Online Annual Report 2009
14 CCW stores acquired in June 1998
22 Browns and Weirs stores acquired in July 2001
Two chains combined under CBW format from July 2001
Now 73 stores
Operating in SA, Botswana, Lesotho, Namibia
Food/liquor/groceries/ethnic cosmetics
LSM 2 6
Six Jumbo stores acquired in April 2001
Now Six stores
Operating in SA
Food/groceries/ethnic cosmetics
LSM 2 6
378 members acquired 1 March 1992
Now 470 members and 533 outlets
Operating in SA, Botswana, Lesotho, Namibia, Swaziland
LSM 2 6


Living Standards Measure (LSM)
The South African Advertising Research Foundation (SAARF) Living Standards Measure (LSM) has become the most widely used segmentation tool in South Africa. It is a means of segmenting the South African market that cuts across race, gender, age or any other variable used to categorise people. Instead, it groups people according to their living standards.


Great financial performance in a tough environment
Acquisition of nine retail hybrid stores completed
Successful roll-out of in-store IT system to 33 stores






Group contribution




Store progress

Opening balance 65
No store movement during the current year -
Stores acquired
Berea (KwaZulu-Natal)
Durban (KwaZulu-Natal)
Durban (KwaZulu-Natal)
Durban (KwaZulu-Natal)
Pinetown (KwaZulu-Natal)
Umgeni (KwaZulu-Natal)
Ramotswa (Botswana)
Ghanzi (Botswana)
Groblersdal (Gauteng)
Store closed Soweto (Gauteng) -1
Total stores in 2009 73
Opening balance
 No store movement during the current year  
Total stores in 2009 6
































































Masscash directorate

Grant Pattison

Robin Wright
Chief Executive

Jane Bruyns
HR Director

Jay Currie
Retail Director

Neville Dunn
Operations Director

Guy Hayward
Non-executive Director

Dino Holmes
Financial Director

Pearl Maphoshe
Non-executive Director

Mike Marshall
Business Systems and Process Director

Craig Surmon
Merchandise Director

Masscash divisional review

Masscash produced a great performance even as trading conditions toughened in the second half of the financial year. Our drive into retail cash and carry stores continued with the acquisition of the six-store Cambridge Food, as well as one Top Spot store, and helped drive the Division’s sales growth, with annualised turnover from this category of stores reaching R2 billion. The ongoing roll-out of our new in-store IT system continues to enhance the aggregation and interpretation of management information.

The Masscash brands

Masscash consists of three entities: CBW, Jumbo and Shield. CBW wholesales food, liquor, groceries and cosmetics in bulk to independent general dealers, government feeding schemes, franchise members, small traders and hawkers in peri-urban and rural areas within southern Africa. CBW was formed by acquiring 14 CCW stores in 1998 and 22 Browns and Weirs stores in July 2001. The two chains were merged in the same year. In April 2001 Masscash also bought six Jumbo stores, which sells mainly cosmetics, toiletries and hair-care products to individual consumers and independent general dealers. A Botswana-based wholesaler Trident, with six stores was acquired in 2003. In 2007 we acquired the three-store Thaba Cash & Carry business as part of our strategy of developing a model to serve wholesale and retail customers in the same store and this is now included in Retail Cash and Carry. Cambridge Food, Top Spot and two Sunshine stores were acquired in July 2009 and are also included in this new category of store. No stores were closed during the year.

CBW now operates 73 stores in South Africa, Lesotho, Namibia and Botswana.

CellShack, which trades in the South African cellular wholesale market, was acquired in 2005. It sells cellular products through its own wholesale and retail channels.

Shield is a voluntary buying association that buys products in bulk on behalf of 470 members who own wholesale or retail food businesses in South Africa, Botswana, Namibia and Swaziland.

Our value proposition

All our stores apply the philosophy of supplying the right range of products to satisfy local needs at a highly competitive price to low- to middle-income wholesale customers. We keep costs down by employing a no-frills cash and carry warehouse format coupled with unsophisticated distribution centres that supply our private label and important general merchandise ranges. Our private label food brands, Econo and Heritage, offer our customers exceptional value and the assurance of stringent quality and safety controls. Our stores are well positioned to take advantage of customers seeking value in the current environment.

Our operating environment

The financial year under review was a tale of two halves. During the first half our trading was boosted by an inflationary tail-wind driven by commodity categories such as rice, oil and to a lesser extent, other foodstuffs. During the second half however, the rate of inflation began to slow and in certain categories, like commodities, even moved into deflation. We also saw a reduction in volumes as increased retrenchments began to hit our core customer base, although this was not uniform across all stores. Those in areas affected by large scale retrenchments in industries such as mining and motor manufacturing saw sales affected more than stores whose customer base is strongly reliant on social grants.

