Alcohol ban ahead of possible Covid-19 fourth wave in December will be crippling, warns Pick n Pay’s Ackerman
The grocery retailer said its recovery from the repeated alcohol sales bans since 2020 will be undermined by further bans. Pick n Pay lost R800-million in sales after the government moved the country into a Level 4 lockdown in June 2021, which banned the sale of liquor.
Pick n Pay chair Gareth Ackerman has criticised the government for its repeated bans on liquor sales since the start of the Covid-19 pandemic in early 2020, saying it is not relying on evidence for lockdown decisions that are damaging SA’s economy.
Ackerman said there is a “wealth of evidence” to show that alcohol sales bans have little or no positive impact as a public health measure to curb the spread of Covid-19 because alcohol has been readily available on the black market.
The government has been slammed by business executives and the liquor industry for its handling of lockdown regulations. Ackerman and other high profile executives have spoken out against the government for not listening to or consulting businesses on lockdown decisions, and not warning the alcohol industry before imposing sudden sales bans.
Ackerman said Pick n Pay is concerned that the national state of disaster, which was extended by another month to 15 November, is “being used by elements of the government to address liquor policy issues without resorting to constitutional processes.
“It is of concern that liquor restrictions are being put in place for the local elections. We need to focus on getting the country vaccinated rather than putting further restrictions on citizens’ rights,” said Ackerman on Wednesday at Pick n Pay’s half-year results presentation.
Ackerman is worried that the government might implement another alcohol sales ban should the fourth wave of Covid-19 infections hit the country over the December holiday period.
He has implored the government to “heed the evidence” and “resist the temptation” to implement further restrictions on the sale of alcohol, which has “an immensely negative impact on jobs, on the economy, on confidence in our Covid response”.
Pick n Pay, which sells liquor in addition to food, household merchandise and clothing, was hard hit by the alcohol bans. The retailer lost R800-million in sales after the government moved the country into a Level 4 lockdown in June 2021, which banned the sale of alcohol in response to the third wave of Covid-19 infections.
Pick n Pay’s liquor business lost 55 trading days during the Level 4 lockdown, over and above the 209 lost trading days it incurred in 2020.
Ackerman said further bans in alcohol sales will harm Pick n Pay’s operations, but also the broader alcohol industry which supports around one million jobs across the value chain (from manufacturing to point of sale) and contributes about R72-billion annually in tax payments to the fiscus.
Pick n Pay’s sales were also disrupted by the July unrest, which left the retailer’s 212 stores in Gauteng and KwaZulu-Natal — 10% of its 2,039 store network — damaged and looted. About 45 of the damaged stores are still closed. Pick n Pay said the unrest cost it R930-million in lost sales because many stores were shut while being repaired. Most of the losses have been covered by insurance.
Despite the disruptive unrest and alcohol sales bans, Pick n Pay grew sales by 4.1% to R46-billion for the six months ending on 29 August 2021. Profit after tax rose 87% to R296.8-million over the same period, with Pick n Pay declaring a 35.8 cents per share dividend, up 91% year on year.
Boone’s turnaround strategy
This was the first set of results delivered by new CEO Pieter Boone, who replaced Richard Brasher on 21 April. Boone said he is still optimistic about SA’s retail market and has not been deterred by the July unrest or the government’s approach to lockdown regulations.
The retailer is planning to invest about R2.5-billion into SA’s economy in 2021 and inject a similar amount of capital in 2022 and 2023. The capital will go towards opening new Pick n Pay stores (64 new stores from 2021) and a distribution centre in Gauteng.
Before Brasher’s appointment in 2013, Pick n Pay had lost its way; it implemented many failed turnaround strategies dating back to Nelson Mandela’s presidency. Pick n Pay neglected its stores by not upgrading them, service at stores deteriorated and costs ballooned as it didn’t modernise its IT or distribution systems. This led to Pick n Pay losing market share to rivals such as Checkers and Woolworths.
But Pick n Pay has now been stabilised.
Boone’s main strategy for growth involves opening more stores, especially those that target low-to-middle income consumers. He said SA’s food and grocery market will grow by R200-billion over the next five years, to be worth R850-billion.
The low-to-middle income consumer segment will contribute the most to this growth, which presents “many opportunities” for Pick n Pay to grow its exposure by opening more than 100 new stores of its Boxer brand in the next three years.
Boone has also identified R3-billion in additional cost savings till 2025, which will be invested in promotions to keep the cost of consumer goods low. DM/BM
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