SPUR CASE STUDY

By JJ Bindemann

For AAA School of Advertising

Date: 29 October 2011

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Index

Introduction pg 2 The History and Background Pg 2 Outlook for the future pg 8 Market analysis and consumer insights pg 10 Competitive Strategies pg 17 South African Food and Beverages Industry Challenges pg 23 competitors pg 29 Positioning of the Spur pg 31 Promotions and advertising pg 31 Consumer Promise Pg 31 Product Elements Pg 34 Distribution, Procurement & Logistical Management Pg 37 Pricing Strategy Pg 37 Brand equity Development & Management: 38 Pg38 Brand Hierarchy for the Spur Corporation Restaurants39 Pg39 Questions related to case study: 41 Pg41 Future Recommendations: 42 Pg42 Reference List P45

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INTRODUCTION:

As a South African there is a handful of things you miss when you live abroad and the

greatest pride overcomes you when you stumble upon a product from your mother

country, and one of those is our Spur restaurants. Some critics may argue that Allen

Ambor was lucky and that the market was just ready for a steak house when he

opened up. This might be true but over the years many new comers entered the

market just to disappear or to come second to The Spur.

The purpose of this case study is to analyse the Spur Corporation and the market, for

future marketing or Brand Management courses.

THE HISTORY AND BACKGROUND: Spur Corporation is a truly South African multi brand

restaurant business listed on the travel and leisure sector of the JSE Limited. The Spur

Corporation consists out of 3 restaurant brands namely: Spur Steak Ranches, Panarottis

Pizza Pasta and John Dory‟s Fish & Grill. The group provides consumers with a

reasonably priced dining experience in a family orientated environment. This multi-

million Rand Corporation was established 44 years ago when the founder and current

Executive Chairman, Allen Ambor,

invested R4 000.00 to open the

Golden Spur in Newlands, Cape

Town – 1967. It fast developed a

reputation for taste, nutrition and

value for money meals. According

to Spur Corporation (2011)the

winning recipe for their success was

that they started with a warm,

relaxing family friendly environment.

They added generous portions of

great tasting food and a hearty

helping of quality.

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Over the 4 decades the Group has excelled to grow into one of the most recognized

brands in the country and today the Spur is proudly know as the official restaurant of

the South African Family.

In December 1990 the second restaurant brand, Panarottis Pizza Pasta was created on

the same principal that made the Spur Steak Ranch a household name. Like some

critics may say again, Panarottis opened its door just at the right time to capitalize on

the growing popularity of Pizza and Pastas.

John Dory‟s Fish and Grill , a KwaZulu-Natal based franchise comprising of seven outlets

was drawn into this stable by the Spur Corporation‟s purchase of 60% shareholding

within John Dory. Today the Spur Corporation owns 65% shares of the Mediterranean

culture and charismatic John Dory Fish & Grill.

The Spur Group was listed on the JSE in 1986 with a total of 43 franchised Spur Steak

Ranch outlets. In 1999 major restructuring was needed to reform the Spur Corporation

as we know it today. The Spur Corporation is an investment holding company. Through

its subsidiaries, primarily the Spur Group (Pty) Ltd, John Dory‟s Franchise (Pty) Ltd, Steak

Ranches International BV, Spur Corporation UK Ltd and Spur Corporation Australia Pty

Ltd, the group carries on the business of franchisor in the family sit down restaurant

market. Through subsidiaries, Spur Advertising (Pty) Ltd, Panarottis Advertising (Pty) Ltd,

John Dory‟s Advertising (Pty) Ltd, Spur Advertising UK Ltd, Spur Adve rtising Australia

(Pty) Ltd and Panarottis Advertising Australia Pty Ltd, the

group provides marketing and promotional services to

franchisees. A subsidiary of the company, Spur Group

Properties (Pty) Ltd owns certain properties which are

owner-occupied from a group perspective. The

company also has indirect interests in various companies

in the United Kingdom and Australia which own and

operates Spur and Panarottis restaurants in

According to the Spur Corporation (2011)1their success is greatly due to the love shown

by all stakeholders, the franchisees, staff, shareholders and the South African public for

the Spur Brand. The stakeholders comprises largely out of the franchise businesses of its

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three trading brands, Spur Steak Ranches, Panarottis Pizza Pasta and John Dory‟s Fish &

Grill, and its manufacturing and product distribution business.

