Giulietta Talevi Companies editor & columnist
Pieter Engelbrecht. Picture: Bloomberg/Halden Krog
Pieter Engelbrecht. Picture: Bloomberg/Halden Krog

Hearing an SA CEO describe his company’s trading performance as "incredible" is about as rare as getting hold of a Covid vaccine shot. But Shoprite has pulled out all the stops, and grew sales from its local supermarkets — adjusting for SA’s booze ban — by 7.8% over the six months to end-December. Trading profit grew a handsome 18.3%. Unsurprisingly, the share has considerably outperformed the JSE’s food & drug retailers index, rallying 46% over the past six months, against the latter’s 26% gain. The FM spoke to CEO Pieter Engelbrecht.

You had a cracker time in SA — and you’ve formalised your withdrawal from Nigeria and Kenya — but is everyone in SA retail focusing on SA at the worst possible time?

PE: The first thing is that Covid wasn’t good for anybody, and these results mustn’t be seen as us having some tailwinds, that things just came our way — certainly not. I think this is testament to a fantastic management team, whom I thanked in my presentation.

Second, the continent is really just a tale of devaluing currencies and that continues unabated. We have not made a decision to withdraw from the continent at all. We’ve just had a hard look at our investments and our return on those investments. It’s definitely part of our strategy to retain a core set of non-SA countries — as long as they are profitable. Who knows? Maybe 10 years from now it’s a different call. But investors are not happy to not see any return on their investment.

It still seems incredible that in Nigeria no-one can make a real go of supermarket retail …

PE: The thing is, in that example, 15 years ago when we went there it was a completely different story to today. There have been 10 very draconian laws passed over the past 10 years that have made it extremely difficult to trade. When we went there we put in an international-standard supermarket with an assortment of about 20,000 items — these days, if we’re lucky, we would have 2,000 or 3,000 products.

In SA, is it the case that people are spending on food across the income spectrum because this is really the only thing anyone can afford right now? Is food retail the only game in town?

PE: Well, we’ve got this multibrand strategy — Shoprite, Checkers. Usave and Hyper. Shoprite, you can see that those customers were hit hardest with unemployment. And it was very lucky for us to have launched that Xtra savings product.

In Usave, people can walk there — so they can save transport money and buy essentials. Checkers is a bit of a different market and I think that analysis is quite right — we’re still benefiting from "share of stomach" as people don’t dine out as they used to. But what was interesting was the growth that we got out of furniture — at 15.7% since we could open again, and a reduction in credit sales. So there are some anomalies in the market.

Your Checkers and Shoprite Xtra savings rewards programme now has 17-million members — the biggest base in SA. And in the results you said: "To say we are optimistic with regard to the future of our business as a result, would be an understatement." Why are you that confident?

PE: I think if you start having that level of customer data you can start to deploy what we call precision pricing and give customers, in real-time, products that they look for at prices that they are prepared to pay.

We’ve given back R2.1bn in savings. That kind of promotional activity would not be possible unless you have accurate data. We’re now in our first year really of mining that data and getting the pricing correct, the assortments correct, and balancing that with high in-stock levels, and because we now have fewer visits from customers but they tend to buy more items, it’s imperative that one has a high level of stock — and yet we still managed to reduce our overall level of stock holding by R2bn. That can’t be done without having such a level of information. I did say at the presentation that our data "lake" on the consumer is now six petabytes [one thousand million million bytes] of information.

Is that all your in-house IT work?

PE: Yes. And what made it good was when we launched with Checkers first, we built it so that it was scalable enough to be able to just add the Shoprite rewards programme on top.

Is the data really that valuable?

PE: Well, in time to come you’ll be seriously at a disadvantage and it will be increasingly difficult to compete against players that have that information.

One can influence purchase behaviour: I could move you from one brand to another, as an example.

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