Taste Holdings to open up to 100 outlets across country

Posted On Friday, 24 May 2013 10:52 Published by Commercial Property News
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Despite the stagnating disposable income environment‚ Taste Holdings will open up to 100 outlets across the country‚ as it continues to entice cash-strapped consumers with strong value propositions‚ CEO Carlo Gonzaga said on Wednesday.

Carlo GonzagaConditions are not expected to be rosy for retailers as the country’s consumer spending slowdown worsens due to mounting cost pressures‚ but fast-food operators seem to be bucking the trend as time-poor‚ bargain hunting consumers see worth in aggressive promotion strategies.

Taste Holdings‚ whose portfolio includes Scooters Pizza‚ St Elmo’s‚ The Fish & Chip Co and Maxi’s on Wednesday reported normalised headline earnings per share up 22% to 15.1c for the year ended February.
 
“It is tough and we are cautious but we’re in the right place to offer people value. Nowadays fast food is not so much a luxury‚ quite honestly in some cases its sometimes cheaper to than supermarket food‚” Gonzaga said. In March‚ rival Spur Corporation posted a 35.3% rise in first-half profit as its "Bottomless Ribs & Buffalo Wings" and its "Unreal Breakfast" offering‚ kept the value proposition going.
 
Meanwhile‚ Steers‚ Debonairs Pizza and Wimpy-owner Famous Brands said it expects to report diluted headline earnings per share and diluted earnings per share of between 329c and 335c‚ an improvement of between 21% and 23%‚ when it reports its full year results next week.
 
Taste Holdings said system-wide sales across the group exceeded R1bn for the first time‚ gaining by 52% to R1.38bn. Lower gross profit margins in its newly established food distribution business and the set-up costs of this business filtered through to a 22% increase in operating profit to R43.3m.
 
“Last year we took the plunge as part of our vertical integration strategy and we set up a distribution business. We supply to 520 of our franchisees‚ distributing about 90% of their basket of goods‚ the only thing we don’t deliver to them is soft drinks and fresh veggies‚” Gonzaga said.
 
Previously‚ the group made use of a third-party distributor. “We now control the route to market and that applies especially so to African expansion. Another big benefit is that by being able to control the warehousing aspect we are able to procure better on behalf of our franchisees‚”
 
Famous Brands also leverages opportunities in supply chain and manufacturing. Through backward integration‚ it provides products like spices‚ cheese and sauces to its franchise network‚ at a more competitive price — ultimately supporting its overall franchise model.
 
Taste Holdings’ food division saw a 70% increase in system-wide sales to R1.12bn. Same-store sales were marginally positive‚ as cost increases above inflation‚ particularly in electricity‚ placed continued pressure on store-level profitability. NWJ‚ its jewellery brand‚ ended the period with four fewer stores. System-wide sales rose 5.6% to R263m and same-store sales at corporate outlets increased 14.3%.
 
Looking ahead‚ Mr Gonzaga said the company would continue its measured southern African expansion and in the current year would open outlets in two new sub-equatorial African countries.
 
Taste already operates in Namibia‚ Botswana‚ Zimbabwe‚ Swaziland and Lesotho.
Last modified on Friday, 24 May 2013 11:24

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