File picture: Independent Media

Johannesburg - The recent 3.4 percent depreciation of the rand against the US dollar following charges levelled against Finance Minister Pravin Gordhan was not the good news Taste Holdings was expecting.

Taste Holdings, which bought global brands Domino’s and Starbucks to South Africa, imports most of its ingredients and when the rand weakens it makes doing business more expensive as costs escalate.

Taste chief executive Carlo Gonzaga said yesterday that a stable environment was what the business needed right now so that investment could come to the country.

“When we roll out our business by opening new stores it means that we import some of the ingredients associated with our business. When the rand weakens, it becomes difficult to do business because of our exposure to the exchange rate.

“Costs escalate and that is why we need a stable environment politically to operate. Volatility in the markets force businesses to be a bit conservative,” Gonzaga said.

Taste widened its losses for the half year to end August by 16 percent to R34.36 million, as compared with the R29.7m reported in the prior corresponding period.

Higher costs

The company incurred costs of R14.4m as a result of the pre-opening costs of Starbucks and its marketing, some costs were linked to Domino's Pizza stores conversion, a further write-off to St Elmos and Scooters, and leasing.

However, Taste is not fazed by the losses as it believes it is on the right track on its growth path. “The three Starbucks stores have traded well ahead of the original investment cases and forecasts.

“In the four months of trading, the Rosebank and Mall of Africa stores falling into this period under review produced a combined revenue of R18m and are already producing positive four-wall earnings before interest, taxes, depreciation and amortisation despite the expected control challenges inherent in a new business,” Gonzaga said.

The company has a diversified brand portfolio within the food division that appeals to middle and upper income consumers in Starbucks, Domino’s and Maxi’s. Lower income consumers are catered for in Zebro’s Chicken and The Fish & Chip Company.

The luxury goods division has brands such as Rolex, Omega, Hublot, Breitling, Rado, TAG Heuer and Longines Swiss watches and Montblanc. The division achieved sales growth of 25 percent during the period.

Taste’s core revenue rose 15 percent to R519.3m, up from R451m, while headline loss per share came in at 9c as compared with a headline loss of 10.5c in the corresponding period. Taste shares remained unchanged on the JSE yesterday at R1.70.

BUSINESS REPORT