Restaurant group Spur Corp is concerned by the government’s crackdown on plant-based food products that are labelled as meat, saying it had to seek alternative supplies after shipments carrying Beyond Meat products were diverted to another country.
Spur Corp brands include Spur, RocoMamas, Panarottis and John Dory’s.
This week the Consumer Goods Council of SA filed an urgent court application to stop the government from confiscating plant-based food products that have labels such as meat, burgers, sausages, or chicken.
The Food Safety Agency, on behalf of the department of agriculture, land reform & rural development, intends to start seizing the products on Monday.
In July, the department issued a directive ordering that plant-based food producers come up with alternative labelling or their products would be removed from shelves. It said the objective was to protect consumers against the “sale of substandard or misleading products that may purport to be genuine processed meat products”.
Spur Corporation CEO Val Nichas said on Friday that it was a concern for the group.
Recently a supplier shipping two containers with Beyond Meat products diverted them to another destination over fears they may be seized, and Spur had to find another supplier.
“The issue is causing havoc,” said Nichas, adding that Spur restaurants providing Beyond Meat products might have to tweak their menus.
“We will continue to have the offering on our menus but we probably won’t be able to brand it until the matter is finalised,” she said.
Spur is increasing its plant-based offerings and vegan alternatives across all its brands as it capitalises on the growth in this trend.
Ten months ago it opened a new restaurant in Rosebank called Modrockers, a plant-based quick-service restaurant. The establishment is still in its pilot phase and recently suffered a setback as its location is undergoing construction work.
However, Nichas said that once the refurbishment was complete the group expected trading conditions to improve as the new site would attract more people.
There are plans to open a second pilot restaurant in another area. “We believe there are opportunities to test elsewhere but we want to make sure we go through every possibility at the existing site,” she said.
Nichas said the group would monitor the performance of Modrockers for 12 to 18 months.
In the year to June, the group increased headline earnings by 31% to R121m amid a strong post-Covid trading recovery, during which the group capitalised on increasing restaurant foot traffic. Group revenue grew by 32.5% to R2.4bn. South African restaurant sales rose 30.5% to R7bn while international food outlets were up 10.3% to R736.4m.
In SA, growth has been driven mainly by the Spur brand, which increased restaurant sales by 30.1% to R4.74bn. Spur represents 68% of the group’s South African sales.
Takeaways grew by 30%, with the highest percentage being in RocoMamas (57%) and Panarottis (39%), as pizzas and burgers are the most popular products for takeaway and delivery.
Chris Gilmour, an investment analyst with Salmour Research, said Spur produced very strong top-line growth, albeit from a relatively low base. “Bottom line is also very good. This is far better than I was going for six months ago. Spur is now back to where it was three years ago,” he said.
He expects a “really good” December period compared with last year as overseas tourists return.
“It will be interesting to compare Spur with Woolies Foods. I know this might sound strange, but in such a tight consumer environment, Woolies is struggling to keep its prices reasonable, and down-market casual dining, [which] most Spur outlets offer, is a really good alternative. Just watch out for increasing input costs thanks to the war in Ukraine, which will likely last well into next year,” said Gilmour.
Russia’s invasion of Ukraine has resulted in soaring prices of sunflower oil and raw materials such as fertilisers.
We will continue to have the offering on our menus but we probably won’t be able to brand it until the matter is finalised
— Val Nichas, CEO of Spur Corp
Nichas said the war had directly affected supply chain costs in a way that had influenced food categories in addition to oil, which increased by more than 40%, adding that this was “significant in preparation of our menu offering”.
She said the company may have to raise prices due to increases in items such as cooking oil. However, in categories such as pizzas and burgers “we have to remain competitive and provide good pricing and good offerings and value as well as customer experience”, she said.
With SA facing severe headwinds while consumer disposable income is being eroded by higher fuel, electricity and food costs, as well as rising interest rates, Nichas said its brands had not been affected as consumers tended to gravitate to brands they trusted, “so we are fortunate that we have brands that appeal to consumers”.
With research firm Euromonitor expecting SA’s limited-services restaurant sector — which includes fast food, chain and independent restaurants — to show annual compound growth of 8.6% from 2022 to 2026, Nichas said the situation “offers a positive outlook and an opportunity to leverage this expected growth”.
Spur Corp has 631 outlets: 547 in SA and 84 across Africa, Mauritius and the Middle East.
Locally 23 restaurants were opened in the year to June, including nine RocoMamas, five Spurs, four Panarottis and five in the speciality brand portfolio. The challenging conditions led to the closure of 15 local outlets. Black franchise partners now represent 28% (2021: 22%) of the group’s network, said Nichas.
Four Panarottis and two RocoMamas outlets were opened in Zambia, as well as a RocoMamas in Namibia and India. Nichas said the group planned to open 32 new restaurants in SA and nine internationally in the 2023 financial year.
Following its first Spur drive-through, which opened a year ago, the group opened its first RocoMamas drive-through in Little Falls in the west of Johannesburg. At the end of this month it will open a second one in Queenswood, Tshwane.
“We will continue to expand this convenient and lucrative channel to meet the needs of our customers for convenience,” said Nichas.
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