28 Mar 2013 Bowler Metcalf’s plans for Quality Beverages
A Financial Mail report says the transaction values QB at roughly R138m – a seemingly fair price, considering the filling operation recorded interim earnings of R5,6m from turnover of R190m.
QB’s profits are currently driven by the strong niche captured by its flagship Jive brand in the Western Cape. The challenge, however, is to extend Jive into Gauteng. This could be a long and costly process, remembering that QB took the best part of 20 years to build its profitable niche in the Western Cape.
From an operational perspective the Johannesburg filling plant is ticking along nicely, but CE Friedel Sass admits brand-building in Gauteng has not delivered the desired results, “leaving the associated costs unrecovered”.
Whether Bowcalf’s major shareholders are happy to accommodate several more years of losses from QB’s Gauteng push remains to be seen, questions the FM. It speculates that perhaps it would make more sense to sell QB to, or partner with, one of the large food companies that hold existing beverages capacity.
On paper, QB would conceivably fit well into Pioneer Food Group’s Ceres Beverages and Clover’s fledgling beverages operation, or even add a new leg to rapidly diversifying liquor group KWV.
These options would relieve Bowcalf of the capital requirements needed to drive QB’s growth into new territory, but retain the important bottle-manufacturing contract.
Sass says Bowcalf is open-minded on QB. “If we ever considered a deal with QB, we would need the right fit. Right now our main focus is to improve QB’s Gauteng results.”
Quality Beverages was founded by well known Cape Town entrepreneur, Sharief Parker, as a manufacturer of mainly value-for-money cool drinks aimed at a broad-spectrum volume market. Its brands are Jive, Jive Lite and Vimto, and it does third-party filling for mainly retail brand holders.
Bowler Metcalf acquired an initial interest in the Quality Beverages in 2002 in order to cement a relationship with a promising customer. Over the years, this stake was increased to 74.9% by way of acquisitions and issues.
Source: FM