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Cape Town - I went off to the Convention Centre to go and see the presentation by Steinhoff.
If you recall, they’ve just done the biggest deal in South African corporate history with the acquisition of Pepkor.
READ: Steinhoff moves into clothes with R68.2bn Pepkor buy
Two hundred people were at the Cape Town Convention Centre to listen to what Markus Jooste and his team had to say. It wasn’t just Jooste himself, but many of the heavyweights of Stellenbosch as well.
Christo Wiese was there. Jannie Mouton was there. Claus Daun came out from Germany and I bumped into an old friend – Sean Summers – a former CEO of Pick n Pay, who now runs the UK and Australian operations for Steinhoff.
It was really an interesting story that Markus Jooste was able to tell us, and I think this is where it gets really fascinating.
This company was built as a conglomerate in a period where people didn’t like conglomerates. It was also built as a vertically integrated business.
What that means is that they literally make or source the products, distribute or deliver the products to their own operations, and then sell them themselves.
This vertically integrated model takes out many costs that might otherwise affect the price of the product at the end of the day.
It’s not a simplistic model, but it’s a rather simple one in that you build the base and you throw volumes onto the base and that’s really what Steinhoff’s about.
Steinhoff AGM (Pic: Alec Hogg)
The acquisition of Pepkor is going to increase the base by 3 000 outlets. Pepkor was telling us that they meet something like 300 -million people’s demands around the world.
They’re not only in South Africa and there’s not only the Pep brand.
The main story here is that Steinhoff is looking to take its profit margin from the 7% at the moment on sales, to 10% by 2016.
With the base in place, with more volumes going through the system, who’s to say Markus Jooste and his team won’t achieve it.
WATCH Steinhoff's presentation
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