Famous Brands takes aim at Nando's
Johannesburg - Famous Brands [JSE:FBR] - the owner of Steers, Wimpy and Mugg & Bean among others - plans to grow its newly-acquired grilled chicken fast food brand into a strong industry player over the next five years.
Famous Brands announced on Monday it had acquired a 51% controlling stake in the small family-owned grilled chicken chain Giramundo, founded in 2007.
Giramundo has a single retail outlet in Bramley (Johannesburg), three container outlets (in Alexandra, Thembisa and Soweto), as well as a production facility in Bramley.
Currently employing 40 people, the operation produces a range of chicken products, including chicken burgers and chicken livers.
"The potential is quite significant in the business. We're very optimistic that this brand will be a very strong challenger in the chicken category in the next five years," said Famous Brands CEO Kevin Hedderwick.
It took 10 years for Famous Brands to find a suitable brand to enter the mainstream chicken industry because of high entry barriers.
Hedderwick said over the past few years the group examined a number of existing brands but none met its requirements. The price was either unrealistic or the product incapable of achieving Famous Brands' best-in-class philosophy - the goal to be either number one or two in its category.
"Key to the acquisition is the low cost of entry and limited associated risks," said Hedderwick. "Of major importance is the product's flame grilled positioning - a category within the chicken market that is showing strong growth."
He added that the product itself has performed brilliantly according to the group's market research in terms of presentation and taste, and flame grilled chicken has gained wide acclaim as a healthy alternative to deep fried chicken.
The move caught the market unawares, due to Famous Brands' best-in-class policy.
"I'm a little surprised; I would have thought they would go for something big. Having said that, I think they (Famous Brands) are definitely spot on. They desperately need chicken in their portfolio," said Absa Asset Management analyst Chris Gilmour.
High hopes for humble restaurant
Glimour said with Nando's being SA's main flavoured chicken grill brand, there is definite space for growth in that category.
"Price is going to be the main differentiator. My feeling is that Nando's is a bit expensive, catering for the more upmarket consumer."
Famous Brands said it will invest R1.2m in the business to re-engineer and enhance existing intellectual property and cover operational costs for the first two years.
Gilmour said he doesn't expect an "explosive" roll-out of outlets. The important thing is to find good sites and monitor consumer response before embarking on massive store roll-out, said Gilmour.
The chain has already identified sites and franchisees for two new outlets in Kokstad and Nelspruit, expected to commence trading by November 2010.
Hedderwick said Giramundo has the opportunity to roll out this brand to Famous Brands' existing 1 500 SA franchisees as well as its petroleum partners.
"Against the odds, this humble chicken restaurant has built a formidable reputation in its surrounds," Hedderwick said.
"I am confident that the combination of this superb quality product and Famous Brands' core competence of building brands in the food service arena will ensure that Giramundo's will become one of the group's mainstream brands."