Revenue declined by 1.5% to R173.9 million (2014: R176.6 million). The decline is largely attributable to the closure of the Captain DoRegos depot in November 2013. Excluding the revenue contributed by the depot in the prior year, comparable revenue increased by 13.0%.
The manufacturing division includes the sauce and décor manufacturing operations in Cape Town. The sauce manufacturing facility manufactures more than 400 000 litres of sauce per month. This includes certain of the group’s unique sauces and sauces for external parties under licence.
Developments at the sauce manufacturing facility included a new management team, improved stock control, reduced wastage, securing of a consistent supply of raw material and the implementation of a new costing system. These changes led to considerable operational improvements at the facility. There was also an increased focus on food safety and employee health and safety.
High food inflation and exchange rate pressures on imported inputs affected margins as price increases were limited to support franchisee profitability.
Group supply chain logistics is outsourced to a third party, which coordinates transactions between suppliers, the group’s manufacturing facilities and franchisees. This allows the group to negotiate better prices on core items in the basket, and ensures security and consistent quality of supply.
The group’s procurement department manages the relationship between the outsourced distributor, suppliers and franchisees, audits suppliers and facilitates third-party food safety audits on suppliers and the outsourced distributor. The group charges franchisees a margin of, on average, 3% on the volumes sold through the distributor. This is known as the cost of integration.
Volumes shipped through the distributor increased 3.9% to 43 209 tonnes (2014: 41 603 tonnes) as new products were added to the basket, franchisee participation increased, new restaurants opened and overall restaurant turnover grew.
The main focus was on ensuring that inbound and outbound service levels were maintained. In the year ahead, the group aims to deepen its understanding of suppliers’ capabilities and prioritise demand planning to improve the flow of goods.