Smaller operating segments include the group‟s training department, export business,

décor manufacturing business and radio station.

The group has seen sustained growth in

the recent years and passed the 300

restaurant mark in early 2006. By 30th

June 2010 this had increased to 359.

There are 245 Spur Steak Ranches and

50 Panarottis Restaurants and 26 John

Droy Fish & Grill outlets. Internationally

the group has 32 Spur Steak Ranches

and 6 Panarottis Pizza and Pasta

Restaurants in Africa, Australia,

Mauritius, United Emirates and the United Kingdom. According Spur Corporation(2011)

the Managing Director, Pierre van Tonder said that “the rapid growth in the middle

income market in South Africa – the prime target group of the Spur – has lead to

opportunities for restaurants in new areas as population demographics has shifted.”

The development of new shopping malls and entertainment centers also creates

opportunities for expansion while restaurant re-location and refurbishments provides an

opportunity to increase customer volumes. According to Spur Corporation (2011) “Spur

is constantly re-inventing and innovating to exceed consumer expectations.”

According to BusinessLIVE (2011)

“the Spur reported an increase in revenue of 15.9% to R403.4 Million for the year June

2011 as improving consumer‟s sentiment in South Africa resulting in stronger second half

trade performance. But the Spur Group said trading conditions remain difficult in the

foreign markets in which it operates, particularly in the United Kingdom and Ireland.”

Due to the uncertain economic environment the group has decided to consolidate

their UK operations by appointing a full time executive to head the group‟s operations

in the UK as this is expected to improve their performances.

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According to Spur Corporation (2011 “The Spur will focus primarily on Africa where new

restaurants are expected to be opened in Malawi, Tanzania, Namibia, Nigeria and

Mauritius.” They also plan to strengthen their footprint in South Africa with 11 Spur‟s, 2

Panarottis and 2 John Dory restaurants.

According to Spur Corporation (2011, Spur‟s vision is to be the best family sit-down

restaurant in the markets in which they trade. Their mission is to be dedicated at all

times to their customers and employees and to provide a “taste for life” for their

customers and be a “great place to work” for their employees.

Spur Corporation is South Africa‟s leading family sit-down restaurant group. Its value-

based quality family offerings across Spur Steak Ranches, Panarottis Pizza Pasta and

John Dory‟s Fish & Grill have capitalised on the increased spending power of the rapidly

growing middle class in South Africa.

They plan to continue their restaurant expansion across Spur Steak Ranches, Panarottis

Pizza Pasta and John Dory‟s Fish & Grill in South Africa, while growing our international

operations on a sustained basis as they enter some new and unchartered markets.

Along with the growth in the size of their market and potential customer base, new

opportunities arise as the population demographics of the country shift. The opening of

shopping malls and entertainment destinations always create scope for new outlets,

while restaurant relocations and refurbishments also provide an opportunity to increase

customer volumes, according to Spur Corporation , 2011.

Spur Corporation assists franchisees in a number of areas both before and after

opening. Initial support includes compiling a business plan and cash flow forecast,

assistance in choosing a site and negotiating a lease, as well as operational guidance

with the opening and initial running of the restaurant. The well-trained, motivated and

experienced operations team provides ongoing backup, support and assistance to

franchisees. The team is responsible for upholding the high quality of the brand and its

products, as well as assisting the franchisee in all aspects of building and maintaining a

successful business. Support is also provided by way of the evaluation and training of

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employees, integrated information systems and the Spur Corporation marketing plan.

Regular restaurant visits ensure that the Spur‟s high operational standards, external

health and safety regulations and their customers‟ demands for quality and service are

met and maintained.

