Trade Tatler
“Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”
Ronald Reagan



THIS ISSUE:     15 Jul - 21 Jul

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Shoprite  War! Hooah! What is it good for?

Amid rumours of a fresh outbreak in market share hostilities between The Big Red One and The Big Blue, Shoprite has announced that sales for the year to June rose 13.6% to R67.4biljoens, driven by aggressive (their word, not ours) marketing and new store openings, with like-for-like growth at a more pedestrian 4.8%. Taking inflation (4.6%) and retail sales (4.6% in May) into account, it would appear that the market is growing at around 9.2%, which would suggest that Shoprite is indeed doing rather well. The only fly in the ointment, it seems, is the grim spectre of Shoprite’s low internal food inflation, which dropped from 4.2% in the first six months to 0.2% in the second, although this might be mitigated by a 2.6% rise in volumes.
Comment: All of which suggest that further jostling on market share can be expected come results presentation time.

Business Report 16/07/10

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Massmart  Back in Nam

Massmart has successfully got the qualified go ahead from the granite-faced commissars of Namibia’s Competition Commission for their acquisition of the catchily-named Pupkewitz Megabuild chain of hardware emporia, an acquisition which builds on the recent success of the Massbuild Division here at home and plugs nicely into the Group’s strategy for expansion into Africa. Massmart is flying high at the mo: after some iffy interims, total sales for the Group are up 10.1% to R47.5billion for the year to June, with Massdiscounters performing particularly well. Massdiscounters you will recall is home to Game, 40 this week and still pretty in pink.
Comment: While numbers have been hard to come by, old man Pupkewitz himself has been heard to mutter that “when Harold Pupkewitz negotiates a deal he always walks out happy.”

I-Net Bridge 14/07/10, New Era 15/07/10

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SPAR  On the beach

An update on SPAR’s venture into pharmacy: the idea is not, unlike some of the other big players, to gut the independent sector and march roughshod over the competition, but simply to add value to SPAR’s existing service offering. The plan, apparently, is to open 10 or so pharmacies, in either an in-store or a TOPS-like format just outside the store. Interestingly, the concept is only available to existing SPAR members. The inaugural store has just opened at Shelley Beach, with additional licences currently being applied for.
Comment: Refreshing that SPAR is not talking about demolishing the competition and stamping out the little guy as some other players have been doing, at least by implication.

I-Net Bridge 15/07/10

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Unilever  Blue sky mining

Suave Unilever Eurochair Paul Polman has pointed with concern to SA’s high unemployment rate as a barrier to Le Grand Bleu’s continued growth on these shores. He believes that supply chain efficiencies and the launching of value products that will take on private label brands are the way to go to achieve continued success, which last year saw Unilever increasing turnover 12.2% to R11.9billion. Although store brands still only make up round 20% of the market here, retailers like Pick n Pay and Shoprite are upping the ante on their quality, and taking on the national brands. Simultaneously, companies like Unilever are looking at economy variants in some of its major brands, keeping the cache but losing the cost to consumers.
Comment: Strong national brands are a cornerstone of our culture. Let’s do our bit to keep them alive!

Business Report 13/07/10

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Cibapac  News of the arcane

Multi-faceted food packaging manufacturer Cibapac has announced its acquisition of Intercas, which makes casings for processed meat (that sounds like a euphemism for something) and is the local agent for Kalle, the leading, and very German, producer of sausage casings (aha!). Cibapac, you probably do not know, sprung into existence last year. It was previously the SA subsidiary of LINPAC packaging, but became a wholly-owned SA entity after a private equity deal and management buyout. It has proceeded to expand handsomely thorough innovative growth avenues ever since. Intercas is very much a going concern, as a leading producer of polony wrappings, while kale supplies over 120,000 different products into 80 countries. The market for sausage casings is growing at a wholesome 3.4% annually.
Comment: A succulent deal, fairly bursting at the casings with meaty goodness, by the sound of things. 12/07/10

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SABMiller  Proper English lager served here

Local brewer SAB had a splendid World Cup, thank you very much, selling 13,000 extra hectolitres, or 44 million dumpies (that’s above and beyond usual consumption for June and July). This not unexpected windfall affected the entire range of brews, with the premium international brands like Peroni, Grolsch and Miller going down well with foreigners who fancied a bit of reassuring familiarity with their pint. SAB, a sponsor for 50 years of football in SA, threw its impressive weight behind the success of the World Cup, keeping fan parks amply supplied with a range of generic “South African Beer” that tasted a lot like something you might have had a couple of times before, and investing R40million into its Castle Kingdoms initiative, the transformation of 550 taverns and bars in 42 townships into cool new soccer-themed venues.
Comment: And now, it appears, the big guy might be doing its bit for rugby once again. Nice.

I-Net Bridge 19/07/10

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Consumer Spending  The road to hell

Consumers, bless them, intend to spend less in the next six months than during the worst of the recession, according to Mastercard, who has a keen interest in these things. 45% of consumers intend to reduce their spend on discretionary items like cars, fashion and entertainment, compared with 38% six months ago. 44% plan to maintain their spend on these fripperies, while just 11% intend to increase it, compared with 18% previously. Why is this? Consumers are apparently less optimistic now than they were about the economy back then, perhaps. And job losses from the recession kicked in as late as early 2010.
Comment: And of course, vuvuzelas and Bafana Ts. Rocky times, even for sellers of overpriced credit.

Financial Mail 16/07/10

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Retail Sales  Heavy is the head that wears the crown

While consumers may intend spending less (see previous story) what they’re actually doing is another story. Retail sales accelerated at the fastest pace in two years for the month of May, ticking up 4.6% compared with forecasts of just 3.6% from gloomy economists in their increasingly threadbare tweed. On the downside, the mad boffins at StatsSA have revised their April increase from 3.2% down to 2.9%. May’s boost is thought to be attributable to the World Cup. Retailers have now recorded five straight months of positive growth after emerging from negative territory. Last year, retail shrunk an average of 5% per month.
Comment: And retail takes its rightful but onerous place as driver of economic growth, replacing replenishment in the manufacturing sector.

Business Day 15/07/10

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Carrefour  Indochine all over again

Under the leadership of Lars Olofsson, who is not a psycho ex-policeman in the Girl with the Dragon Tattoo, but a former senior manager at Nestlé, Carrefour is pulling out of smaller Asian markets and underperforming others to focus on the heartland, namely France, Spain, Italy and Belgium, and China and Brazil among the developing economies. Thus under pressure from shareholder activists who would like to see better performance from le retail giant.

Financial Times 15/07/10

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Convenience  The corner shop lives on

Neighbourhood and local stores in Europe are killing it compared with supers and hypers, according to one research house – and have been the star performers in groups which run these formats, like Carrefour and Casino. As consumers cut back on discretionary spend, apparently, they have less reason to go to hypers. And as they cut back on transport, they tend to shop locally, hence the success of smaller formats.

Global C-store Focus 16/07/10

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Announcement  Isn’t she lovely?

Congratulations to the Chief of Tatler Towers on the arrival of his daughter just last week. About time that bottle of 12 year single malt scotch was cracked open too – the recently rehabilitated mail boy was starting to eye it just a little too fondly.

Tatler Reporter 15/07/10

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