We continue to transform Pick n Pay into a world-class retailer. We are focused on seven key initiatives in order to deliver on the six-pillar strategy we developed in 2007. We are unrelenting in our determination to put the customer first and to be South Africa’s favourite and most admired grocery retailer.

Seven key initiatives

The seven key initiatives currently receiving management’s main focus are:

1. Smart Shopper

Introducing Smart Shopper is one of the most significant initiatives implemented at Pick n Pay in the last 10 years. Smart Shopper is a thank you to our customers by providing real cash savings for customers on all purchases. It provides us with a deeper understanding of the customer, enabling a more targeted offer. By better understanding our customers we are better able to tailor our ranges, make decisions about store locations and more meaningfully engage with them. It also broadens our supplier discussions leading to improved product development, pricing, promotions, private label and other innovations. We are delighted with how enthusiastically our suppliers have been to come on board with the Smart Shopper programme.

We expect Smart Shopper to be a net expense investment in year one as our priorities relate to driving the roll-out and beginning to incorporate the data into our decision making. We can expect the investment to generate positive returns from the 2013 financial year.

2. Trading space

In the recent past our trading space growth has been below our aspirations for a number of reasons, not least of which is the scarcity of good new developments. We continue to be very selective in our site selection but have a significant number of supermarkets confirmed for the next financial year. There are three major areas where we see opportunity for store roll-out: filling the gaps in our traditional heartland, developing emerging market supermarkets and rolling out smaller stores across all market segments.

3. Buying

We are in the process of moving to category buying. We have engaged external assistance in making the move to a specialist buying function. Category buying will drive like-for-like sales growth, increase gross margin by driving down the cost of goods and further improve private label development. We are currently busy with three category pilots but expect to be complete with the majority of the move to category buying by the end of the 2013 financial year.

4. Supply Chain

We have already made enormous strides in our move to centralised distribution of groceries, with our Longmeadow extension handling more than 1 million cases per week in peak periods and achieving a 20% higher in-stock situation in-store compared to direct to store supplier deliveries. The immediate priority for Supply Chain is optimising Longmeadow into a blue print that we can roll out nationally. A crucial element of this is the automation of replenishment and our last 100m project which is revolutionising how we handle the all-important in-store component of the supply chain. We continue to look for ways to reduce energy use in our supply chain, and run our warehouses and fleets in an efficient and environmentally responsible manner.

5. Store efficiency

Our goods not for resale (GNFR) team has not only had significant success in achieving more than R50 million savings in the current year (more than R90 million annualised savings) but has revolutionised how we look at these costs, applying a holistic factbase approach to many of the key cost areas in our business to identify and drive savings. They continue to tackle our cost base and we expect that they will continue to deliver more than 10% savings on their in scope costs.

On top of this, we continue to work to simplify regional support structures, removing duplication and driving efficiency. We have a renewed focus on streamlining in-store processes from receiving to checkout, reducing in-store costs and energy use, and leaving the in-store staff with more time to serve the customer.

6. Organisation

We are in the process of moving from a decentralised business to “One” Pick n Pay. The Group Executive has been streamlined to 10 roles and we are busy confirming the next layer of positions. This new structure provides improved role clarity and is a key enabler to our goal of becoming a world-class retailer with highly specialised capabilities. In order to achieve this we are improving our processes for leadership and capability development and are putting in place reinvigorated KPIs and performance management processes.

7. Energy and waste

Operating responsibly underpins all we do. Whilst sustainability is integrated into all the above initiatives, in 2012 we will have particular focus on reducing energy usage and waste. We have already decreased our kWh usage by 14% from 2008 and are aiming for a total savings of 20% by 2014. Our second area of focus is on reducing waste to landfill. We believe keeping on the path of excellence in sustainability is a key part of our goal of being South Africa’s favourite and most admired grocery retailer.