Being part of the South African culture for so many years the Spur Corporation and its

affiliations have a strong social awareness philosophy and a commitment to improve

their quality of life of disadvantaged South Africans. The Group assists in the upliftment

of communities primarily through sport. Internally the focus is on people development

and the creation of a stimulating work environment which supports the group‟s mission

of making Spur a great work place.

Through the years Spur has been committed to sustainability practices to ensure the

long-term success of the group. More than 140 sport and recreational events was

sponsored by the Spur during 2010 – examples of these events are: Spur Soccer

Masidlale, , Junior Rugby Development, The Spur

annual charity golf tournament, the Teddy Bear Clinic

and Reach for a Dream events.

According to Spur Corporation (2011 “it recognized

that these practices are becoming a business

imperative and no longer a Nice to have.” In

answering this they have established a sustainability

committee, whose mandate is to establish Green

policies and to assist management in developing a

sustainability strategy for the group.

The Spur Group‟s sustainability strategy is based on three segments:

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Economic:

According to the Spur Corporation (2010)Annual Report their strategies are critical to

include the identification and expansion into new markets, capitalizing on all feasible

opportunities within the local market, increasing the utilization of existing manufacturing

and production capabilities, increasing customer frequency and spend and ensuring

financial feasibility of the Group.

Environmental:

The strategy will answer issues with waste management, sustainable energy, water

management and biodiversity. According to Spur Corporation (2011) energy in the

form of electricity has been the biggest threat to the survival of the Spur Group.

Social:

Part of the success of the Spur Group up to date is their social strategy and according

to the Spur Corporation (2011 “Consideration is being given to expanding these

strategies with particular focus on skills development within and external to the group

and giving back to the communities.” For years Spur has been part of the community

and one of their greatest successes is to promote from within their own company.

Several directors and Executive Management have started out their career on the

floors of a Spur. This reflects the family values of the Spur Corporation.

According to Spur Corporation (2011 “Second only to trademarks, people are its most

valued and important asset.” The Spur aims to attract, develop and retrain highly

energized individuals. Over the last few years increased focus is being placed on

creating a more sustainable work environment. Recent policies compiled will focus on

skills development and the basic conditions of employment. According to Spur

Corporation (2011

“all human resource policies are aimed to eliminate discrimination in the

workplace and the group is committed to removing barriers to enable

previously disadvantaged employees to reach their true potential.”

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This is a reflection on the strenuous shortcomings of qualified personal for the restaurant

industry.

To address the shortcomings of skilled labour and customer service excellence, which is

a vital part of the service delivery, an in-house training unit is being created to ensure

that franchisees and their staff members, together with head office employees, acquire

the skills to perform in line with the groups high standards. A wide range of training

courses are offered to franchisees at training centers in Cape Town And Gauteng.

According to Spur Corporation (2011 “during the past year 7 624 delegates attended

internal and external workshops. In addition classroom training is supplied with practical

training at a number of accredited training restaurants in Gaugeng, KwaZulu Natal and

the Western Cape for new franchisees and management.

Financial assistance by the Spur Corporation is provided to employees for skills

development. This includes external courses, part time studies at universities and other

tertiary institutes. Several employees are current registered for degrees, diplomas and

courses through a number of independent institutes. This financial assistance is

extended to employees dependants for primary and secondary educational

requirements.

Incentive bonus schemes which are based on groups and individuals performances

includes a share incentive scheme which was introduced in December 2004 to allow

management to participate in the growth of the Spur Corporation and to assist the

group in retaining directors and management of the highest caliber.

Outlook for the future

According the Spur Corporation (2011Van Tonder said “although consumer optimism

has improved in recent months, heavy debt burdens, increasing fuel, utility and food

prices and the anticipated increase in inflation remain a challenge.”

In today‟s economic environment, sales growth of their restaurants will be driven by

value added and innovative promotions so that franchisees profitability is well

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managed and Spur remain competitive by tailoring their menus to meet their

customer‟s demands.

