Famous Brands acquires 60% of Java Lava

Java Lava's range of packaged food service products includes filter coffee‚ espresso beans‚ hot chocolate and milk powders‚ including instant cappuccino products.

The purchase consideration is R7.3m‚ which will be settled from cash reserves. The effective date of the transaction is 1 July.

Famous Brands CEO Kevin Hedderwick said: "This acquisition is in line with the group's stated strategy to expand its manufacturing capability. The short-term intention is to overlay Famous Brands' business model on the existing Java Lava operation and to extract obvious synergies whereby Java Lava will become a focused manufacturing facility‚ with all peripheral services being integrated into Famous Brands.

"Moving forward‚ the goal is to create a specialist coffee company which will be a source of coffee and related hot beverage product supply to the group's franchised network and will also facilitate taking certain Famous Brands franchised brands to the retail market."

Hedderwick said over time‚ the strategy was to shift Famous Brands' existing coffee and related beverage business into the new joint venture.

"The group has a strong portfolio of franchised coffee brands which include Wimpy‚ Mugg & Bean‚ tashas‚ Vovo Telo‚ Milky Lane and Juicy Lucy‚ and this acquisition will afford both businesses a win-win outcome‚" he said.

Established in 2007‚ Java Lava is owned by partners Brian Best‚ Steve Giddings and Nohlene Bennett‚ and employs 18 staff and three regional agents. The business‚ housed in a purpose-built facility in Sunderland Ridge‚ Centurion‚ roasts more than 20 tons of beans and produces eight tons of hot chocolate a month.

Java Lava's facility has Food Safety Assessments (formerly Safsis)‚ kosher and organic accreditations.

A further R7.0m‚ also sourced from cash reserves‚ will be incurred to equip and extend Java Lava's existing capacity to take on the group's volumes.

It is expected the new plant will be in a position to start the integration of certain parts of the group's business in July. Once fully integrated‚ this acquisition will position the company as one of largest coffee-roasting businesses in SA.

"We will be retaining the skills and services of Brian Best and Steve Giddings. Brian‚ a coffee business veteran with more than 15 years' experience in the industry‚ will continue to manage the business on our behalf; Steve will consult in terms of strategy and product formulation‚" Hedderwick said.

Best and Giddings said: "Java Lava has always had great ambitions‚ and partnering with an established leader in the food services sector will enable us to expand our horizons. The new business will have significant advantage in an industry that benefits strongly from high-profile brands‚ quality and scale."

Hedderwick said the transaction was in line with the group's strategy to build manufacturing capability and to "pursue acquisitive growth".