Further Expansion

The decision to enter the fashion world with the takeover of the clothing boutique chain, Papillon, at first appeared to be a considerable deviation from Pep’s basic line of business of serving the lower-income market. However, true to his entrepreneurial nature, Renier wanted to try something different - but not too different: he emphasized that the goal was to sell basic fashion wear for cash and that the new company would be reorganized very much in accordance with Pep’s business principles: ‘We reorganized the group and brought their controls and accounting principles into line with those of Pep. Pep Stores paid R100,000 for Papillon, which incorporated 14 stores and the Stiletto factory. 

The other innovation of 1976 concerned Pep’s decision to add a selection of non-food groceries in some of the Pep branches. For many years Renier has been eyeing the grocery market as an avenue for expanding Pep’s sphere of influence and with the success of fellow-Cape based food retailer, Raymond Ackerman’s Pick ‘n Pay, groceries appeared to be the logical direction. Pick n’ Pay was the market leader in the food sector at the time and competing against Ackerman presented a huge challenge. There was an additional incentive for Pep to enter the grocery market - Pick ‘n Pay had begun to compete directly against Pep by selling clothing and shoes in its giant Hypermarkets. Initially Pep focused only on a limited range of toiletries and household requisites, but this represented the humble beginnings of a full-scale entry later on into the food market and laid the foundations for Pep acquisition of the food chain, Shoprite, in 1979.

In spite of this minor setback Pep’s sales showed a steady increase of 20 percent from R91 million to R110 million, while the number of stores rose to 362. Together with 49 Papillon boutiques, the Pep group now had 411 retail outlets. Another indication of Pep’s growing confidence was that it began to accept orders for exporting. Although the company had been investigating the possibility of exporting some of its own manufacturing for two years, orders were only taken now on certain clothing ranges - one order came from Britain for 1,5 million pairs of women’s panties. Another highlight in 1980 was the increasing success which Pep achieved with its Student Prince line of school clothing.

The years 1979 to 1981 were not only characterized by good financial results and rapid organic growth, but also by the distinct change in focus of Pep as a clothing retailer to a much broader conglomerate consisting of clothing, food and manufacturing interests. For many years Renier had the vision of expanding his empire into something much larger, but he only had three years to transform this vision into reality. This required bold steps far beyond mere organic growth and necessitated a degree of imagination and calculated risk-taking which would lay down the foundation for the Pep Group’s rise in later years as the largest retailer in the Southern Hemisphere – Renier had to become the ‘grand Acquisitor’.

Half Price Stores clothing retail chain of Sam Stuppel had for many years been an annoyance and a thorn in the side of Pep Stores. It never constituted a serious threat to Pep due to its comparatively small size and its image as a less efficient clone of Pep Stores. Although Half Price Stores at its peak had about one quarter as many branches as Pep, its taxed profits seldom exceeded more than 5 percent of that of Pep. Renier made his first offer to buy the Half Price for more than R1 million in April 1978, but this offer was not accepted by the judicial management. Another offer was submitted in May 1987, this time for R2,4 million. The final purchasing consideration for Half Price was about R3 million and the acquisition increased Pep’s net asset value in 1979 by 5,4c per share to 446c per share. Eventually Pep Stores decided to keep in business only 88 of the stores of Half Price, as opposed to the 104 stipulated in the final offer, but this discrepancy was due to rental agreements of a number of these expiring and other stores simply closed. 

In 1979 Renier decided bring into realization a long-standing idea of his and of his financial director, Whitey Basson, to diversify into the food sector. For three years Pep’s management had been studying this possibility and experimented with selling small quantities of household items in certain of Pep’s branches.  When an opportunity finally came up in May 1979 to establish a more substantial foothold in the grocery market, there was no hesitation on Pep’s part in making an offer for a small food retailer called Shoprite. Shoprite was a food and household retailer based with eight stores located in the Western Cape. In contrast to the lengthy and costly Half Price takeover bid, the acquisition of Shoprite went very smoothly - the purchase price of R1,9 million was paid for in cash and Pep took possession of eight Shoprite stores, cash assets of R1 million and the experience of Shoprite’s existing management and 450 staff. It was decided to operate Shoprite as an independent concern and Whitey Basson, at this stage eager to find a new challenge within the Pep group, was appointed managing director and ably assisted by Rogut and Geller with their considerable experience. With the average profit of a Shoprite store close to R100,000 per year, compared to about R20,000 of a Pep store, the prospects for Shoprite appeared promising and Renier indicated that he wanted to increase by threefold the number of Shoprite stores in the Western Cape and then expand nationally. With Whitey Basson as MD, Renier had picked the right man for this job and Shoprite began growing at a rapid rate.

