Time for AVI to look at unpacking its basket

As footwear businesses Green Cross and Spitz continue to drag down AVI’s performance, maybe now is the time to ask pertinent questions about its structure.

The company manufactures, processes, markets, sells and distributes branded consumer products in the food, beverage, footwear and cosmetics sectors.

AVI’s extensive portfolio includes more than 50 brands, including frozen food company I&J, Frisco coffee, Five Roses tea and Bakers biscuits. Having so many brands in different consumer categories is likely to breed complexity and duplication of processes over time.

Do these brands belong under one roof? Is it not time for AVI to unbundle some of its businesses? Doing this often brings with it a simplified and focused strategy for firms sitting with unrelated and underperforming brands.

In SA, cases of successful unbundling include pharmaceutical company Adcock Ingram, which emerged from Tiger Brands as a separate entity in 2008 and listed on the JSE. A more recent example is that of automotive holding company Motus, which unbundled from Imperial Holdings in 2018.

AVI is no stranger to this; it became a focused consumer brands company in the 2006 financial year after the sale of Vector Logistics and the unbundling of Consol.

In a tough business environment in which consumer spending has slumped, AVI has become lethargic, with revenue growing by a pedestrian 1.2% in the year to end-June.

The poor conditions experienced by AVI and other consumer-facing companies make the case for another unbundling compelling.

NASPERS

As Africa’s largest listed company took its international assets offshore on Wednesday, can what remains behind Naspers still be considered an SA business?

How local can an entity really be when its SA assets account for less than 1% of the group’s asset base?

Over decades, the Cape Town-based company has transformed its business from a print publisher to an internet company.

Earlier this year it disposed of MultiChoice, an operation still largely based on a two-decadesold legacy business model and perhaps its biggest anchor to the SA market.

MultiChoice, which now has a separate listing, has a market capitalisation of about R51bn.

Looking at where and how a company allocates its capital says a lot about the priorities of that company.

In the past three months alone, Naspers has ploughed millions of dollars into businesses in India, the US and Southeast Asia, among other regions, with a paltry R30m invested in SA cleaning service SweepSouth.

Though the company says local competition authorities make it hard for it to write the type of cheques it wants to locally, the proof of the pudding is in the eating.

Naspers, which will continue to hold 73% of Amsterdam-listed Prosus, has simply outgrown mom and dad’s house.

What remains to be seen is how investors will interpret this move.

Why invest in Naspers and its SA business when one can simply go straight to Prosus for the lucrative international assets, which include the gift that keeps on giving: Tencent?