In its quest for vertical integration, franchise giant, Famous Brands, has bought one of South Africa's biggest producers of french fries and other potato-based products.

Based in its namesake town on the Cape's West coast, Lamberts Bay Foods (LBF) is a subsidiary of JSE-listed fishing company Oceana and  produces for the wholesale, retail and QSR markets.

It is one of only three french fry manufacturers in South Africa and has supplied product to Famous Brands for the past 20 years.

The group said the purchase fell below the threshold of a categorised transaction of the JSE listings requirements and would be settled from cash reserves. The latest acquisition comes a month after the group snatched a 51 percent stake in Lupi Osteria, an authentic Italian restaurant business that operates in KwaZulu-Natal.

This month Famous Brands also acquired a 51 percent stake in Salsa Mexican Grill, a fast casual dining concept centred on Mexican food and drinks.

Famous Brands strategic advisor and ex CEO, Kevin Hedderwick, said the company would only disclose the value of the LBF acquisition to the shareholders during the group’s annual general meeting later this year.

Successful diversification from fishing

The company was established in 1995 by Oceana, as a social responsibility project to offset job losses resulting from the decline in fishing employment opportunities in the region. It has subsequently matured into a viable commercial operation.

Today LBF is the single largest employer on the West Coast north of St Helena Bay, employing 305 people.

“The acquisition advances the group’s stated goal to build capability and capacity across our logistics and manufacturing supply chain operations," says Hedderwick.

"This acquisition not only affords us security of supply of a key strategic menu item for our franchised network, it also provides us with an existing food services and retail customer base, which has significant expansion potential over time.”

The South African potato processing industry is growing rapidly to meet strong demand fuelled by the brisk growth in food services and the convenience market. However it lags its peer industries in developed countries and illustrates the growth potential for the LBF business, he says.

Currently, LBF processes some 24 000 tons of potatoes per annum. Potatoes are sourced mainly from Mpumalanga, Limpopo, Free State and the Sandveld region of the Western Cape. Long-term relationships with growers close to Lambert’s Bay are one of the business’s key strategic advantages and accordingly, an ongoing development initiative.

“Our motivation to do this transaction with Famous Brands was our tacit recognition of their ability to maintain and grow LBF in line with their core business. The acquisition strengthens LBF’s potential for growth and enhances the long-term certainty of product off-take," says Oceana CEO Francois Kuttel.

He added that the transaction would enhance the long-term job security of the staff and have a positive impact on the Lambert’s Bay Community. Famous Brands has no intention of moving the plant, or of altering arrangements with LBF's employees or growers.

“Famous Brands’ management has set an operating profit target of R1-billion by February 2018 – this acquisition will make an important contribution to achieving that goal,” adds Hedderwick.

LBF staff who are currently beneficiaries of the Oceana Empowerment Trust will not be affected by this transaction and will continue to receive their share of the benefits.

Source: BDLive.co.za; IOL.co.za