PnP: Aggressive Boxer expansion and new store format for ‘inbetweeners’

Ambitious growth plan for discount Boxer brand and ‘Project Red’ stores for customers floating between it and the traditional Pick n Pay brand.
Project Red stores aim to service the customer looking for competitive pricing, with a focus on fresh fruit, vegetables, bakery and meat products. Image: Supplied

JSE-listed retailer Pick n Pay plans to open 200 new Boxer stores by 2026 as part of its plan to double the discount retail brand’s sales and gain 3% market share. The plan was unveiled by Boxer MD Marek Masojada on Tuesday.

“We have identified the locations we want to be in, and our property teams are hard at work securing premises,” Masojada says.

Read: Pick n Pay ups on-demand grocery delivery ante with Takealot deal

“We need to maintain our market leading like-for-like sales growth in our existing store base, and our commercial marketing and store operations teams are passionately obsessed with continuous delivery of exciting, innovative and disruptive promotions to drive sales.”

To support this goal, Pick n Pay is expanding its supply chain, announcing that it has opened a distribution centre in the Western Cape and has plans to open another in Gauteng.

Boxer, which already has 380 stores in SA and eSwatini, has been part of the Pick n Pay stable for 20 years and has grown significantly in that time.

A good time to look for property

Sasfin senior equity analyst Alec Abraham says news of the aggressive Boxer expansion initially raised concerns that the retailer might spend too much time pursuing the discounter’s growth, losing sight of its core market.

But Abraham says his concerns eased once it became clear that the retailer still plans to work on improving the customer’s shopping experience at its traditional core brand.

“I initially thought that they are [already] struggling to hold on to market share in their traditional market where Checkers is gaining market share, if they are going to focus so heavily on Boxer – you know, just like we saw with Massmart – they are probably going to land up with a bloody nose and lose focus on their traditional market,” he tells Moneyweb.

Abraham notes that despite his reservations, this might be the best time for PnP to take on this Boxer expansion, given the state of the business environment post-Covid-19 – particularly the property sector.

“Previously I was very dubious that they would get good sites to aggressively expand, but with the disruption in the property space, I think they are lucky and they probably have a better opportunity to find nice sites to expand their Boxer [stores].”

New-format Project Red stores

At the same time, Pick n Pay unveiled a new store format in terms of what it calls “Project Red”.

Although it is not yet clear whether the new format will go by a different name, the Project Red format will cater to the needs of the customer floating between the discount Boxer brand and the traditional Pick n Pay brand.

Project Red stores are meant to service the customer looking for competitive pricing and market-beating promotions, with a focus on supplying a wide range of fresh fruit and vegetables, bakery and meat products.

This store format will house 8 000 products – 10 000 fewer than that available at traditional Pick n Pay stores.

However, Abraham is not confident that the retailer will manage to pull this differentiated store format off.

“Lots of companies have tried that – Woolworths has tried that – to curate a somewhat different range of products for a different neighbourhood. I think it’s very difficult and I am not as certain of that, I don’t think that will be particularly successful.”

Read: Pick n Pay reports a rise in FY profit, ups dividend

He nevertheless commended the retailer for reducing its product offering for customers, saying this will help in delivering customer value and will help the retailer to save costs.

“It speaks more to focusing the product range and trying to get more volumes out of fewer [products] in order to get additional rebate from their suppliers,” he says.

“You see this across the board – Dis-Chem is doing it and Clicks has done is for many years – really trying to focus the number of [products] so that they can get as much rebate from fewer products and that way try to deliver a better price perception to their customers.”

Listen to Pick n Pay CFO Lerena Olivier speak about the group’s latest FY results:

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