Premier Group, the maker of Blue Ribbon bread, Snowflake flour and Iwisa maize meal, is taking the Golden rice brands national as it aims to become one of the top two players in the competitive market. The company also expects India’s lifting of its ban on rice exports to result in lower prices, which will boost its rice distribution business.
In June, Premier added rice to its portfolio with the acquisition of a 30% stake in family-owned rice distributor Goldkeys International, whose rice brands include Golden Delight, Golden Pride and Torico Thai. Goldkeys, founded in 1994 and one of the country’s largest rice importers, also has other products such as beans.
“We have gained quite a good traction with that business,” Premier CEO Kobus Gertenbach said this week at the interim results presentation.
“In terms of the other geographies, we’ve got more work to do. As the rice category probably benefits from some substitution out of maize, I think that Goldkeys will definitely be a beneficiary of that.”
The acquisition provided Premier an entry into the rice category dominated by the likes of Tastic, sold by Tiger Brands; PepsiCo’s Spekko, and other independents such as Wilmar.
“I think our competitive advantage is that we only do top-quality products, so as consumers try the product, they certainly see the quality that’s underpinning the brand,” Gertenbach said.
“We can also be quite price competitive against some of the other existing players as we build our distribution out wider. There is definitely a nice opportunity, and to grow that business into at least one of the top two biggest players in the country over the years to come.”
In September the Indian government lifted its year-long ban on non-basmati rice exports, imposed to ensure sufficient domestic supply. With the lifting of the ban, Gertenbach expects significantly reduced import prices.
Premier, which is eyeing acquisitions to add new products to its portfolio, reported a 4% rise in revenue to R9.7bn while operating profit grew 17% to R945m for the six months to September.
Its stable includes Dove cotton wool products and Lil-Lets in the home and personal care aisle, Rascals and Manhattan in the sweets category and Iwisa and Super Sun mageu in the nonalcoholic drinks category.
“We have critical mass in all of those categories that we operate in,” said Gertenbach. “It’s really about adding more fast-moving consumer goods categories onto the platform that fit well with our existing business. If opportunities come along, we will look at anything that makes sense to us”
Shaun Chauke, senior equity research analyst at Nedbank Corporate & Investment Banking, said many grocery categories had become “commoditised”.
“There is some loss to pricing power due to increased private label penetration and a constrained consumer environment. A targeted area to try and go after will have to be around staples, where this makes substitution easier for the consumer. In this case, the 30% acquisition in Goldkeys provides that upside optionality.”
Premier’s Millbake division, which includes Blue Ribbon, increased revenue by 2.6% to R8.1bn and earnings before interest, tax, depreciation and amortisation (ebitda) by 15.8% to R1.1bn. The company said upgrades to several bakeries and wheat mills in prior years continue to improve quality and consistency of Millbake products. Premier expects to complete its Aeroton mega-bakery, in the south of Johannesburg, by the first half of financial 2026.
Our product will be by far the best-tasting bread in the market, and the quality will be consistent
— Kobus Gertenbach
Consumers in the west and east of Johannesburg “are going to get a significantly better quality product”, Gertenbach said. “What we’re manufacturing at the moment is, in my view, at least on par with our competitors, but what we will be able to do when Aeroton is done will be significantly better than the quality offered by our competition. I think our product will be by far the best-tasting bread in the market, and the quality will be consistent.”
Chauke said bread had done well for Premier, with more potential cost savings to come through once Aeroton is commissioned. The business owns 1,100 delivery vehicles, and about 60% of wheat flour produced is supplied to its own bakeries. Premier has wheat mills on the same sites as its major bakeries in Cape Town, East London, Durban and Pretoria and in Eswatini.
“This high level of integration within Millbake is a core differentiator for Premier, as it ensures the company uses flour of consistent quality in the baking process at low costs, as these bakeries do not have to incur transport costs. We believe this enables Premier to maintain its targeted margins, which is a core competency and offers a competitive advantage,” Chauke said.
Premier’s revenue from the groceries and international division grew 9.7% to R1.6bn, but ebitda was down 2.1% to R105m.
Chauke praised Premier’s discipline to invest in capex along with its pricing, cost management and focused strategy. Premier had invested more than R6bn in capex since 2012.
“It’s a machine that keeps on giving; the business still has significant headroom to grow its earnings given the benefits in capex investment and organic initiatives,” he said.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.