18 Sep 2013 Africa’s growing appetite for fast foods
In SA, Famous Brands produces 265 000 cups of specially blended coffee a day. With 2 175 restaurants, the company, whose brands include Wimpy, Steers and Mugg & Bean, also makes 77m ice-cream cones a year. It’s the big daddy of SA franchising, with a R9,7bn market capitalisation, and it wants to repeat its local success in the rest of Africa. It is not alone…
The continent, with its mushrooming middle class and large expatriate community, is being seen by consumer industries as the next region for long-term growth. Consumer spending accounts for over 60% of sub-Saharan Africa’s GDP, and in 2012 about a quarter of countries in the region grew GDP at 7% or more. Several, like Sierra Leone, Niger and Côte d’Ivoire, are among the fastest-growing in the world.
Overall, the region is forecast to expand at more than 5% over the next three years, far outpacing the global average, according to the World Bank.
Kevin Hedderwick, CE of JSE-listed Famous Brands, says the group will double the size of its African presence.
“By 2016 we would like to have 400 restaurants outside SA,” he says. “Top of our radar are Nigeria, Ghana, Angola, Kenya and Zambia.”
Operating in 15 countries in Africa, the group began its expansion in the late 1990s. Its reach also extends to India and the UK. “I always tell people we’ve paid our school fees, we’re quite a long way up the learning curve,” Hedderwick says.
Continued growth in pizza consumption per capita in the huge market of lower living standards measure (LSM) consumers and desire for convenience among upper LSM consumers has put Debonairs Pizza ahead of its mother brand Steers in the popularity contest. Demand for its triple-decker pizzas and subs has surged, and its “rest of Africa” region now accounts for 15,9% of the brand’s total sales.
Another local stalwart, Spur, is also ratcheting up its presence. Hotel, supermarket and retail development has been one of the major factors driving expansion, CE Pierre van Tonder says, adding that this has resulted in opportunities for casual dining and fast-food quick service restaurants (QSR) to open.
Spur, which also owns Panarottis, trades through 24 stores and has more outlets planned for the next 12-18 months in Nigeria, Zambia, Namibia and Mozambique.36One Asset Management equity analyst Daniel Isaacs says there is a global trend to eat out.
“Our grandparents could make a four-course meal with an onion and a carrot. I think today most people don’t even know how to cook. The structure of family life is also changing, with a dual income needed to keep up with costs. So convenience is a huge driving factor. Eating out used to be a luxury, a huge event, but it’s become a lot more affordable,” he says.
This is especially the case in SA, where a cash-rich and time-poor middle class has led to a greater utilisation of quick-service dining over formal restaurants and preparing food at home, despite the macroeconomic conditions.
“Food service in the country can only grow. In emerging markets, for every 1% growth in GDP there’s 2% growth in food service,” Hedderwick says. As consumers in the rest of Africa start to get into higher GDP per capita brackets, their spending on leisure goods increases, Isaacs notes.
The search for higher yield has drawn international players too. NYSE-listed Burger King entered a joint venture with SA gaming and leisure group Grand Parade Investments in line with its aim to grow its brand presence in high-growth emerging markets.
The Home of the Whopper’s first store in SA rang up sales of R4,9m in just seven weeks. “Part of our master franchise agreement is that we have the rights to Namibia, Botswana, Zambia, Zimbabwe, Mozambique and Mauritius. We feel there’s definitely a market for us and we’re looking at getting across our borders,” says Burger King SA CE Jaye Sinclair.
Though most of the prime sites in SA have already been snapped up by bigger players, Sinclair says mall owners, managers and letting agents are “falling over themselves” trying to offer Burger King locations because consumers want differentiation “from tired old brands”…..