Famous Brands takes a big bite out of catering firm
Famous Brands is continuing on its acquisition spree, this time buying 49.9 percent of catering company Word of Mouth for an undisclosed amount.
The group, home to well-known names such as Wimpy and Steers, has bought 5 other companies so far this year, expanding into food paste production, Italian dining and Mexican food. The deal advances Famous Brands’ strategic growth agenda, boosts its brand portfolio and extends its presence into new categories.
By Word of Mouth was established in 1993 by Karen Short after identifying a growing demand for high quality catering and professionally managed events. Karen’s husband, Adrian Short, joined the business 10 years later.
It is based in Gauteng, in Linbro Park, and also manages a 400-seater venue, The Polo Room, at the Inanda Polo Club and has more than 200 staff members.
The deal is the culmination of two years of intensive discussions and flowed from a then-undefined concept for Famous Brands to move into the leisure space, says Kevin Hedderwick, Famous Brands’ Strategic Advisor with responsibility for merger and acquisition activity.
“Having explored an extensive range of investment opportunities in the food service leisure and hospitality sector, we are delighted to announce our partnership with the owners of By Word of Mouth, Karen and Adrian Short.”
Although Hedderwick says this is Famous Brands’ first foray into this category, it is confident that its core competencies will ensure that opportunities to elevate this brilliant business to greater heights are created.
The company, which has a network of 3 000 outlets, reported an 18 percent increase in operating profit to R792 million in the year to February. Its headline earnings went up 16 percent to 541 cents a share and the revenue increased by 31 percent to R4.3 billion.
Hedderwick says, although he would like some breathing space now, he is still passionate about the sector, hinting that more deals may be in the offing.
Big brother support
The Shorts will continue to manage the business, supported by Famous Brands, he says.
Karen Short adds the partnership is a great fit for numerous reasons, and it is confident that Famous Brands will provide the support that we need to take our business to the next level, including establishing an offering for its clients across the country.
“Importantly,” she notes, “we are pleased that as founders of the business we remain the majority shareholders and can continue to personally deliver our high-end, boutique service, and drive our ambition to remain a dominant force in the industry.”
Hedderwick says, in the short-term, Famous Brands will integrate By Word of Mouth’s business into Famous Brands’ infrastructure where synergies permit and leverage their existing state-of-the-art kitchen facilities at Linbro Park.
Over the medium term, the intention is to expand the business’s existing presence in the premium corporate market, a fast-growing segment of the commercial catering category. Over the longer term, the goal is also to establish a footprint for By Word of Mouth in Cape Town and Durban.
Hedderwick says the most exciting part of this deal for him is the “opportunity to enter the home meal replacement retail space, through high-end stand-alone stores offering bespoke products created by Karen Short. This retail business model will resemble the hugely successful ‘COOK’ company in the UK, which produces ready-made meals using ingredients and techniques that ‘a good cook would use at home to ensure meals look and taste homemade’.
“I am particularly excited about the growth prospects of this component of the business because there is a strong and growing demand for an offering of this kind in the economically resilient upper-end of the South African market.”