The Zimbabwean investment of Pick n Pay, South Africa’s third-largest supermarket chain by sales, is proving to be lucrative and strategic as competition in the South African grocery sector heats up, and eats into its market share.
Despite earlier fears that the Omicron variant of Covid-19 could impact on volumes and revenue, Pick n Pay’s stores in Zimbabwe top performed in the quarter to the end of December.
Under a partnership with Zimbabwean-listed Meikles Limited, which also runs prime city and resort hotels, and has just separately listed an agro-processing unit on the Zimbabwe Stock Exchange, Pick n Pay has seen its visibility in Zimbabwe expand in the past few months. This has boosted sales volumes.
“Sales volumes at the supermarkets segment increased by 32 percent and 29 percent for the quarter and nine months (to December), respectively, relative to the same period of the previous financial year,” Meikles, which jointly runs TM Supermarkets together with Pick n Pay, said in a trading update yesterday.
The higher sales volumes for Pick n Pay’s stores in Zimbabwe bodes well for the grocer, which is facing intensifying competition from Shoprite in the South African market.
According to former chief executive Richard Brasher, leading a turnaround at the group, speaking in April last year Pick n Pay had a 16 percent share of the food and grocery market. He added that a significant portion of this was in the affluent and middle-income market.
Pick n Pay’s chief executive Pieter Boone, speaking in October as the retailer delivered financial results for the half-year ended August, 2021 – which saw group comparable earnings per share increase 90.9 percent year-on-year while sales growth increased by 4.1 percent over the same period to R46 billion – said the retailer would use the learnings from the Boxer model to reposition its Pick n Pay Value supermarkets, as an aspirational but affordable store for middle and lower-income customers.
This amid intensified competition in the South African grocery retail sector, with Checkers trying to eat Woolies high-end customers’ lunch. According to research by NeilsenIQ, Shoprite’s South African stores gained market share as the grocer staved off competition from rivals such as Spar, Woolworths and Pick n Pay.
Apart from its rich pickings in Zimbabwe, Pick n Pay has also been bumping up its positioning in the South African market, capitalising on online shopping to beat possible slowdown from the impact of Covid-19 lockdowns.
Analysts at Fitch Solutions highlight that while they “forecast total household spending to increase in 2022 when compared to 2021, it would only rise above the pre-Covid-19 levels of 2019”, next year.
“This means that South Africa’s consumer spending recovery will spill into 2023.”
The South African grocers are now in a race to effectively position to tap into this opportunity.
For Pick n Pay, there is the double opportunity of growing prospects for its Zimbabwe operation and clawing back lost market share in South Africa. The Zimbabwe chain is continuing to invest in store upgrades.
Meanwhile, Pick n Pay’s Zimbabwean partner, Meikles has also recorded an uptick in room occupancies and revenue per available room for its hotel division during the period under review. The company runs prime hotels in Harare, and in the resort town of Victoria Falls.
Despite the Omicron variant-induced cancellations of regional and international bookings, there was a sustained growth in both room occupancy and revenue at the hospitality segment during the quarter under review.
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