RFG, maker of brands including Today pies, Bull Brand corned meat, Rhodes jams, Hinds juices and Squish baby food, posted a healthy set of annual results even as food producers struggle with high input costs and power cuts.
We spoke to CEO Pieter Hanekom about the business.
As prices rose, the sales of vegetables and canned fruit decreased in SA. But pie sales were up. Are cash-strapped consumers just not eating vegetables and sticking to cheaper carbs?
It is a combination of factors. The cost of packaging really put a lot of pressure on the cost of the canned product [and reduced volumes sold]. When fruit and vegetables are in season, people would rather buy fresh produce in a plastic bag, which is a lot cheaper than anything you put in a can.
You put through price increases of almost 13% on average due to increased costs. Yet, food producers often struggle to put up prices, as they face intensive push back from retailers. How did you manage that?
A lot of products are sold into Woolworths and that consumer is a bit more resilient. But retailers don’t just accept a price increase. You have to go with a proper presentation,
We work extremely closely with Woolworths. They actually recommend our packaging suppliers. We’re in a big partnership with them so it is probably a bit easier to put up prices there. But with the other retailers its a totally different ballgame.
You have solar panels on factory roofs, but do solar panels generate enough power to support energy-intensive manufacturing?
Putting solar on rooftops, as a thumb suck, can only run about 10% to 13% of your factory needs. So we are putting some solar plants on the ground.
Obviously, it takes a bit of time because you need to get authorisation from the local authorities for that. Then you need consistent sun or you need to start looking at buying battery packs to store power.
With generators powering 100% of your factories currently, does this mean load-shedding doesn't lead to production delays?
It's fine if you've got enough generator capacity to run factories, but what about your water supply?
Municipalities need power to pump water to certain areas. So we have had water shortages at some manufacturing units and had to invest in water storage capacity.
Do you think food prices will stabilise as input costs come down?
Two years ago, we said, hopefully we would be able to give relief to the consumer [in price decreases] and increase sales growth again. Then the Russian and Ukraine war took place [and input costs rose]. Then last year we said we needed costs to come down and then load-shedding intensified. I hope there is no event that happens.
If no [big] event takes place and the rand stays at current levels, maybe prices will stabilise. A lot supplies get imported and the exchange rate plays a role.
But consumer price inflation is sitting at 5.9%, and food inflation is between 8% and 10%.
Let's hope that we get some relief. But from where I am sitting, none of the commodities or input costs we have are likely to record double-digit decreases
You saw international volumes fall more than 13%, even though foreign revenue rose thanks to a weak rand.
We didn't ship all our products in September, due to delays at the Cape Town port. We are really worried about the ports.
Load-shedding also put pressure on the cold room suppliers [that refrigerate fruit in summer]. There were fewer pears available to can and export.
Your share seems to be a little low, given the recent performance. Does this worry you?
Management can’t sort out the share price. The share price must be sorted out by shareholders. Obviously, we think that there’s a lot of value in our business. We have good performance shown by our metrics. Our cash flow improved.
I think low liquidity is the main issue [depressing the share price]. This big investors want to be able to buy a bigger stake and liquidate a bigger stake quickly.
We think we have got a very good business.
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