TASTE HOLD­INGS

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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.

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