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Report to stakeholders

Chairman's report

Our efforts on the sustainability front have been greatly augmented by Pick n Pay’s participation in the Consumer Goods Forum (CGF), an international association of retailers, manufacturers and service providers committed to a sustainable, safe and healthy consumer goods industry. As the co-chairman of the CGF, I have been able to gain valuable insights into those global and emerging retail trends that are improving sustainability across the value chain. We have been able to integrate many of the CGF’s programmes and initiatives into Pick n Pay’s own strategic commitments. As a signatory to the CGF protocols, such as the Global Food Safety and Refrigeration Initiatives, we are in the process of adopting international benchmarks that ensure excellence at all points of our operations. These trends are also emerging in the South African consumer profile: while many of our consumers remain under intense cost of living pressure, many others have increasingly demanded premium and mainstream products that are either organic or fair trade.

Of course, no retailer in South Africa could hope to have escaped the recent worldwide polemic about adulterated food products and food safety. In this regard we have been able to reassure our customers that Pick n Pay has always been fastidious about food safety and every product line stocked in our stores is subject to rigorous testing, independent third-party auditing and/or laboratory analysis. I believe that the current issue is more about trust and good faith than it is about hygiene or the adulteration of products. Putting customers first is what builds trust: high on the list of consumer rights is the right of access to comprehensive, visible and reliable information about contents, ingredients and quantities, so that customers may know what they are buying.

In addition to this process of stringent checks and controls, we make every effort to give preference to local suppliers. This not only makes it easier to trace the geographic origin of products, but also to monitor the methods of manufacture. It enables us to enforce strict standards at the food source. Through developing long-term relationships with suppliers, we are able to monitor the entire supply chain, from farmer to wholesaler, delivering fully traceable, high-quality produce which we are able to trust and which is continuously monitored by independent auditors. Currently, over 90% of our products are sourced locally.

Such support for local producers and small-scale entrepreneurs is also an integral part of our commitment to job creation, economic development and broad-based black economic empowerment. It is in keeping with Pick n Pay’s procurement policies to also give preference and support to those who were historically excluded from South Africa’s formal economy.

We have spent much time during the past year in reminding ourselves of those basic values and fundamental principles which have always been at the core of our enterprise. I believe it is imperative that we should, even in the midst of the changes that we have embarked upon, reflect on the elementary principles of ethical conduct, business practice and social responsibility that informed our establishment in 1967. These are the principles that have underscored our subsequent development as South Africa’s most respected retail brand.

Our experience has demonstrated that there can be no substitute for our time-tested legacy principles of consumer sovereignty, “doing good is good business” and maximising business efficiency. In the past few years and particularly now, the executive leadership of the Group has again focused on these principles, the need to continue perfecting them and to ensure that they lie at the core of our business philosophy and model.

• Enhancing the shopping experience;
• Opening our fair share of new trading space to get closer to where our customers live and work; and
• Generating deeper customer insights to improve our offering.

We are aiming to improve the shopping experience and give our customers more reasons to shop with us - range, quality, service, price and convenience.

We will continue the Group's strategy of expansion into Africa. The number of stores operated by Pick n Pay in the SADC region now exceeds 100 and we are trading in Botswana, Lesotho, Mauritius, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe. As we expand, key decisions on the choice of local partners and whether new stores are company owned or franchised will depend on the most efficient and effective way of investing in individual countries.

The fact that we have progressed as far as we have in transforming the business, without losing sight of our core foundational principles, is testament of a loyal and committed staff who have been asked to endure much uncertainty over the past year.

Looking back on the past five years, I remain satisfied that we took the right decision to embark on this programme of change when we did, and to absorb the necessary financial and institutional pain in the short term, and remain confident that ultimately it would be to the tangible benefit of shareholders, customers and employees. It is part of a journey, and despite the unsatisfactory financial performance in the 2013 financial period, I am confident that 2014 will reflect our hard work.

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