Business

Libstar revenue rises 9.6%, new CEO named

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FIFI PETERS: It would seem that South Africans ate quite a lot of cheese in the first six months of 2022. Libstar, a company that makes a wide range of cheeses under its Lancewood brand said that revenue from its perishables category – which is food that has a limited shelf life – jumped 14.6% in the six months to June, boosted mainly by strong volume sales of prepacked hard cheese.

We’ve got Charl de Villiers, who is the current CFO of Libstar, and also the incoming CEO of the company – as per the announcement that came out of Libstar yesterday – on the Market Update for more on the numbers.

Charl, first of all, congratulations on your appointment. We’ll get to that in just a bit. But I want to start off with the cheese. Are we eating more cheese as South Africans than we did this time last year? And if so, why?

CHARL DE VILLIERS: Thank you. That’s a very good introductory comment. Yes, indeed, people are eating more cheese. It seems to be a global phenomenon with the per capita intake increasing globally, in fact.

Within the South African context we see cheese and particularly dairy as an affordable alternative, a protein alternative to some of your higher-cost proteins within the market.

I guess to a large extent innovation within that category, from yoghurt straight up to up to your daily categories, is driving the growth following our investment in our capacity some years ago.

FIFI PETERS: So would you say that there’s still more growth to be had in the year ahead? You mentioned affordability. We were just talking now about the prospects of interest rates going up even more, and of that eating into the level of affordability for most people right now. Would you say that the dairy category, the cheese category, still has more legs to run?

CHARL DE VILLIERS: Absolutely. Consumers are under pressure, no doubt. So we as a food manufacturer need to cater to differing trends, I guess, in terms of consumer behaviour, but also price points. We mentioned in our presentation today how we launched a R300 value offering in the white Gouda variant of cheese, speaking to how consumers are, I guess, somewhat price conscious, but also to how we are catering towards those markets. That is really driving the volume growth, particularly in our dairy business, which is our largest operating division.

FIFI PETERS: And how would you describe the state of the consumer right now, given the view that you have? I’ll tell you why I’m asking this. While we’re told that the consumer is under pressure, [if] you look at a lot of important economic figures that measure consumer spending and what they’re buying and what they’re not buying, most of those figures are saying that consumers are still shopping. They’re not only buying food, they’re still buying clothes, they’re still buying a bit of jewellery, maybe some perfume and cosmetics here and there. So how would you describe the state of the consumer, and would you say that the view that the consumer is under pressure right now is exaggerated or is in fact the real view?

CHARL DE VILLIERS: From a food manufacturer’s perspective I think certainly the battle for the wallet of the consumer is certainly intensifying. You mentioned other kind[s] of durable products as opposed to food products.

Within the food category, I guess, consumers are looking for more choice, and then they are also looking for value-for-money offerings.

So it’s important for us to cater to the upper end as well as the more affordable options across the ranges of products that we offer.

So, from a food perspective, I think definitely there’s a lot of thought going into how the monthly salary is getting allocated. But we are trying to cater to differing needs of the consumers throughout our product range.

FIFI PETERS: Libstar also supplies quite a number of the leading retailers in this country through your private-label line. I’d like to understand how that is going for you, just given inflationary pressures. We’ve seen food inflation rising in the double digits. What has that meant for how much of that inflation you’ve had to stomach, and how much of that inflation you are able to pass on to some of your clients in the retail space right now?

CHARL DE VILLIERS: Yes, that’s a very topical question at the moment. To answer the first part of your question, private label has grown to about 22.8% from way below 15% some years ago. So certainly the concept of a private label within the food categories that we play in has gained significant traction over the past few years.

The question is why, and the answer that we would offer to that is that private label offers a greater choice and is also the value perception around the price point versus the value of the product.

But, as you quite rightly point out, inflationary pressures in terms of our manufacturing costs have been quite significant – not only in this reporting period, but for the past few months and in fact since the advent of Covid.

So while we can – through operating efficiencies and through some innovation on our side – try to mitigate some of those cost pressures, we inevitably do have to pass on these price increases to customers. But we of course work with our trading partner to try and find ways in which to keep these products price-competitive on the shelf in order to cater to consumer needs.

FIFI PETERS: So, while your perishables category grew quite nicely in terms of revenue growth, it was quite a different picture for the groceries division. These are goods with a longer shelf life, like the spices that you make. You do cite some of the challenges that you faced in the period from supply-chain disruptions and logistics costs, and a bit of load shedding. But on the logistics and the supply disruptions that impacted your ability to export, is this all Transnet?

CHARL DE VILLIERS: I think it’s not necessarily tied to one particular agency. Whenever you pick up a newspaper, you will see that supply-chain issues are not unique to the South African environment.

Throughout the world we’ve seen delays, both manufacturing delays at shipment port, and then also delays at the transshipment ports – and we experience the same thing.

Of the group’s revenue 12% is generated through exports that make it to the USA, Europe and Australasia.

In this regard we experienced some delays which [prevented] us from recovering some of the costs that we had to incur. You’ve mentioned the shipping costs themselves being between 200% and 500% higher than they were pre-Covid in certain instances. So those are the types of costs that we’ve had to absorb and, in addition to that, try to navigate the delays in timing that have unfortunately plagued the worldwide stage.

FIFI PETERS: To your appointment now. The current CEO, Andries van Rensburg, who actually co-founded the business back in 2005 and helped bring it to the JSE as a listed company in 2018, has decided to call it quits and has elected you as his successor. As I said, congratulations, but what are you hoping to bring to the table, Charl, when you formally start in the role in January next year, I think it is?

CHARL DE VILLIERS: Thank you. As much as I would like to say this was Andries’s decision, of course a board needs to follow quite a rigorous process, and I’m very honoured by the trust that they have placed in my abilities.

I started with Libstar five years ago, and I’ve spent quite a bit of time with Andries across the financial, the operational, and the commercial disciplines within the group.

So in terms of what I bring to the table, I think it’s important to understand that Libstar is a decentralised business. We have capable operators at the divisional level, and I’ve been involved with Andries and with the numerous other executives at the central level in developing and evolving the strategy to what it is today. So, to put it very bluntly, it’s up to us now to implement and do justice to that newly developed strategy of ours.

FIFI PETERS: We shall watch and see exactly how you deliver that justice, Charl. Thanks so much for your time and I look forward to speaking with you again in your new role as the CEO. Charl de Villiers is the current CFO of Libstar and the incoming CEO.

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