After years of being overlooked by investors, the food producer sector is making a strong comeback on the JSE, according to Foord Asset Management.
Groups such as Premier, Tiger Brands and Rhodes Food are emerging as standout performers, benefiting from strategic capital investments, easing inflation and improved macroeconomic conditions.
“The food producers sector on the JSE includes well-known companies such as Tiger Brands, AVI, Astral, Oceana, Premier Group, RCL and Rainbow Chickens. This sector has long been out of favour with investors. Limited pricing power, heightened competition from private labels, underinvestment in manufacturing facilities, and rising commodity prices have squeezed margins for many players,” said Equity Analyst at Foord, Dhersan Chetty.
“Weak management in certain quarters has also contributed to these companies’ inability to pivot when needed. As a result, investors often overlooked food producers in favour of more attractive growth opportunities elsewhere on the JSE.”
Premier Group’s stock has surged 65.33% over the past six months and more than 101% in the past year, making it the best-performing stock among the groups in review. Tiger Brands has also delivered solid returns, rising by 24.07% in six months and 32.65% over a year, with strong long-term growth of more than 50% in both the three and five year periods.
In contrast, other food producers show a mixed bag of fortunes. AVI saw a marginal decline of 1.8% in the six-month period but managed a 9.58% gain over the past year. Astral Foods had modest short-term gains but struggled in the long run, with a three-year decline of 10.15% and a five-year drop of 15.82%.
Oceana declined 4.54% over six months and 6.53% over one year. RCL Foods, which recently unbundled Rainbow Chicken, has shown short-term gains of 8.16% over six months and one year but remains weak in its three- and five-year performance with declines of 31% and 3%, respectively.
Chetty said the sector is experiencing a resurgence due to strategic capital investments by select players. Companies like Premier and Rhodes Food Group have upgraded manufacturing facilities, improving efficiency and boosting competitiveness, he said.
Beyond company-specific improvements, Chetty said the broader industry was enjoying favourable economic conditions.
“Beyond these capital upgrades, the entire food producer industry is enjoying what we refer to as a ‘purple patch’ in industry parlance. After a prolonged period of negative volumes, exacerbated by steep food inflation, there are recent early signs of a rebound,” Chetty said.
Food inflation, which previously pressured consumers and led to declining volumes, has now stabilised. This stability allows food producers to pass on price adjustments more effectively without pushing consumers to trade down or reduce purchases.
Commodity input costs such as wheat, maize and rice have come down, easing pressure on margins. Lower interest rates, declining fuel prices and improving consumer confidence, partly driven by government policy reforms and the introduction of the Two-Pot retirement system, had further boosted volume growth, he said.
“Forward-thinking companies like Premier and Rhodes are leveraging these improving conditions by focusing on profitable volume growth instead of aggressive price discounting. Their investments in high-quality production and advanced technology allow them to offer competitive prices without sacrificing margins. By upgrading logistics systems, strengthening procurement processes and maintaining a disciplined approach to capital expenditure, they are not only cutting costs but also boosting returns on capital.”
According to Chetty, despite their recent strong performance, food producer stocks remain attractively valued relative to their improved fundamentals.
“These companies generally carry modest debt levels. Strong balance sheets allow them to deploy surplus cash towards higher dividend payouts and share buybacks — which, in turn, can boost share prices,” said Chetty.
“The result? Stocks like Premier and Rhodes were among the top performers last year and key contributors to the stellar returns of the Foord Equity Fund. The companies still trade at attractive valuations, especially when weighed against their revitalised fundamentals. For smaller asset managers with the flexibility to take more meaningful positions in these under-the-radar small caps, the once-stale sector remains a compelling opportunity.”
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