Big fast food price hikes coming for South Africa

 ·26 Oct 2022

Quick service and casual dining group Famous Brands says that higher fuel costs and inflationary pressure have led to major price hikes at South Africa’s favourite fast food chains – and the trend is expected to continue.

Reporting its interim results for the six months ended August 2022, the group noted that consumers are facing increased financial pressures due to escalating inflation and interest rates.

“During the review period, the South African consumer faced several macro-economic issues, which an inflationary environment has exacerbated,” it said.

“Higher costs for fuel, food – notably oils, fats, breads and cereals – non-alcoholic beverages and electricity were the main drivers of inflation. Rising input costs have forced many in the restaurant sector to raise their menu prices substantially in the first half of 2022, with more increases anticipated for the remainder of the year.”

Despite the adverse economic climate, Famous Brands said that consumer behaviour is returning to normal following the end of Covid-19 restrictions.

“Since the removal of all Covid-19 restrictions in June 2022, the restaurant industry has seen a positive shift in consumer behaviour as consumers return to restaurants, resume travel and attend sporting events. This has supported improved restaurant turnovers and restaurant marketing spend,” it said.

Meanwhile, the threat of Covid-19 has subsided, and many consumers are determined to return to normal life, it said.

“While consumers shop online for convenience or safety, they also crave meaningful interpersonal connections. Competitors in the restaurant industry are continuously innovating their consumer value proposition through bundle deals, competitions, loyalty programmes and use marketing campaigns to reinforce key quality perceptions.”

Famous Brands’ portfolio of restaurants – which includes popular fast food chains like Steers and casual dining groups like Wimpy – performed well over the period.

Total revenue increased by 19% to R3 579 million (2021: R3 004 million). This revenue is 11% higher than the R3 222 million (excluding Gourmet Burger Kitchen) in the comparable period ending August 2019, demonstrating a strong recovery from Covid-19.

The operating profit increased 77% to R393 million, while headline earnings per share increased to 215 cents (2021: 97 cents).

Leading Brands’ revenue was up 25% to R431 million, while the revenue for Signature Brands showed a strong recovery, up 68% to R103 million. Better trading conditions for franchise partners allowed Famous Brands to wind down most of its Covid-19-related royalty relief packages.

The removal of Covid-19 restrictions slowed down the growth of the home delivery channel as consumers returned to sit-down dining and take-away orders, the group noted. However, home delivery appears to remain a notable channel as a result of a long-term shift in consumer behaviour towards the convenience of e-commerce.

Collect ordering continued to show positive growth as consumers continued to use this channel post the pandemic.

For the rest of the year, the group said that it will focus on growing its delivery and logistics channels, as well as look to take advantage of prime property space for rentals as the market has become competitively priced.


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