Pick n Pay: Rebuilding Resilience Through Strategic Turnaround and Supply-Chain Agility Pick n Pay, a cornerstone of South Africa’s retail landscape for more than five decades, operates an extensive network of 2,269 stores across Southern Africa, including its high performing discount brand, Boxer. As a leader in the fast-moving consumer goods (FMCG) sector, the Group manages a complex ecosystem of company owned and franchise stores. In 2024, amid a weakened liquidity position and a changing competitive environment, the Group announced a transformative two step recapitalisation plan. The plan comprised a R4.0 billion rights offer followed by the R8.5 billion initial public offering (IPO) of the Boxer business on the Johannesburg Stock Exchange (JSE) in November 2024. These strategic actions were intended not only to reduce debt, but also to strengthen the Group’s operational foundations and supply chain capabilities in response to the distinctive challenges of the South African market. Strategic Sourcing and the “Pick Local” Philosophy Although food and groceries remain central to the business, Pick n Pay’s supply chain is a multifaceted operation that encompasses clothing, liquor, retail technology, and logistics arrangements. The Group’s value proposition is underpinned by its Pick Local strategy, which prioritises procurement from South African producers to support local industry, preserve freshness, and reduce exposure to global supply chain disruptions. This commitment is particularly evident in the fresh produce and butchery categories, where rigorous quality assurance processes and regular supplier audits are standard practice. A key element of Pick n Pay’s sourcing approach is its emphasis on inclusive economic participation through the Enterprise and Supplier Development (ESD) programme. The ESD division offers mentorship, preferential trading terms, and business development support to small and emerging enterprises, helping them become retail ready. In 2025, these efforts were further formalised through the Small Suppliers’ Toolkit, which equips entrepreneurs with training to navigate the demands of a national retail supply chain. This focus on small and medium-sized enterprises (SMEs) is not solely a corporate social responsibility (CSR) initiative; it also supports the development of a more diverse and resilient supplier base. Supplier Reliability and Risk Mitigation Given South Africa’s persistent infrastructure constraints, particularly the energy crisis and logistics bottlenecks, supplier reliability is central to Pick n Pay’s risk mitigation strategy. The Group has developed long-term relationships with key suppliers, moving beyond purely transactional arrangements towards more collaborative partnerships. To support a consistent flow of goods, Pick n Pay uses performance-based supplier evaluations, categorising vendors according to their capacity to provide consistent quality, cost efficiency, and innovation. To improve end to end visibility, the Group has integrated supply chain data into platforms such as SAP, enabling real time monitoring of inventory levels and demand patterns. This digital capability was demonstrated during the integration of the Bottles on demand delivery service, which enabled the start up to check stock availability across stores and report it directly to the central system. This visibility now extends to second-tier suppliers, allowing the Group to monitor upstream risks such as harvest cycles and feedstock availability and thereby improving forecasting accuracy in a volatile market. Sustainability and Environmental Stewardship Pick n Pay is increasingly embedding sustainability principles in its core operations as part of its commitment to environmental stewardship. Its sustainability programme includes ambitious targets to reduce plastic waste. The Group has made progress in replacing single use plastics with recyclable or compostable alternatives in Pick n Pay Clothing and fresh produce categories. By August 2025, the Group reported progress towards aligning a significant proportion of consumers facing packaging with recognised sustainability standards. Beyond packaging, Pick n Pay is exploring innovative approaches to reduce its carbon footprint. These include energy efficient lighting and refrigeration across the store estate, as well as pilot solar installations intended to reduce the impact of Eskom’s unreliable power supply. Such initiatives form part of a broader strategy to reduce greenhouse gas intensity and strengthen waste recovery systems through partnerships with local recycling organisations. Digital Transformation and Logistics Optimisation The Group’s digital transformation has accelerated in response to demand for on demand convenience and real-time logistics management. Through strategic partnerships with third party logistics (3PL) providers and the use of sophisticated route optimisation software, Pick n Pay aims to ensure that its distribution centres (DCs) function as efficient operational nerve centres. These DCs, including substantial cold storage facilities, receive goods from thousands of suppliers and dispatch them to stores with precision. The logistics ecosystem is supported by advanced warehouse management platforms and delivery fleets equipped with GPS. Together, these tools help to enable just in time delivery across South Africa’s road network. Whether the business is responding to heightened demand during festive periods or supporting a new product launch, the system is designed to adapt rapidly. Store managers place orders electronically, triggering coordinated activity throughout the logistics chain. This digital integration helps ensure that each item, from a loaf of bread to a bottle of milk, arrives at the required location when needed. Section 189A Challenge: Rebalancing the Human Element As part of its turnaround strategy, Pick n Pay initiated a Section 189A consultation process in May 2026 to reset its labour cost base. This difficult but necessary step was intended to reshape the Group’s labour model and support long-term sustainability. Although the process involved challenging negotiations with unions such as the South African Commercial, Catering and Allied Workers Union (SACCAWU) over Sunday pay and rostering, it also reflected the Group’s aim of developing a future fit operating structure. Within this interconnected ecosystem, every participant, including suppliers, truck drivers, and store associates, plays an important role in providing the value and service that South African customers expect from Pick n Pay. QUESTION 1 [4 marks] Pick n Pay’s supply chain integration practices, including supplier partnerships, SAP-enabled stock visibility and logistics coordination, are intended to maintain product availability despite infrastructure constraints and changing customer demand. Critically evaluate the extent to which these practices strengthen Pick n Pay’s operational resilience. In answer: a) Refer to one specific practice from the Pick n Pay case study and explain how it supports timely customer service during a disruption. (2) b) Assess one limitation or remaining risk associated with this practice, considering South Africa’s energy or logistics challenges, and recommend one practical improvement. (2)