Spur recently launched their smaller format Spur restaurant model which enabled the

brand to increase the penetration into rural areas. Spur Corporation (2011Van Tonder is

of the opinion that “this model makes it feasible to operate

in smaller towns which have growth potential and where we

have not traded until now. The start-up costs are

substantially lower than the standard format Spur outlet

owing to the smaller trading area and simplified menu

offering. Two such outlets were opened in Nylstroom and

Groblersdal and have delivered rewarding returns.”

Internationally Spur is increasing to 38 restaurants in Aberdeen (Scotland), Mandurah

(Western Australia), Durbai (United Arab Emarites), Maseru (Lesotho) and the first Spur

Express outlet in Gaborone (Botswana).

Over the past year several rumors appeared in the media claiming that Spur might buy

Famous Brands. In March 2011 according to Spur Corporation (2011)Van Tonder said it

was highly unlikely that Spur would buy additional restaurant brands. “We are

expanding our off-shore interests so it‟s likely some of the cash pile will be used for

international operations.” This was contradicted by the Spur Corporation‟s acquisition

of 60% stake in Cappuccino‟s, the café and pizzeria restaurant franchise, for

approximately R25 million in cash. Cappuccino‟s currently operates 15 franchise

restaurants, with the majority of the outlets being in Gauteng. This contradicting action

is a reflection of a shift in priorities of the Spur group due to the international

economical turndown.

The past years market conditions suppressed trading conditions in the local restaurant

environment and in the international markets in which the group operates. The rising

food, fuel, retail renting prices and emerging food shortage within South Africa remains

a relevant constant threat to the group.

According to Spur Corporation (2011Van Tonder said, “the turnover was up only 6% to

R175m, but operating profits came in almost 20% higher at R66m.”

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The Spur Corporation addresses these environmental threats by creatively and

innovatively designing menus and recipes to be cost effective and highly profitable.

The Spur group also invested in stabilizing their purchases through the acquisition of bulk

produce through cost effective channels and outsourcing distribution. To address the

rise in rental costs the Spur continuously negotiates on behalf of its franchisees and uses

its bargaining power, since the group has Panarottis and the Spur trading within the

same retail spaces. The East Rand Mall is an example where the Spur has built a stand-

alone store adjacent to the Mall and has improved their volume considerably.

MARKET ANALYSIS AND CONSUMER INSIGHTS:

The Spur competes with a wide variety of competitors within the South African food and

beverage market for the share of wallet. Spur is very clear that they consider

themselves as a sit-down family restaurant. Within this market there is a vast amount of

competitors. Spur as by definition even though they do provide sit-down service could

be classified as a fast food restaurant. This places Spur in the unique predicament

where it enjoys very nigh brand awareness and strong brand knowledge but with all the

advertising and marketing it is a very good fast food restaurant and a nice family Steak

House therefore this study will consider the entire food and beverage industry as a

competitive factor.

The South African restaurant industry i.e. market structure and competitive strategies

The food and beverage industry in South Africa is evolving and it comprises out of

independent restaurants, coffee shops, franchised restaurants, fast food outlets, large

supermarket chains, informal traders as well as independent food caterers and other

catering services providers.

Over the last twenty years the restaurant industry in South Africa (SA) has been

reengineered. According to Maumbe (2010) Due to globalisation, urbanisation, an

increase in the black middle-class, and women in the workplace, the food and

agricultural supply chain, consumption patterns of the population, and food industry

competition has altered In addition, Maumbe (2010) recently claimed that the South

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African restaurant industry is making use of a combination of vertical and horizontal

market coordination, branding, and product differentiation strategies to assist the cost-

effective production, consumption, marketing and distribution of food products.

