PnP’s Bottles purchase helps cap its lead as online grocer

Pick n Pay’s acquisition of on-demand grocery and liquor app Bottles will help cement its position as the biggest online grocery retailer in SA and enable it to take advantage of the expected growth in online retail.

Commenting on the Bottles acquisition, Pick n Pay CEO Richard Brasher said: “It gives us the ideal trilogy. We [Pick n Pay] can deliver food in a van, and a lot of it if you want it; you can pop in to click and collect if you don’t want the restriction of being at your house at a certain time; or if you want it delivered within an hour of an order you can do so on the [Bottles] app.”

Brasher was speaking this week after the release of results for the 26 weeks ended August 30, which was accompanied by the announcement of the Bottles acquisition.

“The combination of those three things we believe will give us the biggest platform, the best platform in the country.”

Pick n Pay, which has been in a partnership with alcohol delivery app Bottles for the past 18 months, said that within four days of the government’s initial ban on alcohol sales, the app had morphed into grocery delivery.

Bottles now has more than 350,000 registered users.

Pick n Pay also reported that its largescale timed deliveries to customers had “increased dramatically over the lockdown period”, with its online sales doubling and a 200% increase in active online customers.

In commentary accompanying its firsthalf results, the group said Pick n Pay Online, which was launched 19 years ago, was SA’s largest online food and grocery retailer and its investment in its digital platformand mobile technology had delivered double-digit growth in online sales each year for the past five years.

Independent investment analyst Chris Gilmour said the 100% ownership of Bottles would “further augment” Pick n Pay’s position as the country’s dominant online grocery retailer.

Gilmour said online retail in general in SA had major potential as it accounted for only about 2% of all retail sales.

“Currently, food delivery around the world is around 12% to 15%. If you could get to figures in the high single digits, it would be phenomenal. I think the clear leader would be the likes of a Pick n Pay. They have definitely cemented their position with Bottles.”

But Stephán Engelbrecht, head of research at Anchor Group, said rival Shoprite’s recent full-year results showed that Checkers was achieving market share gains against other grocers and that its own online proposition, Sixty60, was helping.

“I think this [Pick n Pay’s acquisition of Bottles] is a defensive play. This will provide them a bit of a defence against what Sixty60 has been doing in the upper tiers of LSM [living standards measure] groups,” he said.

Brasher conceded Shoprite took market share off Pick n Pay in that group’s latest full financial year, but said the reverse was true in the year prior to that.

“In retail it’s a marathon rather than a sprint, so in the last financial year that Shoprite reported it had a better year so they grew their business and demonstrated they were a good company. But in the previous year they said themselves that they had ‘been to war’ and had lost market share. So we took market share off them. Now we are into this year, so we [Shoprite and Pick n Pay] are now one all.”

Pick n Pay’s turnover in South African business increased 3.4% to R42.7bn in the 26 weeks ended August 30, while Shoprite’s South African business delivered an 8.7% increase in sales to R122.4bn for the 52 weeks to June 28.

“Our [Pick n Pay] results now were entirely in Covid period while their results showed three months of Covid effect and nine months pre-Covid,” said Brasher.

But this year was “going to be quite sporting, to be honest”.

“Although our results are down in terms of profitability, I think we’re competitive and we are doing a good job. I think formal retail has also been given an advantage by the complete shutdown of the hospitality trade.”

Pick n Pay estimated that R2.8bn was lost in sales over the period due to trading restrictions and temporary store closures.

Brasher said the liquor ban had the biggest impact on lost sales, with tobacco having a “more modest effect. The two together would be well over 50% or 60% of the [R2.8bn] sales loss.”