No stopping Famous Brands train

Famous Brands' share price has again spiked to new levels, this time courtesy of its purchase of 75% of Cater Chain Food Services.

This is part of CEO Kevin Hedderwick's "integration" strategy to bring the entire supply chain in-house to support the company's well-known brands, which include Wimpy, Steers, Debonairs Pizza, Milky Lane and Tashas.

His plan is to buy companies that do the work Famous Brands outsources - it already owns bakeries, an ice cream plant, a sauce and spice plant, dairy production and a coffee roasting plant, for example.

This is partly why Famous Brands' share price briefly touched R115 this week - a 148% rise in three years, far ahead of the JSE's All Share Index, which has only risen by 48% over that time.

Of course, this does mean that Famous Brands' shares are now pretty expensive, trading at a price-to-earnings level of around 25 - far higher than the JSE's 16.6. But if Hedderwick's plan keeps paying off and Famous Brands' profits keep soaring as a result, it'll remain a compelling investment.

Cater Chain, which produces about 900 tons of meat a month, including beef, lamb, bacon and chicken, is part of that.

The company, which was started by brothers Roy and John Tem-Tem in 2004, operates from a 15900m² production facility in central Johannesburg. The plant has processing equipment and cold storage capacity and separate halaal and non-halaal facilities.

Hedderwick wouldn't say how much Famous Brands spent on the deal, but it would have had to reveal the cost if it was a large transaction.

Hedderwick said the deal appealed to Famous Brands for numerous reasons: besides integrating outsourcing businesses, Cater Chain also gives Famous Brands an immediate income stream, which is more cost-effective than building a new facility, which would take three to four years to really benefit the business.

"Furthermore, operating on a five-day week, single-shift system, the capacity to take on additional business is significant," he said.

Famous Brands continues to expand its portfolio of well-known brands locally and in Africa. Last week the company said it would open its first Debonairs Pizza in Angola in an innovative tie-up with Shoprite Angola, which will become the master franchisee.

Shoprite Angola will operate and manage the Debonairs Pizza brand in the country to complement Shoprite's Hungry Lion brand.