Related Articles
Top Stories
May 25 2012 13:58
The costs of the first phase of the Gauteng Freeway Improvement Project have increased significantly to almost R90bn, according to a report.
May 24 2012 17:31
The Reserve Bank will maintain current interest rates, and a considerable reduction in the local petrol price is anticipated, says governor Gill Marcus.
May 25 2012 11:36
The JSE has identified and stopped "incorrect" trades from one of its members, and will reverse the trades and lower the session's total value after the close.
Johannesburg - The proposed bid for AVI, the R7bn food producer, by rival food group Tiger Brands could be the first of others in South Africa's consumer sector, which has not yet felt the full force of the world economic slowdown, a retail industry expert said.
Speaking at a conference titled The Economic Outlook, convened by the Gordon Institute of Business Science (Gibs) on Thursday, Gemini Consulting's vice president & head of business strategy practice, Grant Hatch, said consolidation in the retail value chain may be a feature in 2009.
"Production [agriculture], the supply side and the retailers will see some consolidation. Cash-rich companies will consolidate their position in the market."
Tiger Brands said on November 17 2008 it was considering a 2 400c/share bid for AVI, implying a total equity value for AVI of R8bn.
In an update on January 26 2009, AVI said it was considering a firm proposal from Tiger Brands.
Hatch said the economic downturn could also result in a number of surprise failures in the retail chain. "We will see some late-cycle big shocks such as the citrus exports," said Hatch. South Africa's citrus market exports to the Russian market, which Hatch said was "in a mess".
"There will be some big failures in certain markets that we weren't expecting," he said without providing other details.
Shopping down
Investors could expect certain retail stocks to thrive, however, such as Shoprite and Pick n Pay.
Hatch said consumers, pressed by shrinking disposable income, would shop down in the non-durable market such as food while deferring purchases of durable products, such as vehicles.
"Car manufacturers are facing some serious restructuring because the market is engineer-driven rather than consumer-driven."
Meanwhile, retailers would seek to grow in African markets while retailers with unsound business plans, such as Woolworths - which was exposed to the high end of the South African market - would continue to suffer.
"If you want a trend for 2010, it would be how some retailers build in a greater share of the African market into their businesses," said Hatch.
- Fin24.com