Is Checkers eating Pick n Pay’s lunch in Mzansi?

As the retail environment in South Africa continues to develop, certain grocery stores have significantly outperformed others.

Checkers, which includes its Hyper branches, expanded its store count by 25 during the fiscal year ending June 30, 2024, resulting in a total of 321 supermarkets.

Woolworths also expanded its presence, increasing the number of Woolworths Food locations in Southern Africa to 651 from 479 in 2023. Of these stores, 430 are located in South Africa.

Nevertheless, not all of South Africa’s retailers had a successful year.

Pick n Pay, which operates both Pick n Pay and Boxer stores, issued a trading update for the 26 weeks ending August 25, 2024, last week.

It was discovered that Boxer experienced a 12% increase in sales and the opening of twelve new stores, whereas Pick n Pay’s performance was subpar. Overall, sales decreased by 0.3%, with only a 0.1% increase in Pick n Pay South Africa’s sales.

The closure of 24 supermarkets, including 10 corporate and 14 franchise stores, as part of a transition strategy to close loss-making stores, is partially responsible for this decline.

Sean Summers, the CEO, had previously disclosed his intention to shutter 35 underperforming stores and transition 70 outlets to the Boxer brand.

For the past few years, the retail environment in South Africa has been undergoing a transformation. Checkers, among other retailers, has been able to capitalize on this shift.

Grocery delivery services are becoming increasingly popular among consumers, who are also favoring smaller, more expedient stores over larger, “hyper”-sized stores.

In recent years, retailers such as Checkers and Pick n Pay have introduced their own premium ranges, despite the fact that Woolworths has always dominated the upmarket grocery sector in South Africa.

As the retail environment in South Africa continues to develop, certain grocery stores have significantly outperformed others.

Checkers, which includes its Hyper branches, expanded its store count by 25 during the fiscal year ending June 30, 2024, resulting in a total of 321 supermarkets.

Woolworths also expanded its presence, increasing the number of Woolworths Food locations in Southern Africa to 651 from 479 in 2023. Of these stores, 430 are located in South Africa.

Nevertheless, not all of South Africa’s retailers had a successful year.

Pick n Pay, which operates both Pick n Pay and Boxer stores, issued a trading update for the 26 weeks ending August 25, 2024, last week.

It was discovered that Boxer experienced a 12% increase in sales and the opening of twelve new stores, whereas Pick n Pay’s performance was subpar. Overall, sales decreased by 0.3%, with only a 0.1% increase in Pick n Pay South Africa’s sales.

The closure of 24 supermarkets, including 10 corporate and 14 franchise stores, as part of a transition strategy to close loss-making stores, is partially responsible for this decline.

Sean Summers, the CEO, had previously disclosed his intention to shutter 35 underperforming stores and transition 70 outlets to the Boxer brand.

For the past few years, the retail environment in South Africa has been undergoing a transformation. Checkers, among other retailers, has been able to capitalize on this shift.

Grocery delivery services are becoming increasingly popular among consumers, who are also favoring smaller, more expedient stores over larger, “hyper”-sized stores.

In recent years, retailers such as Checkers and Pick n Pay have introduced their own premium ranges, despite the fact that Woolworths has always dominated the upmarket grocery sector in South Africa.

On the Kaya Biz podcast, Andrea Slabber, Insights Lead at Trade Intelligence, discussed some of the major developments in the grocery industry in South Africa.

According to her, the six major grocery retail companies in South Africa have opened 378 net new stores in the last six months, but this does not always equate to actual growth.

The average number of new stores that have opened in the last five years is one every day, seven days a week, which is truly astounding. And it is.

“It sounds confusing as well, because where is this growth occurring?”

“The numbers show that there hasn’t been much actual growth. Inflation has cropped it.

According to Slabber, the FMCG sector is currently experiencing two significant trends.

First, a significant number of stores that were formerly located in the wholesale and independent retail sectors have been acquired.

This approach has accelerated the growth of stores, especially for the Shoprite Group.

“So, I guess it’s shifting market share from one channel to another.”

The other trend is that smaller, more convenience-focused stores make up the majority of the stores that retailers open.

“They have also purposefully decreased the size of their hyper and very large supermarkets.”

Slabber clarified that this has led to a “fragmentation of the trade” at the moment.

“The number of stores expanding precisely is more significant than the actual growth.”

This indicates that even though there might be more stores, the quantifiable trading isn’t increasing significantly.

She went on to say that the FMCG (fast-moving consumer goods) sector is extremely competitive.

“It costs money, and everyone is trying to either grow or protect their market share.”

Slabber claims that Checkers’s range of store sizes is one reason it has excelled this year, even surpassing Woolworths with an average turnover per store that is 2.6 times higher.

Consumers have plenty of choices from big, hyperstores to little convenient stores depending on Checkers range.

But the demographic of Checkers customers reveals the most important realization in her perspective.

“They have been successful in drawing the higher income wallets into their stores and have clearly been able to change the emphasis of the shopper demographic visiting their outlets.”

The retailer has accomplished this by redesigning and modernizing their stores and including luxury private label products including Forage and Feast.

On top of this, the store provides lots of discounts and offers that appeal to bargain buyers.

“Absolutely, I don’t believe Checkers stores are visited by just Woolworths customers who used to buy from them.

The average South African does their grocery shopping in a month over four to five different stores, thus people shop around for what they want, where they want when they want.

Sadly, though, Pick n Pay does not seem to be “where they want”.

“They have been rather lucky overall; Boxer is one of the few stores showing positive volume growth, along with Shoprite and Clicks,” Slabber said.

Still, this growth was rather subdued.

Pick n Pay, on the other hand, lacked even the same success.

The negative underlying volume growth is the one thing that really grabs attention. Particularly in the food area, the Pick n Pay stores have quite great concerns about that.

“That presents a great difficulty.”

“I think to the extent Pick n Pay may have lost relevance with their grocery-oriented customers and their biggest challenge will be trying to get those shoppers back into their stores.”

Slabber claimed that Pick n Pay has to work hard if they are to get their game back.

SOURCE FROM BUSINESSTECH