Pick n Pay (PIK) – Saving Private Label

PIK’s topline growth of 7% y-y was disappointing and we estimate its corporate supermarkets growth may have been as low as 4.3% y-y. We consider some of the factors that could be contributing to the anemic growth in its corporate supermarkets, and note that the growth in private label participation may have been aided by management keeping this category’s prices in check relative to national brands. This strategy does however curtail topline growth. Our monthly pricing surveys show PIK’s R500m Price Cut promotion may be a reactive move in response to SHP adopting more aggressive pricing practices from December 2016. The surveys also show some deterioration in availability in PIK stores over the last few months.