It’s global vs local in SA’s great food scrap

THE share prices of Taste Holdings and Grand Parade Investments suggest investors are not quite ready to stomach the development risk associated with rapidly rolling out global fast-food brands.

While Spur Corporation and Famous Brands have lengthy track records in brand-building and expansion in the local fast-food and quick-service restaurant sector, Taste and GPI are relative newcomers.

The scepticism over Taste and GPI probably relates to a key question asked by wary investors: “If these international brand opportunities were so good, why didn’t Famous Brands or Spur grab them?”

For mainly retail investors the brand stature of Burger King and Starbucks is alluring. But taking on global master franchise agreements for brands that have demanding and exacting owners is a huge bite for players that have not cut their teeth in this competitive market.

Alan Keet, CEO of GPI and Grand Foods, said the group prided itself in being “glocal”, characterised by local and global considerations.

“GPI’s strategy to expand its food portfolio is not based on brand origination but rather on whether the brand will resonate with South African consumers,” said Keet.

“In the case of Dunkin’ Donuts, as we’ve done with Burger King, we’ll start with popular products that fans around the world have come to love with a long-term view to innovate and cater to local tastes.”

But Taste — with the Domino’s Pizza brand — and GPI — with Burger King — have endured some initial snags.

Burger King opened 17 restaurants at an average cost of just under R8-million a store. The target of 100 stores by the end of June was put under review, with GPI now aiming to open at least 80.

But the group also holds a 10% stake in Spur, which some market watchers regard as a safety net.

Orin Tambo, a senior analyst at Intellidex, said: “If you are a new entrant in this industry, there is some sort of insurance in taking up global brands. They are tried and tested and chances of failure are low.”

Tambo said Famous Brands had maintained a strong position in the home market, setting the benchmark when it came to consumers’ tastes, making it difficult to dislodge.

“For Famous Brands, I don’t think it will make any sense for it to take up any global brands. They are well represented in the majority of the fast-food market segment and taking up a global brand might cannibalise their existing operations.”

Darren Hele, CEO of Famous Brands, said there was no guarantee that global brands would resonate with South African consumers.

“Our perspective is that the investment case for local investments is significantly better than global brands . . . just because it’s global doesn’t mean that it’s necessarily better. I think there are enough South African investment cases to prove differently.”

The group, whose local portfolio consists of South African favourites such as Wimpy, Mugg & Bean, Europa and Tashas, recently acquired a 51% stake in KwaZulu-Natal-based Italian-concept family dining restaurant chain Lupa Osteria.

“The whole Starbucks is overhyped and it’s taking a huge push to the market. But no one’s gone back and analysed Domino’s and looked at the projections that these people had for these brands coming in, versus what they are achieving,” said Hele.

Domino’s first store was launched in October 2014 and the brand had 63