Mergence Capital believes Vitality is not as important for food shopping as it is for gym membership.
Pick n Pay helped establish the HealthyFood programme with Discovery over a decade ago. Picture: Patrick Louw/ Independent Newspapers
By Nicola Mawson
AS Discovery Vitality realigns its health food partner strategy, its decade-long relationship with retailer Pick n Pay will officially come to an end on August 31.
While not the best timing for the retailer, the end of the partnership and Discovery Vitality’s decision was announced September 26, 2023, before Sean Summers took over at Pick n Pay as chief executive and started implementing a turnaround plan.
Discovery’s health and wellness offering will, from September, be teaming up with Shoprite’s Checkers brand as well as its Sixty60 offering for the Vitality HealthyFood benefit.
On Wednesday, Shoprite reported that total sales of merchandise increased by 12% to around R240.7 billion from continuing operations in the year to June. Online sales from the Checkers Sixty60 app grew by 58.1%.
Peter Takaendesa, the head of equities at Mergence Capital, said the move made sense for Vitality as Shoprite was South Africa’s largest retailer.
“It is quite likely that most of Vitality’s mid-high-income members are already doing their shopping at Woolworths and Checkers in addition to Pick n Pay and Spar,” he said.
Takaendesa added it was “unfortunate for Pick n Pay supermarkets to lose the key part of the Vitality partnership to earn Discovery miles”.
Mergence Capital believes that Vitality is not as important for food shopping as it is for gym membership; more so now, as there are many other loyalty schemes in the retail market, including those from banks and retailers themselves.
“Most people are walking around with multiple loyalty cards in their wallets,” said Takaendesa.
Discovery and Pick n Pay will continue to partner in other aspects, including the ability to spend Discovery Miles by choosing Pick n Pay as a reward option in the Vitality Mall.
Independent retailer analyst Chris Gilmour said the move was “not a vote of no confidence in Pick n Pay. It’s a natural re-alignment of Discovery’s healthy food partners. It now uses Woolies and Checkers, two top-end retailers that complement Discovery’s ambitions to get its clients eating healthy foods”.
Takaendesa noted that the investment case for Pick n Pay now was more about its Boxer business, in the same way Transaction Capital shares became a case of buying into WeBuyCars prior to the recent unbundling.
In May, Pick n Pay announced a new strategy to restore its core Pick n Pay supermarket business to profit, after its R3.2 billion taxed loss for the year to February 25, and plans for a R4bn rights issue and the listing of Boxer in November are in full swing. The rights issue closes today.
Pick n Pay helped establish the HealthyFood programme with Discovery over a decade ago. That, along with its Smart Shopper offering’s data, into which people have opted for personalised offers, provides incredible insight into habits, which it can leverage. Pick n Pay has more than 10 million unique Smart Shoppers.
Discovery Vitality said it “appreciated the long-standing relationship with Pick n Pay that has enabled Vitality members to get rewarded for their choices”. Discovery Vitality has more than two million members.
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