Regardless of the economic crisis SA market trends show an increased demand for fast

food by South Africans. In 2009, the take-away and fast food restaurants showed a

staggering 8.1% growth Maumbe (2010) Customary home-cooked meals tend to

decrease, seeing that both household incomes and standards of living rise, more

people are eating fast foods and at restaurants. Globalization and westernization of

diets is also driving food consumption patterns ( Pingali, 2007). As a result the

configuration of the restaurant industry structure has changed notably. For instance,

the industry used to be dominated by oligopolistic market configuration, however in

recent years a more multiplicity structure has evolved i.e. multi-national and regional

franchises, independent food caterers, and informal traders. Even though most South

African restaurant industries are coordinated as franchises, others are owned by

independent entrepreneurs that have thrived under the Broad-Based Black Economic

Empowerment (BBBEE) Act of 2003 Maumbe&Van Wyk(2008)

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Competitive advantages in the food and beverage industry

The Porter model is a useful analytical framework to determine how to gain competitive

advantages by intentionally arranging a business within an engaging industry

environment and then leveraging these advantages over rival competitors.

Industry Rivalry 1. Very High 2. Low pricing

power 3. Low profit

margins 4. Market

overpopulated

Potential Entry 1. Relatively high initial

capital outlay 2. Growing industry very

fast 3. Scale of economies is

important 4. Logistics in South

Africa is expensive 5. BBBEE greats new

opportunities for new entry’s

Bargaining Power of Customers

1. Limited disposable income

2. Relatively low average purchase

3. Rising segment of discerning consumers

4. Consumer Council of South Africa

5. Promotion of Access to Information Act, 2000

6. Consumer Protection

Act 2010

Buyer Bargaining Power of Buyers

1. Regional franchises has the market power

2. Many suppliers 3. Very low operator

brand loyalty 4. Switching costs is low

(e.g. distribution channels)

Threats of substitutes

1. High meal solutions

options

2. Switching costs is low

for customers

3. Regional franchises

control the market

market

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Overall the restaurant industry has become increasingly global and highly competitive

food and beverage industries are gaining a competitive advantage by using a

combination of strategies. According to Maumbe (2010). These strategies include co-

branding, employee empowerment, international as well as domestic franchises and

installing information and communication technologies (ICT).

An example of co-branding includes filling stations and fast food companies that are

making joint investments, thereby operating as one. This allows them to raise consumer

awareness of their food services as well as expand sales. It is crucial for success that

South African restaurant industries implement BBBEE agreements. Not only does this

improve employee empowerment but may also be used as a competitive edge. The

Franchising Association of South Africa (FASA) is the governing body for franchisees in

the South Africa. In the food and beverage industry, FASA supervise competition and

best interest issues for the small to medium and micro-enterprises (SMME). Finally ICT, if

implemented properly, can be a valuable competitive and communication tool.

Structuring ICT plays a fundamental role in facilitating the search characteristics of food

products, the making and processing of food orders, and the expansion of

communication channels with industry suppliers and other key stakeholders.

Consequently this would influence the flow of market information thereby lowering

costs in the restaurant food supply chain.

Economic

There is no doubt that the food and beverage industry and economy has a synergetic

relationship.

In 2007, the total income for the food and beverages industry was R26 604 million. It

would be fair to say that the restaurant and coffee shop segment contributed the most,

since this segment contributed the largest percentage share (47%) of the total income

in the food and beverages industry, next was the fast food outlets (29%) and then

caterers and other catering services such as „ready made‟ meals (25%) (Statistics South

Africa, 2007). Also in 2007, the food and beverage industry in South Africa employed

181 373 people. A further break down showed that restaurants and coffee shops

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employed 92 500 people, constituting the largest percentage (51%), followed by

caterers and other catering services with 54 412 (30%) and finally fast food outlets with

34 461employees (19%).

The strategic importance of ICT according to Maumbe (2010) in the South African food

and beverage industry is demonstrated by aggregate expenditure of R382 million per

annum (30%) on computer technology and software, second to plant and heavy

equipment R679 million in 2007. The trend on national ICT investment indicates rising

importance of ICT as a source of competitive advantage in the South African business

sector and food and beverage industry in particular.

Before the international economic crisis, South Africa was ranked 25th by the Global

Competitiveness Report out of 75 countries, and had a sound economic growth rate

estimated at 4% per annum. International multi-national food service chains such as

McDonalds and KFC have invested in South Africa. According to Maumbe (2010) “This

may be attributed to South Africa‟s progressive stable political situation, sound

economic growth rate under a stable African National Congress (ANC)-led

government and its competitive and advanced business environment. This growing

consumerism provides major investment incentives to global food and beverage firms.”

