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After Checkers onslaught, PnP plays catch up in convenience

A three-way battle is on for two million affluent shoppers.

The aggressive move by Checkers into the prepared/convenience foods space has taken the market by surprise. From not playing in this segment at all barely 18 months ago, it now has more than 150 new “convenience” products on its shelves, with a pipeline of over roughly 100 in development. It expects the range to hit 500 products by the end of the year.

Its biggest push so far has been in children’s meals and snacks, which were developed by celebrity chef Gordon Ramsay and his daughter Matilda. This has been the centre of a many-months long promotional campaign on television, social media, in store and in its weekly promotional leaflets. Along with this range, comes salads, sandwiches, typical “microwave meals” like pastas, soups, prepared veggies and “street food”, as well as ready-to-bake pizzas. It has also launched a number of “ready-to-braai” prepared meats and side dishes. 

Shoprite Holdings CEO Pieter Engelbrecht maintains that the continent’s largest retailer has market leader Woolworths in its sights. But, analysts suggest that much of the market share it has taken in this space has been from Pick n Pay.

Now, the country’s second-largest supermarket group, Pick n Pay, is playing catch up.

It entered the category about five years ago, with an offering of salads, soups, pizzas and pastas and then, after a few years, inexplicably withdrew the products from stores (this could’ve been linked to a supplier or distribution issue). Pick n Pay has relaunched its offering in recent years and is arguably pushing as hard as Checkers to grow its share of the category.

Consistency of availability remains an issue (as was the case in its previous push), with a vastly different experience between its next generation stores, aging/underperforming stores (including some Hypermarkets!) and its franchise-owned-and-operated stores.

Pick n Pay CEO Richard Brasher is “unfazed” by the aggressive play by Checkers, telling Moneyweb earlier this month that “convenience food is a worldwide trend. We will play in it. We do play in it and we will compete in it. The market will grow and everyone will grow with it”. 

In its results for the 26 weeks ended August 27, PnP says “convenience foods are a key part of the group’s strategy to grow its private label offer. Products in this range are selected on the basis of exceptional taste and innovation, and are displayed prominently in-store, with modern and attractive packaging. During the period under review, Pick n Pay achieved 12 first-place awards in the Sunday Times Food Awards, an independent taste test dedicated to finding South Africa’s best supermarket foods. Pick n Pay was awarded more than double the first-place awards of any other retailer”.

Awards aside, this is a volume game and not a category that one gets right quickly. Engelbrecht told Reuters that “Shoprite had upgraded its food technology and development facilities and gone on a hiring spree for food developers and technologists. He said the department had grown ten-fold in a year, without giving more specific details on staff numbers”.

Woolworths chief executive Ian Moir told the FM that it has the “technology and product developers and partners or suppliers, in some cases for over 30 years. You don’t establish that overnight, or easily”.

Private label – as a whole – is one of Pick n Pay’s five key focus areas on the customer-facing half of stage two of its turnaround plan. The others are prices, promotions, personal discounts, and more stores, which are better.

This extends beyond convenience/prepared foods into practically every other category on its shelves. Pick n Pay is the grand daddy of private label in South Africa. Its No Name brand, which it claims to be one of the most iconic in the country, launched over four decades ago in 1976.

In the six months to end-August, it says it “launched a further 400 private label products… Of these, 163 were new, and 237 were redesigned and improved products. Pick n Pay’s private label range has grown to more than 2 000 products, with participation of 19%”.

It says its (private label) share is above 45% “across a number of products including sugar, cooking oil, UHT milk, frozen poultry and eggs” and is “growing share in key categories such as bottled water, coffee and soft drinks”.

Recent new category launches are baking and household (cleaning), with some noticeable promotional and marketing pushes in these in recent weeks. Pick n Pay also says it “has established firm links between its plan to grow its private label offer, and its enterprise and supplier development programme, which seeks to nurture and develop entrepreneurs in South Africa”.

By comparison, Shoprite, as a group, lags in private label, with participation up 1% in the 2017 financial year to 14.7%. It says the industry standard is 18.5%. However, it notes in its annual report that “private label sales have been growing at 2.5 times the pace of total sales”.

It’s understandable why private label is such a big focus area (over 70% of Woolworths’ food proposition is private label): margins are so much better! In the prepared/convenience meal space, that’s especially true.  

This is shaping up to be a bruising battle between three formidable competitors.

Shoprite’s Engelbrecht told the FM’s Zeenat Moorad in September “Somebody said: ‘Yes, but you’re just copying the brand leader.’ So we brought out the Oh My Goodness children’s meals [developed by chef Gordon Ramsay and his daughter Matilda]. I will now wait and see who copies whom.”

Pick n Pay notes in the commentary to its H1 2018 results that it will “continue to innovate” in convenience, “including through the launch of Pick n Pay’s new convenience range of meals for children in the second half of this year”.

