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Pick n Pay would investigate a strategy of smaller stores, including garage shops, to capture more convenience shoppers, the supermarket group said yesterday.

November 30, 2007 By Tom Robbins Cape Town – Pick n Pay would investigate a strategy of smaller stores, including garage shops, to capture more convenience shoppers, the supermarket group said yesterday. Rival Woolworths Food, a local pioneer of convenience shopping, has already partnered with Engen to offer ready-prepared meals at petrol station stores. Pick n Pay announced earlier this month that it would spend R110 million sharpening its brand, in a move to defend and grow its core top-end market. In addition, it is introducing new ready-prepared meal lines and working on sprucing up its fresh produce. Nick Badminton, Pick n Pay’s chief executive, said newly appointed general manager for convenience Cobus Barnard had been briefed to re-evaluate the supermarket group’s convenience offering, including looking at store sizes. Bernard, a convenience expert, had previously worked at Woolworths Food, which captured busy top-end shoppers at stores located on busy suburban roads. But it could not be assumed that a smaller store strategy would be introduced. Analysts are arguing that squeezing small stores into built-up neighbourhoods is not the only factor that makes a store convenient. They say factors such as location, longer trading hours and ready-prepared meals are key too. Until now Pick n Pay’s convenience push has been through 190 franchised smaller Family Supermarkets, which offer longer trading hours and include the increasing number of working mothers as a target market. Abri du Plessis, the chief investment officer at Gryphon Asset Management, said Pick n Pay suffered from having a neighbourhood store footprint in established suburbs that was too small. He said the group would battle to extend it as most sites had been sewn up by Spar-branded stores, which had the largest network in these areas. But he expected Pick n Pay to focus on new residential areas, where he believed the retailer would be able to compete on price with Spar. Quinton Ivan, an investment analyst at Coronation Fund Managers, said a move into garage stores would be the right step, but cautioned that it would be difficult until Pick n Pay’s centralised distribution system was implemented. This would avoid supplier trucks clogging up store entrance points, as one truck would deliver all the stock needed by an outlet. Despite aggressive expansion by Woolworths Food into the convenience format in recent years and accompanying strong market share gains, it shocked the market last week after revealing that real same store sales growth had declined 1 percent. Analysts said new stores had been stealing market share from existing ones, arguing that most debt-stressed high-income earners had started shopping down. But Spar, which also has strong exposure to the buoyant bottom-end of the food market, produced strong sales growth figures in the year to September. Volume sales were up as the group shipped 14 percent more cases of food and toiletries from its warehouses. Badminton said it was likely that the Pick n Pay Family Supermarkets would be rebranded simply Pick n Pay as research showed consumers did not differentiate between franchised stores and corporate supermarkets.