Pick & Pay vs Shoprite for Africa

Posted On Friday, 15 June 2001 10:01 Published by eProp Commercial Property News
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IN the bun-fight for domination of the food retailing business in South Africa, with Whitey Basson's Shoprite chain in one corner, and Sean Summers' Pick 'n Pay in the other, the outcome looks like a hard-fought draw, locally at least, with both groups claiming around 40% of the R50 billion industry.

 

Property-Housing-ResidentialThird prize goes to Spar which has a mere 10% or so of the market despite a 680 store presence in Southern Africa.

But growth is non-negotiable for both Cape-based companies so each company has taken off over local borders, but in very different directions, and their different strategies to claim additional market share are causing a great deal of head scratching among investors.

With Pick 'n Pay's share price coming under pressure, the indications are that investors are less impressed with the Claremont company's efforts than they are with Whitey Basson's mission into Africa.

In a nutshell, Pick 'n Pay are aiming to take over loss-making food chain Franklin's even while they talk of an aggressive roll out of local stores: 5 Pick 'n Pay Superstores; 20 Family Stores; 10 Score; and 10 Ritevalu stores.

But the store roll-out looks like an attempt, says retail analyst Julie Bennett of stockbrokers Barnard Jacobs Mellett, to unseat Shoprite in the lower-end of the market. This doesn't particularly gel though, when one looks at the numbers of new stores - the roll-out still favours the higher brow stores over the 'economy' ones.

And Bennet acknowledges that the overlap - the commonly contested market - between Pick 'n Pay and Shoprite is 'about' 30%.

This will become less, in fact, if sceptics of Pick 'n Pay's African aspirations, are right in their claim that there are enough clues in the Africa roll-out of Pick 'n Pay stores to suggest that management view any claims for low-end market share here and in Africa as no more than a necessary evil.

For instance, the current store roll-out has them targeting a 7-store presence in Tanzania, but those stores are no more than of the convenience variety, and nowhere near the size that Pick 'n Pay operate in this country. Bennett concludes that the group may be trying to achieve a certain mass in one central country before trying to expand elsewhere. This is debatable however, as using such a small base is hardly going to set up critical mass in the time Pick'n Pay will need it. Critics may well say that the steps being taken are no more than window dressing, but the fact is that the group is having serious trouble repatriating earnings from their 50-store chain in Zimbabwe and this may explain their intransigence.

In the meantime, Whitey Basson is attempting to colonise Africa for the Shoprite food giant - in a big way.

Already in nine other countries, including Mauritius and now Egypt, the company has around 85 stores of the 572-chain elsewhere other than in South Africa.

This presence has, on top of the need for strong nerves in the face of failures like that of UK retailer Sainsbury's in Egypt, also necessitated the building and running of African distribution centres - in all, an aggressive move into the Dark Continent.

But Shoprite too, has it's critics who say that the expansion and search for market share is overtaking the realities which the group faces, realities which include uneconomic floor space, systems which need to be upgraded, store branding which requires stan-dardisation, and the slow ingestion of earlier acquisitions. Shoprite is, say critics, a turnaround case, implying that internal issues deserve more consideration and that expansion should be tackled more carefully.

Management would be duty-bound to agree with the above assessment but will point to the fact that an existing customer base of 34 million shoppers, and the ease with which extra revenue and thus market share can be generated, would make expansion almost impossible to avoid.

What the companies have in common is a frantic attempt to escape the restrictions of the local market, one where the economy has seen the 14th consecutive quarter of decline in employment figures and in population growth. In other words: there are fewer and fewer shopper about.

Market share has been claimed, and the giants are equals in South Africa, but whether one of them pulls away in the near future will depend a great deal on which strategy works best.

Last modified on Thursday, 17 April 2014 09:51

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