In the Zone with MWEB Entrepreneur: Pick n Pay's formula for success

From the early days when there were four Pick n Pay stores, to the successful supermarket chain it is today, these are some key events behind the history and growth of this iconic South African brand.

A business background

Pick n Pay's founder, Raymond Ackerman, is the son of Gus Ackerman, who started the Ackermans department store chain in 1916. As a commerce student at the University of Cape Town, Raymond Ackerman's lecturer, Professor WH Hutt, believed in the principle of consumer sovereignty. His words, "treat the customer like a queen and she will make you a king", made a lasting impression on the young Ackerman. "Hutt," says Ackerman, "hammered into us consumer sovereignty. If you fight for the consumer, she will look after you. This man had a huge influence on me."

After graduating with a BCom, Raymond joined Ackermans in 1951 as a trainee manager. In the early 1950s, Ackermans was sold to rival department store chain Greatermans. When Greatermans branched into food retailing, Ackerman recognised the potential for a new type of shopping experience - self-service supermarkets. He encouraged Greatermans to start its own supermarket chain, which they called Checkers, and he was promoted to general manager of Checkers.

Early in his retail career, Raymond spent some time in the US where he studied its growing post-war supermarket boom. While in the US he met a marketing expert named Bernardo Trujillio who gave him a powerful metaphor, which would become the basis of the Pick n Pay operational ethos.

Using the analogy of a table, Ackerman says, "Trujillio showed me this, the four legs of a table. The consumer must sit on top; she is your mission. However, you must have sound administration, this is one leg. The right merchandise for the consumer at the right price is the second leg, meaning you have to fight collusion and cartels. The third leg, which I think is cardinal and other people miss out on, is social involvement. Way back in the 1950s and 1960s, people were talking about this, whereas today you hear the words social responsibility. It's caring about your society; the more you give in life, the more you get back. That leg is as important as the other two. The fourth leg is people, and that goes with the third leg."

Endings and beginnings

In 1966, after nine years of running Checkers and taking the number of stores from four to 85, two life-changing events occurred in Ackerman's life. The first was the death of his father and the second came two weeks later, when he was fired from Greatermans, for no apparent reason, and given two weeks severance pay. Despite these enormous setbacks, he held on to his retail dream and used his severance pay and a bank loan to buy four "Pick 'n Pay" stores in Cape Town.

Pick n Pay Stores listed on the JSE in 1968, and soon began expanding beyond the Western Cape. In 1975, Pick n Pay opened South Africa's first hypermarket store, a new retail concept which combined department store and supermarket operations under one roof.

In the mid-1980s Pick n Pay opened a store in Brisbane, Australia, and subsequently another in Melbourne. However, due to strengthening international resistance to apartheid, Pick n Pay was later forced to withdraw from Australia.

The company purchased Boardman's in 1984, but sold it to Edcon twenty years later. 1988 was a milestone year for the company when they achieved a R3-billion turnover and opened their 100th store. In 1994, Pick n Pay took a majority stake in the Score supermarket group, and in 2002 the group acquired the similarly positioned Boxer Superstores. All of the Score supermarkets have since been converted into Pick n Pay or Boxer franchises.

In 1998 Pick n Pay appointed Sean Summers as Managing Director for the group while Gareth Ackerman took up the position of non-executive Deputy Chairman, with the task of looking after the family's interest in the group. Raymond Ackerman remained as 'hands-on' Chairman. In 1997, Raymond and Wendy Ackerman celebrated the 30th Anniversary of the founding of Pick n Pay by creating the Ackerman Pick n Pay Foundation, which was established as a corporate foundation, with R30-million set aside to create a fund for philanthropic purposes.

In 1999, the Institute of Marketing Management nominated CEO Sean Summers as "Person of the Year", which is the same award Raymond Ackerman received in 1970.

Online retail

Online Internet shopping became a reality in June 2001, and in the same year, the group made a re-entry in Australia by purchasing the Franklins retail group. Unfortunately this proved to be an unsuccessful venture, and the struggling Franklins business was duly sold to Metcash Australia. Summers stepped down as CEO at the end of February 2007 and was succeeded by the company's Retail Managing Director, Nick Badminton, who resigned from the board of Pick n Pay at the end of the 2012 financial year.

Despite significant challenges, including an unsuccessful foray into the Australian market, which the group has had to recover from, Pick n Pay is catching up again. The group has more than doubled its turnover and headline earnings since 2003, and these figures have increased year-on-year for the past decade. In an interview with the Financial Mail, Pick n Pay's recently appointed new CEO, Richard Brasher was asked about his impressions of Pick n Pay, and the challenges it faces.

"Pick n Pay is a great business and a brand people care about and trust. But it probably didn't change enough over 10 years and then tried to change too much in the past two. My focus is to stabilise the business, reintroduce strong fiscal control and create a platform for growth," Brasher said.

Many of Pick n Pay's stores are franchised and Brasher doesn't plan to change this. "Franchise is a good place to be. You have less control over a franchise but it does not make it a bad business. It may make it a better one. If you create value for franchisees by being a good brand they will grow value for you."

Partnerships

In an expansion of its forecourt retail offering in South Africa, BP recently announced that it will partner with Pick n Pay to build 120 more food convenience stores at its fuel stations over the next five years. The partnership, expanding on Pick n Pay's 17 existing Express convenience stores, takes on Engen's similar relationship with Woolworths Food, which already has 45 stores. Pick n Pay announced that it would start by opening 40 new Express stores in the 2014 financial year.

On 31 July 2013, Pick n Pay announced that Wendy Ackerman has been featured on the cover of the August 2013 issue of Forbes Africa, which celebrates the continent's biggest influencers in business with a monthly cover story. As a non-executive director of Pick n Pay, Wendy Ackerman has five decades of experience in the retail business, and is one of the founding executives of Pick n Pay. She retired from the Board in 2010, but as a non-executive director, remains involved in the business.

Raymond Ackerman's entrepreneurial skills catapulted Pick n Pay into one of the largest chains in South Africa. Abiding by the philosophy 'if you can dream it, you can do it', and striving to always put the consumer first, staying innovative and engaging with customers, as well as recovering from mistakes, this brand is certain to continue growing from strength to strength.

YouTube videos:

Pick n Pay has their own Youtube channel, showcasing recipes and smart shopper information, as well as features from their 'find GOODNESS' project, which supports South African people, businesses and organisations that spread goodness in their communities.

Pick n Pay partnered with the Velokhaya Life Cycle Academy, a not-for-profit organisation based in Khayelitsha, Cape Town, to encourage kids from disadvantaged communities to get off the streets and onto bikes.

An inspiring video showcasing how Pick n Pay is empowering various small business entrepreneurs through the Pick n Pay foundation project.

*Source: Pick n Pay 2013 Integrated Annual Report.