Global fishing group Oceana says its canned food offerings are well placed to increase market share as load-shedding intensifies and cash-strapped consumers opt for cheaper, nonperishable sources of protein.
Commenting in the group’s latest annual integrated report released on Thursday, CEO Neville Brink said canned foods are becoming more convenient locally as load-shedding intensifies and the fishing group sees growth potential in the canned fish category.
Oceana owns the Lucky Star brand, which sells canned pilchards, sardines, middlecut (mackerel) and tuna.
Prices of chicken, the most widely consumed protein in SA, are soaring and nonperishable food items have become more attractive to cash-strapped consumers, who cannot store fresh foods in refrigerators because of persistent blackouts.
“Cost, the unreliability of electricity, and that spaza shops don’t carry refrigeration all favour shelf-stable foods,” said Brink.
“Canned fish remains a large protein category and competitive as a shelf-stable protein, while other categories (including chilled meats and frozen chicken) are perishable.”
Brink said the brand was a strong competitor in the affordable protein category, maintaining its market share even in tough economic times. Given inflationary pressures for other proteins, “our Lucky Star business has been well positioned in terms of pricing”, he said.
But the canned foods sector has not been without its share of headwinds. Availability of cans and steel was greatly reduced due to recurring Covid-19-related lockdowns in China while in SA, the production of paper-related products, such as cardboard boxes, has been affected severely by high energy prices and load-shedding, driving up costs and limiting availability.
Renewable energy
Power cuts also affected the group’s processing plants, but the company said a huge renewable electricity project in SA is under way,
The rollout of a number of initiatives, including its long-term project for renewable energy developments, which will supply 100% of the electricity requirements for two canneries and fishmeal plants, is proceeding. The first phase is to be completed in early 2023.
The development is designed to provide reliable power to the group’s manufacturing and other operations along the west coast and put it on track to achieve independence from third-party, nonrenewable electricity supply by 2040, and carbon neutrality across its operations by 2050.
The Lucky Star brand, which traditionally focused on canned pilchards, has in recent years grown to include mackerel and tuna.
Despite the increasing costs of raw material for cans, he said Oceana aims to expand into the highly attractive canned protein sector.
“Lucky Star is leveraging its brand and its depth of canned fish distribution into other affordable canned foods,” Oceana told Business Day.
As part of an expanded product portfolio, Lucky Star has begun to procure and market canned meat and canned vegetable products such as baked beans and chakalaka.
Its ready-to-eat soya mince in four flavours has also just launched, adding to the shelf-stable nutritious proteins, with fishmeal and fish oil offerings in SA and internationally.
Acquisition opportunities
“The company is further diversifying its portfolio in the protein space,” said Mustaq Brey in his chair’s note.
“[We are] harnessing the strength of the Lucky Star brand, and its resources and expertise in canning and supply chain logistics, to deliver exciting new opportunities for organic growth while continuing to explore compelling opportunities for acquisition,” Brey said.
Oceana is also upbeat about making strides in its strategy to exit the cold storage market, having entered into an agreement in October to dispose of its interests in CCS for R760m.
The disposal of CCS, which is highly reliant on electricity supply to meet cold storage requirements, will enable Oceana to focus on its core strategic objectives and strengths in the fish protein sector. The transaction remains subject to regulatory conditions being fulfilled by no later than February 28.
After an unprecedented whistle-blower incident at the start of the 2022 financial year that led to delays in the publication of its 2021 financial results and annual report, the R6.9bn JSE-listed group staged a turnaround in the second half of 2022 after a troubling first half that was characterised by low inventory levels and internal staffing battles.
Former CEO Imran Soomra’s unexpected departure was followed shortly after by the suspension and eventual firing of its former CFO Hajra Karrim while its external auditors PwC also resigned suddenly.
In the second half of 2022, Oceana staged a tremendous recovery shored up by improved catches and increasing market share in overall protein consumption in SA that lifted group revenue 11% to R8.4bn.
Brey lauded the board and management for their resilience and assured shareholders that he remains optimistic that Oceana is well positioned to deliver further growth, despite big challenges in the operating environment, locally and globally.
He said the outlook for squid, hake, horse mackerel and south coast rock lobster is positive, with generally strong resource stocks and positive demand as well as price prospects.
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