CAPE-based food companies finished 2015 – rather enticingly - with plenty on their plates.
Perhaps the biggest surprise was the push by well-known chemicals giant AECI to extract heartier profit flavour from its fledgling food division – especially two of its specialised businesses based in Cape Town.
AECI has set a goal to become a major supplier of food ingredients and additives to customers in SA’s food manufacturing and retail sectors as well as expand these services into Africa and
the Middle East.
The company wants to increase revenue from about R400m to R1bn by its 2017 financial year with product growth and acquisitions.
AECI’s most recent acquisition (effective from August last year) was the R235m deal for Bellville-based Southern Canned Products (SCP,) which manufactures and distributes a broad range of juice based products. According to an investor presentation, AECI wants SCP’s contribution to its food segment to be as much as 50% in the longer-term.
SCP, established in the sixties, supplies fruit concentrates and purees to local beverage firms like Distell, Appletizer, Ceres as well as European formulated juice blenders.
The compounds are tailored for customers’ requirements, which allows beverage manufacturers to produce an end product that is consistent in taste, appearance and flavour. SCP also blends and bottles olive and seeded oils under the Olive Pride brand.
AECI’s other food ingredient is Montague Gardens-based Affodable, which produces liquid marinades and sauces for the local market and was acquired in 2012.
The Montague Gardens plant recent underwent a R20m upgrade that was completed in May last year. The upgrade increased Afoodable’s capacity from 550 tons a month to 1,000 tons a month.
According to AECI’s investment presentation the growth strategy at Afoodable involves increasing volumes markedly in the year ahead – an initiative that will include the expansion of the product range and chasing exports.
Franschoek-based Rhodes food Group (RFG) also added to its recipe with the acquisition of Athlone-based ‘eastern foods’ specialist Alibaba for R42m.
Alibaba’s products include samoosas, pies and rooties – which are sold to all major South African food retailers, forecourt bakery outlets and independent traders.
RFG directors said Alibaba would strengthen the company’s position in the bakery and snacking category, particularly in the convenience store channel after the recent General Mills acquisition.
In the year to end February, Alibaba generated profits of just over R6m from turnover of R48.2m.
Steenberg-based Bounty Brands – which was recently concocted by Steenberg-based private equity group Coast 2 Coast – made a bold move into the food sector with the adventurous offshore acquisition of Sonko, a leading producer of rice, groats and specialist bread products in Poland.
Bounty CEO Stefan Rabe said Sonko did private label business with major Polish retailers, but also exported to 22 countries throughout the world (including South Africa.)
He said Coast2Coast and Bounty would set up offices in Europe to pursue complementary acquisitions.
Bounty is not overlooking local opportunities, and recently snapped up Liberty Foods – a food supplier with branches in Cape Town, Johannesburg and Durban.
Rabe said Liberty imported the bulk of its products under the Liberty Select and Chef brands. “Due to its significant distribution capabilities, it has also been awarded a number of long-term exclusive distribution agreements from brands such as Heinz, Wellington and Appletiser.”
Rabe believed Liberty was the ideal platform for future food brand acquisitions.
Sonko and Liberty will add some R850m a year to Bounty’s annual revenue, pushing total revenue to almost R2bn. Rabe reiterated Bounty’s strategy was to grow revenue to over R5bn in the next two years.