Union on collision course with embattled Pick n Pay

Unions are on heightened alert after rumours surfaced that UK retailer Tesco was in talks to acquire Pick n Pay.

Despite denials, the SA Commercial Catering and Allied Workers' Union called for a boycott of Pick n Pay and a march to the house of founder Raymond Ackerman.

Cosatu said that the union had confirmed that Pick nPay was in talks with Tesco .

The union has appealed against the sanctioning of the R16.5-billion deal between US giant Walmart and local retailer Massmart. The union said the deal, which was approved by the Competition Tribunal in May, will threaten jobs in manufacturing.

Cosatu has also slammed the proposed retrenchment by Pick n Pay of 3137 workers, saying it was "clearly an attempt to anticipate the arrival of Walmart in South Africa".

The retailer last month announced that it was considering the retrenchment as a result of declining profitability and the loss of market share to Shoprite and Woolworths.

According to Absa Investment analyst Chris Gilmour, Pick n Pay's intention to retrench had underlined the seriousness of the situation that it had found itself in as it tried to play catch-up after a series of errors over the past few years.

"A lot of what's happening with Pick n Pay is the culmination of a confluence of strategic errors that opened the door for Massmart, [such as] entering Australia, not concentrating on general merchandise in their hypermarkets, not putting in centralised distribution timeously and not keeping ahead of the pack with IT.

"Their cost base is rising far faster than their revenue base. People do tend to be the biggest slice of costs and unfortunately Pick n Pay is in the situation where it has to look at this [retrenchments]. This is obviously something they didn't want to do.

"They left it to the absolute last moment after they tried everything else they possibly could," Gilmour said.

Another analyst noted that there was no link between PicknPay's job cuts and Walmart's entry into South Africa.

"Walmart is not to blame for the cuts but it is a pressure point. Pick n Pay is definitely on the back foot when it comes to market share and the entry of Walmart will only add competition in the middle-to-upper market," he said.

But it is not all bad news for the retailer.

Last week the company welcomed the Federal Court of Australia's dismissal of an application by the Australian competition regulator seeking to prevent Sydney-based Metcash from acquiring PicknPay's Australian operation, Franklins.

Dubbed "the headache that doesn't want to go away" by another analyst, the long-delayed R1.4-billion sale of 80 stores and eight franchise agreements was first announced in July last year.

The Australian Competition and Consumer Commission blocked the acquisition last year, saying the deal could mean a significant lessening of competition through the removal of Metcash's closest competitor in the New South Wales groceries sector.

But Justice Arthur Emmett said he was not persuaded that there was a separate market for the wholesale supply to independent supermarkets of packaged groceries, as the commission claimed.

He said that Pick n Pay had had considerable retail experience outside Australia but had not been able to operate the Franklins business profitably.

"It is possible that an acquirer with more direct experience in Australia would be able to operate the Franklins business more successfully than Pickn Pay."

In November last year, the commission said there were "other parties", that would not raise the same competition concerns as Metcash, that had "expressed strong interest in acquiring the entire Franklins business", but the court rejected this and ordered the commission to pay Pick n Pay and Metcash's legal costs.

It is unclear whether the deal will go ahead immediately but Pick n Pay chairman Gareth Ackerman said earlier in the year that "as soon as that interdict gets lifted the deal can proceed".

The company will spend the proceeds from the sale on its distribution centres. - I-Net Bridge