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October 28, 2008By Tom Robbins

Cape Town – Shoprite sales in the quarter to September were up 25.9 percent as it sold more groceries and was helped by a doubling in internal food inflation, the supermarket group said yesterday.

Internal food inflation rose to 16.5 percent for the three months to September compared with 8.2 percent in the same period a year ago. In September, inflation “eased 0.4 percent lower” than in the preceding two months.

Rival Pick n Pay said last week that September inflation had shown a “modest decline” from its reported 14.5 percent in August.

Inflation statistics from both supermarket groups were released before the more dramatic slide in the rand this month.

The decline in the rand will result in a rise in imported grocery prices if sustained.

Shoprite sales outside South Africa were up 44.5 percent in rand terms, helped by major African currencies strengthening against the rand.

The retailer said the “satisfactory” 25.9 percent growth in group sales over the quarter was identical to the rate of growth achieved over the same period last year.

The group grew market share in South Africa by 1.5 percent.

Mark Ansley, a portfolio manager at Cadiz, said Shoprite’s reported 1.5 percent growth in market share was a “massive grab” over a short period.

This indicated that it was not just the weaker rand that was pushing up rand sales in the rest of Africa. It would translate into real sales growth in South Africa on a same store basis, he said.

Pick n Pay said market share over the six months to August had dipped as higher price rises on basics, such as rice and cooking oil, skewed rand value sales growth towards supermarket groups with greater exposure to lower market segments. These include Shoprite and Spar.

But Pick n Pay said in August that its market share had risen to 32.5 percent from 31.8 percent a year ago.

Under chief executive Nick Badminton, Pick n Pay has moved to improve its perishable offering, including convenience meals, to defend and grow its customer base in the core higher-market segment.

But it has spruced up the packaging on its entry-level house brand products in a bid to gain a bigger slice of the bottom market – the most resilient segment in the downturn.

Analysts have criticised supermarket groups for not investing enough in private label brands, which theoretically have higher margins than manufacturer-owned national brands.

Pick n Pay is also converting its Score supermarkets into Pick n Pay Family franchises, to better compete against the Shoprite brand and Spar in the lower market segments.

Pick n Pay said that as a result, Soweto market share had more than doubled to 47 percent in August compared with the same period last year.

Shoprite’s share price yesterday rose 0.83 percent to R44.75, while Pick n Pay dropped 3.03 percent to R11.20.