Food in the lower end of the market is defensive compared to general merchandise as demand for basic foodstuffs is significantly less price-sensitive. Successive interest rate hikes and tightening of lending by the banks did not have as big an impact on our customers as they are not as credit sensitive as more banked higher LSM groups. Operating at the low end of the market, the Masscash business tends to be more sensitive to the effect of retrenchments and increases in wages and social grants than general inflationary pressures. Severance packages, used by retrenched workers to bide them through the first few months after being laid off, also helped delay the effect of job losses on our sales.

We continue to engage with suppliers to keep the costs of basic foodstuffs as low as possible and dedicate a portion of our social investment to feeding schemes in an effort to alleviate financial pressure on our end-customers.

Financial performance

To make comparisons with the prior financial year meaningful, all current year income statement figures in this review are compared to the equivalent figure for the prior year’s 52-week period.

      2009 2008 2008 2007
      52 week 52 week 53 week 52 week
Sales Rm   15,215.7 13,353.5 13,610.4  11,794.7
Trading profit before interest 3 Rm   481.9 390.5 402.1  293.7
Trading profit before interest as % sales %   3.2 2.9 3.0 2.5
Operating profit before interest Rm   485.7 386.6 398.2 277.8
Operating profit before interest as % sales %   3.2 2.9 2.9 2.4
Net finance costs Rm   47.7 36.8 37.4 13.9
Trading profit before taxation 3 Rm   529.6 427.3 439.5 307.6
Trading profit before taxation as % sales %   3.5 3.2 3.2 2.6
Operating profit before taxation Rm   533.4 423.4 435.6 291.7
Operating profit before taxation as % sales %   3.5 3.2 3.2 2.5
Inventories Rm   1,077.6   1,094.5 765.0
Inventory days days   29   32 26
Net capital expenditure 1 Rm   117.7   91.1 59.8
Cash flow from operating activities Rm   308.0   163.4 333.7
Number of stores     79 71   72
Trading area m2   270,324 247,007   246,276
Average trading area per store m2   3,422 3,479   3,421
Number of employees     5,931 4,893   4,608
Sales per store R000   163,047 158,023   133,775
Sales per m2 R000   48 45   39
Sales per employee R000   2,565 2,729   2,560

1   Net capital expenditure is defined as capital expenditure less disposal proceeds.
2   The ratios have been calculated using year-end balance sheet figures.
Trading profit is earnings before asset impairments, BEE transaction IFRS 2 charges and foreign exchange movements.
4 Shield is shown as average sales to each independently owned outlet
(ie this represents only a portion of the outlet's sales).

Despite the different trading environments between the first and second half of the year, the Division reported total sales of R15.2 billion, representing growth of 13.9%. Comparable sales growth was 11.6% and our annual sales inflation was 14.0%. In interpreting sales growths, it must be noted that in September 2008 British American Tobacco South Africa (BATSA) changed their distribution model which has the effect that we lost almost all of our wholesale cigarette sales – resulting in us having to close our Jumbo cigarette distributor. These lost sales affected total sales growth and comparable sales growth by 4.2% and 5.0% respectively. Adjusting for these figures shows that the Division did see volume growth.

Trading profit before interest and taxation of R481.9 million was 23.4% higher than the prior year. This growth was achieved through a good sales performance, by maintaining our low-cost operating structure, the positive effect of the higher net margin Retail Cash and Carry stores and the loss of the very low margin cigarette sales.

Net interest received improved from higher commercial interest rates and better working capital management. Debtors remain well controlled and stock levels increased to R1.1 billion representing 28.5 days which is an improvement on the prior year’s 32.3 days.

Capital expenditure of R120.8 million for the year was 22.5% lower than the prior year’s R155.9 million. The total amount invested in our Retail Cash and Carry acquisitions was R192 million.

Trading profit before tax return on sales





3.0% 3.0%         

Trading profit before tax return on sales has been calculated using profit before tax adjusted for asset impairments, the BEE IFRS 2 charge and net foreign exchange movements.

As wholesale food volumes tend to be constant, the Division’s sales performance is materially affected by the level of sales inflation. As inflation slows or moves into deflation, the Division’s ability to hold its trading profit margin comes under pressure and, with deflation, will even reduce. As the higher net margin Retail Cash and Carry stores gain momentum however, the target profit margin may be increased above 3.0%.

