Pick n Pay’s chairman Gareth Ackerman speech at The Consumer Goods Council of South Africa (CGCSA)

Cape Town, South Africa, 2015-9-24 — /EPR Retail News/ — The Consumer Goods Council of South Africa (CGCSA) is the representative body of the entire consumer goods industry in South Africa. Our chairman Gareth Ackerman recently presented at their Annual summit on Friday 18 September 2015. The summit brings together about 500 local and international speakers who are Sector CEOs, Supply Chain and Commercial executives, Marketing and Brand Management executives, and Heads of customer care and call centre managers amongst others.

Here is the full text of his speech:

A very warm welcome to our members, invited guests, our speakers from South Africa and those who have travelled from abroad, as well as members of the media present.

This is indeed the highlight of our calendar year as the Consumer Goods Council of South Africa, when we hold our annual summit, an event that provides an opportunity to discuss issues pertinent to our industry and members in particular and also interact and share ideas for mutual benefit.

We meet against the background of growing concern about the health of the global and domestic economies, pressure on businesses to overcome considerable obstacles to trade, an increasingly discerning and demanding consumer and of course, intensified competition for market share.

In particular, consumers everywhere are under strain and are searching for new and better ways to achieve value. The success of discount retailers in Europe, and the growth in online channels are just two responses to this trend.

Consumers are also increasingly expecting businesses with whom they do business to demonstrate shared value. This can take various forms, including leadership on urban renewal, business mentorship, supply chain development, delivering products and services that align with their increasingly demanding sustainable development and ethical values, or supporting local community partnerships. Companies which fail to demonstrate shared value can rapidly lose the trust of their customers, with catastrophic results.

South Africa’s Food Security Challenges

The biggest threats to food security in South Africa can be summarised in five main areas:

  1. Climate change and water scarcity
  2. Food waste
  3. Global economic forces
  4. The rand/dollar exchange rate
  5. Land tenure and policy uncertainty

A particular challenge for us all is that of environmental sustainability, which has been rising up the global agenda for some years, but is now, taking full hold of the national discourse in many global economies. Tackling climate change is as pressing a challenge for Africa as it is for any other region of the world, perhaps even more so given that we are a water-stressed continent and many millions of our continent’s citizens are food insecure. The global Consumer Goods Forum, of which I am also the co-chair, has made some bold commitments in this area, including pledging to fight for an end to deforestation by 2020.

  • Yesterday US Government endorsed SA sustainability position
  • The purchase of sustainable palm oil
  • Fires in Malaysia last week

Climate change and water scarcity

  • World Wildlife Fund (WWF) study found that water availability is the single most important factor that limits agricultural production in South Africa.
  • WWF estimates that 98% of SA’s water is already allocated, with 63% of available surface water being used for irrigation, 14% for urban domestic use and 18% for commercial, industrial and mining use.
  • These are major issues for a semi-arid country like SA.
  • Talk of “load shedding” – Johannesburg

Our CGF commitment is to show strong leadership on food security by specifically preventing and reducing food waste, and maximize its recovery as we move towards our goal of halving food waste within our own retail and manufacturing operations by 2025. These initiatives are particularly important when you consider that in a world of rising population, increasing cost of food, concerns about inequality and growing food insecurity, food waste is one of the greatest challenges of our time with 30% (1.3 billion tonnes) of food produced being wasted each year.

Food Waste

  • If food waste was a country it would be the third largest emitter of greenhouse gases globally after the US and China and its water footprint is equivalent to 3 times the volume of Lake Geneva.
  • In Africa as much as 40% of all food produced is wasted before it reaches the consumer (enough to feed roughly 300 million people).
  • The CSIR estimates that in SA about 9 million tonnes, or 30%, of local agricultural production is wasted each year (R60bn a year or 2% of GDP).
  • Big problem in Africa is lack of adequate logistics and cold storage facilities; poor road infrastructure; congested borders; food traceability laws in major export markets like EU.
  • Food that doesn’t `look perfect’ according to EU guidelines typically never reaches the shelves of retailers.
  • Wastage also occurs in the form of retailers being forced to throw away food that is past its shelf life but is still perfectly fit for human consumption.
  • This is why Pick n Pay supports FoodBank SA, which collects edible surplus food from manufacturers and retailers and distributes it to non-profit organisations.
  • By giving FoodBank SA surplus food, which is still perfectly safe to eat, the company is already contributing 40,000 meals per week for people in dire need – and is saving almost 1000 tonnes of food waste per year.

Locally, rising non-communicable diseases have also become a challenge not only in South Africa, but globally, with obesity being the main focus at this stage. In response to this, we as the South African food and non-alcoholic beverage industry are looking into initiatives aimed at promoting healthy eating and physical activity as part of a healthy lifestyle. This is in an effort to support the Department of Health in achieving its objective to prevent and control non-communicable diseases. This ties in with the National Development Plans and the Millennial Development Goals.

Turning to the health of the global economy, it is evident that we are heading for uncertain times. For the first time since the last credit crisis of 2008/09, we are facing the spectre of another downturn. The International Monetary Fund has already revised global growth to just 3.3% from a previous estimate of 3.5%. Upheavals in China are causing havoc in emerging markets, and currently there seems to be no let-up in the near-term.
Here in South Africa growth is expected to be as low as 1.7% from previous estimates of 2.2% made at the beginning of the year. The primary inhibitors are constrained electricity supply plus a tighter fiscal stance. Job cuts are worsening in South Africa, and this has a direct impact on consumer spending and affects our businesses and our ability to create, let alone sustain existing jobs.

