PROFIT margins are squeezed and inflation is down, limiting the ability to profit from trading stock, while industry sales are hardly growing. Despite this, the recession seems to have been a good one for food retailers, with nearly all claiming increased market share.
In the recent reporting period of the four groups with more than half of SA’s food sales, market-share claims were the hot item. It started on October 21, when Pick n Pay posted half-year earnings. The chain said its market share grew to 33,9%, putting it ahead of rival Shoprite. But Shoprite disputed Pick n Pay’s statement — which included the assessment that Shoprite had 29% of the market and 25,3% — as “hogwash”.
Shoprite said it had a 31,7% market share in September, the biggest share of any supermarket group.
Pick n Pay said Shoprite was “just plain wrong”. Shoprite stood by its claims. None of this was made easier for befuddled observers as both justified their positions based on market research company Nielsen’s figures.
Last week, convenience chain Spar posted earnings, saying sales grew 18% for the year to September. CEO Wayne Hook was unwilling to state his company’s market share, however.
“We try to stay away from percentages,” he said. The very way figures were calculated was changing, said Hook, whose company also relies on Nielsen figures. “In the old measurement system, your market share grew to 27,9%,” Hook said.
If this talk of market share seems confusing, it is. One analyst said: “We don’t go there.” The only certainty in this bun fight came from Woolworths, which admitted refreshingly in posting annual results in August that it had lost ground. ’ food market share fell from 9,2% to 8,5%, and clothing and footwear from 15,3% to 14,5%.
In food, particularly, customers have been drawn to Shoprite, whose Checkers brand targets Woolworths’ customers with its “Don’t change your lifestyle, change your supermarket” campaign.
Still, Woolies’ losses are only temporary, by one reckoning. “It’s a gourmet, upmarket brand. When times get tough, that brand suffers. When things turn around that brand will turn around faster,” says Securities analyst Syd Vianello.
So would the real grower please stand up? Supermarket bosses are as capable as anyone of manipulating figures to their advantage. It turns out the two giants were arguing apples and pears. Pick n Pay’s claims were based on a 12-month rolling average; Shoprite took figures for September in isolation. Pick n Pay was calculating market share of its Pick n Pay-branded stores as it converted its defunct Score brand into .
“Pick n Pay distorted the numbers. In their thinking they imagined Score didn’t exist … on the face of the earth,” says Vianello. This veteran observer likens the Pick n Pay analysis to a Cold War mind-set. “It was like when East Germany’s border with West Germany was the end of the world and there was nothing beyond. Pick n Pay were doing something similar. It was just written out of their lives.”
While Woolworths has lost most market share in the past two years — and Pick n Pay was the “largest longer- term loser”, according to Vianello — Woolies may have the last laugh.
Woolworths’ shares outperformed those of its three rivals. Since the start of November last year, Woolies stock rose almost 52%, double the JSE all- share’s 25%. Pick n Pay came next, up 24% and Spar rose 23%. Shoprite lagged with a 20% increase.
It is worth taking a leaf from Pick n Pay’s book, or its heated October 28 statement: “Profitable market share is more important than market share in isolation.” Woolworths probably couldn’t agree more.
-Bleby is retail industries editor. Mathe is a staff writer.