Business

Collapsing service delivery threatens owner of iconic Five Roses and Bakers biscuits in South Africa

Malcolm Libera

 ·7 Sep 2026

AVI Limited says the deteriorating state of South Africa’s public infrastructure is becoming an increasingly serious threat to its operations.

Poor service delivery has forced the owner of iconic brands such as Five Roses tea and Bakers biscuits to spend more time and money protecting its business from service delivery failures.

In its results for the year ended 30 June 2026, AVI was direct about the operational challenges facing the group.

The company said South Africa’s consumer environment remained difficult, with households under pressure from weak economic growth, high unemployment and limited disposable income.

“South African consumers continue to experience pressure from constrained disposable income, elevated unemployment and subdued economic growth,” AVI said.

However, the problems facing the group extend beyond weak consumer spending. AVI warned that global geopolitical uncertainty has increased fuel price volatility and inflationary pressures, creating further uncertainty across supply chains and operating costs.

In South Africa, the deterioration of municipal services has emerged as a major operational risk.

AVI’s directors said that the “ongoing deterioration in municipal infrastructure in key operating regions continues to increase the cost and complexity of maintaining efficient operations”.

For a group with major manufacturing plants, distribution networks and retail operations across South Africa, unreliable public infrastructure can create significant disruption.

Problems with municipal services can affect production, logistics and the ability of businesses to operate efficiently.

AVI said management has responded by focusing on “protecting volumes, preserving margins and optimising returns through disciplined pricing, cost management and operational efficiency initiatives”.

The threat has become significant enough to feature directly in the group’s financial planning.

AVI stress-tested its budgets against a downside scenario that specifically considered the financial and operational risks associated with deteriorating public infrastructure.

Despite these risks, the group concluded that it should remain profitable and cash generative even under more difficult conditions.

“The Group is expected to remain profitable and cash generative, with the overall financial position remaining sound and sufficient liquidity available to meet obligations as they fall due,” AVI said.

AVI reports solid financial results

The company’s latest financial results show that its portfolio of established South African brands remains resilient despite the difficult operating environment.

AVI reported net profit of R2.56 billion for the year, up from R2.43 billion previously. Cash generated by operations reached R4.41 billion, while the group paid R2.19 billion in ordinary dividends.

Its return on capital employed increased to 35.7%, substantially above the group’s weighted average cost of capital of 11%.

Snackworks, which includes Bakers biscuits and other snack brands, remained one of AVI’s strongest businesses. Revenue increased to R5.72 billion, while operating profit rose 6.8% to R1.38 billion.

AVI’s beverages division, which includes Five Roses, Freshpak and premium coffee operations, faced greater pressure. Revenue declined from R5.30 billion to R5.16 billion, while operating profit fell to R1.56 billion from R1.62 billion.

The group’s footwear and apparel business, which includes Spitz, Kurt Geiger and Green Cross, delivered strong growth. Operating profit surged almost 16% to R305.7 million.

Indigo Brands, which owns brands including Yardley, Lentheric and Exclamation, managed to increase operating profit despite lower revenue, while seafood business I&J delivered a strong recovery, with operating profit jumping 32% to R318 million.

AVI said its strong balance sheet and R5.1 billion in banking facilities provide protection against future disruptions.

The table below summarises the key financial results of AVI Limited.