Pick n Pay recovery bid: slash prices by R500m

In a bid to drive sales and recover market share, Pick n Pay is taking its discounting a step further.

The plan is to cut prices to the value of R500-million on 1,300 items, including meat, vegetables and fruit.

David North, Pick n Pay's group executive of strategy and corporate affairs, said this week: "We are doing exactly what we've said in our strategy, which is that we need to have a sales-led as well as a cost-driven recovery."

The company, South Africa's third-largest grocery retailer in terms of market capitalisation, adopted a turnaround strategy in 2013, under the leadership of CEO Richard Brasher.

Its discounting includes the Smart Shopper programme on which card holders can earn points, and one-day sales at hypermarkets at least five or six times a year. It has also used promotions such as Stikeez to draw shoppers.

But North said on Wednesday: "We are certainly not dialling up promotional activity with this announcement." The company has said the programme is to help consumers, particularly low-income earners. The commitment to lower pricing was continuous, whereas "when you look at the promotions, those will shift from one set of products to another set over time", North said.

"Inevitably, when you lower prices, you do it on the right products that will benefit those on lower incomes to some extent, because they spend a higher percentage of their total income on food. But the move we have made is to help customers across the board."

But Ashraf Mohamed, chief investment officer at JM Busha Investment Group, said this was a strategy for Pick n Pay, much as for other retailers, to mitigate against a fall-off in sales.

Mohamed said the only way Pick n Pay could improve sales was to use discounting. "Pick n Pay has also felt the heat in terms of pressure on revenue, so the only way to boost revenue is to offer lower prices and hope that the basket is bigger than normal."

Continued discounting was not sustainable as "it is done in the hope that it increases stock turnover and, by increasing stock turnover, it helps with not having wastage [especially in fresh food] ", he warned.

"Wasted food comes straight out of your profits in the business. You do it on your fresh food first, after that you push it through on your tinned food ... but it's a story of stock turnover and driving revenues."

North said that through Smart Shopper data, price trends and customers' buying patterns, Pick n Pay identified products that were important to customers. A medium-sized store would stock about 13,000 to 15,000 items.

Customer data also showed that inflationary pressure had affected those in various segments of the economy, not just lower-income earners.

The latest data showed that overall food inflation eased to 9.9% in February, from 11.4% the previous month.