Outcome of PnP-supplier pricing meeting - statement

Pick n Pay's statement

“The meeting was both constructive and engaging. It gave us an opportunity to illustrate to our suppliers the intense consumer pressure we are facing and at the same time, gave them an opportunity to provide a good insight into what is currently driving food prices, although these differ widely from product to product and category to category. We have asked all of them to investigate further, ways of cutting costs, explore supply chain synergies and possible areas of improvement. A number of troubling areas in respect of input costs was highlighted and these will be further investigated. The issues affecting the supply chain in South Africa will require thorough investigation and calm heads and will not be fixed overnight, but this is a very good start. Follow up meetings with every single supplier present will be held over the next few weeks.” - Nick Badminton, CEO, Pick n Pay.

Outcomes:

• Relationships with suppliers will continue to be characterised by open, transparent and very robust debate. Suppliers will provide detailed explanations of significant increases by providing evidence of such input cost increases, to satisfy Pick n Pay that increases are justified. This will enable Pick n Pay to communicate with accuracy to its customers.
  
• Suggestions were made that suppliers apply the same detailed scrutiny when they are asked for increased prices.
  
• Some suppliers raised the issue of import parity, but accepted that there were strong arguments both for and against import parity and that this required further discussion and understanding.
  
• Possible areas of monopoly in input items were identified, and where appropriate, our suppliers were encouraged to report these to the Competitions Commission. Areas highlighted where possible further investigation may be required include packaging, tin, paraffin wax, glass and fertilizer.
  
• Pick n Pay would continue with its efforts and investments to move away from direct store delivery to managing its own distribution to reduce total supply chain costs and pass on these savings to consumers. All suppliers committed to supporting Pick n Pay in this transition, accepting that they would, in parallel need to eliminate infrastructure in their own distribution systems.
  
• Pick n Pay was moving its internal structure towards category specialisation, which means that its buyers would become specialists in those fields, enabling them to develop an even more detailed understanding of the component and input costs of each product.

Further comments by Pick n Pay:

• Consumer education is key, and to this end, Pick n Pay would continue communicating directly with consumers and with society more broadly on critical issues affecting food prices. Manufacturers have undertaken to do similarly.
  
• Pick n Pay would continue, with increased focus, to identify and fight any perceived anti-competitive behaviour or any increased concentration of selling power. Pick n Pay will also be putting in place a strategy to develop alternative sources of supply where concentration is most severe.