Your move, Woolies.

Hilton Tarrant works at immedia. He can still be contacted at hilton@moneyweb.co.za.

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There may be a perception that Pick ‘n Pay is a more prestigious store to shop in behind Woolworths of course, but the staff at Checkers are friendlier than those at Pick ‘n Pay and in respect of the products that I use (not what the merchandiser selects in his sample basket), I find Checkers to be cheaper of the 3 top supermarkets. Checkers have a long way to go to catch up with Woolworths in respect of prepackaged ready meals, but they have a fine new variety and it will not be long before they have even more ‘quick’ meals available which are competitively priced and very tasty. So, I agree, if you add price, quality and instore services ice, then Checkers stands out right in front.

And then there is always the 15% back in ebucks which works for me!

There may be a perception that Pick ‘n Pay is a more prestigious store to shop in behind Woolworths of course, but the staff at Checkers are friendlier than those at Pick ‘n Pay and in respect of the products that I use (not what the merchandiser selects in his sample basket), I find Checkers to be cheaper of the 3 top supermarkets. Checkers have a long way to go to catch up with Woolworths in respect of prepackaged ready meals, but they have a fine new variety and it will not be long before they have even more ‘quick’ meals available which are competitively priced and very tasty. So, I agree, if you add price, quality and in store service and friendliness , then Checkers stands out right in front.

Checkers are battling with pitching to the affluent, it is not their style.

It has never been the strategy of Checkers to pitch to affluent. Their target market right from the beginning has always been the value market. Even Whitey said it in as many words in an interview on radio a week or two ago.

That’s my point.

What I see in Pick n Pay stores gives me no confidence as an investor. Frequent stockouts, grumpy staff, pricing errors and ongoing failures in their SmartShopper system, which is frequently off-line (so discounts aren’t paid), or the in-store terminals don’t work, or bonus points aren’t awarded, all point to a business in decline.

A group selling CONVENIENCE food thinking it’s OK to inconvenience customers at the check-out? Grumpy staff who are more interested in their own conversations than serving customers, not enough tills open.

There are certain branches that DO have proper queue management, but they are the rarity.

Then there are the stock-outs….

Why is Spar not even mentioned in the article.Shop there every now and then and have noticed that they’re only marginally more expensive than Mr.Brasher’s company.Stores are cleaner,staff more friendly, their meat is better and let’s not even mention their bakeries which put the rest to shame!

Good point, Bruce.

Spar stores’ cleanliness make me even doubt whether I take enough showers in a day. Hahahahha!!

Pick ‘n Pay’s unmitigated f’up of epic proportions occurred around 2008/2009 when they announced with great pomp that they were going to take on Woolworths in the high LSM pre-packed foods market.

The first problem with that is that nobody in PnP at that stage had the slightest clue of how to do that. The staff in the stores sure as hell weren’t going to change their attitudes and the senior corporate staff clearly had a gigantic brainfart at the time because they saw that with the affluence of the property boom, the Woolworths market was growing.

Cue the finance collapse as this was announced. Woolworths was the established brand in this retail LSM and people weren’t going to change. What did happen is that those who moved into the Woolworths LSM during the boom moved back down to the PnP LSM, but PnP was busy rebranding and that costs money which pushes costs and pricing up and so those people moved elsewhere e.g. to Checkers, Spar, Foodlovers

For the past 8 years, PnP has been flapping around in the deep end trying to recover and establish an identity again.

It isn’t so much as Checkers had an onslaught so much as PnP gave it away.

They have completely lost their mojo and it will take many intelligent people (who clearly aren’t there currently) and a huge amount of work to get it back.

Pick ‘n Pay greatest business mistake in my opinion was getting rid of the ‘Score’ brand, probably the one Supermarket chain that was on a level footing with the behemoth that is Shoprite.
They then proceeded to re-brand Score supermarkets with that new, upmarket, Pick ‘n Pay look, a move that didn’t go down well with the lower LSM market, stores began to feel too fancy for them, fancy look goes hand in hand with perception of high prices, so many made their way to Shoprite, sounds ridiculous, I know, but very true.
Look at this way, a lot of grant receipients are probably Shoprite customers, guaranteed revenue for them, nothing fancy needed, just perception and the right image, and serving that base as best as possible.

Richard Brasher’s current success at PnP largely down to clever cost-cutting rather than regaining market share, though he is doing well.
Pick ‘n Pay trades in a very tough market, only time will tell if minor tweaks, such as convenience foods will do the trick.

I find PNP stores dirty & smelly by comparison with say Woolies & Checkers.Perhaps it’s specific to the stores visited.Also I agree that their systems, ie IT, are not up to it.Tried paying for a utility bill the other day, but the scanner scanned incorrectly, and it took 5 minutes for the teller to figure it out.Not her fault.

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