SA Food Producers – Food for Thought

Our food producer sector initiation focuses on three of the majors TBS, PFG and RFG. We explore how their respective export businesses to both international and African markets will face challenging times ahead. We reiterate the threat of private label (PL) based on an analysis of shelf space allocations to PL. We view Tiger Brands’ emphasis on marketing as a positive and highlight that it’s LSM target is under pressure. In our view, TBS will have trouble shaking-off the listeria scandal, which we estimate to have material impacts over the next few years. Our bottom-line on PFG is that the business has a healthy operational leverage, and the company needs to drive growth to exploit it. We are positive on Rhodes Foods’ latest acquisitions owing to possible synergies and caution its international business may be at risk if rand strength persists.