Nampak is expanding its presence in the deciduous fruit canning sector after agreements to supply Tiger Brands’ Langeberg & Ashton Foods (L&AF) coupled with a “significant” deal with private label manufacturer Giants Canning.
This comes as the JSE-listed packaging manufacturer shifts into the second phase of its turnaround plan and looks to leverage off the high demand for can packaging.
Unveiling the group’s new and simplified logo this week, CEO Phil Roux said the deals, which were not reflected in the results as they happened post period, would be “a step change in profitability” for the group’s diversified segment in the new financial year.
“Deciduous is just a natural follow on,” Roux told Business Day. “We’ve been packing Rhodes’s deciduous fruit for a long time. We’re just delighted that Langeberg & Ashton Foods have chosen us as their supplier.
“So we actually own production of deciduous fruit canning, production of the can in SA, given that we do the business both for Rhodes and now for Tiger Brands.” .
Gaining market share and expanding the client base are key factors in Nampak’s volume growth.
Chronux research analyst Rowan Goeller said Nampak had turned the diversified business around and was now starting to win good new customers.
“The growth into canning businesses will provide growth as they exit some non-performing businesses in that division,” Goeller said.
Joburg-based Giants Canning specialises in canned vegetables, beans, soups and jams. Its website states that Giants is SA’s largest co-packer of corporate brands, providing 95% of all private label brands, and having just started to expand internationally.
Producing canned fruit, fruit purées and fruit cocktails, the L&AF canning factory in the Cape winelands is the biggest in SA and one of only two fruit canning factories — the other is in Tulbagh.
The world-class factory plays a vital role in enabling local canned fruit to occupy the niche position it does in the world market.
Tiger Brands first publicised its plans to divest from L&AF after a strategic review in 2020, leaving the business without a viable growth path. It was earmarked for closure in 2021 which would have left fruit farmers in the Karoo, Ashton, Robertson, Ceres and the Breede River areas out of business. It resolved to sell it after an outcry by the communities that would have been left destitute.
Roux, a former Tiger Brands executive, said Nampak was well placed to handle additional work as it ramps up its capacity at the Springs Line 2 while relocating a spare line from Angola to SA, amid high demand for canned beverages and food which would benefit all its businesses.
Citing the group’s technical competence and a research & development department with “scientists that are the envy of others”, Roux said Nampak had the resources to fully satisfy the tough requirements for exporting canned foods.
“We understand the science, which is quite delicate and technical,” said the CEO. “You’re exporting to overseas markets and 90% of the fruit goes out of the country in the can, goes to discerning markets like Japan, so you have to have the appropriate technology to be able to supply that.”
According to Agri SA, the country is ranked in the top seven fruit canning countries in the world by production.
Small Talk Daily analyst Anthony Clark said that given that Nampak had recently had competitors coming in nibbling at its heels, it was now going back on the offensive and looking to reclaim market share and canning volumes.
“The deciduous fruit business of Roads and Tiger is what Nampak does, and with Giant on board as well, it basically allows them to corner the market in deciduous fruit canning,” said Clark, adding that with looming improvement in the logistics and port operations , canning for export could be a lucrative market.
“Interestingly, with Lucky Star also expanding its business, taking the Lucky Star brand out of Pilchards into affordable protein and soya-based canning, again, that adds some volume to Nampak. And additionally, the Astral product, the chicken in a can is also, I understand, a product that Nampak will be packing.” .
As companies like Oceana broaden and diversify their canned product lines to lessen their reliance on seafood products — which are still prone to fluctuations in global commodity prices — the canned food market in SA is anticipated to grow due to factors like convenience, extended shelf life and growing demand, as well as the expansion of online retail platforms.
Down 2.68% to R414.07 on Tuesday, Nampak shares have surged 127% since the start of the year.
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