Pick n Pay ratchets up rivalry

Intense competition in food retail is set to get even keener. Pick n Pay today launches Brand Match, which compares prices of the 1000 top-selling branded products among all big supermarket chains and pays back any difference at its tills in coupons if the products cost less elsewhere. It is a strategy to regain market share.

Pick n Pay CEO Richard Brasher said South Africans preferred branded products, and shopped around for the best deals. "This will help save them a bit of time."

It will also help the retailer communicate its price advantage. A recent Standard Bank research note says Pick n Pay's pricing is 5% below that of nearest rival Checkers and 6.7% below that of Massmart's Game.

Pick n Pay has worked with market research firm Nielsen to establish the basket of 1000 branded grocery products that South Africans spend most on, and two independent research companies will compare prices nationally every week.

Brand Match will trigger a price comparison at the till when a customer is buying 10 or more products from that basket.

If the basket of Brand Match goods is cheaper at Pick n Pay, the till slip will show where the customer has saved. If it would have been cheaper elsewhere the customer will get a voucher for the difference, up to R50.

The battle between big food retailers is getting bloodier. Pick n Pay, Shoprite and Spar have taken legal action against Massmart (and landlords) over exclusive lease agreements, which they say bar competing supermarket chains from operating in a shopping centre.

Massmart entered food retail in a big way three years ago, and is gaining market share. Its annual food sales were over R30-billion and growing 6-7% a year, said CEO Guy Hayward.

This makes the group possibly the third-largest food seller in the country, trailing Shoprite and Pick n Pay.

Massmart has moved into food through Makro and Game, as well as Cambridge, giving it a buffer against slowing sales of durables and semidurables.

Consumers are spending their money on food, not on durables. About 40% of Game's sales are in furniture, appliances and equipment, the weakest part of the retail market.

Massmart said it would soon lodge a formal complaint with the Competition Commission against every retailer that filed legal action.

Hayward said the group was not opening supermarkets, but offering a narrower range of 8000-9000 items where supermarkets would offer 20 000 to 30 000 stock-keeping units. "We would hopefully give you better prices and less temptation."

At constant exchange rates, Massmart's profit fell 5.7% in the 26 weeks to June 29 . Sales rose 10.2% to R35.7-billion.