Fitter PnP is in many ways pick of the pack
● Pick n Pay has had a good week. Its interim results show volume increases not seen in years, at a time when the market is particularly tough.
At the beginning of last year CEO Richard Brasher and senior executives recognised that if they kept doing what they were doing in the face of an increasingly tough economic environment, the group would be in a dire situation. So it reduced costs and improved efficiencies, enabling it to drop prices, deliver simpler and more personalised promotions, improve the fresh-food offering and upgrade stores.
Brasher, who became CEO in 2013, said the group was stronger, fitter, more competitive and energetic, “and consumers have rewarded us with more turnover and market share”.
“We are seeing people tightening their belts and seeking greater value. When there are promotions, there’s more shopping. People shop around so we have to be very good so they come back. People now tend to shop more often and their collective basket is bigger over a period of time. I can see them spending a higher proportion of their income with us, but not necessarily in a single shop.”
The group delivered its best results of the past five years in terms of volume growth, with overall turnover up 6.4% to R41.2bn. It also benefited from operational efficiencies, better productivity and buying, and a greater proportion of centralised distribution.
Distribution has previously been one of Pick n Pay’s weakest points and it was behind the curve when compared with competitor Shoprite, which implemented centralised distribution more than two decades
It is ahead in its loyalty programme, its credit facility and its online channel Phibion Makuwerere
Research analyst at Intellidex
ago. Now, centralised distribution accounts for about 80% of Pick n Pay’s business, meaning the group can deliver most products to most stores almost every day and carry less stock. It also enables greater control of product ranges store by store and allows for more efficiency in the stores.
“It’s close to the ambition I had five years ago,” Brasher said. “We are developing a whole group of suppliers who couldn’t survive without centralised distribution — distribution to every single store becomes too complicated and expensive. So that allows us to create jobs in the small manufacturers.”
Brasher is optimistic about much of the business. There’s been a big push on fresh food, meat is very strong, and the fruit and vegetable department is the strongest he’s seen it since he came on board.
“Our clothing and liquor business is doing well,” he said.
Customer growth is in double digits. Phibion Makuwerere, a research analyst at Intellidex, said the results were impressive given the depressed consumer environment — and the restructuring under Brasher was bearing fruit.
“Areas in which Pick n Pay is ahead of its peers are its customer loyalty programme (Smart Shopper), its recently launched credit facility, and its online sales channel development.
“This kind of customer engagement is likely to be a key sales driver in future, particularly as customers are becoming more service conscious and technology savvy.”
The group said it had offered R2.4bn in discounts to shoppers on the Smart Shopper programme.
The week was also notable as the company celebrated its 50th year as a listed entity. Only 43, or just over 10%, of the companies on the JSE have achieved this.