Improved efficiencies

Our low margin, high volume wholesale business model has little room for expense growth which demands that we always focus on managing expenses lower without compromising control, efficiency or effectiveness. In addition, about 55% of our cost base is made up of employee-related costs. The Division managed to avoid retrenching staff and focused instead on upskilling existing staff, implementing tighter staff scheduling and making better use of flexible staffing solutions to bring down fixed labour-related costs.

We managed to extract some efficiencies in the supply chain by optimising stock control in an acute inflationary environment. Specifically, careful management of food categories to reduce the impact of food price volatility on our business also led to an improvement in inventory levels.

Jumbo Crown Mines

Investing in our community

Each day more than 8,500 children receive a balanced meal at a container kitchen sponsored by Masscash. As part of the company’s corporate social investment programme, old shipping containers are converted into catering kitchens, complete with stainless steel cooking counters, gas cookers and equipment. Each container costs about R67,000 to convert. A Masscash store then 'adopts' a container and provides food on an ongoing basis for volunteers to prepare and distribute to hungry school children.

Masscash works in partnership with the Classic Institute of Education, an NGO operating schools in certain disadvantaged communities in South Africa. A thorough analysis is conducted to ensure that the neediest schools are targeted in areas not reached by government feeding programmes.

This year, Masscash will deliver another 16 kitchens, more than doubling the number of children being fed through the programme. Most of the children currently receiving meals through Masscash container kitchens are in the Eastern Cape and during the coming year, we plan to extend the programme to government schools in all regions across the country.

Sadly, the year was marred by a tragic incident involving two customers at our Nqutu store in KwaZulu-Natal. In February 2009, a bulk stack of palletised maize bags collapsed onto two customers, fatally injuring one while the other has since recovered after initially being hospitalised.

Although subsequent governmental investigations have cleared the company of any culpability, we immediately took full responsibility for all costs associated with the incident including the emergency services, funeral proceedings, hospitalisation, subsequent treatment and incidental costs. We also contributed a capital amount of R300,000 to an education trust for the deceased woman’s dependant.

We have thoroughly investigated the incident and now ensure that all suppliers and logistics providers are made aware of the minimum standards for packing and stacking bulk items. We are also ensuring that all our stores and their personnel are aware of the same issues and that all store racking comply with local health and safety standards as well as our own minimum requirements.

Upgrading IT

The continuing roll-out of our new point-of-sale IT system will significantly enhance management information and fundamentally change the way we do business. We began rolling out the Arch Retail Management System in April 2008 and this has now been successfully rolled out to 33 stores and we plan to complete the roll-out to all stores in the second half of next year. The system allows a common master file of stock data across the Division and seamlessly integrates with the Division’s accounting and finance functions. Through the stock master file, the new system provides our buyers with powerful reporting functionality, thereby improving the quality of their information when negotiating with suppliers.

The system will also enable us to support our Saverite franchise format, which targets wholesale customers with annual sales of between R5 million and R35 million. Masscash offers Saverite members highly competitive prices by leveraging Group purchasing volumes, selling them our private label brands, and keeping distribution costs down through tight supply chain management.

Jumbo Crown Mines

Risks and rewards

The biggest external risks our business faces include increasing unemployment, volatility in food prices and the government maintaining its social grant programme.

Masscash continues to focus on consolidating and growing our R2 billion footprint in the lower-to middle-income Retail Cash and Carry model in Southern Africa. In particular, we intend competing with the major retailers through our Retail Cash and Carry model. Our acquisitions of six Cambridge Food stores, as well as one Top Spot and two Sunshine stores are part of our strategy of consolidating our position in this market. We will also look to acquire 14 Score stores. Masscash has already taken on two Score stores in Botswana, while the rest await Competition Tribunal approval in South Africa.

During the year we undertook a number of customer surveys and interviews. These highlighted areas where we can improve our delivery to customers. Our decentralised execution model, which involves local stores managers interacting with customers on the floor, helps us to keep a close eye on customer trends and to respond appropriately.

Future outlook

We expect general economic conditions to improve from early 2010. Retrenchments should taper off and possibly reverse as the economy enters a recovery phase. The impact of government spending on social grants, on infrastructural projects and the FIFA World Cup 2010 should all provide positive short-term impetus. Over the medium term we intend to consolidate our position as a leading wholesaler and retailer of basic food across South Africa through our hybrid store model. Longer term, Masscash views the good growth prospects of several African countries as an opportunity for further expansion of our successful business model.