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Woolworths chronicles: Thriving through the tempest

The Financial Mail takes another fascinating look at ever-nascent Woolies and how it’s surviving, even thriving, in an economy buffeted by hectic headwinds…

It is conceivable that juicing is a fad too far and that kale isn’t as saintly as it seems. However, for the fervent who cleanse, reset and detox but might be averse to slicing, chopping and dicing, it has never been easier to get in five-a-day, thanks to Woolworths.

One might argue that its precut juice mixes pander to the lazy, but the retailer is more inclined to call the prepped offerings and shortcuts it sells “solutions.”

“Customers come in [to our stores] and want to be inspired about what to make for their meals. They want us to help them, to make it easy for them. Even if it’s just allowing them to put sprinkles on a salad — they feel less guilty,” says Woolworths CEO Zyda Rylands. “Customers also don’t have to get to a big mall — we have small stores and some big ones. It’s just convenient to get to us. We are very well positioned.”

A R25bn food business

The group has made fat profits from catering to the time poor and cash rich, and in doing so it has altered retailing in SA to build a R25bn food business.

Five years ago, when SA’s weekly food shoppers became Woolworths’ target through its supermarket-slash-grocery strategy, Pick n Pay was in the throes of its descent and Shoprite was gung-ho on Africa.

Woolworths dug in and stole market share. And it’s been doing so ever since. Customarily frequented for “jocks and socks”, fancy jam and biscuits, its aisles began to brim with more mundane items like loo roll and tomato paste.

And though Woolworths essentially became a different animal as its basket shoppers became trolley shoppers, its position as a niche player has endured.

Sasha Naryshkine, a director at asset management company Vestact, which holds a “buy” rating on Woolworths, says the “Woolies” client is still happy to pay for quality.

“What is key is that they [Woolworths] are differentiating themselves from their competitors in their food offering, making sure that they appeal to higher-income groups that are not price sensitive,” says Naryshkine.

“There’s this whole idea that the rich remain rich and are less likely to worry about price over the superior quality. Food is less risky [and] premium (not too premium) is pretty sticky, provided that they keep the quality and maintain the brand, relative to their peers … management are masters at this.”

Despite the broader economic malaise, Woolworths’ full-year numbers largely came in above expectations, unlike most of its peers.

Food delivered strong numbers: total sales were up 11.9% and 5.7% on a comparable basis. Transformation initiatives at its Australian outfit, David Jones (DJs), are seemingly on track — it posted its strongest earnings since 2011.

And while Clothing & GM didn’t exactly shoot the lights out due to what group CEO Ian Moir called “a horrible, nonexistent winter” (sales were up 8.2% or 4.4% comparably), the only real lemon was Country Road….

Financial Mail: Read the full article