South Africa was isolated during the apartheid regime from the international business

world. The end of apartheid meant that international companies could penetrate the

highly profitable South African market since it was socially acceptable. The companies

who entered the market the soonest capitalized on the well developed infrastructure

and economical environment created by the old South African regime.

Market structure

South Africa has a well-developed food and beverage industry with various market

structuring.

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Regional and global multi-national corporation franchises:

The franchise food and beverage chains include global multi-national corporations as

well as regional franchises. The main regional franchises in SA include the King Pie,

Nando‟s Group, Spur Group and Famous Brands and occupy a dominant market share

in the food and beverage industry according to Maumbe (2010), of which the later two

are the foremost. The leading regional franchises have outlets located in all the major

cities in South Africa and have entered the fast food market in other African countries

as well. For instance, the Famous Brands Group operates over 2000 outlets in South

Africa and 15 other African countries. .

The global multi-national corporation franchises (GMNCF) are the main competitors in

South Africa‟s developing food and beverage market. The two leading franchises are

Tricon Global Restaurants [TGR] (i.e., KFC and Pizza Hut) and McDonalds. The Tricon

Global Restaurants chain offers its traditional chicken meals and pizzas. McDonalds on

the other hand is a major global fast food chain, however it does not occupy a

dominant market share in South Africa‟s competitive food & beverage industry. The

GMNCF competes with the regional franchises which dominate the domestic market

and are now expanding into global markets.

Supermarket food chains:

Supermarket chains have gain access to the market segment which traditionally used

to be dominated by franchised fast food operations and are aggressively selling hot

meals to urban consumers. According to Anon, (2011a ) the main supermarket food

chains in South Africa are Pick ‟n Pay, Shoprite Checkers, while Woolworths has focused

on a growing organic food market niche.

A recent investigation in China (Yu and Abler, 2009) indicates that rapid economic

growth leads to structural changes in food demand and, as incomes rise, it shifts

consumer preferences away from grains towards meat and dairy products. South

Africa‟s rapid economic growth, the preference for American-style cuisine,

urbanization, and rising consumerism are all factors which have resulted in the

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appearance of new supermarket chains and independent restaurants that market

take-away foods according to Maumbe (2010).

Contract food caterers:

The Contract food caterers sector is fairly concentrated and is dominated by relatively

few large catering companies and the leading caterers (based on the number of

contracts) are Compass Southern Africa, Reserve Holdings and ICS Holdings.

According Maumbe (2010)

“Both the private and public sectors subcontract their catering services to these

leading contract caterers. Contract caterers purchase the bulk of their supplies

directly from local manufacturers, catering wholesalers, and distributors on a

contract basis”.

Informal independent traders:

Informal traders provide and market food directly to consumers, thereby cutting out the

middleman. This group include individual street vendors operating on the roadside,

main public transport terminuses, and other designated or non-designated places for

selling food.

According to Maumbe (2010) I”n most urban areas, such informal traders rent space

from local municipality “and sell hot burgers, sandwiches, and pies to passers-by. This

food service segment is a major part of the so called “second economy” in local

townships.

Global and domestic forces:

The restructuring of South African food and beverage industry is being influenced by

the global and domestic forces of change according to Maumbe (2010) . At the

global level, major trends driving food and beverage industry are demanding efficient

marketing, product consistency price stability, safety and nutrition, and predictable

product availability. (Jekanowski, 2001). In South Africa, similar trends are affecting the

food and beverage industry including many new entrants, co-branding, ICT

deployment, customization, health consciousness, multi-franchising, service

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differentiation, and employee empowerment. Irrespective of food and beverage

industry location, success belongs to those firms that can prepare food better, faster

and safer than competitors. The food and beverage industry are generally quick to

adapt to constantly changing taste and preferences of their customers.

