Money& investing Brasher: the exit interview
Analysis and coverage of SA's top companies and investments - the guide to where your money should be The outgoing CEO laments SA’s culture of blame, but praises its unique generosity
ý If Richard Brasher had had his way, perhaps it wouldn’t have taken almost nine years to restore what was once retail royalty in SA to something finally approaching its storied past.
“It’s a lot harder to do things quickly here,” the Englishman tells the FM.
“I was probably a bit naive when I first turned up because I thought I knew how to do this. But to try and get 90,000 people to do it for you, to work with the authorities and government, to work with labour partners and the like, it can feel quite glacial. What should have taken me four or five years has taken me eight.”
Ironically, 2020 wasn’t one of those slow-moving years for the retailer.
“In spite of Covid, we’ve achieved more than in the previous three. It’s not that we were incapable of being fast and capable and brave, but we had to stop things getting in the way of us moving quickly.”
One of Brasher’s biggest frustrations has been a culture he found pervasive in the country: of not dealing with issues.
“Having a good excuse isn’t a close cousin of success. It doesn’t matter whose fault it is, if it’s a problem let’s fix it. Then if we want to have a witchhunt, we can.”
This is clearly one of the subtler problems Brasher had to contend with at Pick n Pay — but no less profound than
restoring its paper-thin margins, or changing the belief among SA’s investor community that it had become a retail has-been.
“Believing that it’s your accountability, irrespective of whose fault it is, is something that I grew up with in my last company and I’ve had to instil into us at Pick n Pay. The excuse department in the company was shut when I turned up. I don’t want excuses.”
Brasher’s appointment in 2013 was both a new journey for him and a new trajectory for the founding Ackerman family, who’d always promoted from within the company.
He was Pick n
Pay’s first CEO not only from outside the business, but from outside SA. It was also Brasher’s first move out of the UK
— though, as an executive with UK retailer Tesco, he’d traded across 35 countries during his career with the group.
His exit shocked his industry at the time. He was CEO of Tesco UK and Ireland and had been in the running to get the top job at Tesco, but didn’t.
Around the same time, Raymond Ackerman realised Pick n Pay needed the best of global talent, as it was floundering. Margins were nudging 1%, profits were down, it was behind in centralised distribution and it was increasingly lagging its peers, where once it had been the industry benchmark.
A meeting with Ackerman and his wife, Wendy, sealed his move.
“Raymond’s the real deal. I’ve seen enough retailers in my career to spot one when I see one,” says Brasher.
For one, Pick n Pay still had a great brand. Brasher says the retailer had the right strategy, but hadn’t done enough for too long — then tried to do too much.
“It had a huge indigestion problem, which is what I arrived to.”
Ackerman says the moment they met, “I just clicked. That was very important because I’d been very strong about promotion from within. [But] Richard’s done a wonderful job for us.”
When Brasher started, the retailer had fewer than 1,000 stores. That has now doubled, as has turnover. Profit has tripled: when he came in, headline EPS were at 85c; in the past financial year, that had moved up to 205c a share.
But it’s not all gone entirely according to his wishes.
“I planned to leave when I’d broken through the R100bn mark, but I didn’t quite make that,” he says.
And while Pick n Pay’s margins have more than doubled during his tenure, to 2.3%, they are still nowhere close to Shoprite’s, which hit
5.6% in the first half to end-December — though Brasher has said before it’s unfair to compare the businesses, given Shoprite’s higher-margin furniture division, as well as fewer franchises.
In a 2019 interview with the FM, he said: “When I started, our profit margin was about 1% and I think standing up in public saying ‘I’m going to get 5%’ just seems a bit immature, to be honest.”
While Pick n Pay has created more jobs during his tenure, it’s also had to cut others, and last year took a R100m hit on a voluntary severance programme.
However, there’s not much difference between the share price performance of the two retailers: over five years, Pick n Pay is down 9% against Shoprite’s 0.5% decline.
“My biggest satisfaction is I’m handing it over in good shape,” Brasher says of the group.
“If you leave something better than you found it, you know you’ve made a contribution. And I’ve still managed to prove that the good guys can win.
“It doesn’t have to be brutally commercial. I know what brutally commercial looks like, I’ve played that game as well. Our ambition has always been to put a bit of that back — into the staff, into the community.”
But, he says, “they couldn’t keep giving back if they couldn’t earn it in the first place”.
Richard Cheesman, analyst at Protea Capital Management, says when Brasher started at Pick n Pay, the retailer was in a bad state.
“They had exited Australia but it wasn’t rosy, as margins had collapsed. Shoprite had aggressively rolled out distribution centres and was eating their breakfast. There were concerns around management and head office was considered bloated.”
Suppliers were starting to get wary about extending terms, and it was getting to the point where the balance sheet was under strain, he says.
“Pick n Pay is in a much better place compared to then. Brasher had to get a lot of things right to get here. It’s not perfect, but clearly it has been a successful tenure,”
Cheesman says.
On the negative side, some of the accounting along the way was more aggressive, and there were concerns around executive share grant dates being extended. “But overall, it’s been a significant improvement.”
