SOUTH AFRICA – Taste Holdings is aiming to have 150 Domino’s Pizza outlets by December next year, a footprint that would cement the restaurant group’s place in SA’s fast-growing pizza category, CEO Carlo Gonzaga said on Thursday.

Competition in the segment is intensifying, with YUM! Brands’ Pizza Hut having re-entered the country after a six-year hiatus.

Local players such as Famous Brands-owned Debonairs, Spur Corporation’s Panarottis and private player Romans Pizza are expanding aggressively.

Taste, which will open its first Domino’s Pizza store in a month, signed a franchise agreement in April for the brand in SA as well as six other African countries.

Expansion of Domino’s Pizza will be through new store openings and the conversion of Taste’s current pizza brands, Scooters and St Elmo’s.

Vunani Securities analyst Anthony Clark said the Domino’s Pizza franchise was “a really good idea”.

“For Taste it’s a much better, broader international platform and we all know how aspirational global food brands go down in SA — look at KFC, Burger King and McDonalds,” he said.

There will, however, be one-off costs relating to the store conversions, training and the establishment of a centralised dough production facility in Midrand, Johannesburg due to open in January. Unlike Pizza Hut, which already has brand recognition, Dominos will also have to spend money on marketing its brand to consumers.

“Dominos Pizza will do quite well for Taste but it’s not going to be an easy roll-out. It will be lengthy and expensive,” Mr Clark said. “They’re talking about converting around 200 stores at around R600,000-R800,000 a store. That will take between a year to two years.”

On Thursday, Taste reported a decline in core headline earnings to R8.8m for the six months ended August 31, from R9.9m in the same period last year, as a result of costs associated with restructuring its food division. Turnover rose 15% to R302.3m.

This year, Taste raised R220m capital via a domestic medium-term note and a fully subscribed rights offer for the Domino’s Pizza conversion and acquisitions in the food and jewellery segment.

October 13, 2014;