The cold war that has prevailed for years between Pick n Pay and its minority shareholders seems to be thawing. But it's far too early to forecast a resumption of the very warm relations that existed between the Ackermans and their shareholders up to the early years of this century. Analysts are encouraged that after years of operational decline there are signs of progress, but their enthusiasm about recovery prospects is muted by the feeling that they have heard it all before.For at least the past five years, Pick n Pay shareholders have been promised that management finally have a handle on the key challenges and that a recovery is in sight.story_article_left1This time around, things just might be different. Not least because management are now quite restrained in what exactly they are promising. They acknowledge that all they have achieved in the past two years is "stabilisation of the business" with tougher financial controls, working capital management and better supply chain management.Now, in stage 2, they have to grow the business, and from there, in stage 3, secure "sustainable long-term growth".A more significant reason for optimism is that for the first time in the group's 48-year history, management are led by an "outsider". Former Tesco senior executive Richard Brasher is leading a team who must know they are running out of options and have to pull off the long-awaited recovery.For the Ackermans and Brasher, who left Tesco in 2012 amid reports of tensions with his CEO and shortly before Tesco reported an unprecedented collapse in profit, there is more than profit at stake in Pick n Pay's recovery.At this stage, Brasher is not talking up a storm. At the recent AGM, he said the first stage of the long-term recovery plan had been concluded. "I'm not happy, but I am satisfied with our performance and know we're on track against strong headwinds."Retail analyst Syd Vianello said the signs were good, but cautioned: "It's going to be a long, hard slog from here. Brasher is doing the right things, but we're not seeing sufficient evidence yet."mini_story_image_vright1Vianello said it was encouraging that what could be fixed had been fixed. "Labour is on flexi-time and significant progress has been made with centralising distribution."Management said this year they accelerated central supply to 45% of goods supplied to stores. The target for end-2016 is more than 60%.Now, said Vianello, they needed to get the top line (sales) right. This means clawing back some of the market share lost to increasingly aggressive competitors Shoprite, Woolworths and Spar, when trading conditions have turned against retailers.Between 2003 and 2015, year-on-year retail sales increased on average 5%, with a record high of 15% in September 2006 and a record low of -6.2% in 2009. In May this year, retail sales were up an annualised 2.4%.Sasfin analyst Alec Abraham said he was disappointed with the low level of new store openings this year. He reckons it will be tougher now than at any other time in the past 10 years to claw back market share.It is not just Shoprite/Checkers and Spar that Pick n Pay has to battle, but a more vigorous Woolworths."Woolworths didn't have much of a marketing strategy for food and groceries until recent years; it has become much more aggressive about its offering and its pricing. It's often cheaper than Pick n Pay." Abraham said the group also had to up its game on distribution, particularly of fresh goods.But Renaissance Capital believes the operational efficiencies achieved and on the cards will be sufficient to drive returns and lift the share price.Pick n Pay's R60 share price is just 32% ahead of the level at which it traded five years ago. Over that period, Shoprite's share has almost doubled, Spar is up 140% and Woolworths has surged a dizzying 313%.The comparative return on assets explains much of the share's performance. At 5.9%, Pick n Pay's return on assets has recovered from the 4.3% low of 2013, but is significantly below its competitors.Shoprite's is 12.7%, Spar's 14.92% and Woolworths' 17%.But share price performance is not just about selling more stuff more efficiently. Investors were also excited about retailers buying stuff outside Africa.Woolworths, which spent extravagantly on buying Australian stuff, has been rewarded with an equally extravagant surge in share price. Spar's more modest Irish purchase was well rewarded by shareholders. Shoprite/Checkers had to rely on a robust Africa strategy to secure its share hike.Pick n Pay not only disappointed on the home front, it refused to move outside Africa.By the time it turns 50, in two years, this group will either be on its way to reclaiming its former glory or a takeover target.sub_head_start When family outstays its welcome at its own firm sub_head_endThe real genius when you are the patriarch in a family-controlled business is, according to Nicky Oppenheimer, timing.It's knowing when to step down as much as when to step up.It might be that Raymond Ackerman didn't get this aspect of running a family-controlled business quite as spectacularly right as he got others.By most accounts, Ackerman held on to control of the business for about 10 years longer than he should have. Which is why, for the four or five years up to the appointment of Brasher in 2013, AGMs had been tense affairs, with standoffs between agitated shareholders and obdurate board members.mini_story_image_vright2Ian Scott, Grant Thornton's managing partner in the Western Cape, said most businesses start as family-owned. "The successful ones grow under an entrepreneur, but at some stage the family has to decide whether to bring in professional management and step back, particularly if the company is listed and is not performing."The Venter family at Altech/ Altron also got the timing badly wrong, as did Aaron Searll at Seardel."They did very well in setting up the company and driving it for decades, but they overstayed," said Scott.When they overstay, families undermine the benefits they bring to business. The long-term perspective, willingness to stand by the company during tough times, commitment to organic rather than acquisitive growth, and identifiable owners rather than anonymous institutions are traditional strengths that become weaknesses when the family overstays.The change in Pick n Pay's fortunes occurred several years before the shareholders started to agitate. Return on equity and return on assets peaked in 2006, then declined steadily until 2013.For non-family shareholders, the impact of family control was aggravated by the pyramid control structure that had been put in place decades ago. It meant that with an effective stake of just 26% the Ackermans could call all the shots, not just in terms of operations - a generous dividend policy was designed for the benefit of the family.At last year's AGM, Raymond Ackerman, who stepped down as executive chairman in 2012, explained that the pyramid structure, which is now banned by the JSE, was put in place to ward off a hostile bid for control the family faced in the very early years.One crucial consequence was the delay in appointing an "outsider" as CEO, someone who would bring new ideas and new energy to the group and, most importantly, not be in thrall to the Ackermans. Few believed the line that Pick n Pay was a "family-controlled but professionally managed company".By 2012, when CEO Nick Badminton resigned after a five-year stint, the controlling shareholders finally accepted the need for an "outsider".Remarkably, for years the Ackerman-led management agreed with aggrieved shareholders about what was needed operationally to rescue the group but were unable to implement the necessary changes.story_article_left2Critical among those changes was the need to move to a centralised distribution system.Current nonexecutive chairman Gareth Ackerman has said he underestimated the extent of cultural shift needed to change from a regional-dominated organisation to a centralised one. Each region had its own buyers, accountants, marketing staff and even advertising.For decades, this had worked exceptionally well for the company and its shareholders. But in a more competitive industry that had access to the powerful technology needed for centralisation, the decentralised model was proving to be a huge competitive disadvantage.The challenges for the Pick n Pay leadership were daunting. For the centralised distribution system to work, regional executives, who had held sway for decades and for whom the principle of decentralised management was ingrained, would have to give up their power.It is an enormous challenge and one that can probably only be done by an experienced "outsider" such as Brasher.If Brasher can pull off the delayed recovery needed, shareholders might be prepared to overlook the frustrations and disappointments of the past eight or so years and focus on the value created by the company since it set up shop in 1967.A R100 investment in Pick n Pay at the time of its listing in 1968 was worth R1-million in 2010 when Raymond Ackerman retired. In the intervening 42 years, he revolutionised retailing in South Africa and probably taught Shoprite, Woolworths and Spar much of what they needed to know to eventually beat him at his own game...