School of Retail
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THIS ISSUE: 28 Jan - 02 Feb
Nigerian SMEs have got nothing but love for Shoprite, if we’re to believe the free press of that awakening Sub Saharan giant (Nigeria, obviously, not Shoprite). Smaller businesses which supply products and services to Shoprite report gentlemanly behaviour from the chain, which sources everything from carrots to frozen prawns from an average of 140 Nigerian businesses every month. Shoprite, they say, insists on quality but has been active in supplier development, and refreshingly, never pays late. They are a little less enthusiastic when it comes to the performance of their own government, which, they believe, could be doing more about transportation and security.
Comment: Supplier/retailer relations appear to be cordial in the hinterland, coming, as they presumably do, off a low base.
The Nation 28/01/11
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And in other news related to pyramids and dynastic succession, Pick n Pay has mounted its spirited annual defence of the structure by which the Ackerman family controls the business. As you may remember, The Ackermen own more than half of Pick n Pay Holdings Ltd (Pikwik) which in turn owns 51% of Pick n Pay Stores, giving the family an effective 26% stake in that chain of fine emporia. All well and good when the dosh is rolling in. But some investors believe that dismantling this structure would make the board more accountable and able to respond more nimbly to the rapidly shifting challenges and opportunities of a dynamic market environment, quoting Pick n Pay’s tardiness to roll out into Africa and their lateness in adopting central distribution as areas of concern.
Comment: Concerns like this generally pitch up in inverse proportion to the dividend. No one is currently querying the number of sons on the Shoprite board, for example.
The Times 29/01/11
Shoprite has begun construction work costing $12million US on a supermarket in Lubango, Angola, on a 6,000m2 plot which will accommodate two banks, one of them a Standard Bank and will have parking for 120 cars, or 40 Ratels. Later on this year, The Big Red One will be adding a warehouse on the outskirts of town, and opening more supermarkets in Matala, Kuvango and Namibe province. They already have two supers in Luanda and one in Huambo, which is what we call hardcore. In Namibia, in the meantime, labour union Nafau is attacking Shoprite on a range of issues, notably that the retailer is spreading false information about the outcome of a case in which both parties were involved, and that it has implemented late salary increases for Nafau members.
Comment: Was it not Pliny the Elder who remarked: “Ex Africa, semper aliquid novi”, not Syd Kitchen who sang “Africa is not for Cissies”?
Adcock Ingram, you will know, is the manufacturer of such late-night family friends as Corenza C, Myprodol, Panado and Citro-Soda, among many other over-the-counter and prescription remedies. What it no longer is, is the owner of The Scientific Group, a medical products supplier which it has sold for an undisclosed sum to private equity swashbucklers Capitalworks and its BEE partner Brimstone. The disposal is a shrewd strategic move for Adcock, which will now be able to focus on its two major challenges – getting back onto the shelves those of its key painkillers which it was forced to withdraw over safety concerns, and winning back a bigger share of the government’s ARV tender.
Comment: Since its unbundling from Tiger Brands, Adcock has done great things as SA’s number 2 pharmaceutical business after Aspen, and clearly still has its eye on the main prize.
Business Day 02/02/11
Back in the day, the eager cub reporters in the Tatler newsroom were hot on the heels of a big story about Walmart running a buying operation down in the Cape. One of the things they were buying, apparently, was 9 millions of litres of wine for sale in Asda, and this was mainly shipped in vast, wobbly 24,000-litre bags to the UK and bottled by third-party bottlers. Now Walmart-owned sourcing business IPL is building its own bottling plant in the Western Cape to do that work. This means that volumes are likely to increase to the tune of 1–2 million litres per year, but also that prices are likely to go down, which is what we in the industry call a “two-edged sword.”
Comment: A graphic illustration of Walmart’s mighty buying power and supply chain efficiencies in action.
Business Day 01/02/11
KWV expects a 75%–85% drop in earnings for the six months to December, due to the buoyant rand and diminished thirst among the vinophiles of Europe. This news will not be greeted with joy by shareholders, particularly those activist ones who believe that directors sitting on the boards of both Pioneer Foods and KWV are conspiring to drive down the price of the purchase of the latter by the former, if you follow us, and there’s no reason you shouldn’t. Pioneer is currently offering a modest R12 per share for the acquisition, where last year the little feller was trading at R18 per. Comment: It honestly all seems a little too conspiratorial to be swallowed.
No lesser nor more sober a personage than Nestlé global boss Paul Bulcke has expressed concern at the World Economic Forum in Davos at the volatility of food prices, although he thinks that on balance it’s a good thing that they are going up as it gives farmers a reason for getting out of bed. Other commentators have warned in doom-laden tones about the social dangers of rising prices – at a meeting of agriculture ministers from Europe, Africa and Canada, officials warned of riots and unrest unless swift action is taken to improve security and battle rising food prices, while the UN has warned that surging prices for cooking oil, cereal and sugar in particular, “will affect millions of people.”
Comment: And in our own experience, it is surely no coincidence that the last spike in food prices was attended by an outbreak of xenophobic violence.
The Kagiso Purchasing Manager’s Index (PMI) measures the percentage of purchasing managers in an economic sector who reported better business conditions from one month to the next, and the great news is that it’s up 2.9 points to 54.6, a level it last saw in April of the year 10. What can this mean? A recovery in manufacturing by all accounts – a reading of 50 and over points suggests expansion in the sector, which was hit hard by strikes, a strong rand and general economic lassitude last year. While unemployment remains a concern, the bosses are in general more sanguine about factory conditions for the next 12 months than they were in the last 12.
Comment: Cautious optimism then, like Impala at a muddy waterhole.
Hit by escalating glass and tomato prices – the former went up 35% in the last two years – Tiger Brands has taken the difficult decision to resize its bottles of All Gold tomato sauce rather than hitting punters with an unpalatable price increase on existing sizes and potentially losing sales and share in the process. For example the 750ml is now a toned 700ml.
Fin 24 31/01/11
Staff at the Big Bay Checkers in Bloubergstrand have been instructed to come to work with a full set of front teeth or a letter from their dentist saying that new ones are on the way. And that’s all we have to say about that.
News 24 02/02/11
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