Bread and pizza bring in more dough for Retail Food Group

24 March 2020, Written by Matt Ogg

Bread and pizza bring in more dough for Retail Food Group

The Covid-19 pandemic has led to mixed results across Retail Food Group's (ASX: RFG) different businesses, with positive signs over the past fortnight for Crust and Pizza Capers stores, bakery franchise Brumby's, and Di Bella Coffee's e-commerce and grocery divisions.

On the flipside, limitations on restaurants and cafés are expected to negatively impact Di Bella Coffee's retail customer network overall, as well as Donut King outlets.

The company is also gearing up for a reduced customer count across its domestic franchise network; a trend RFG expects will likely be more pronounced amongst outlets operating within shopping centres.

Around 200 of RFG's international outlets have also been temporarily, including 29 in the US.

The situation has led the company to withdraw its FY20 EBITDA guidance of $42-46 million.

RFG executive chairman Peter George highlights increased demand for bread and bakery products is driving strong sales at Brumby's, while home delivery services demand has led to an uplift for the company's quick service restaurant (QSR) division which includes Crust and Pizza Capers.

"Our coffee and bakery brands are all delivering compelling value deals, bundling, grab'n'go, and takehome promotions, and have all now partnered with aggregators to capitalize on the home delivery opportunity," says George.

"Crust and Pizza Capers have quickly rolled out a series of value deals to the broader mass market as well as a contactless delivery promise.

"To date we have only experienced a handful of temporary domestic outlet closures which are attributable to the coronavirus, however some of our master franchise partners and the USA network have indicated more direct impacts on trading as a consequence of stricter health measures within their territories."

George highlighted a commitment to supporting franchise and master franchise partners. This includes "operational modifications to meet changing circumstances, vigorous representation of their interests with landlords, supply chain management, and other initiatives designed to provide direct support".

"However, given the current significant uncertainty and the speed of change, it is difficult to reliably predict future activity and outcomes," he says.

The group has also adopted short-term strategies including realigning promotional activities, workforce planning initiatives to reduce payroll expense, a deferral of non-essential capital expenditure and projects, a recruitment freeze and ceasing non-essential travel.

"Whilst it remains premature to make reliable judgments, we anticipate there will be a growing need for RFG to provide additional financial and other support to its franchise community as the Covid-19 situation develops

"The strategies we are implementing, when coupled with RFG's enhanced balance sheet following the Company's recent recapitalisation, provide the Group with increased scope and capacity to respond to the unique set of challenges and evolving retail landscape in which its retail franchise network operates."

Elsewhere in food retail, yesterday roadside convenience restaurant operator Oliver's Real Food (ASX: OLI) announced the temporary suspension of operations four four weeks.

The decision was based on the government's advice to cancel all unnecessary travel arrangements and shut all non-essential services.

The group said it would continue to closely monitor the situation to seek to re-open its stores as soon as possible.

"The most important thing to focus on right now, is that we protect the health and safety of our staff and customers and that we all get through this in order to preserve our business and as many jobs as possible," says Oliver's CEO and founder Jason Gunn.

"Given our concern for the safety of our staff and customers, and the Government's mandate for people to cancel all unnecessary travel and to shut non-essential services, we feel we have no choice other than to cease trading our stores temporarily.

"We remain committed to providing employment for all of our team when we recommence trading."

 

Updated at 11:28am AEDT on 24 March 2020.

 
Author: Matt Ogg

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