Can PNA prevail, where CNA floundered?

Who could have imagined that the seemingly placid business of stationery could be so cutthroat?

Yet, the battle for shoppers has pitched CNA, a company that was created at the height of Joburg’s mining boom in 1896 to sell newspapers, against the upstart PNA, which opened its doors in 1992.

CNA, once a proud JSE-listed giant, has been in decline for years. In 2002, it was put into liquidation, before being bought by Edcon for R14m — before Edcon itself collapsed into business rescue.

On the shop floor, this meant smaller stores, less stock and the tangible sense of a fading force.

PNA, by contrast, is surging. It now has 86 stores — half as many as CNA’s 167.

This month, the battle moved to one of SA’s most exclusive malls, Hyde Park in Joburg, where PNA is opening a shop — ironically, in the very spot once inhabited by a failed CNA outlet.

So why does PNA think it will prevail, where CNA floundered?

Herman Botha, PNA group general manager, says it’ll be a "bespoke" offering, catering specifically for the discerning shoppers who visit Hyde Park’s 130 speciality stores.

Botha speaks confidently about PNA’s prospects — a sentiment underscored by the fact that even during Covid-19, it opened two new stores.

By the end of the year, Botha says the group plans to open another eight stores, bringing the total to 94.

But the battle is unlikely to be as easy as he thinks, as the CNA that imploded during the Edcon days is gone.

In February, it was bought by a consortium comprising JSE-listed Astoria Investments (60%) and a group of investors led by entrepreneur Benjamin Trisk (40%).

Directly above the new PNA in Hyde Park is Exclusive Books — which was revived by Trisk, before he left the company in acrimonious circumstances in 2018. He was suspended by the Exclusive Books board, pending a disciplinary hearing.

Since then, it seems, Trisk has been plotting to buy CNA to revive its fortunes. He approached Astoria director and former Citadel CEO Jan van Niekerk to join him.

In February, Trisk’s consortium snapped up CNA for R1, while taking on CNA’s staff, its leases and stock — but no trade creditors or debt.

Several other rivals — including Exclusive Books, PNA and Bidvest, which owns Waltons — had looked at CNA but walked away. (Waltons, which has 45 stores, also operated in Hyde Park until a few years ago.)

Van Niekerk, now CNA’s chair, lauds the fact that it’s a business that survived world wars, the Great Depression, oil price shocks and various political regimes.

Maybe, but it’s a business that, up to now at least, has been in retreat. Last year, under Edcon’s wing, it made a R110m loss for the financial year, as it had to pay hefty costs to the head office.

Speaking to the FM, Van Niekerk says CNA aims to break even this year, despite Covid. From next year, he reckons it can begin making a profit again.

"We bought it because we believe it’s a good business. Of course Covid hurt us — we took over as owners from April 6, but we only had all the stores open by the end of May," he says. "It meant that our turnover for July, for example, was 50% of what it was last year, partly because of the virus, but also because we closed the electronics lines."

Since then, he says, there’s been a recovery. In August and September, CNA’s trading was "in line, and maybe a slight bit better" than the previous few months.

The question is, can Trisk and Van Niekerk restore CNA’s mojo after its long years as a listless also-ran?

"I don’t want to speak ill of the previous owners, but all I can say is that, finally, the 1,000 CNA staff have an owner who loves it as much as they do. We sell paper — whether it’s in the form of books, wrapping, magazines or stationery, so we know exactly what we want to be," says Van Niekerk.

In some towns, he points out, CNA is the only place for residents to buy books and paper. But it’s not the same in cities, where CNA doesn’t only face the likes of Exclusive Books — it’s also competing with online retailers such as Takealot.

In February, Trisk told Business Insider he has a clear idea of what he wants CNA to be. "It has to be the first port of call for the mother who is concerned about whether her child is coping with maths. I want it to be a store that has a sensitivity for what a young black child in grade 1 or 2 is going through," he said.

Clearly, reading is a big part of the new vision — hence the return to paper.

But there are still a lot of balls in the air, partly as CNA now has to build its own IT systems and distribution centre, after the divorce from Edcon.

But Van Niekerk is not bothered. He says that while he and Trisk only bought 167 stores, they plan to expand to 250, reversing the shrinking footprint of recent years.

In choosing locations for new stores and deciding which ones to close, Van Niekerk says, the focus will be on rental costs and turnover per square metre.

There are, of course, big differences between the business models of PNA and CNA.

While each CNA store is owned by the group, each PNA is owner-managed. It’s rather like the difference between Spar’s individually owned stores, and the corporate-managed Checkers.

Botha says it works because the franchisees pour their time, resources and investment into the stores, while PNA provides an experienced operations team to back them up.

"Another crucial difference is that our business model is slightly different from a regular franchise business in that we allow store owners to tailor their product offering to meet the needs of their immediate communities," he says.

Practically, it means a PNA in a university town such as Potchefstroom or Pietermaritzburg can tailor its products for students, while a store in a business area might focus more on office supplies.

"We do serious market research in the communities in which we operate … and the product range is tailored accordingly. It is not a one-size-fits-all strategy, so our product offering is more diverse yet more targeted," he says.

The fact that CNA allowed PNA to come after its market was to its detriment, but I believe there’s enough space in the market for all these retailers

—  Jan van Niekerk

The basics, however, stay the same: stationery, art and craft materials, educational books, greeting cards and toys.

Stores between 300m² and 600m² work best, says Botha — but the size ultimately depends on the location, which often means larger-format stores.

CNA, meanwhile, is smaller, with an average store size of 350m². And, unlike PNA, CNA has been shrinking its stores in recent years — a trend that isn’t likely to stop.

The question is: has CNA not permanently weakened itself by losing ground to such rivals as PNA? Can it get back up from the canvas?

Van Niekerk flips the question, saying PNA’s success just illustrates that there’s enough demand for a stationery business in society.

"The fact that CNA allowed PNA to come after its market was to its detriment, but I believe there’s enough space in the market for all these retailers. We’ve got to compete with PNA, but also Exclusive Books, Bargain Books and Typo, as well as the online merchants. If we make sure we’re in the right areas, and we’re appropriately sized, we can succeed," he says.

Strategically, he has a clear vision: ditch electronics, add more stationery, expand educational material, and focus on children’s reading and local literature.

CNA and PNA are betting on ink and paper, despite the digital trend

—  What it means:

The decision to stop selling technology — cellphones, laptops, video games and gaming equipment — is an interesting one, because that’s an area in which every retailer has tried to dabble in recent years.

But few have really made it work. Van Niekerk says CNA will continue to sell some accessories, such as phone chargers, but only if they’re relevant and the margin is reasonable.

Quite what products will remain relevant in a post-Covid world is still an unknown factor.

Experts speak of a greater "home-body economy", in which board games, arts and crafts, home offices and home schooling are increasingly becoming the norm.

Botha is gambling big on the fact that this is positive for PNA’s business model, and it has doubled down by opening in one of SA’s most exclusive malls. But Trisk and Van Niekerk aren’t planning on letting PNA just grab market share as easily as it has in recent years. It’ll be a tussle worth watching.