Revenue for the division increased by 8.4%, while operating profit increased by 20.2%.
Growth in revenue from the sauce manufacturing facility lagged growth in restaurant sales as volumes declined due to changing customer taste profiles. Operating margins in the facility improved due to a focus on cost containment and more stable raw material input costs. A price increase of 4% was implemented in December 2018, more than a year after the previous increase of 7.1% in November 2017. New product lines are being investigated to improve capacity utilisation.
While revenue from retail products increased by 7.7%, this has historically earned a very small margin. The group’s strategy regarding retail products has been primarily focussed on building brand equity, rather than generating profits. The business has grown over the years, and has reached the point where profit opportunities could be leveraged.
Distribution revenue relates to the procurement fee charged to franchisees on sales through the group’s outsourced distributor. Revenue increased in response to the increase in this fee from a standard 3% to 4% of the value of sales in January 2019. This will benefit the first half of the 2020 financial year.