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Donut Delights Case Study

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Article 6

Donut delights Locals love international brands. The question is, do investors? Marcia Klein 14 November 2016
/www.moneyweb.co.za/news/companies-and-deals/donut-delights/

Summary:
International fast food brands popular in South African market but pressure on consumers disposable income a problem. Takeaway and fast food is buoyant with Stats SA showing a 0.6% in food, but a 6.1% increase in takeaways. Krispy Krème and Burger king and Dunkin donuts along with Domino’s have taken note and interest. MacDonald’s has shown how it’s succeeded in an overtraded market with 200 stores opened since Nov 1995.
An increasingly dense market and no growth. This shows in Grand Parade (Burger king, Dunkin Donuts and Baskin Robbins) and Taste (Domino’s and Starbucks) headline earnings.
Grand parade had store revenue dropped by 20% showing pressure on consumer spending. Taste holdings recorded a loss in 6 months due to store costs incurred and converting existing stores. Domino’s weekly sales have increased by 17% since March with 74 outlets.
Starbucks is trading ahead with R18m combined revenue. Famous Brands, Taste’s big rival has been going global .Grand Parade and Taste are going to do battle.
Concerns are muted growth prospects, license fees, high cost of opening stores, and small market in a country where people drink mostly instant coffee. Also drought and devaluing rand investment doesn’t look good. Vertical integration is a key and they are both building supply chains.

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