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No one’s exactly reinventing the wheel here, but it does seem to us that there’s a bit more vertical integration of the supply chain going on than usual. This week’s example: Pick n Pay, who is looking to buy Western Cape-based meat supplier Tomis for a cool R340m. Tomis runs a 15,000m² lamb feedlot, lamb and beef abattoirs, and a meat packaging plant, all located on a 140-hectare farm. It recorded sales of R720m in FY2022, to both wholesalers and retailers, including Pick n Pay. So what’s the thinking? According to Pick n Pay the deal will “significantly enhance” the Group's fresh meat offer and ability to develop and roll out value-added products. It will enable it to cut costs and offer shoppers greater value while securing reliable supply and achieving synergies with Pick n Pay’s centralised supply chain distribution network. It will also assist with the execution of the Ekuseni strategy, under which meat is a key category.

Comment: Sounds like a smart move. Although there is also advantage to be had in squeezing suppliers for margin when times are tough.

Let’s take a peek at what it might mean to be a small supplier to a big retailer. Agrikool – just to pick a name at random – is a small agricultural business, founded in 2018 and based in Pietermaritzburg, which develops small to medium-scale local farmers, and connects buyers, growers, producers, and transporters of agricultural products, working with 22 farms in the KZN Midlands. It’s also developed an e-marketplace to connect these growers with consumers. Looking for customers, they took a cheeky swing at Shoprite, and hit pay dirt, as it were, landing their first order in late 2021. “The Group understands the key role we can play in the success of small suppliers like Agrikool through access to our large consumer market to grow their businesses and create much-needed jobs,” explains Maude Modise, General Manager: Enterprise & Supplier Development. “We launched Shoprite Next Capital specifically to assist small suppliers with compliance, working capital and training to ensure their businesses are commercially viable and sustainable in this tough economic climate.” Agrikool delivered fresh produce worth over R3m to Shoprite stores in just over a year.

Comment: A brilliant model for the development of South Africa’s hardworking and innovative SMMEs.

Shoprite has appointed former Telkom and BP South Africa boss Sipho Maseko to its board as an independent non-executive director. Maseko has the approval of analysts and was most recently in the news as the leader of an ultimately unsuccessful bid to purchase Telkom. Moving on, Dis-Chem has announced that ex-CEO Ivan Saltzman has also committed to divest 32.25 million Dis-Chem shares owned by the Saltzman family to incoming chief Rui Morais and a group of key senior executives. The divestiture of an effective 3.75% interest is an incentive to ensure Morais and co’s “ongoing commitment”. Finally, Massmart extended its Halfway Day sale – pioneered in Game last year – to Makro stores on June 30. The idea is that South Africa’s value seekers mark the middle of the year by treating the occasion as a mini-Black Friday. “Our shoppers look to stock their pantries, buy in bulk, and make the smartest decisions around deals and pricing – specifically when it comes to big-ticket purchases,” says Katherine Madley, VP of Group Marketing. “The Halfway Day sale is the perfect opportunity for both Game and Makro shoppers to make smart purchasing decisions on their must-have items.”

Comment: As good an occasion for a promo as any and set to become a Massmart staple. The canny supplier will look for opportunities to get onboard with this well in advance of Halfway Day 2024.

In the UK, food retailers are fiercely rejecting accusations that they have profiteered off the decline in global food prices and decried the idea of a price cap to prevent shoppers from being unfairly exploited. “This is fiercely competitive as a market,” Sainsbury’s food commercial director, Rhian Bartlett, told MPs last week. “We’re generally considered one of the most competitive food markets in the world. I’m not sure what price caps would add to that process, other than bureaucracy.” The retailers have received support from an unexpected quarter. “It’s not very convincing to argue – at least as of yet – that grocery inflation is driven by ‘greedflation’,” said Bank of England policymaker Swati Dhingra, who has looked at their financials and cannot find evidence of them failing to pass on lower prices. In the US, supermarket chain Kroger has joined the top four biggest retailers, behind Walmart in number one spot, with $499.65bn in 2022 US retail sales, Amazon ($232.46bn) and Costco ($164.15bn). Kroger ($147.62bn) beat down The Home Depot ($145.94bn) to achieve the position.

Comment: So, three grocery retailers plus one with a huge footprint in the sector.

Crookes Brothers is a venerable name in agribusiness, with farms in KwaZulu-Natal, Mpumalanga and the Western Cape, as well as in eSwatini, Zambia and Mozambique. It first listed on the JSE in 1948 and is valued there now at just shy of R500m. 60% of sales come from sugar, with bananas accounting for around 20%, deciduous fruit for 10%, and macadamias for just under 5%. And the business is having a heck of a time of it, they tell us, with an almost R200m loss in the year through March, victim of a downturn in the prices of bananas and deciduous fruit, and a bad outlook for macadamias, which are now grown cheaply and en masse in China and elsewhere. It’s selling off its apple and pear farms in the Cape as the war in Ukraine has seen fruit destined for that market going to Europe, driving prices down even as chemical, fertiliser, and packing costs hit record highs.

Comment: Tough times for an iconic South African business in a sector hit hard by the vagaries of geopolitics, as so many others have been.

Nestlé is getting out of the carbon offset market and putting the cash it would have spent on credits towards cutting emissions in its own supply chain, while dropping the increasingly meaningless “carbon neutral” pledges for its brands. Offsetting has become subject to accusations of greenwashing, with many offsetting projects contributing negligibly to emissions reductions while giving credit to businesses for reductions that would have happened anyway. Back to our shores where the Poultry Association has confirmed outbreaks of highly infectious H7 avian flu on two Mpumalanga farms. While the outbreaks have been contained, the worrying aspect is that these outbreaks, like an earlier one this year, was spread by wild birds, making them more difficult to control. Finally, the South African citrus industry is on tenterhooks after the introduction of New European Union pest control rules that will cut orange exports to Europe by 20% this year. The new measures require enhanced cold treatment for citrus exports due to concerns over false codling moth and citrus black spot and could see as much as 80,000 tons of our fruit left off the EU’s shelves.

Comment: Tough times in the agricultural sector, through circumstances beyond the control of our farmers.

Relief is on the way for shoppers as food prices commence their halting decline to more normal levels. Particularly so for carb-loving South African consumers – the prices of staples such as mielie meal, cereals, breads, and cooking oils are set to drop fastest. Globally, the prices of grains and fats have already declined 30% since they peaked late last year, although sugar, wheat flour, bacon, cheddar cheese, onions, broccoli, spinach, pumpkin, peppers, and baked beans are all still 30% more expensive than they were a year ago. And load shedding – which is costing our suppliers and retailers billions of rands in diesel costs and lost productivity – is keeping prices in the Beloved Country higher than elsewhere. Because of the lag between price reductions at the agricultural level and the till point (driven by food producers buying forward on prices approved months ago), it will still be a while before the beleaguered shopper sees any major price drops, and sales experience their long-awaited upward swing. For more on the latest retail trade sales numbers and what they mean, watch this interview with our very own Senior Retail Analyst, Andrea du Plessis.

Comment: A decline in food prices brings with it a glimmer of hope for shoppers. Hopefully it brightens into something more permanent.