Whitey Basson outsmarted Walmart and stopped them from buying Pick n Pay

Around fifteen years ago, Walmart wanted to enter the South African market, and former Shoprite CEO Whitey Basson outsmarted them to ensure they did not threaten his company.

Whitey Basson is well-known a South African retail giant who built Shoprite from an R1 million business to the biggest retailer in Africa, worth over R160 billion.

However, it was not only his retail expertise which ranked him among the top executives globally. He was also a master business tactician.

This skill was illustrated in how he outmanoeuvred the world’s largest retail corporation, Walmart, when it wanted to enter South Africa.

In the book, Whitey, by Neil Joubert, Basson lifted the veil on what happened behind the scenes when the American giant started to approach local retailers.

Basson said that when Walmart came to South Africa to explore opportunities, they approached him and asked whether Shoprite would sell to them.

He told them that Christo Wiese was the controlling shareholder and that they would have to ask him about buying Shoprite.

“I don’t think that is likely to happen, and I don’t think we would like to be a subsidiary of an overseas company either,” Basson told Walmart.

He was right. Shoprite’s billionaire chairman, Christo Wiese, told Walmart that they could not buy Shoprite.

However, Basson and Shoprite faced a significant threat. If Walmart were to buy Pick n Pay, it could make their life very difficult.

Pick n Pay did very well at the time. Under CEO Sean Summers’ leadership in the 2000s, Pick n Pay became the grocery market leader in South Africa.

Pick n Pay achieved an average annual revenue growth rate of 16% annually, which was higher than Shoprite’s over the same period.

“I planned to get Walmart off our back and prevent them from buying Pick n Pay, because that was my biggest fear,” he said.

“So, I talked to the Walmart team for almost two hours to convince them that Makro was their best option.”

His plan worked exactly as planned. In 2011, Walmart bought the majority stake in Massmart, which owned Makro and Game, for R16.5 billion.

“Thank heavens they didn’t buy Pick n Pay. That would have been a major problem,” Basson said in an interview with Joubert.

Making sure that Walmart did not become a threat

The next step in Basson’s plan was to ensure that Walmart would not make Makro and Game successful competitors to Shoprite and Checkers.

Walmart is known for its aggressive pricing, which posed a significant threat to Shoprite and other local retailers.

At the time, Massmart was listed on the Johannesburg Stock Exchange (JSE), which means the company’s financial performance was closely watched.

Basson explained that all he needed to do to ensure that Massmart could not aggressively cut prices after the Walmart acquisition was to ensure it remained listed.

“If they had come in unlisted, they could simply have wiped us out with discount prices. It wouldn’t even have made a dent in their books,” he said.

“However, if you’re listed, and your performance is constantly analysed in the press, it hamstrings you quite a bit.”

He said Walmart did many things with Massmart that were ‘really stupid’. “Game was a total disaster. They literally destroyed a good business within two years,” he said.

“I don’t think their entry into the South African market was well thought through. I do think their hardware stores are excellent and will do well in South Africa,” he said.

Massmart struggled, and in August 2021, five years after Basson left the company, it sold a part of its stable to Shoprite for R1.36 billion.

The deal comprised 56 Cambridge Food and Rhino Cash & Carry stores, which included 43 liquor outlets, as well as 12 Masscash Cash & Carry stores. They became Shoprite or Usave stores.

Basson said he never thought Walmart would become the force in South Africa that it was in the United States.

He explained that the South African market had its own challenges and was among the most competitive in the world.

“Never fight a small war with your entire defence force,” Whitey said regarding Walmart’s entry into the local market.

In August 2022, Massmart’s board and Walmart reached an agreement for Walmart to buy all the shares in Massmart, which owns Makro, Game, and Builders.

Massmart delisted from the Johannesburg Stock Exchange on 22 November 2022, which marked the end of an era.

This is a summary from the Neil Joubert’s book, Whitey: The Rise and Rule of the Shoprite King. It is available here.