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Lucky-Star

Pilchards for Africa

Fishing conglomerate Oceana is looking to cast the nets of its highly profitable canned fish business into African markets.

Tiger Brands-controlled Oceana owns the best-selling Lucky Star canned pilchard brand, which provides more than three million meals a day as a protein staple in local households.

Writing in the company’s annual report, released late December 2014, CEO Francois Kuttel said that after the continual growth experienced over previous years by canned fish operations, there were signs of a flattening in conventional growth opportunities in the domestic market.

But he said Oceana saw significant potential for growth in sales volumes in southern and East African markets, where the per capita consumption of canned fish is substantially lower than in SA. “In these markets, we will be seeking an increase in sales volume through a low-risk strategy that focuses primarily on identifying and securing the route to market.”

He said West African markets were highly commoditised and were already large canned fish markets. “As Lucky Star was not able to offer a competitive advantage in the supply of the product on a sustainable basis we reached the conclusion that it was not economically viable to compete with existing players in those markets in the medium term.”

But Kuttel stressed that Oceana was committed to expanding into southern and East African markets. He said category development marketing and distribution initiatives were begun in several southern African markets in the second half of the 2014 financial year. While Oceana’s initial efforts to enter African canned fish markets had proved disappointing, the lessons learnt would serve the company well as a restructured team took the strategy forward, he said.

Vunani Securities small to mid-cap analyst Anthony Clark said shifting increasingly into African markets was a natural extension for Oceana’s canned fish business. “They have already been exporting into a few African countries through their horse mackerel business.”

Clark said it would be interesting to see whether Oceana pushed for acquisitions as part of this expansion strategy. “If I were a betting man, I might wager that Oceana could look at a Spanish or Moroccan fishing venture.”

The canned fish and fishmeal division is Oceana’s largest contributor, accounting for more than 60% of revenue. In the year to September the canned fish and fishmeal division pushed revenue up 17% to R3.1bn, with operating profit jumping 77% to R381m.

One of the key challenges for Oceana’s canned fish division is that the volume of pilchards required to support sales of Lucky Star products exceeds what is available from landings of fish in SA and Namibia with the company’s quotas.

Oceana has proposed acquiring the fishing arm of consumer brands giant Foodcorp, which would secure additional pilchard quotas. The proposed transaction has been held up by a ruling by the competition authorities.

Kuttel said Oceana also procured raw fish from Mexico, US, Canada, Morocco, Mauritania and Japan.

Source: BDLive.co.za

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