The Spur Corporation says that things are getting extremely competitive in the pizza franchise industry in South Africa, with brands turning to heavy discounts to draw customers as the economy continues to bite.
The group has published a sales update for the six months ended December 2019, showing a small 4.5% growth in sales over the period – even smaller (1.2%) when comparing like-for-like sales year-on-year. Sales totalled R4.1 billion over the period.
While food sales were relatively flat across most of its brands, the group saw declines in the pizza segment (represented by Panarottis and Casa Bella), which shrank 1.2% when comparing like-for-like stores.
Spur Corporation chief executive, Pierre van Tonder, noted that the sales performance of the group over the six month period reflected the “economic reality” facing the South African consumer.
“Stagnant economic growth, rising unemployment, increases in energy, utility and living costs, regular bad news concerning state-owned enterprises and the recent widespread load shedding have hit the consumer hard and consumer confidence remains negative,” he said.
“Trading in these circumstances is certainly proving challenging.”
Spur Steak Ranches still account for the majority of the group’s total turnover, accounting for 60.5% – and the brand managed to perform well despite the economic headwinds in the country.
However, it has been a bit of a struggle when it comes to pizza, the group noted, with competition stiff, and price-points from competitors shrinking to stand out.
Pizza is the third largest fast food category in South Africa, making up 21% of the over 5,000 fast food stores in the country.
“The pizza market in South Africa is extremely competitive with local quick service restaurant brands discounting products significantly to maintain sales volumes.
“Panarottis’ move away from significant discounting to maintain franchisee profitability and ensure the sustainability of the brand, combined with competitor activity, has impacted the brand’s turnover growth,” it said.
John Dory’s benefitted from the re-opening in December 2018 of two large restaurants (temporarily closed for renovation for much of the comparative period) and RocoMamas was boosted by the opening of a net five new restaurants during the period.
The Hussar Grill’s higher income customer base remains relatively resilient to the current economic pressures, the group said.
In South Africa, 20 restaurants were opened and 4 closed during the period, while 10 restaurants were opened and 4 closed internationally.
At 31 December 2019, the group’s restaurant base comprised 642 (June 2019: 620) outlets, including 83 (June 2019: 77) operating outside of South Africa.