SHARE WATCH: 14:20 17/10/2017
Cape Town – The South African fast food industry has come under severe pressure of late. The management of these fast food retailers keep telling us that in an economy that is not growing as it should, making money is becoming increasingly harder.
These companies should also acknowledge that increased competition in the South African market is becoming ever more prevalent. Recent entrants into the markets include chains such as Chesa Nyama and Pizza Perfect.
Famous Brands, who owns household brands Steers, Wimpy and Debonairs among others, has seen its share price drop over 40% over the last year. The biggest reason is that investors are extremely negative on their Gourmet Burger Kitchen (GBK) acquisition in the UK. Having paid R2.1bn for GBK, the expectation is for GBK to contribute considerably to bottom line earnings.
Unfortunately, the opposite has happened. GBK only made a profit of R16m before interest and taxation. Management has cited reasons such as investor uncertainty due to Brexit. However, the fast food competition in the UK has also intensified and growing market share is becoming increasingly harder.
Taste Holdings owns the fast food brands Dominos Pizza, Starbucks and Zebro’s. Outside of food, Taste also has jewellery interest in NWJ, Arthur Kaplan and World’s Finest Watches.
Taste has been trying to become profitable and hopes that the international brands of Starbucks will do exactly that.
Read more (about a number of other Fast Food businesses) at https://m.fin24.com/Markets/Equities/share-watch-fast-food-industry-in-crisis-20171017