South Africa’s Pick n Pay to Expand Into Nigeria

South African based Pick n Pay Stores Ltd. announced plans to enter Nigeria after posting a 26 percent increase in full-year profit.

The company said it agreed to partner with Nigeria Stock Exchange listed AG Leventis & Co. to enter the Nigerian market because of its over 90 years’ experience doing business in Nigeria.

“A key part of the group’s strategy is to establish a second engine of growth in markets in the rest of Africa,” the company said in a statement on Tuesday. Pick n Pay will hold 51 percent of the operation in Nigeria, “which will roll out a combination of large and smaller formats to meet consumer needs.”

Currently, South African retailers are experiencing weak domestic consumer confidence, a weak currency and rising interest rates. The central bank cut economic growth forecast for South Africa to 0.8 percent this year, the slowest pace since the 2009 recession.

While speaking to the press after the company’s year-end results, CE Richard Brasher said:

“The opportunity presented by Nigeria is well-known: a population of 180m, an economy worth US$500 billion, and GDP growth of around 5% a year.  Some analysts forecast that by 2030 Nigeria could have 160m households with sufficient incomes for discretionary spending, and a consumer goods market worth more than US$1 trillion.

“The development of modern shopping malls since 2005 in a few major cities reflects rising incomes and changing lifestyle options enjoyed by middle class Nigerians. Existing formal players in this market have relatively little scale.

“Nigeria is a country and a market which Pick n Pay cannot ignore in its quest for long-term sustainable growth.  The challenge of course is how to succeed in Nigeria.  We can all point to examples which have not worked.

“I set three pre-conditions for success in the Nigerian market:

• First, we need to understand local consumer needs and how these are evolving in the country. We have done an enormous amount of research on-the-ground over the past two years to get this right.
• Secondly, given the complexities of the Nigerian market, we believe a joint venture with an experienced local partner is the right approach. I am delighted with our decision to enter Nigeria with AG Leventis, which has nearly 90 years’ trading experience in the country.  AG Leventis has huge expertise in supply chain logistics from their activities in the FMCG, motor vehicle, logistics and real estate sectors, and notable FMCG capabilities through Leventis Foods.
• Thirdly, as elsewhere in Africa, our growth must take place in a deliberate, planned, and unhurried way, without putting the business under undue risk.

“Leventis is a family business with a similar operating ethos to that of Pick n Pay and I am confident that we have the right decision, the right partner and the right plan.”

AG Leventis Group Executive Vice Chairman and CEO Michael Economakis said: