Pick n Pay: The emerging market, township, factor

Comeback kid, Pick n Pay, is stalking ‘emerging’ South African markets and mainly the black townships which were left unattended by mainstream retail operators in the old bad apartheid days.

The move suggests that the unfolding township economies’ story is only beginning. The future is black. Nedbank, a banking group which used to pride itself for being an elite brand saw the light in the mid 2000s.

A Pick n Pay statement accompanying financial figures for the six months ended September is telling. “We have broad appeal across all income groups, from lower income communities to the most affluent households. The key to success in retail – and the heart of any good business – is to appeal broadly, to exclude nobody, and to move hand-in-hand with customers needs and aspirations.”

During the six months ended September Pick n Pay launched 44 new stores, 38 of which are in South Africa. The six other stores were opened in Zambia, Mozambique, Namibia and Zimbabwe.

Commenting about its South African new ventures Pick n Pay said “There is ample opportunity to expand our footprint in South Africa, particularly into areas where we have not yet traded.  We were delighted to open stores in Chatsworth, KwaMashu, Hammarsdale, Burgersfort, Pongola, and Elim during the period, all areas in which Pick n Pay has never operated before”.

The group added that “We now have more than 1 000 stores, consisting of 594 owned and 433 franchise stores, across multiple formats and in eight countries”.

While the Group remains focused on our core South African business, we continue to look for profitable and sustainable growth opportunities in the rest of Africa,” said the company.

The markets cheered the company yesterday as it announced these news as attached to the financials for the six months ended September. Pick n Pay shares shot up by 8% on the day. Granted the markets were more likely cheering an apparent turnaround for the Pick n Pay business.  Group till sales grew by 8.1% to R35bn. Headline earnings per shares jumped by 36%. It would seem things are beginning to happen for Pick n Pay which looked stuck in a decline over the past few years.

The emerging economy economies theme is certainly going to be big going forward. A research conducted by the Newspaper Advertising Bureau, a division of Caxton & CTP Publishers & Printers has made some telling findings.

Commenting about research findings NAB said “With retail under tremendous pressure to grow and most key nodes saturated with stores and major shopping options, SA’s townships are being seen as the only option for new stores or brand growth”.

“In today’s competing market most brands are under pressure to grow and expand. SA’s economy has lagged since 2007, and marketers are looking for new areas to extend their distribution network”.

Africa has been the obvious market for SA retailers and manufacturers that hold massive growth potential but domestically SA’s townships remain the ‘no brainer’ for local growth. Many marketers prefer to throw this market into one generic segment but the ROOTS survey shows key differences in these hotspots and warns marketers from ‘boxing’ these important markets into one group”.

NAB observed that since 2007 there has been a significant change in some of these key townships most notably with movement in the LSM’s. The survey saw an 80% jump out of LSM 3-5 into the 6-8 groups as urbanisation and asset accumulation forged ahead.



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