Samantha Enslin-Payne
Pick n Pay has opened its first Mozambican store in Maputo with plans to open two more outlets later this year, and it is looking for other opportunities in the country to build on its existing presence in southern Africa. But with its business at home struggling, questions have been raised about its expansion into other markets.
Syd Vianello, a retail analyst at Nedbank Capital, said yesterday: “It has always been my view that Pick n Pay should fix their business at home, rather than spread their resources thinner and thinner in other markets.”
For the year to February, Pick n Pay reported that profit from continuing operations was down 29 percent year on year to R908 million.
Vianello said that it was not clear how the group was going to make a lot of money elsewhere in Africa, particularly in markets such as Mauritius and Mozambique, which would be franchise operations. He added that the money the group could make outside South Africa would be “peanuts” compared with what could be made in South Africa.
But Nick Badminton, the chief executive of Pick n Pay, said that there was no risk that the group was spreading itself too thin, adding that the focus in Africa was on countries where “we have identified significant opportunities” to provide customers with better value for money.
He added that the group had achieved “a great deal” strategically in terms of the South African operations.
This included the consolidation of three inland regions into one, which would improve operating efficiency.
It has also completed the rollout of SAP, which means there is a fully integrated system across Pick n Pay resulting in more efficient business processes and timely information, enabling faster decision-making. It also has plans to roll out more distribution centres.
“We should start seeing the manifestation of our investments in 2012,” he added.
Pick n Pay’s strategy on the continent has mainly been through partnering with locals and through franchising, although in Zambia it operates corporate-owned stores.
Badminton said the most significant opportunities lay in the Southern African Development Community region.
Consumer spending in Africa was set to sky-rocket within the next decade and it was also expected that the continent would have doubled its population to 2 billion people by 2050, he said.
The group has operations in Zimbabwe, Botswana, Lesotho Namibia, Mozambique and Zambia. In the year to February 2012 it plans to open a further two stores in Mozambique and two stores in Mauritius. Next year two more stores will be opened in Zambia, one in Mauritius and one Malawi.
Competitor Shoprite has 161 outlets in 15 African countries, excluding South Africa, and Vianello said that Pick n Pay would struggle to get there.
Shoprite had learnt that the profits were in west Africa not east and southern Africa, with the exception of Zambia, Vianello said.
The Shoprite group could not comment yesterday as it is in a closed period ahead of releasing its results in August.
Massmart has also headed north. Massmart corporate affairs executive Brian Leroni said one of the group’s priorities was to expand operations in sub-Saharan Africa, including introducing brands such as Builders Warehouse.
Massmart has 30 outlets in 12 other African countries. A Builders Warehouse will be opened in Gaborone later this year and five stores, including Game and Builders Warehouse, will be opened outside South Africa in this financial year.
Asked whether Pick n Pay’s move was a response to Walmart’s plans to expand in Africa via Massmart, Badminton said Pick n Pay had embarked on its African expansion strategy years before Walmart announced its intention to buy Massmart. “This region remains largely untapped and it presents an increasingly attractive market for us.”
Pick n Pay Stores fell 1.48 percent to R40.20 yesterday.