon, chairman Meikles, told Finweek in a phone interview that five more Pick n Pay branded outlets will be opened this year. The company is already finalising the shutdown of the Greatermans departmental store in Harare’s central business district. It will be replaced by a Pick n Pay branded grocery outlet.
“All in all this year we have lined up five Pick n Pay branded outlets throughout the country,” said Moxon.
In 2013, TM Supermarkets invested about $25m to give its stores across the country a facelift. Pick n Pay already has two branded shops in Harare. Not to be outdone, OK Zimbabwe has also announced that it will invest around $16m in refurbishing its stores, signalling the intensifying race for Zimbabwean grocery shoppers.
Retail industry executives say the retail scene in Zimbabwe is currently subdued although it has improved from the lows seen last year. Moxon, however, said that retail operators in the country were positioning themselves for better times ahead.
“It’s still difficult, but we are finding it much better. It’s much better compared to last year,” he said.
Other retail players in Zimbabwe include Spar franchise operators and smaller local operators. Botswana-based Choppies Supermarket recently said it was seeking an increased presence in Zimbabwe and other regional markets.
Meikles, which also runs agro-processing, city and resort hotels as well as tea processing and packaging operations, said in February that it had received a boost from strong demand for its fastmoving consumer goods during the ninemonth period to the end of December 2013. This has spurred the move into opening more grocery outlets, expansion and modernisation of those already existing.
Pick n Pay is looking to diversify its exposure beyond the SA market. Economists told Finweek this week that expansion into Zimbabwe provided the company with a market that has much promise and room for margin expansion owing to its usage of multiple currencies and low economic growth base.
“Turnover in fruit and vegetables, takeaways, butcheries and liquor has shown useful growth. Sales and operating margins though comparable to historical levels are under pressure due to lack of spending power by consumers, but have benefitted from the growth in the service areas,” Meikles said in a February trading update.
SA grocery companies are being urged to explore markets in the rest of Africa. Growth in the Africa retail scene is likely to be driven by the continent’s expected consumer spending boom. Africa’s growing population is projected to be spenders of about $1tr in the next six years, according to AT Kearney’s retail competitiveness index.
The African Retail Development Index (ARDI) ranks Rwanda, Nigeria, Namibia, Tanzania and Gabon in the top five. According to the study, these countries offer the most growth potential and profitability prospects going forward for retail operators.
Pick n Pay is hoping to strike it rich in Zimbabwe, which did not have a high score on the ARDI rankings but is considered an attractive market for distributing consumer goods. Management at the Zimbabwe retail operation is now focused on growing Pick n Pay’s share of this promising market.