Today’s edition
Pour Decisions
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Good morning, it’s Friday the 30th of October. While the rest of the world is drinking less, South Africa’s biggest brewers are reporting some surprisingly strong sales. Also in today’s roundup, Pick n Pay is giving some of the country’s biggest clothing retailers a run for their money, and FlySafair is one step closer to getting a new owner. Let’s get into it.
MARKETS
STILL ON TAP
South Africans say they plan to drink less, and the beer keeps selling anyway
The global alcohol industry has a growing problem: people are drinking less. Alcohol servings worldwide have fallen about 2% a year since 2019, and a Bloomberg tracker of 54 listed drinks companies has lost about $850 billion in market value since its 2021 peak.
South Africa is proving the exception. This week Heineken said its beer and ready-to-drink volumes here grew by double digits, and AB InBev, the company behind SAB, sold more here than in any third quarter before, even as its beer volumes worldwide slipped. Rather ironically, 30% of South Africans told Worldpanel this year that they plan to cut back, against 17% globally.
Where the brewers are heading:
- Alcohol-free: AB InBev’s revenue from alcohol-free beer jumped 35% worldwide in the quarter.
- Premium: Heineken’s premium beer volumes grew 11.5%, helped along by Bernini here.
- Wine: Heineken has put its whole local wine portfolio, including Nederburg and JC Le Roux, under strategic review.
So South Africa is bucking the global trend for now, and what fills its glasses is changing all the same.
DRESSED FOR GROWTH
Pick n Pay is best known for groceries, and now it is outgrowing South Africa’s clothing chains
It’s easy to forget that Pick n Pay is also a clothing business, and right now it’s doing considerably better than the rest of South Africa’s clothing market. In the six months to August, Pick n Pay Clothing grew sales 3.9%, against just 0.3% for the market, and over two years it has grown roughly three times faster. That’s no small feat when the competition is Mr Price, Pepkor and The Foschini Group, chains that have struggled to grow sales consistently.
The business itself isn’t new. Its first standalone store opened in Pretoria back in 2002, and there are now 439 of them. What’s new is how it borrows from the grocery side. In March its clothes went into asap!, the same delivery app shoppers use for groceries, and together with a relaunched website, online clothing sales have grown 137%. Pick n Pay says the app’s clothing sales came in well ahead of budget, and it opened seven new stores and revamped another 13 in the six months.
The catch: sales at stores open a year or more still fell 0.7%, so 10 more revamps are lined up to get the existing shops growing again.
BAGEL BITE
Roughly how many Earths would equal the Sun’s volume?
A. About 1,000
B. About 100,000
C. About 1.3 million
DOING THE ROUNDS
After spending years buying up businesses in South Africa and overseas, Bidvest is changing its approach. In its latest annual report, the group says it isn’t planning any major acquisitions in the year ahead. Instead, it wants to focus on growing the businesses it already owns, paying down debt and improving returns on its investments. Currently, it’s earning a 13.4% return, against a target of around 14%. It’s also selling off assets to reduce debt, including part of Adcock Ingram, while looking for a buyer for Bidvest Bank. Full story →
FlySafair started with just two planes in 2014. Today, it accounts for more than half of South Africa’s domestic airline seats, and it’s about to get a new owner. The Competition Tribunal has approved its sale to investment group Harith, in a deal reportedly worth around R7 billion. Harith previously tried to buy SAA, but walked away from that deal. It says FlySafair will keep its existing management and low-cost model. The takeover still needs a few final approvals, but is expected to be completed before the end of the year. Full story →
Almost four out of every five tourists visiting South Africa in September came from neighbouring countries, particularly Mozambique, Zimbabwe and Lesotho. Now, while total tourist arrivals were only down 1.3% compared with last year, overseas visitors fell by 11%. And that’s a problem because international tourists generally spend more money. In fact, a recent report by BDO estimates that South Africa missed out on R6.5 billion in foreign spending last year because of its heavy reliance on regional tourists. Full story →
South Africa’s biggest chicken producer, Astral Foods, is expecting its earnings to roughly double this year. In its latest trading update, the company says headline earnings per share should increase by between 95% and 105% for the year to September. And a big reason is that maize and soya have become cheaper, bringing down the cost of feeding its chickens. But Astral has also been selling more feed, improving efficiency on its farms and selling more higher-margin chicken products. Its full financial results are expected on 23 November. Full story →
WEATHER
BAGEL GAMES
Have you got what it takes to win today’s Wordle? Play here →
THE ANSWER
As for the Bagel Bite, the answer is: C. About 1.3 million
The Sun contains about 99.8 percent of the solar system’s total mass. Its volume is approximately 1.3 million times Earth’s, which is the basis for the familiar claim that 1.3 million Earths could fit inside it. This compares total volume rather than the number of intact spherical Earths that could be packed inside without gaps. Although some stars are vastly larger, the Sun is actually larger than most stars in our galaxy.
That’s your Friday, and your week, wrapped. Enjoyed it? Forward it on, a friend can subscribe in a click. Written by the Business Bagel crew.