The company — like the rest of corporate SA — has more contact with the government now than in the Zuma era, but Brasher is not sure whether just having contact is enough.
“Sitting around a table having a discussion doesn’t necessarily mean we’re working together, it just means we’re having a discussion about working together.
“It is a good step forward, but it needs to progress into real collaboration.”
His view is that governments should be involved in doing less, but enabling more.
“I think governments shouldn’t interfere in running almost anything. Having visited 70-odd countries, having traded in about 35 countries across four continents … my view of governments is that of course they have a very important role, but not to run stuff. Usually with governments, when you want them they’re not there and when you don’t want them, they’re all over you.
“Be bright enough to know when you’re not, and then when you find out you’re not, go find someone who’s brighter than you to get it done. That happens better in other places than here.”
SA’s vast inequality can be a major challenge for business in SA, as well as a distraction.
Take the affluent shoppers who frequent stores like Joburg’s Nicolway or Cape Town’s
I’ve still managed to prove that the good guys can win. It doesn’t have to be brutally commercial
Richard Brasher
“where if people want peeled organic grapes dropped gently into their mouths, I’m sure we could find a way of doing it”.
But, he says, the real story of SA is that “the vast majority of consumers have got less”.
This is a huge opportunity for Boxer, which has lagged its mighty competitor Shoprite in the segment.
Brasher believes SA’s overall grocery retail market is worth about R600bn. Based on his metrics, the most affluent sector is about
R100bn, of which he reckons Pick n Pay has about a 24% market share.
The next level down is the middle class, worth another R100bn, of which
Pick n Pay’s share is about 25%.
The real game, though, is in the R350bn lower end, where Pick n Pay’s share is just 10%.
Under Brasher, Pick n Pay reinvented Boxer about four years ago and made it into a limited-range wholesaler with clean, bright stores, in-house music and a powerful butchery, unusual for a discounter.
Brasher insists that being a low-cost retailer doesn’t mean you have to look low-end, or that you disrespect your customers.
“It has to be clean and bright, and the tills have to be open and you have to say please and thank you.”
Boxer is now “the fastest-growing retailer in the country by a country mile”, he says.
The brand has doubled its footprint over the past five years. Last year it opened about 44 stores, the biggest rollout in Boxer’s history.
Brasher also believes this value offering is the way to expand outside SA.
Where other retailers such as Shoprite and Mr Price are now exiting Nigeria, Pick n Pay has a test store in Lagos, through a partnership with large family-owned group Leventis.
“We think the route into Africa is through a limited-range discount format rather than a flagship store dropped gently into every capital.”
For example, the store has about 3,500 lines instead of the usual 20,000.
“We’re the African cousin of the European soft discounter,” says Brasher, referring to Germany’s Aldi and Lidl.
“It’s nothing more than a small test. I’ve stuck with it, despite everyone saying ‘You’re mad’. I haven’t bet the farm, I haven’t even bet a cow.”
The numbers in Nigeria are, after all, still compelling. There are 200-million people, 90% of trade is informal, and the country is not dominated by modern retail.
As for his successor — another foreigner, Dutchman Pieter Boone — what advice would he pass on?
Focus on value for money and invest in technology, he reckons, though not to the exclusion of your physical stores.
“We have to have a meaningful online busiConstantia,
ness, but it’s hard to be a big business in online and make money. The grocery model doesn’t lend itself easily to what’s happened with clothing and electronics.”
Don’t play a brutally commercial game either, he suggests.
Brasher is still evidently struck by SA’s many contradictions.
“I find this society uniquely generous. It’s a sort of bizarre cocktail. Someone could be mowed down with a semi-automatic weapon from the back of a taxi, but [if] there’s a fire or a flood or a tragedy, the people who have the least in society put their hands in their pocket. I’m humbled when people who I know have almost nothing want to make a contribution.”
As for his own future, Brasher has been nominated to join the board of the largest listed food retailer in Russia, X5 Retail Group.
“I think Russia looks very similar to SA. A large proportion of the population has very little money; they’re quite rural still. And they need to be served good-quality products at a low price they can afford, close to where they live.”
Still, at 59 Brasher no longer wants to be responsible for running a company.
He’s also keen to do less in the selling of goods, and more in their making.
“I think there’s something very important about people that make stuff or grow stuff.
I’ve spent my career buying things off people and selling them to other customers, and that’s been a great journey, but there’s something intrinsically good about making something.”
Brasher is keen to get involved in agriculture in “some shape or form”, adding that SA’s wine industry has been treated terribly over the past 18 months.
Many may have been put off by operating in a country run by President Vladimir Putin, but, as Brasher says, concerns about politics didn’t stop him coming to SA.
“It’s been an adventure, that’s what it was meant to be. It’s been all of that and then some.”
Somewhat surprisingly, Brasher has chosen to stay in SA. His son Jack considers himself a South African, and his wife has started a company to combine her interests in art, fabric and sewing.
“I’m not on the piece of elastic that everyone thinks I was and that I would have flown straight back to London. Even if we could.”
Pick n Pay’s full-year results to February 28 2021 will be released this week.