In the US, the food and beverage industry answered a growing consumer demand for

healthy diets by offering salads and vegetarian options. According to Maumbe (2010)

Global trends indicate that food and beverage industry competitive strategies depend

on a combination of factors such as culinary experiences, strategic industry alliances,

and global food market developments.

Competitive Strategies

Franchising Strategy

The South Africa‟s food and beverage industry is dominated by the regional and global

franchises. South Africa has an extensive franchise restaurant chain that serve wide

variety of meals. According to Maumbe (2010) “About 90 percent of franchises in

South Africa have been locally developed while 10 percent were developed

internationally. Franchising industry contributes about 12 percent to Gross Domestic

Product (GDP) in South Africa.” Approximately 165 franchisers and affiliates are

registered with the Franchise Association of South Africa (FASA) and over 6000

franchisees. The franchising strategy aims to overcome stiff competition between

regional and global franchises.

Market Coordination Strategies

The South African food and beverage market is highly influenced by the backward and

forward linkages into agriculture and retailing.

Partnerships have been forged between food and beverage outlets and other

strategic industry partners such as farmers, specialist retailers (e.g. bakeries, butcheries,

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and green groceries) and wholesalers. Specialist retailers are the main suppliers to

restaurants. Dry groceries are often purchased through catering wholesalers, while

perishables and frozen products are purchased directly from the manufacturers or

designated distributors. The effective coordination of each link in the South Africa‟s

food and beverage industry food supply chain is critical as it affects key strategic issues

such as food security, food safety, nutrition, health, corporate social responsibility and

environmental sustainability.

According to Maumbe (2010)

“The South Africa‟s food and beverage industry is characterized by the use of

production contracts, tight supply chains, and ICT to enhance coordination of

product and information flows up and down the supply chain”.

In production specification contracts, the producers and food and beverage outlets

sign product specification contracts whereby producers promise to deliver certain

quantities and quality of their products. On the other Maumbe (2010) said hand the

food and beverage outlets pledge to buy the delivered amount at the stipulated price-

quality relationship. Rigid supply schedules are usually maintained to minimize

marketing risks associated with the nature of food products.

In market specification contracts, the food and beverage outlets provide both

managerial and financial support to farmers. In addition, the buyer specifies the

varieties of the food products to be grown. These types of contracts are commonly

used by GMNCF such as McDonalds, KFC‟s and Tricon Global International. Maumbe

(2010) found that supermarkets in Gauteng province of South Africa use dual

procurement strategies involving direct purchase from farmers and sourcing from Fruit

and produce markets.

South African consumers are becoming more discerning and according to Maumbe

(2010), 2010 South Africans “are not willing to compromise on these attributes”. The

development of centralized distribution centres in South Africa ensures that standard

food or meal solutions are delivered to numerous outlets around the country. Although

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food and beverage outlets have different operator owners, the basic requirement for

the franchisor is to market a uniform product across the chains at all times. According

Nagengast and Appleton (1998) “The relationship between farmers, wholesalers, and

food and beverage outlets across the county is typical of vertical market coordination

while the collaboration among franchised outlets is characteristic of horizontal market

coordination”. Both forms of market coordination mechanisms are widely used in food

and beverage industry in the supply chains for dairy products, meats, and fresh

produce (Gibbons, 2004). The potato supply chain is the „mainstay‟ of the food and

beverage industry globally Nagengast and Appleton, (1998). Most of the popular food

and beverage outlets franchises in South Africa (e.g., KFC, Nandos, Chicken Licken

etc.) are vertically linked with producers through centralized wholesalers.

Maumbe (2010), founded that “Vertical and horizontal coordination strategies yield

several benefits to the food and beverage industry such as assured supply, building

trust-based supply chains, the ability to market quality products, and reduction in

procurement costs in the long term. “

Co-branding Strategies

In Co-branding it is expected that the alliance will generate profits for both parties. In

many cases this can cut down on expenses, especially advertising costs.

There are a number of co-branding efforts in food and beverage industry in South

Africa. For instance Maumbe (2010), found that Engen and Wimpy co-branding on

national highways, they are advertised together and both benefit from each other.

