Photo by Fikri Rasyid via Unsplash
South African grocery retailer Pick n Pay has unveiled a new strategy aimed at restoring the profitability of its core supermarket business, Reuters reported.
After disappointing financial results last year, the company is reorienting its strategy to revive the loss-making business. Simplicity, quality, affordability and sustainability will be the four aspects of the new initiative, termed the Back-to-Basics strategy, proposed by Pick n Pay’s new CEO Sean Summers.
The strategy involves the reorganization of the shop network: more than 100 loss-making supermarkets will be closed or converted into Pick n Pay franchises or Boxer shops. The company hopes that this way, the network will become more compact and profitable. Moreover, the transformation will create a future-oriented Pick n Pay shop chain with efficient, modern, and well-located stores, targeting middle and high-income customers.
Pick n Pay will also pay attention to fresh product ranges and private label offerings. The new operating model will focus on minimizing waste, simplifying internal processes, and improving staff productivity, which is expected to generate R1.3bn of benefits by 2026.
“While always carrying execution risk and the risk of conditions changing or things not going exactly to plan, the corporate plan to turn around the business appears plausible,” commented Alec Abraham, Senior Equity Analyst at Sasfin Wealth.
On Monday, the Ackerman family, founder and majority shareholder of Pick n Pay, announced that it will relinquish control by reducing its voting rights to slightly below 50% following the rights plan offer. Ackerman Investment Holdings (AIH) will also waive the right to nominate the chairman, CEO, and CFO. Additionally, the family’s representation on the Board of Directors will decrease to three members starting from the Annual General Meeting in FY24.
The current Chairman, Gareth Ackerman, who will step down next year, told investors that he acknowledges the need for changes in the board’s composition, as well as the need for “new blood and ideas.”
South African grocery retailers like Pick n Pay, but also Shoprite, Woolworths, and Spar have been competing in recent years in their efforts to adapt to a changing market landscape. New strategies, as well as enhanced digital shopping experiences, expanded product lines, and new pricing policies are becoming more common.