By 1980 Pep’s factories were already running at full capacity just to keep up with supplying Pep’s retail outlets and Renier was looking to expand Pep’s manufacturing capacity. Such an opportunity emerged in August 1981 when the Rembrandt group of Anton Rupert indicated that it would he eager to rid itself of one of its most worrisome subsidiaries, the clothing manufacturer IL Back. Due to very advantageous payment terms Pep eventually paid only 5,8c per share and a total amount of R5,4 million in cash, considerably less than the R6,23 million originally agreed upon. Even though the takeover had no immediate effect on the net asset value or earnings of Pep, it did result in an increase in the number of Pep employees to over 14,000. Renier also moved his own office from Pep’s headquarters in Kuilsrivier to the IL Back premises in Parow and appointed himself, Tom Ball, Christo Wiese and F.A. du Preez to the new board of directors of IL Back. 

The IL Back takeover in 1981 was Renier’s final major action as chairman of Pep Stores. Although his resignation three months later took the business wor1d by surprise, Renier had been quietly preparing his company for this eventuality throughout the past six years by strengthening the management team. Renier has been trying to strengthen the senior management for some time and in November 1980 Tom Ball was appointed as managing director of Pep Stores. Renier now held the sole position as executive chairman. The senior management consisted of Renier, Tom Ball (managing director), Whitey Basson (managing director Shoprite), Basil Weyers (marketing director), Frank Weetman (sales director), Jan le Roux (group financial manager), Jimmy Fouche (group company secretary), Nico Cilliers (group manufacturing executive), Danie Thiart (personnel manager), Jannie Holtzhausen (distribution manager). In June 1981 management was further strengthened by the appointment of former company secretary, Christo Wiese, as non-executive vice chairman of Pep. Wiese left the group during the early l970s, rejoined Pep’s board in 1975 as non-executive director, but was otherwise involved in the running of his own mining company, Octha Diamonds.

Among other key and mid-level personnel were senior buyers Baba Thiart, Gert van Rooyen, Nick Steyn, Andre and Marietha Nel, Ritha Wind, Wileen Munnik, Beryl le Roux, Maureen Lourens, Elmein Mosterd, John Lee, Adri Pieters, Jack Meyer, Tokkie and Izaan van der Merwe (daughter of Pep pioneers Essie and Hester Esterhuyzen); regional managers such as Frans Venter, Hannes van Zyl, Peet Erasmus, Philip le Roux, Abel van Zyl, Christo Burger, Chris Mayne; factory/production managers such as Rudi Geyser, Archie Roux, Wolfgang Mittner, Pietro Tieto, Graham Steele, Norman Balladen, Danie van Rooyen, Klaus Kuhn, Bennie Combrinck. In addition there were the managing director of Pep Print, Bokkie Wulfse, the editor of Pep News, Ben Conellissen (Alice’s brother), and others in senior management such as Johann Visser, Izak Louw, Jurie Bezuidenhout and Hantie Mouton.

Together with the newly-appointed vice-chairman, Christo Wiese, Renier continued to consolidate his shareholding in Pep and by June 1981 the two of them held 25 percent of Pep’s issued shares. Wiese later said that Renier and he were preparing for ‘any eventuality’ (presumably including a hostile takeover): ‘Renier and I have always had an informal arrangement with several other shareholders that, in the event of a bid, we shall stand together’.Two months later, on 9 November 1981, with his company’s position and prospects more promising than ever, Renier announced his resignation as chairman of Pep Stores, effective immediately - he agreed to remain with Pep until his formal departure at the end of Pep’s financial year in February 1982.