Integrated Annual Report 2021
Integrated Annual Report 2021
TRADING GENERAL MERCHANDISE, FOOD (INCLUDING WHOLESALE) AND LIQUOR; AND BUYING ASSOCIATION
Massmart Wholesale comprises Makro, Wholesale Cash & Carry and Shield. Makro sells Food, Liquor and General Merchandise categories, catering for retail, commercial and wholesale customers. Cash & Carry sells Food, Liquor and General Merchandise categories and includes the brands CBW, Jumbo Cash & Carry, Sunshine, Trident, Eureka and Saverite. It caters for commercial and wholesale customers. Shield (a voluntary buying association) services wholesale and independent trader customers.
1.1%
R47.4bn
INCREASED SALES
2020: R46.9bn
50bps
15.1%
DECREASED GP MARGIN**
2020: 15.6%
35.7%
R753.7m
DECREASED TRADING PROFIT***
2020: R1,172.1m
22
Makro stores
in South Africa
DEC 2020: 22
66
Jumbo and Shield stores^
in South Africa, Botswana, Lesotho,Mozambique, Namibia, Swaziland and Zambia; and Shield, a voluntary buying association
DEC 2020: 69
* Massfresh was previously disclosed as part of the Massmart Wholesale operating segment but has been included as part of the discontinued operations for presentation purposes due to the discontinued operation classification of the Cambridge, Rhino and Massfresh businesses. Refer to note 3
** Excludes inventory write-offs as a result of the civil unrest.
*** Business unit trading profit/(loss) includes Corporate allocations.
^ Includes 12 Cash & Carry stores that form part of the disposal of Cambridge, Rhino and Massfresh businesses.

2021 Highlights

  • Achieved a 2.6% growth in Makro’s retail customers
  • Increased Makro’s in-store customer satisfaction rate by 8.9% year-on-year to an average of 71.2% for the year
  • Achieved a 32.4% increase in our online customer satisfaction rate which, however, is still below its in-store average
  • Increased the number of Pickup fulfilment points Makro has conveniently located in most metropolitan areas across South Africa to 272
  • Launched the Makro mini-app within the VodaPay Super App
  • Grew online sales by 18.6%
  • Re-opened five of the seven stores impacted by the civil unrest during the year
Our Customer Value Proposition (CVP)
Multi-channel business: serving B2B and B2C customers across commercial, retail and wholesale customer segments
Curated range of products: offering high value branded and Private Brand products at low prices
Range of categories: across Food, Liquor and General Merchandise
Customer solutions: providing customers with an effective route to market solution that is unique in its reach, capability and versatility
2021 Strategy
  • Complete the integration of our businesses by creating merged teams across all functions, extending the Makro point of sale and ERP systems and infrastructure to all Massmart Wholesale stores
  • Accelerate e-commerce through a clear focus on the customer journeys that we seek to win in, including General Merchandise, where we have category leading shares
  • Roll out Makro Express app which is an in-store scan-and-pay app, which was successfully trialled in Makro Woodmead
  • Pilot a standalone ‘Powered by Makro’ Liquor store format
  • Complete the divestiture of non-core and non-strategic Masscash store assets
The challenges we faced
  • The ERP system conversion of Cash & Carry stores to SAP is an 18-month long store-by-store conversion programme. It is designed to keep risks and potential faults to a minimum due to the size and nature of the business. It does, however, impact efficient operations while we manage two separate systems until all Cash & Carry stores have been converted
  • Load shedding reduced our sales as our customers were not able to operate as they normally do, which resulted in a reduction in purchasing frequency and basket sizes as they managed their stock risk (particularly with fresh produce). In addition, the demand for load shedding related products we saw in 2020 was not repeated in 2021
  • The loss of our two DCs during the civil unrest, together with local and global supply chain challenges, resulted in insufficient in-stocks during our busy trading period. The civil unrest also severely impacted KZN sugar suppliers and affected stock availability in a significant Wholesale trading category
  • Covid-19-related trading restrictions, stock shortages due to raw material shortages (glass and aluminium) and disruptions to supply chain resulted in reduced Liquor sales
  • The reduction in Government Covid-19 grants resulted in reduced spend within this customer group
  • Seven stores were impacted during the civil unrest
  • Lost estimated sales of R2,947.1 million, with an estimated lost trading profit of R544.0 million due to the civil unrest and Covid-19 trading restrictions

 

 Read more detail on our year of unique challenges

Our progress during the year
  • Massmart Wholesale converted 13 of 44 South African Cash & Carry stores to the SAP ERP system. This is part of our ongoing initiative to integrate our business by merging the Makro point of sale and ERP systems and infrastructure within Cash & Carry
  • We implemented organisational restructures to gain greater productivity and efficiencies from a single Wholesale team across merchandise, marketing, finance and operational excellence
  • Our online capabilities were enhanced by launching the Makro mini-app within the VodaPay Super App, improving our user experience journey on the Makro website and tailored it to users shopping behaviour. Online sales grew by 18.6% year-on-year
  • Strong growth in Makro’s mBrand (10.6%) due to innovation in the frozen convenience category, bottled water and canned tuna, however, penetration for Private Brand products for Massmart Wholesale remained flat
  • We introduced Cash & Carry’s successful trader brand, Econo, in Makro, in the pilchards, biscuits, pasta and peanut butter categories
  • We grew the Trojan fitness brand by 5% due to a shift in working consumers’ habits, which resulted in more “work-out-at-home” products being purchased
  • We began our store refresh and maintenance programme to improve in-store experience across our entire fleet of stores
Our strategic focus in 2022
  • Re-open Makro Pietermaritzburg, following significant damage caused by the civil unrest
  • Actively find opportunities to open new Makro stores in under-represented markets
  • Complete the SAP ERP integration of Cash & Carry Wholesale stores
  • Implement a simplified and optimised Cash & Carry operating model to reduce costs and increase efficiencies
  • Introduce Walmart’s Global Integrated Fulfilment (GIF), a fulfilment system for on-demand purchases as we accelerate growth online, including through OneCart
  • Digitise B2B trading operations via a unified selling platform
  • Introduce a limited range of General Merchandise products in Cash & Carry to increase retail traffic and improve profitability
  • Expand Shield operations by serving and recruiting DIY and building supply customers, introducing and growing the Liquor offering, enhancing the offer to Shield members to purchase from Massmart stores and digitising trading operations
  • Resume our store refresher programme for certain identified stores, which will include remodelling stores with new fittings, change in-store layouts and relaunch of butchery and fresh fruit and vegetables

 

Read more detail on our omnichannel offering

Future outlook

 

We have made good progress in unifying our business thus far, and will maintain this momentum. We are focused on completing the conversion of Cash & Carry’s ERP systems to SAP. We will build on and leverage the momentum gained in 2021 in e-commerce and recapture feet in our stores to expedite the execution of our planned initiatives for 2022. Massmart Wholesale remains focused on our mission of saving families and small businesses time and money so that they can live better lives and run better businesses.