Retail logistics, warehousing, data and marketing company CA Sales (CA&S) grew sales in the half to end-June by almost a quarter as it finetunes its understanding of the nuances in its markets in multiple countries in Africa.
For example, says CEO Duncan Lewis, Namibians’ staple diet is pasta, while Botswana is primarily a rice and SA both a maize and rice market.
This intimate knowledge allows the group to put forward compelling value propositions for its consumers in different countries. Lewis said the group is successful because it works with local teams that understand the nuances of their retail market.
“We are very specific in buying businesses that are local — Zimbabwe for Zimbabweans and Namibia for Namibians.”
The group, which was unbundled from investment holding group PSG when it delisted, makes 85% of its revenue outside SA, in Namibia, Botswana, Eswatini, Zambia and Zimbabwe. It plans to expand further in Zambia and East Africa.
It distributes household and personal care goods, food and alcohol products to 35,000 retailers representing 200 consumer brands, including AB InBev, Coca-Cola, Energizer, Phillips, PepsiCo, Heineken, Tiger Brands, Unilever, Kellogg’s, Nando’s and Lucky Star.
When it wants to buy companies, it takes a minority stake to learn from the previous management and locals before growing its share.
In the six months under review, CA&S Sales earned R5.2bn, a 22% increase as it distributed more products into more stores and expanded further in Namibia by buying the Taeuber & Corssen consumer goods distribution business.
The split of revenue growth was 16.8% coming from existing businesses and 5.7% acquisitive growth, Lewis said. Growth came from taking more products to more stores. “Our clients are gaining market share. We’ve improved distribution networks, and the number of stores [ we deliver to] and the ranges in store.”
Smalltalkdaily analyst Anthony Clark said CA&S grows by “piggybacking” on existing clients and taking goods to new countries where it already has a presence. An example is winning the bid to take its Nestle chocolate distribution in SA to Namibia in a highly profitable deal.
CA&S’s local understanding of markets reveals consumer insights and shows how well its equipped to do business in these countries.
Lewis said tobacco volumes, which only make up 5% of distribution, have declined in the countries they distribute in due to more robust illicit markets. As consumers come under pressure many switch from hard spirits such as brandy or vodka to beer, he said.
While beer drinking is declining in the US, there is no sign of any decline in Africa. Five-litre box wines are also growing in popularity — which Distell noted before being bought out by Heineken.
Headline earnings per share, a main profit measure in SA, grew 21.5% to 36.5c and gross profit 25.9% to R786.8m.
It did not declare a dividend as its policy is only to do so at year end.
Lewis said it is better to hold on to its cash to fund acquisitions and to reward shareholders by growing the business. It is looking at “acquisitions in new territories with businesses we like and trust and believe that can complement that overall group”.
The group aims to grow revenue to R20bn by 2030, effectively doubling its revenue, and will do this through expansion and buying businesses.
It wants to grow in Kenya and Zambia. “We have prioritised certain countries in East Africa. We’ve got a growing presence in Zambia. We have been in Zambia for close to two decades … We see that market as an investment. We would look to acquire appropriate businesses in that geography and neighbouring countries where appropriate”.
Clark said with a 40-year-old history CA&S has deep relationships and understanding of the markets it operates in. He feels the “stock is undervalued" and expects the stock price to grow to at least R8.50. He called it a hybrid between a logistics business and retailer.
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