Rival food firms plan to expand capacity

Their expenditure signals a renewed thrust to take advantage of market opportunities in SA.

Competing for Africa

They are also battling for market share in the rest of Africa, where a growing middle class is providing a lucrative hunting ground for companies in sectors such as food, telecommunications and financial services.

Tiger Brands and Pioneer Foods said in their latest annual reports that investing for future growth was vital to their success.

Tiger Brands chairman Lex van Vught said SA's largest food manufacturer has budgeted more than R2,5bn to expand domestic capacity over the next five years.

During the past three years, the group had spent about R1,8bn on a similar programme, which also included upgrading its facilities.

Challenges

Van Vught said the short-term challenges imposed on the group by the economic environment, which included a strong rand, should not deter Tiger Brands from spending money to expand manufacturing capacity.

"Over the next five-year period, the company believes it will be necessary to invest domestically in excess of a further R2,5bn in building capacity so as to be able to meet demand."

Expansion and expenditure

During the year to September, Tiger Brands had started the expansion of its Hennenman flour mill at a cost of R561m, which was expected to be commissioned next year.

It had also authorised the expansion and upgrade of the bakery in Durban at a cost of R109m, while the upgrade of the Pietermaritzburg bakery "to a world-class facility" had already been completed at a cost of R187m, he said.

Pioneer Foods planned to spend more than R1,2bn on expansion over the next three years despite having to budget more than R850m in fines for anticompetitive behaviour, chairman Zitulele Combi said.

"Pioneer Foods will not reduce its committed capital expenditure of R1,228bn from 2010 to 2013 as a result of the settlement agreement and further commits to increasing its capital expenditure by an additional R150m," he said.

"This expenditure is linked to certain anticipated capital programmes, subject to economic, market and other conditions, which will assist in job creation as production capacity grows."

Source: Business Day