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| Review of operations – Bidfood continued |
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| Macro factors |
Largely stable exchange rates were beneficial for Speciality Foods, while continued GDP growth was positive for all operational units. The hospitality sector is a major beneficiary of the country’s continued economic upturn, with strong growth evident in both general tourism and business travel. These developments were positive for Caterplus and contributed to improved overall performance.
Crown National, a division of Bidfood Ingredients, and Patley’s drew particular benefit from the economic upturn.
Higher interest rates and somewhat stronger consumer inflation had little overall impact on our business. |
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| Industry developments |
Management successfully addressed the key challenge of managing the transition from very low food inflation in 2006 to higher food inflation in 2007. However, the significant increase in food inflation in the second half of the year could be cause for concern if a worsening trend leads to substantially increased prices.
Some shortages have become evident in some food categories, notably seafood and certain spices, while the prices of some major commodities such as maize have risen as a result of lower local production. |
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| National challenges |
| Growing pressure on South Africa’s road infrastructure and constant increases in the price of fuel have showcased a continuing challenge for all distribution businesses – delivery efficiency. Within Bidfood operations, the strategic goal is to bring the biggest basket of the best available products to our customers with each single delivery. This endeavour will result in a longer delivery cost per product delivered. Though higher distribution costs sharpen the challenge, the net effect is to increase our competitive advantage as a national supplier offering the broadest range of products to customers in every corner of the country. Continuing investment in IT support and a significant investment in upgrading distribution infrastructure will tend to entrench this advantage. |
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| Risks |
Business risks are little changed. Health scares and outbreaks of a disease such as avian flu affect food consumption patterns. Some risk-proofing is afforded by Bidfood’s status as a food safety leader that continues to make strong progress on the road to full compliance with HACCP (hazard critical control point) requirements. As a broadline supplier, we provide alternatives no matter what food group is affected by a sudden shift in demand.
Bidfood operations are “ahead of the curve” when it comes to food safety. International experience indicates this is an area of growing public concern, though South African consumers are not yet as sensitive to the issue as consumers in markets such as western Europe. We encourage more rigorous food safety controls, both on imports and within the domestic market. We believe our proactive positioning will deliver strategic benefits going forward. We are constantly aware of our responsibility to deliver food products that have undergone rigorous food safety tests. |
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| Sensitivity analysis |
We provide a balanced mix of premium brands and basic foodstuffs and ingredients. An operational unit such as Speciality Foods may be sensitive to a marked weakness in the exchange rate or lower levels of disposable income, but the impact is cushioned by the breadth of the range across our other operational units.
Crime as it impacts international perceptions is an area of acute sensitivity for all businesses serving the hospitality industry, but the impact cannot be precisely calibrated or fully mitigated. The momentum created on the run-in to the 2010 Soccer World Cup will help to reduce the sensitivity.
In general terms, the key economic variables – GDP growth and relatively stable exchange and interest rates – were broadly favourable in 2007 and are expected to remain so. |
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| Proudly Bidvest |
The Proudly Bidvest positioning has been strongly expressed at Group level at exactly the right time for Bidfood as the focus area for our business is to obtain maximum leverage from our national representation and strength as a value-adding partner of our customers.
Proudly Bidvest is prominently featured in vehicle livery and all corporate identity elements. The Bidvest connection is also a source of reassurance for larger clients while the Group’s strong BEE credentials are helpful when we are significant contributors to divisional and corporate procurement programmes. |
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