Pick n Pay Zim­babwe

Finweek English Edition - - INVESTMENT - One of Meik­les’ depart­ment stores that will be changed into a Pick n Pay store

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.

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