Pick n Pay’s plan to topple Shoprite The retailer goes into attack mode with the separation of its Pick n Pay and Boxer brands in its biggest shake-up since it was founded 55 years ago 19 MAY 2022 ADELE SHEVEL Pick n Pay is splitting itself up and accelerating the rollout of Boxer stores in arguably its biggest shake-up since it was founded 55 years ago. Dutch CEO Pieter Boone describes it as moving out of "defence" mode and into "attack". The group — which for almost two decades now has lagged its once much smaller rival Shoprite — has taken flak for being too broadly spread across its customer segments. It’s hoping the strategy will spur growth in less-affluent markets, while also challenging rivals such as Woolworths at the top end. The plan for Boxer, catering to lower-income consumers, is to double sales over the next four years. Boone says the combined brands will give "unrivalled proximity" to customers. "You take so much complexity out of the system. Imagine what that does for all of your processes, stock holding, wastage, shrinkage ... and [for] clarity when it comes to providing your customer offering and the way you communicate." A partnership with Takealot, the country’s biggest online retailer and digital delivery company, will also be launched in metro areas in August, delivering on-demand sales from Pick n Pay. Says Evan Walker, portfolio manager at 36One Asset Management: "I think their tie-up is interesting. That’s where Shoprite has taken some market share with its Sixty60 offering and Pick n Pay might claim that back." Boone acknowledges that Pick n Pay’s overall market share has stagnated over the years, blaming a lack of differentiation and price competitiveness. The retailer has served all income groups in the same way, across one label, whereas Shoprite Holdings, for example, is split into Shoprite stores for the lower end and Checkers for the middle- to upper-income customer. Boone hopes the new structure will enhance shareholder returns and reckons the changes should lead to a 3% gain in market share by financial 2026. While Pick n Pay shares have bested Shoprite year-to-date — they’re up 13% against 7.7% for Shoprite — over three years the performance is decidedly less impressive. Against Shoprite’s gain of37% and Woolworths’ increase of 29%, Pick n Pay shares have delivered a negative 7% to investors — including dividends. In practice, the rejig means Pick n Pay outlets will split into a "blue", upper-end division, and a "red" division aimed at the middle-income segment. The stores will offer a more focused range of items to boost efficiency and reduce costs; savings can be passed on to consumers, much like the discounters Aldi and Lidl have done in Europe. It also frees up cash — which can be reinvested back into the business. The three brands — Boxer and Pick n Pay red and blue — will each have its own leader. While it seems, at first glance, somewhat cosmetic, "this is not a PR initiative or a quick fix", says Boone. Yet Walker says the changes are basic retailing; "it’s not rocket science," he says.
1.4.2 Critically discuss the steps that will be required in executing the required change. (10)
