Famous Brands, the owner of the Steers, Wimpy and Debonairs quick-service restaurant brands, has bought fresh fruit juice manufacturer Trufruit as part of its strategy towards becoming an integrated food and beverage company.
Kevin Hedderwick, Famous Brands' chief operating officer, said:
"This investment underpins our strategic intent to use our extensive franchise network base to become an integrated food and beverage supplier."
The Trufruit acquisition is still subject to a due diligence. Famous Brands declined to disclose the value of the deal.
Hedderwick said: "We will continue to evaluate similar opportunities with other vendors, and anticipate that there will be further strategic transactions to follow."
In 2003, Famous Brands bought the Wimpy and Whistle Stop brands through the acquisition of Pleasure Foods for R150 million.
Famous Brands' food services division supplies the franchise with dry goods, sauces, butchery and bakery products.
Giuseppe Jerman, an analyst at T-Sec, said: "The Trufruit deal is to be expected as it is in line with Famous Brands' strategy of expanding its food services division.
"The group is looking for businesses that are complementary. This could, for example, include a straw manufacturer. The Trufruit deal will have a positive impact on margins."
Famous Brands currently has 1 095 outlets. Its brands also include FishAways, Brazilian Coffee and House of Coffees.
Trufruit manufactures fruit juices from its KwaZulu-Natal Midlands base in Baynesfield. The company, which generates annual revenue of between R15 million and R18 million a year, employs up to 45 staff, depending on the season.
Trufruit's management will be retained for a minimum of five years with Evan Antel, the founder of the business, continuing to head operations.
Fruit is sourced predominantly from the Midlands citrus areas and the KwaZulu-Natal north and south coasts.
Trufruit currently supplies products to three of Famous Brands' operations - Steers, Debonairs Pizza and FishAways - nationally, which comprises about 30 percent of its gross revenue.
"The idea is for Trufruit to supply fruit juice to all the group's brands," Hedderwick said.
Other sectors it markets to are food services, hospitality catering and recreation. It is expected that Trufruit will contribute about 5 percent to the gross revenue of Famous Brands' food services division.
Hedderwick said that through the deal, Trufruit's market share would grow to the other brands in the group such as Wimpy, Whistle Stop, House of Coffees and Brazilian Coffee.
"However, growth will not only be limited to Famous Brands franchise network. The intention is to grow Trufruit's existing business to other food services vendors in the hospitality and leisure sector as well."
Andre de Wit, operations manager for Steers KwaZulu-Natal, said:
"This transaction represents another step forward for Famous Brands and unlocks value for both the group and Trufruit."
Famous Brands' share price rose 25c to R7 and the leisure and hotel sector 0.19 percent.