Share price: 270c JSE code: TAS
HOLD A CYNICAL VIEW OF EVENTS MIGHT suggest Taste Holdings had a solid — but eccentric — fast food franchising model with a profitable recipe that mixed casual restaurant chain Maxi’s, a multi-brand pizza offering and The Fish ’n Chips Company with a jewellery franchising sideline. But the market lost its appetite when investors digested the implications of Taste acquiring the local rights to global brands Domino’s and Starbucks — specifically the development costs.
This, of course, feeds the inevitable market curiosity as to why bigger JSE listed players like Famous Brands and food-aligned empowerment investment entities didn’t snap up these renowned international brands ahead of little old Taste.
In truth, Taste has shown it is extremely capable of profitably rolling out brands. The issue, though, is that the roll-out of Domino’s and Starbucks might be accelerating while consumer spending in fast food diminishes in leaner economic times and when competition (especially at the lower end of the market) intensifies. The costs of bringing big global brands to South Africa will mean a couple of lean years for Taste. The next two years will be about convincing shareholders — who have forked out more than half the company’s market capitalisation in shares-for-cash placements in less than two years — that the brands offer sustainable cash flows rather than just a novelty factor. It might be prudent to wait before making any big decisions.