05 Jul 2013 Rainbow to take the chicken out of its name

Rainbow Chicken, South Africa’s largest processor and marketer of chicken, said this week it planned to change its name to RCL Foods. A general meeting of shareholders would be held on August 2 to authorise this. [Caption: Rainbow Chicken CEO Miles Dally.]

This comes as the group broadens its range of brands and diversifies into other product categories to counter the cyclical nature of the chicken industry, which has seen hit badly the the deluge of cheap chicken imports from Brazil and the European Union.

Earlier this week Rainbow paid R393m to raise its stake to 88.1% in South Africa’s third-largest food producer, Foodcorp, whose brands include Yum Yum peanut butter and Ouma Rusks.

“Rainbow will now have more control of the Foodcorp business, where previously there were negative control clauses that … meant Rainbow had to go through Foodcorp’s management and get approval on everything it wanted to do,” says SBG Securities equity analyst, Sumil Seerajan.

He adds that Rainbow’s name change will be line with its strategy of building brands and getting into the packaged foods and overall foods business, “which had more stable margins”.

In what Rainbow described as the most difficult period in the history of the country’s poultry industry, in February it reported a 74.1% plunge in first-half profit and cancelled its interim dividend.

Foodcorp, which typically sells about 200-million loaves of bread and 120-million pies a year, also exports certain products, mainly to Western Europe, the Middle East, the Far East and the rest of Africa.

Following its acquisition of a stake in Zam Chick from Zambian agricultural player, Zambeef, in February, Rainbow announced in May it had reached an agreement with Zambeef to establish a joint hatchery operation for the supply of day-old chicks.

Rainbow’s rival, Astral Foods, operates in the Zambian market through feed supplier Tiger Animal Feeds and its breeder farm and hatchery business, TigerChicks.

Avior Research equity analyst, Jiten Bechoo, says many of South Africa’s poultry producers were looking to Africa, and Zambia in particular, for the next wave of growth.

“It’s a good target market. The country’s economic prospects are likely to lead to an increase in the per capita consumption of chicken. The cost of production there is a lot lower because maize is subsidised and they’re self-sufficient in terms of soybean,” he notes.

Source: BDLive.co.za