Pick n Pay risks being completely left behind in multi-billion-rand pet market

The aggressive push by both Checkers and Woolworths into the ‘adjacent’ pet category has seen both grab significant market share over the last three or so years.

Checkers moved first by launching standalone Petshop Science outlets near its supermarkets in 2011, much like it has situated Liquorshops. At first, it opened only a dozen of these. By the end of December 2024, it had 128 stores. At the current rate, it is opening 30 to 40 of this format per year.

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At first, Woolworths expanded the space dedicated to pet food and accessories in its larger ‘Market’ stores. It knew this was a fast-growing segment and one that had attractive margins, which is why it acquired specialist retailer Absolute Pets from its private equity owners in October 2023.

This is a category that has high single-digit (often double-digit) margins, compared to Woolworths Food’s approximate 7% and Shoprite Group’s around 6% (although the margin in the Checkers segment will, necessarily, be higher than in the Shoprite/Usave business).

And the pet market is a big one. In 2022, it was estimated to be worth R7 billion. This could easily be closer to R10 billion now.

At that time, Reveal Insights showed that 22seven (since rebranded to Vault22) users were spending an average of R1 200 a month on their pets’ upkeep. Everyone wants a piece of the category.

Lots of options for pet owners

West Pack Lifestyle, which was acquired out of business rescue last year by a private buyer and is the holding company of Petzone, is the third biggest chain after the Woolworths and Shoprite Group businesses, while Family Pet Centre is a big-box operator from the founders of Safari & Outdoor (with a large stake owned by JSE-listed Astoria).

Other noticeable players are privately-owned Pet Heaven, Cat Box, and Pet World. Even Food Lover’s Market is rolling out VetsMart stores adjacent to some of its outlets.

Two obvious players are noticeably absent – Pick n Pay and Spar.

It’s no coincidence that both are dealing with fundamental issues in their core business of grocery retail.

In Pick n Pay’s case, the problem was existential – it had to sell a stake in Boxer (via a JSE-listing) to save the core PnP business.

Spar

Spar is battling a number of self-inflicted issues, chiefly a botched (and since mostly aborted) implementation of SAP as well as a poorly timed, ill-fitting acquisition in Poland that has cost it (read: shareholders) more than R4 billion.

It may yet enter the category (there have certainly been a few hints from new CEO Angelo Swartz that it is considering adjacent categories).

However, its independent retailer model (which somewhat resembles a franchise) makes it less simple to be aggressive when doing so. Its fledgling pharmacy business, largely confined to the small-town market where Dis-Chem and Clicks don’t play, is evidence of this.

Pick n Pay

Pick n Pay, on the other hand, has been completely silent about anything outside of its two core businesses: supermarkets (including liquor) and clothing.

Now that Boxer has been separated, Pick n Pay Clothing remains the lone bright spot for the group.

Read: Shoprite opens its first apparel store, with one eye on PnP Clothing

In the last financial year, it reported like-for-like sales growth of 7.7% (with overall turnover at standalone stores up 17.7%). It has nearly 400 stores already and is outpacing the growth in the rest of the market by 6.3% according to industry body, the Retail Liaison Committee.

Supermarkets have been the real millstone, something that CEO Sean Summers was recruited back by the founding Ackerman family to fix and turn around.

Summers has been clear that Pick n Pay will have to shrink to be able to grow again.

It is busy shutting or converting more than 100 loss-making stores. With some, leases have already been terminated, and doors shut. With others, it will convert these to Boxer stores in areas where this makes sense, or to franchise (‘Family’) ones in areas where it does not (and where it can find a willing franchisee).

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The early signs have been great, with a clear turnaround in like-for-like turnover (when stripping out the impact of store closures). It’s still burning cash but will reduce this sharply this year (it will nearly halve last year’s R2.4 billion net cash outflow). Next year, it is targeting cash flow breakeven and aims to report a trading profit in FY27. This will be the first time in four years that Pick n Pay (excluding Boxer) will be profitable.

The one drawback from this turnaround is the sheer amount of management time and focus that it is absorbing.

Had Pick n Pay been firing on all cylinders, it might have been able to give real attention to a category like pets. Instead, it is slimming down and focusing, which is exactly what is needed at this point.

A few years ago, it even outsourced its pharmacies inside Hypermarkets and larger stores to Clicks to remove this complexity from the business. Supermarkets and Liquor are  simple business. So too clothing.

Might it be kicking itself in five years’ time for letting the obvious opportunity in pets slip away?

Worse, will it overpay for a business just to get exposure to the category?

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