Johannesburg - Pizza was becoming the fastest-growing fast food offering on the continent, especially in South Africa, and the financial reports of food service firms, as well as the international pizza companies entering the market, attested to that, equity analysts agreed last week.
Independent retail analyst Syd Vianello said one had only to look at the recent year-end financial results of Spur Corporation’s pizza brand, Panarottis Pizza Pasta, which delivered a 28.2 percent increase in sales. “If you look at these results, there is no doubt that pizza is a growing offering in South Africa and elsewhere on the continent.”
The reason for the growth was the product’s affordability.
“It is relatively healthy and it is affordable. And there is a huge market of people who are looking for affordable food.”
Vianello said the success of chicken chain KFC, owned by Yum Brands, showed emerging markets were looking for affordable convenient food.
Daniel Isaacs, an equity analyst at 36One Asset Management, said pizza had experienced strong growth in the fast food space, and the take-up of pizza in consumer segments that previously had limited access to it had been notable.
Both analysts were reacting to the return of Pizza Hut, which is also owned by Yum Brands and left the South African market in 2008.
It launched its first store in Honeydew, Johannesburg last week and said it planned to open more stores in Boksburg, Midrand and Soweto, as well as in Zambia and Angola.
It is no surprise that Pizza Hut is targeting areas which, as Isaacs mentioned, have had limited access to this offering.
However, Famous Brands has already made its mark in these markets. The JSE-listed group, which has 446 Debonairs Pizza franchises, does not only have outlets in most shopping centres in the townships, but it sells pizza in transport hubs such as taxi ranks for less than R30.
But what took Pizza Hut so long to realise this growth was happening? Vianello was perplexed by the slow response from Yum Brands.
“The fact that KFC is doing so well in sub-Saharan Africa was supposed to give Yum Brands an indication that the fast food market was growing in this region,” he said.
The fact that US-based food company Domino’s Pizza, which signed a 30-year master licence agreement with Taste Holdings, planned to open outlets in South Africa should have been a sign of how promising the market was, he said.
“Yum Brands owns KFC and if there is anyone who understands the dynamics of the South African convenience food market, surely it’s going to be Yum Brands,” he said.
Yum Brands has been in the market for 30 years and operates about 750 local KFC outlets. “They know the market, they have also created the market and contributed to the growth in the market,” Vianello said.
Yum Brands chief operating officer Stephen Hazard agreed that it was a shame for a global brand not to have a pizza offering in Africa. He was quoted as saying: “For us not to be in Africa seemed really a shame for a global brand… As we started to look at the African pizza market it seemed like a really exciting market.”
Isaacs believed the growth in the pizza market with the entry of groups like Domino’s and Pizza Hut “will make the segment more competitive and more difficult for companies to make returns that they were making before”.
Isaacs, however, believed that the returns could still be good, as most of the companies taking part in this market space were positive about its growth.
On Friday, Famous Brands marginally gained 5c to R97.25 while Taste Holdings eased 1.6 percent to R3.05.