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When it comes to fast food, South Africans have a strong preference for chicken in a bucket. Therefore, it is not surprising that the Covid-19 induced lockdown injured everyone involved in supplying the legs, breasts and thighs to the local service.
RCL Foods, which owns Rainbow Chicken, Ouma Rusks, and Selati Sugar, for example, was hit hard by fast food operations that were forced to close the store. This contributed to a 65.4% decrease in overall earnings to R114.2 million for the year to the end of June.
The food producer reported that the impact of direct costs of Covid-19 to date in terms of additional costs amounts to R266.8 million.
The pandemic had a severe impact on its chicken business, particularly in terms of fixed costs related to holding chicken stocks, as well as its Vector Logistics operation, which supplies fast food restaurants such as Nando’s and Chicken Licken.
Read: RCL Foods hit by duties and taxes (September 2019)
Sasfin Securities VP David Shapiro says that while the results were not “attractive,” he believes the company will rise again.
“The results are not great, but there is no reason why they should not come from this [pandemic and continue] to make good products. In general, the quality of their food and products is good, therefore it is up to management to recover and reposition themselves after this. [pandemic]. “
Changes in appetite
The group saw an increased appetite for pet food, biscuits and peanut butter among consumers (and their pets) during the shutdown.
“Pets are a huge market globally,” says Shapiro, adding that the increased demand for pet food may be due to more people buying pets as an antidote to loneliness during confinement.
Market commentator Chris Gilmour says the increase in pet food consumption could be related to the work-from-home factor. “People probably spent more time with their pets and gave them a lot of treats.”
Wayne McCurrie, senior portfolio manager at FNB Wealth and Investments, agrees.
“I doubt that people have drastically increased the number of pets they have. I think they are possibly just feeding their pets more as they are much more at home.
“Pets get fat during the confinement,” he added.
He says there was an increased demand for groceries due to regulations banning fast food establishments during lockdown alert levels 5 and 4, forcing consumers to prepare home-cooked meals.
He does not believe it is due to the direct impact of consumers having liquidity problems due to job losses and pay cuts.
“You will most likely find that overall food expenses have dropped because people weren’t eating out or buying prepared food during previous levels of closure.
Prospectuses
RCL Foods expects tough economic conditions to continue, putting considerable pressure on consumers in 2021.
“Our primary focus for 2021 will be to reestablish our operations for growth and complete our portfolio review to lay the foundation for a future-proof form of portfolio that is tailored to the post-Covid-19 environment,” says the CEO of RCL Foods, Miles Dally.
The group believes that the impacts of the pandemic will continue to be felt in the chicken business unit during the first half of fiscal 2021, due to its significant levels of stockholding and the revenue impacts of its chain relief measures. of supply.
Shapiro says the pandemic is surely at the “beginning” of an entire business environment that will force companies to rethink how they do business after Covid-19.
