Integrated

Annual Report

2018


NAVIGATING OUR REPORTING SUITE

NAVIGATING OUR REPORTING SUITE

Our six capitals

Our ability to create long-term sustainable value for stakeholders depends on the use of various capitals within our business. The International Integrated Reporting <IR> Framework supports integrated financial reporting, and, in particular, the reporting of the Group's business model across these six forms of capital. Refer to "Our business model" on pages 20 to 21 for more information.

Financial

Human

Manufactured

Social and relationship

Intellectual

Natural


Our key stakeholders

The Group is committed to open and constructive engagement with all our stakeholders. Our business model and strategy are designed to consider and address the issues and concerns most relevant to our key stakeholders. Refer to the "Engaging with our stakeholders" section on pages 38 to 41 for more information.

Customers

Community

Employees

Suppliers

Franchisees

Shareholders


Our business acceleration pillars

The second stage of our strategic long-term plan is organised around seven business acceleration pillars. These pillars represent the material growth opportunities that can materially affect our ability to create value over the short, medium and long term. Refer to our "Strategic focus" section on pages 44 to 51 for more information.

Better for customers

A flexible and winning estate

Efficient and effective operations

Every product, every day

A winning team

Boxer–
a national brand

Rest of Africa – a second engine of growth


Previous
Gareth Ackerman

Gareth Ackerman
Chairman

A Message from our CHAIRMAN

13 700
NET NEW JOBS
CREATED 

Over the past three years,
we have invested R5.3 billion
in opening and refurbishing
stores and building our supply
chain. By doing so we have
been able to create almost
13 700 net new jobs


Pick n Pay's character is built on our values of consumer sovereignty, business efficiency, and doing good is good business. These values hold true in good times and bad. While sentiment in South Africa is considerably better - and brighter - than a year ago, the tough times are not yet behind us. But there is a new wave of optimism in our country and we need to build on that together.

At this time last year, we were living through some of the toughest economic times in our recent history. Economic growth was under strain, customers were feeling enormous pressure to provide for themselves and their families, and a sense of pessimism permeated South Africa. Our country's prospects were worrying and it was a tough environment in which to do business. But tough times are a test of character and I am proud of the character we demonstrated as a country and as a Group over that difficult period.

CREATING OPPORTUNITY

South Africa's greatest economic need is for investment and jobs. When times have been tough, others have looked overseas for growth and investment. Pick n Pay has done the opposite, staying true to our commitment to South Africa.

Over the past three years, we have invested R5.3 billion in opening and refurbishing stores and building our supply chain. By doing so, we have been able to create 13 700 net new jobs. As President Ramaphosa said in his first State of the Nation Address, it is our youth who are the hardest hit by unemployment and it is a tragic waste of human potential. The jobs we create often benefit young people who have not previously been employed. A job with Pick n Pay creates the opportunity to earn a decent wage, to learn new skills and, with hard work, to progress within the industry.

We will champion jobs in retail. Over the next three years Pick n Pay will endeavour to create another 15 000 new jobs, and we will find even better ways to target them towards young unemployed people.

EARNING TRUST

During the last year, our sector faced some big challenges, the first of which was the world's biggest outbreak of listeriosis, which claimed over 180 lives. Secondly, the reality of a prolonged drought in the Western Cape and other areas, which gave rise to the prospect of Day Zero, when the taps might actually run dry.

In both cases, the public looked for reassurance and answers, not just from Government, but from the businesses they trust to help them. This is how it should be. I'm proud that people turn to Pick n Pay when they want help and reassurance in tough times, that we don't hide in a crisis, and that we step forward and take responsibility.

The Minister of Health's announcement on listeriosis in March 2018 gave rise to widespread concern across the country and our neighbours about whether the food people were eating was safe, and what they should do if they had any doubts. I'm proud of the way our teams and our staff in stores responded, acting decisively after the Minister's announcement and providing reassurance to our customers.

Behind the scenes, as a responsible retailer and through our representative organisations, we are working hard to ensure that an outbreak like this will not happen again. The industry has to work together on this, and making sure we do is one of my priorities as co-chair of the Consumer Goods Council of South Africa.

