Coffee the rising star at Restaurant Brands

By Phil Boeyen, ShareChat Business News Editor

Wednesday 19th July 2000

RBD's investment in Starbucks appears to be paying early dividends.

The chain of coffee outlets has produced its first positive result after just 18 months operation, and the company says future contribution is expected to grow as the chain develops.

RBD's net profit after tax for the half year was $7.4 million dollars -- a jump of 5.4 per cent over the same half last year. Total company sales were up 3.5 per cent to $120.4 million.

The company says the early positive result from Starbucks reflects its successful start-up and acceptance by New Zealanders. The coffee chain produced EBITDA of $0.2 million.

In its core KFC market, growth has been fairly negligible.

EBITDA, at $19.1 million, was up just 1.1 per cent in total dollars on the prior year.

Future plans for KFC include continuing store revitalisation, with seven major remodels to be undertaken in the second half and a store in Christchurch relocated. It says this effort, combined with the money being spent converting Eagle Boy's stores to the Pizza Hut brand, has curtailed KFC new store development and no new stores will open in the second half.

But while coffee steams ahead and chicken holds its own, the news hasn't been rosy in the pizza business.

Pizza Hut EBITDA was down 10 per cent as a result of pricing pressures early in the period and lower sales in its dine-in restaurants.

Restaurant Brands CEO, Jim Collier, says early this year retail prices of large pizzas fell to lows of $6-$8, but later in the period Pizza Hut improved its products and was able to introduce some price increases to the market. He says prices across all brands have now stabilised at more sustainable levels.

The company is now pinning its pizza hopes on the expansion of its home delivery base, which has increased markedly since the company purchased 53 Eagle Boys pizza stores earlier this year.

It also needs New Zealanders to start eating more of its pizza product.

Mr Collier says New Zealand's pizza consumption is low, with 35 per cent of households eating it once a month. That compares with countries such as Australia, Canada and the USA, where 90 per cent of households eat pizza once a week.

Pizza Hut is also hoping a foray into home delivery of beer and wine - due to be trialled in Auckland this month - will improve sales.

Restaurant Brands is maintaining a fully imputed 4.5-cent interim dividend, which will be paid out in September.

The company also says that it expects the full year's profit will be marginally ahead of last year, prior to the one time charge associated with the Eagle Boys acquisition

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