Pick n Pay takes trade to townships

Traditionally, one would only find a Pick n Pay store in the high income areas but today the company boasts a handful of supermarkets in the townships.

It has converted 32 of its underperforming Score stores into Pick n Pay family stores, some in Soweto and other lower-end market areas.

That is definite competition for Shoprite, which caters for the lower end of the market.

“The one hypermarket store that was launched in Soweto has been very successful to date and the Score Stores that have been converted to franchised Pick n Pay Family stores have been trading well,” said Coronation Fund Managers investment analyst Quinton Ivan last week.

“Running a business in Soweto is different from running a business in a suburb, so a franchisee that is usually from the township is in a better position to understand what the market wants.

“And in this regard, converting Score stores into Pick n Pay family stores, which are franchised, is a good recipe that is clearly working for Pick n Pay,” he said.

Although it could not divulge the exact percentage of its market share in Soweto, Pick n Pay said that the Score conversions this year were targeted to achieve more than R2bn in turnover.

This could be read as a positive reception from customers in townships and a growing market share, an analyst said.

“Our market share in Soweto has grown well and currently our figures indicate we have about half of the major supermarket business,” said Pick n Pay's food director, Kevin Korb.

Pick n Pay said that the plan was that by February next year, 62 Score stores would be converted into Pick n Pays, including 14 stores in Botswana, while 16 Boxer stores would also result from the conversion strategy and would include three stores in Swaziland.

“That's the reason why Spar is so successful; its stores are run by entrepreneurs that understand the area and its wants better than a corporate ever could,” Ivan said.

Competitor Shoprite has eight stores in Soweto.

It said that it welcomed strong competition as this spurred the business on to keep prices sharp and ahead of industry-related developments and changing consumer needs.

Shoprite has an overall market share of 28.4%, with Pick n Pay sitting at 33.4%, while Spar and Woolworths have 26.3% and 11.9%, respectively.

But in revenue terms, Shoprite is the biggest with R59bn, followed by Pick n Pay with R50bn, Spar at R32bn and Woolworths at R20bn.

Source: Business Day

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