21 Aug 2011 Pick n Pay ready to take on Wal-Mart

Despite being in favour of Wal-Mart entering the South African retail market, Pick n Pay chairman Gareth Ackerman indicated that his company was ready to take the giant US retailer head on and beat them.

Speaking at the Cape Town Press Club, Ackerman said Wal-Mart would force South African companies to become more globally competitive and its entry would mean a fundamental change to Pick n Pay’s business operations. “But we are absolutely convinced that we will be there and beat them,” he said.

Ackerman cited the example of the UK market in that Tesco was a small operation when Wal-Mart made its entry there and now the UK retailer is a “powerhouse” and Wal-Mart was in third position.

Ackerman remained emphatic that Wal-Mart’s entry was not anti-competitive and said he could not understand why some thought so.

“The point is that one can never, under any guise, say that the arrival of Wal-Mart on the shores of SA is anti-competitive. It has to be the absolute opposite. For certain parts of government to accuse it of being anti-competitive – I personally can’t understand,” he said.

Ackerman was referring to the court action laid by three South African ministers, namely that of economic development, Ebrahim Patel, trade and industry Rob Davies, and agriculture and fisheries Tina Joemat-Petersson, calling for a review of the Competition Tribunal decision to let the 16.5 billion merger of Wal-Mart with Massmart go ahead.

“I think the arrival of Wal-Mart would be good for the consumer because if they bring a lot of their global purchasing practices in to SA it is going to result in the breaking up of a couple of the local cartels, it is going to make business a lot more competitive and bring prices down, because we are going to be forced to compete on the global stage,” Ackerman said.

He later declined to elaborate on what he meant by “local cartels”.

Turning specifically to what Pick n Pay would have to do to fend off Wal-Mart’s entry, Ackerman said: “We are going to have to do a lot more importing and we are going to have to compete in terms of pricing because there is no way they’re driving us out of the market.”

He admitted that Wal-Mart would pose a huge challenge for Pick n Pay and that it would mean they would have to dramatically change their business to make sure that they were capable and ready.

Ackerman said Pick n Pay had recognised four to five years ago that it needed to change in order to become more competitive globally and that it has taken them a little longer than expected.

“It is a fundamental restructure of the way business is working because Wal-Mart globally have changed the way retailing works. If any retailer doesn’t take cognisance of the changes in the global retail environment they are going to go out of business,” he said.

Source: Business Report