Pick n Pay Sells More of Boxer as Family Era Fades

SOUTH AFRICA · BUSINESS

Pick n Pay, South Africa’s storied grocer, has sold another 11.5 percent of its discount chain Boxer for about R4.7 billion ($290 million). It is fresh evidence that the turnaround, which already cost the Ackerman family control, is running slower and costlier than planned.

Pick n Pay keeps selling the one thing that works

The May placement of about 57.3 million Boxer shares at R82 each cut the group’s stake in the discounter to about 53 percent, from more than 65 percent, per Billionaires.Africa. Boxer listed on the Johannesburg bourse only in late 2024.

Boxer is the group’s engine. Aimed at lower-income and rural shoppers, it lifted turnover more than 12 percent in the year to March and opened 51 net new stores to reach 576.

The legacy Pick n Pay supermarkets went the other way. Their turnover slipped 1.6 percent as the group closed or converted loss-making stores.

How a retail dynasty lost control

Raymond Ackerman bought a small Cape Town grocery business in 1966 and built it into South Africa’s leading grocer. He famously took on apartheid-era price controls to discount bread, milk and fuel, introduced the hypermarket to South Africa in 1975 and died in 2023.

His son Gareth chaired the board for years. In the rescue that followed the group’s 2024 crisis, the family gave up the chairmanship and saw its stake diluted, closing nearly six decades of family control.

The crisis that forced the rescue

In the year to February 2024, Pick n Pay swung to a net loss of about R3.2 billion ($198 million). It also disclosed it was technically insolvent, with liabilities exceeding assets by roughly R183 million, and it had breached its debt covenants.

The insolvency disclosure, more than the loss itself, forced the board’s hand. A market that had watched the grocer drift for a decade finally demanded a full rescue.

The response came in two steps. A R4 billion rights offer was followed by Boxer’s separate listing on the Johannesburg Stock Exchange, which sold roughly a third of the chain for about R8.5 billion.

Together the moves brought in around R12.5 billion ($770 million). They also returned the group to a net cash position.

The rescue changed the shareholder register as much as the balance sheet. Institutions that funded the rights offer now sit where the founding family once did.

What the turnaround has fixed, and what it has not

Chief executive Sean Summers, back at the helm since 2023, says three of his six priorities are largely done: recapitalising the group, rebuilding management and resetting the store base. Group turnover rose 3.4 percent last year and online sales jumped almost 33 percent.

Trading profit still fell 4.2 percent, and the group remains in headline loss, though a narrower one than it had feared. In May it opened a retrenchment consultation for store-based staff.

Summers says the product range has improved, store standards have risen and a new logistics arrangement should cut costs in the years ahead. With the store reset finished, the group plans to open outlets again, favouring smaller formats to keep rents down.

Some analysts read the second Boxer sell-down as a warning that the core is harder to fix than management first thought. Guidance on when the supermarkets break even has already been pushed back.

Why the story matters beyond South Africa

South Africa’s grocery war holds a lesson familiar to emerging-market investors: the value sits at the bottom of the pyramid. The no-frills discounter is outgrowing the middle-class brand that built the group.

Discounters have rewritten grocery hierarchies from Brazil to Germany, and South Africa is following the script. Boxer and Shoprite’s Usave format now chase the same value-hungry shopper.

The parallel with Latin America is direct, where hard-discount formats have rewritten grocery retail from Colombia to Brazil. Legacy brands survived by shrinking first.

The gap to the leader tells the same story. Shoprite was neck-and-neck with Pick n Pay on revenue in 2007, yet now turns over more than double its old rival.

The question is whether Pick n Pay can stand on its own. Or will it keep selling more of Boxer to prop up the core?

For the Ackermans, the arithmetic is bittersweet. The family’s most valuable legacy asset is thriving exactly where its original brand is weakest.

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