Pick n Pay warns rising prices will hit South Africans

‘Certain of these price increases we will need to absorb and some we will have to pass on to the consumer.’
Image: Bloomberg

Pick n Pay Stores chief executive officer Pieter Boone has had a stormy 10 months in charge of South Africa’s third-largest supermarket chain by sales — and he says the task is unlikely to get easier.

The fading of the latest omicron-driven Covid-19 wave and increasingly loose pandemic restrictions have encouraged consumers to spend and travel with greater ease, but the impact of rising fuel, manufacturing and logistics costs is looming, Boone said.

“I want to give a word of caution in relation to what is approaching us,” the 54-year-old said in an interview from Cape Town. “Certain of these price increases we will need to absorb and some we will have to pass on to the consumer.”

Boone has already had to navigate some tough, South Africa- specific challenges. Three months after he took the CEO job, violent civil unrest swept across two key provinces, with rioters torching depots and delivery trucks and looting supermarkets. More than 200 Pick n Pay stores were severely damaged and two distribution centers destroyed, with the retailer estimating lost sales at close to R1 billion ($65.6 million).

The riot-related costs were largely carried by the retailers and insurers. Now, with energy and fuel prices likely to surge and the central bank and government set to remove the stimulus that’s helped South Africans cope with the pandemic, it’s consumers who will feel the pain. The price of gasoline increased in nine of the 12 months of last year.

There is a clear spike in spending on the days that social grants or monthly salaries are paid, Boone said.

It’s “like a rush in order to buy food, not only for yourself, but for the entire community and it’s across all income levels,” he said. “We operate in a country that has massive opportunities, but it will require some more structural reforms.”

Pick n Pay itself is already several years into a turnaround strategy, started by Boone’s predecessor Richard Brasher. Part of this plan is a focus on its low-cost Boxer stores that may double as a way to attract cash-strapped shoppers.

The company has said it plans to open 200 Boxer shops in South Africa in the next three years, a 50% increase. That should help deliver growth in areas where organised retail still has a low penetration, both in South Africa and elsewhere on the continent, Boone said.

They will produce more own-baked breads, while Pick n Pay is looking for additional regional suppliers for fresh items such as milk and eggs.

Pick n Pay’s shares have dropped 5.6% in the past 12 months, compared with a 26% gain on the FTSE/JSE Personal Care, Drug and Grocery Stores index.

© 2022 Bloomberg

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The Covid restrictions and lockdown measures that were implemented by Central Planning authorities across the globe have a cost. There is a terrible price to pay for government intervention in the operation of the free market. These measures only served to shift the temporary problem of overcrowded hospitals to a long-term problem of overcrowded soup kitchens. Leading nations were forced to double their money supply during the pandemic in an effort to stabilize their banking systems. This counterfeit money will lead to a 100% rise in the price of basic necessities. They flattened one curve to increase the hunger problem that is far more virulent and endemic to poorer nations.

If voters were given the facts beforehand, would they still feverishly support lockdowns? Ignorance has a price.

End of comments.

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