Thankfully, the water crisis in the Western Cape has not yet given rise to Day Zero. I want to pay tribute to the people of Cape Town and surrounds who really stepped up to prevent Day Zero becoming a reality. In the way they responded, Cape Town achieved, in a short space of time, more than many other developed cities have managed to do.

Households, businesses, the farming community and Government working together cut water usage to levels which would not have been thought possible a year ago. It is an amazing lesson in trust. Social scientists tell us that we often don't do the right thing as individuals – like reducing our own personal water usage – because we think our neighbours can't be trusted to do the same. It's what they call "the tragedy of the commons". Together, by trusting each other, we have proven that theory spectacularly wrong.

And again, Pick n Pay will play a leadership role on the water issue. We have told our customers that we will find a way to keep our stores open and running as normal even if Day Zero comes. We have a strong plan in place. We will also supply as much bottled water as we can to supplement whatever people can get from other sources.

Customers know they can trust Pick n Pay – in the bad times as well as the good.

BEHAVING SUSTAINABLY

As a retailer with thousands of suppliers and millions of customers, we are mindful of our broad reach and broad impact. In 2015, we announced our War on Waste, focusing on reducing food waste, using water and electricity more efficiently and carefully, and reducing waste in human potential by committing ourselves to creating jobs.

On the issue of food waste, which is a considerable problem in South Africa, we are getting more accurate in our procurement and replenishment, and we are steadily reducing the amount of food which goes to waste in stores. While we have not eliminated waste, I'm proud of the fact that we are now FoodForward SA's biggest retail partner. This year we donated over R70 million in edible food for distribution to their 600 beneficiary organisations, providing more than seven million meals annually.

The spotlight across the world has become more firmly focused on the harm that plastic can do to our environment, and particularly our oceans.

We have made good progress over a number of years in helping customers switch away from single-use plastic carrier bags.

  • Most South Africans are familiar with our reusable green bags, and last year we sold over a million of them.
  • We donate R1 from the sale of every green bag to a community programme.
  • Our supplier began as a beneficiary of our Enterprise Development Scheme. They are now a thriving independent business, employing more than 300 people.

We have also launched a range of recycled, reusable shopping bags made by the Township Group, a women-owned cooperative in the Western Cape. They employ over 70 women and have supplied us with over 600 000 reusable bags in recent years. But more needs to be done.

Around five trillion pieces of plastic are believed to be floating around the world's oceans. Experts fear that the total weight of plastic in our oceans could outweigh fish by 2050. South Africa's marine environment is spectacular, but highly vulnerable. So we need to be among the vanguard of those taking action to reverse the tide of plastic damage.

This a highly complex issue, with our reliance on plastic driven by issues such as food safety standards, convenience and affordability. There are no easy fixes, but Pick n Pay is committed to lead the change in plastic use across our industry. In June, we announced focused initiatives to reduce plastic waste across our operations, including the introduction of 100% recyclable plastic bags, the replacement of plastic straws with paper straws, reducing the plastic packaging in a range of own-brand products and providing free plastic collection from our online customers. Business and Government must seize the opportunity together to make a meaningful, measurable difference in the lives of ordinary South Africans.

This relationship must go beyond seeking the advice and counsel of business. We must actively work together. Together, we will make the most of economic growth and increasing stability, and at the same time, work more cooperatively to consider the impact of proposed legislation more carefully.

Earning trust, creating opportunity, behaving sustainably. This is the Pick n Pay way, and I am exceptionally proud to be Chairman of this remarkable Group.
51 years ago my father set up Pick n Pay and said that doing good is good business.
We have never wavered from that belief and I am determined that we never will.

We have made great progress as a business over the past year, and I want to thank everyone at Pick n Pay for their contribution to this success. Decisive action reduced costs and increased productivity, resulting in a leaner, fitter and stronger Group. This strategy, led by our CEO Richard Brasher and his team, delivered success, which was particularly evident in our final quarter. This augurs extremely well for the coming year and as we grow the benefits we bring to society will grow with us.

My thanks as always go to Richard and his team for their incredibly hard work. I would also like to extend a warm welcome to Pedro da Silva, now heading up our Pick n Pay division, who brings a wealth of international retail experience to our team. We are excited about the year ahead.

Gareth Ackerman
Chairman

22 June 2018