The prospect of high interest rates will potentially worsen household indebtedness; while regulatory uncertainty related to a number of proposed laws that could potentially negatively affect our sector is a cause for concern, and is filtering into the low business confidence that has been revealed by several surveys released in the past few weeks.

Global Economic Forces

  • SA not isolated from the impact of what happens on international markets such as the US, which accounts for 40% of the global maize harvest.
  • A spike in US grain prices typically causes local prices to increase in tandem. This has follow through effect on poultry and beef as maize used as feed source.
  • Rising food prices and diminished food security can cause civil unrest e.g. food riots Egypt to Mozambique, Thailand and Mexico in 2007/08.
  • Increased demand from rising consumer wealth and growing populations in emerging markets such as China are adding to food security fears.
  • Africa also needs to boost its own food security. A recent UNICEF report forecast that 1.8 billion babies will be born in Africa over the next 35 years while the continent’s population could almost quadruple to 4.2 billion people by 2100.
  • This is why Pick n Pay’s policy in Africa is local sourcing, as much and as far as possible. In fact, 94% of our food products are procured from local suppliers – around R40-billion in the last financial year.
  • Governments also need to play their part by improving infrastructure and eliminating cross-border trade barriers.

Exchange Rate

  • The rand has weakened more than 40% against the dollar since the start of 2007
  • International prices of soft commodities such as maize and wheat are denominated in the U.S. dollar, which is still the currency of choice for global trade transactions. A weaker rand therefore results in higher maize price.
  • Food inflation prospects bad
  • Soft commodity prices increase

With this rather gloomy context in mind, you may well ask what the future is looking like for the consumer goods sector. Is there a light at end of the proverbial tunnel? Yes, there is. We have no choice but to adapt to the times, innovate and continue to provide value to our customers, while continuing to grow our business for the benefit of our shareholders, our staff, the economy and the communities in which we trade.
Land Tenure and Policy Uncertainty

  • Deloitte warned in March that SA faces looming food shortage in next 10 years due to average age of farmers.
  • Average age of SA farmer is 62, compared to EU median (55), US (58) and Australia (53).
  • Agriculture’s contribution to SA GDP has declined from more than 6% in 1980 to less than 3% in 2013
  • The declining profitability of farming has left SA with less than two thirds of the number of farms it had in the early 1990s.
  • South Africa had 120 000 farmers in 1994 compared to 37 000 at present.
  • This dwindling population of commercial farmers supports a population of over 50 million people.
  • Commercial farmers account for 95% of SA’s locally-produced food, planting their crops on only 5% of total agricultural land.
  • More needs to be done to enable small-scale food production to succeed (financial support, skills development, access to land etc.)
  • SA also needs to revisit land tenure regime in traditional rural areas, where communal tenure should be considered for conversion into to individual land ownership

Why we chose the theme “Consumer Goods in the Digital Age”? It is a relevant theme for the simple reason that the future of our businesses will to a large extent be determined by the speed at which we innovate, adopt and adapt to the digital and technological age. This has been far from being a simple evolution; it is proving to be a disruptive influence in the consumer goods sector, as it has been in most others.

  • Records and CD’s
  • Video
  • Appliances
  • Computers

I say ‘disruptive’ in a positive sense, in the same way that the tablet is replacing laptops which replaced typewriters. The truth is that the future isn’t what it used to be, and the potential presented by technological change is immense. Provided of course, that we embrace the digital age and disruption to grow our businesses, and most importantly provide both benefit and value to our customers.

  • SA has jumped technology to miss the computer and smart phones

I leave you with this important challenge that we should all consider: consumer-centricism is now key to success, more than ever before. And although consumers and their needs are changing in the most rapid sense, it means more than ever that championing the consumer’s cause should be front and centre of whatever we do. From my own experience at Pick n Pay, the values of staying true to consumer sovereignty, the belief that doing good is good business and being an efficient business has stood us in good stead. That’s because these are enduring principles that survive any evolution or disruptive technology. The ability to take a long-term view, and to act beyond narrow, commercial confines, is what unites many businesses globally, and especially so, family-controlled businesses. This is value creation at its most practical, if not ethical.
The onus is on us to demonstrate how we are vocal and honest champions for the consumer, to embrace important global imperatives such as food security, climate change, environmental protection and sustainable job creation. In that way we will help to build sustainable economies to both serve and absorb the many educated and talented young people searching for a better life.

But for that to happen, especially here in South Africa, we need to narrow what we see as a widening of antagonism and lack of trust (the so-called trust deficit) between the business, labour and government sectors. This is impacting on our ability to negotiate strategies to address unemployment and poverty.

  • CGCSA is working on this

We will continue to engage with the government to find a common ground on these and other challenges we face, not only as a business sector, but as a country as a whole.

  • CGF Summit 15-17 June 2016
  • Members pay for barcodes / cut off
  • Business ethics

What can we do?

  • Create jobs
  • Reduces energy and water consumption
  • Increase the use of renewables
  • Reduce waste
  • Support small and emergency market businesses
  • Build confidence – in the company – the country and the consumer.

I thank you