
THIS ISSUE: 19 Apr - 26 Apr
YOUR NUMBERS THIS WEEK
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Pick n Pay Out of the blue, into the black
As always, we at Trade Intelligence had a sharp-eyed observer at the Pick n Pay results presentation last week, and more so than usual, the devil was in the details and nuances – accompanied perhaps by a couple of angels, too. First the bad news: profit down 15% year-on-year off an increase in sales of 8.1% to R55-odd billion, attributable say Pick n Pay to their expenditure on tightening the supply chain, establishing the specialist category buying function and getting the Smart Shopper loyalty programme up and running. Smart Shopper, incidentally, is already paying massive dividends in terms of both shopper data and targeted promotions, while the numbers above are less worrying than they look, with a pleasing recovery becoming evident in the second half. And while it has been said more than once that deputy CEO Richard van Rensburg is not in line for the main job, the analysts, a notoriously difficult crowd to please, seem to think his pragmatism is just what the doctor ordered during this tricky ambit for the Group. A couple of the focus areas for growth will be Africa, with 94 stores already on the ground and more planned for the DRC and Malawi, and getting the hypers back up to speed, particularly in the neglected area of GM, which will be stacked high and sold inexpensively.
Comment: Being punters, we might pick up a few extra Pikwik shares in happy anticipation of the recovery of which the Big Blue now seems confident.
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Walmart Ay, Caramba!
Commissions, Tribunals and Judicial Appeals? Not so much. In Mexico, where one out of every five stores is now owned by Walmart and where their 2011 turnover was $29billion, The Big Feller has being doing things a little differently. A recent article in the New York Times alleges that this expansion has been enabled by the payment to various regional officials of $24billion in bribes. In the years up to the exposure of the bribes by a former executive, Walmart de Mexico apparently paid these monies to obtain zoning approvals, reductions in environmental impact fees and the allegiance of neighbourhood leaders, presumably a time-honoured practice in Mexico, and then took steps to conceal these payments from head office in Bentonville, Arkansas. The story is getting a lot of heat in the US, where a spotlight has fallen of late on the more south of the border way of doing business a lot of companies adopt once they have hit Tijuana, cranked the hood down on the rented convertible and cracked their first Corona.
Comment: Which in fact makes one rather grateful for the more pedantic approach of our own authorities in this instance.
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Nakumatt Your hinterland lies .... south?
More on those mysterious retailers popping up overnight in east Africa. Or not, as the case may be. Nakumatt, which began life 30 years ago as a small, family-owned mattress shop in the Kenyan town of Nakuru, is now Kenya’s biggest retailer, with a turnover in excess of $500millionUS, up a massive 50% year on year. It has 36 stores in Kenya, Uganda, Rwanda and Tanzania, and is looking at Burundi and South Sudan. Its ambitions are continental, apparently: once it hits Ethiopia, the Mediterranean’s the limit according to MD Atul Shah. And then, reading between the lines, it is cheekily eager to go up against the South African retailers who are making inroads in West Africa, ahem. In order to fund its ambitions, Nakumatt are selling a 25% stake in the business – and word on the dusty though bustling street is that there are at least 10 interested parties, including bigger retailers and private equity outfits.
Comment: Of whom the latter are apparently preferred by Nakumatt.
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Pick n Pay (2) Head out on the highway
Keeping off the subject of profits, supply chains, investments in infrastructure, loyalty programmes and the mysterious resignations of CEOs, Pick n Pay have formalised their relationship with BP, nine of whose forecourts are currently graced by Pick n Pay Express stores. The plan is for another 120 conversions over the next five years, with the focus on sites that will be most relevant to the Pick n Pay customer base. The deal gives PnP a bridgehead into the small store format, which is often a driver of growth, as well as an extension of its offering to potential franchisees. The typical Express store is sized between 150m2 and 250m2 and offers between 1,500 and 2,500 product lines.
