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Woolies chicken set to become cheaper as company launches R1bn bid to 'adjust' prices

| Economic factors

Woolworths has committed to “more accessible prices”, and plans to “invest” R1 billion in keeping prices lower over the next two to three years.

This means in effect that it may shrink its profit margins on some products, and hike prices by less than it had previously planned. Savings due to cost cutting and efficiencies in the business, will also be channelled into price cuts.

 

In the past year, Woolworths food prices rose by 6.5% on average. This is almost double the average price increases (+3.4%) at both Pick n Pay and Shoprite over the past six months. This did not affect its sales, however: Woolworths food sales jumped almost 11% to R35.8 billion in the year to June.

Still, the company is concerned about the impact of the coronavirus pandemic on South African households.

“Because we know our customers are under pressure, we are investing even more in our prices to ensure we remain relevant and accessible, while not compromising on our quality,” says Woolworths SA CEO Zyda Rylands.

Woolworths says it will start by extending savings worth R250 million in food prices – particularly chicken – over the next few months.

Prices will be adjusted for the entire fresh chicken range, including whole and portion chicken packs, but excluding its “Easy to Cook” range, crumbed and marinated chicken.

“While this investment will initially be most visible in our poultry products, we have also applied more promotions on everyday basics across groceries, household and personal care to be more affordable to more customers,” says Rylands.

Rylands says that the company has been focussed on cutting costs and identifying efficiencies in its business and value chain. “We are pleased to be able to pass most of the savings of these efficiencies onto our customers.”

Apart from food price cuts, it will also “invest” R250m in key wardrobe essentials in its fashion business. This division saw its before-tax profit fall by 46% to R948 million in the past year.

While stringent lockdown regulations – which banned sales of many FBH products at first – contributed, the company noted that even before the lockdown, the division suffered a “disappointing” performance. Profit margins shrank as it tried to get rid of stock with sales and other promotions.

 

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