Zambeef sees strong jump in retail revenue

Zambeef Products continued to see improved performance in its retailing and cold chain food production for the six months to March 31, 2017, despite a challenging macro-economic environment during the period.

The retailing and cold chain food products division of Zambia’s largest integrated food processing and retailing company saw revenue grow by 26 percent in kwacha terms and 46 percent in US dollar terms, the company reported this week.

Like-for-like sales in Zambeef Macro and Outlet stores increased by 21 percent in kwacha terms during the period, with new stores adding a 10 percent growth in sales, compared with the same period of last year.

Pressure to maintain affordable prices, despite higher operational costs, resulted in tighter margin and a subdued profit for the sector, which saw only a small rise, to K222 million for the six months, however.

Zambeef is continuing to focus on its core retail and cold chain food products business, which has seen the roll out of new shops across the country, under its popular one-stop macro store models that combine butchery outlets with neighbouring Novatek stockfeed and Zamshu outlets, along with ample car parking. The company now operates 122 Zambeef outlets and 58 in-store Shoprite butcheries, having added seven new own-brand stores and six Shoprite butcheries in the last year.

“We intend to accelerate the roll out of outlets over the next six months with eight Zambeef Macro outlets, three Shoprite stores in Zambia and one Shoprite store in Ghana all expected to open in this period. This expansion of the retailing operations is expected to continue to create demand for our Cold Chain Food Products and our stockfeed,” said Zambeef Joint Chief Executive Officer Francis Grogan.

A total of 70.5 per cent of Zambeef’s turnover is now through its retail operations, which have led to an increase in volume growth in the cold chain food production business as the company seeks to meet demand for goods to support the rapidly expanding division. The cold chain food production operations, which include the beef, chicken, pork, fish, dairy and egg production and processing activities, primarily supply the Zambeef and Shoprite retail chains.

Zambeef’s stockfeed division, Novatek, grew by 2.5 per cent with volume sales increasing by 2.7 per cent during the same period. Zambeef’s cropping operations recorded its highest soybean yield yet; this however was overshadowed by a drop in soft commodity prices that impacted on profitability for the period.

The negative impact on consumer disposable income from the measures taken to stabilise the economy last year put pressure on margins of all retail businesses, including Zambeef and while the company managed to maintain (and in certain areas, grow) market share, this has been at the cost of short-term profit.

Despite the underlying strength of performance of the retail and cold chain foods business, the impact of falling commodity prices upon cropping and Novatek’s stock feed profits resulted in the Zambeef group profit after tax (excluding discontinued operations) falling in the period from K68 million to K5 million.

“The principle focus of Zambeef for the foreseeable future will be on expanding our retailing and distribution footprint and on improving margins and restoring profitability. We will continue to expand the cold chain food production capacity to meet increasing consumer demand; complete the build-out of the new stockfeed plant at Mpongwe and continue to strengthen our balance sheet, through the disposal of non-core assets. I have full belief that the second half will see a return to more normal trading conditions and a much improved financial performance,” noted Zambeef board chairman Dr Jacob Mwanza.