Comment: And speaking of loyalty programmes, which we of course weren’t, you’ll be able to use your Smart Shopper card there too.
MANUFACTURERS AND SERVICE PROVIDERS
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Aspen CanYouBelieveIt?
Aspen has just forked over R2.1billion from its war chest for the purchase of an attractive selection of GlaxoSmithKline’s over the counter brands, including Valoid, Borstol, Zantac, Dequadin, Solpadeine, Cartia and that scourge of sick children everywhere, Phillips Milk of Magnesia. These brands offer Aspen excellent penetration into geographies where they need a little help, like Latin America and Southeast Asia. Together, these paragons of pharmaceutical and commercial virtue generated revenue of £59,3million for GSK last year, but the unpunctuated one seems resolute in its intention to divest itself of its OTC business.
Comment: Of course, Glaxo own close to 20% of Aspen stock, so they win both ways, if Aspen go on to manage the brands as promised.
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SABMiller Break it up, fellers
SABMiller, which is due to post a tidy set of results if the murmurings are to be believed, intends on dropping another R2.5billion on new and revamped breweries on The Thirsty Continent, where it is looking for growth of $400-500million per annum for the next three years. Africa outside of SA remains The Big Chap’s fastest growing market, with volumes having climbed 11% in the last quarter of 2011. Back home, they’re involved in another of their entertaining spats with brandhouse about who the fastest-growing green bottle beer is. Windhoek, say brandhouse, and we have Nielsen to prove it. Ah, but Nielsen don’t measure taverns and restaurants, say SABMiller, which is where 40% of the market is, and also where Castle Lite is taking on all comers.
Comment: It occurs to us, falling squarely into the premium beer demographic as we do, that there is room for more than one brewer in any given geography, and that a spirit of more convivial competition might be good for everyone.
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Sea Harvest Swedening the offer … oh, shut up!
Local seafood merchants (well, what else would they be?) Sea Harvest have announced a joint venture of some unspecified sort with the Findus Group of Sweden, itself a purveyor of fine value-added seafood and other meals, and a long-time customer of Sea Harvest, which has been exporting its fish to them for over a decade. And Findus, in turn is no stranger to these shores as it were, with frozen veg and gourmet meals in the fridges at select Pick n Pay’s nationwide. Now its range, which emphasises taste, food safety and agricultural sustainability will find wider distribution over here – although still with Pick n Pay, on an exclusive basis for one year – and shake things up in the frozen category a bit.
Comment: A clever way to do it.
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Lending Neither a borrower nor a lender be
Bad news for the economy is that South Africans are growing their debt faster than they are growing their asset base. Good news for our great industry – of the short-sighted, short-term variety – is that this is because they are borrowing to fund consumption rather than to give themselves a material leg up in the world. And much of this free money is coming via unsecured lending which has grown worryingly over the past few years: according to the National Credit Regulator unsecured lending was 24% of the total value of new credit extended in the 4th quarter of 2011, compared with only 7% in 2007. This is apparently not yet a threat to the stability of lending institutions, but if it continues might lead to the development of a debt bubble somewhere down the tracks. Household assets have increased 13.9% between 1975 and 2011, while debt has grown 15.6% in the same time, hitting R1,352bn in 2011.
Comment: You’d think that the great decession would have cured us of this nonsense. But no.
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Retail Sales Technically, it’s called a leap
Retail sales, you will be pleased to know, were up 7.2% year on year for the month of February, boosted ever so slightly by the presence of that extra day, when traditionally young women are allowed to go up to things they like and propose to acquire them. Wholesale sales were up 13.9%.
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Colgate-Palmolive A sparkling result
Colgate Palmolive have successfully warded off an ASA complaint brought by GlaxoSmithKline relating to its Total toothpaste, which, it turns out, contains not only fluoride, like other toothpastes which shall here remain nameless, but also Triclosan, an anti-bacterial ingredient, and Gantrez, a copolymer, both of which help Total achieve its promise of 12-hour protection for virtuous teeth.
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