Secondly, Steers, Fish Aways and Blockbuster video co-brand their products. By

providing convenience and variety this grouping is bound to become a lazy night

destination point. McDonalds co-brands its products with McCain which supplies the

potatoes that are used to make the McFries.

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Product Differentiation Strategies

The South African Restaurant industry is faced with stiff competition from the major

supermarkets (e.g. Spar, Shoprite Checkers and Pick‟n Pay), other retail chains,

convenience stores, independent food caterers and informal traders. The Restaurant

industry competes with supermarkets which offer ready meals daily to urban

consumers. Maumbe (2010) stated that this is a “growing challenge posed by the

increasingly popular meals in the deli sections of leading supermarket chains,

meaningful product differentiation has become imperative”.

The marketing of well-known brands is a key driver of product differentiation in South

Africa. Most consumers perceive branded products and their product extensions as

superior quality products. In South Africa, KFC is considered a top-brand with a huge

following of loyal customers. KFC attracts a large customer following and is perceived

as the most popular fast food restaurant chain in South Africa (Brand and Branding

Award).

The second driver of product differentiation in food and beverage outlets industry is

diversification of menus to cater for different socio economic, religious, and cultural

groups. The practices of upsizing meals, adding extensions to meals and bundling meal

solutions (e.g. providing toys at a cost on children happy meals) are common in South

Africa. Pingali (2007) argues that globalization and growing urban middle class has led

to rise in fast food consumption and convergence toward Western Diets. As already

mentioned, supermarkets are entering the arena offering stiff competition by widening

meal solutions and diet choices. As dual income households rise, the demand for

meals for school children has increased creating further expansion in meal solutions and

diet offerings.

A third driver of product differentiation is the sale of healthy products. There is a

growing awareness among South Africans about the benefits of healthy eating. As

health conscious consumers increase, the food and beverage outlets industry is being

forced to adapt. Global trends towards lighter meals, low salt, fat-free, no sugar, and

21

low-carbohydrates have filtered among South African consumers. Although health

conscious consumers prefer low calories, they are usually unwilling to compromise on

flavour. In response to the above changes in consumer attitudes and lifestyle, the

South African food and beverage outlets industry has devised strategies for healthy

food products. For instance, McDonalds South Africa has introduced healthy options

such as salads, fruit and low-carbohydrate options. According to Maumbe (2010),

“Nando‟s promotional strategies are aimed at raising awareness of its wide range of

healthy options. KFC has introduced lower-fat wraps”. In addition to the l diet trend,

South African consumers are demanding more natural foods. Customers are seeking

products that are organic, wholesome, and unprocessed. In response, Woolworths

adopted a strategy to promote its organic product range. The demand for its Kauai

brand is growing as consumer preferences for fresh produce without chemicals or

preservatives have increased. According to Statistics South Africa (2011) Chicken and

fish consumption has also increased while red meat consumption has declined.

Consumers aremore discerning in South Africa, and the food and beverage outlets

industry has responded to the shift toward health consciousness. A number of South

African food and beverage firms have adopted healthy product strategies to

penetrate market segment of health conscious consumers. .

Service Differentiation Strategies

The South African food and beverage industry competes on a number of fronts

regarding service offering. The service differentiation strategy revolves around meal

variety (e.g. kids meals, grilled, fried, salads, etc), drive-through facilities, home delivery

of meal orders, family friendliness, operating hours, convenient locations, and customer

care. Most restaurants are smoke-free zones following legislation to ban smoking in

public in South Africa. Maumbe (2010) is of the opinion “The rise in black middleclass,

stable market conditions, and rise in demand for recreation and eating out offers huge

opportunities for the Restaurant industry.” In South Africa, local products are being

marketed using the “Proudly South African” label highlighting the popularity of buy

local campaigns as global communities strive to protect local food economies and

local jobs. Consequently, consumers and other advocates of locally integrated food

22

economies tend to associate such national campaign with products and services

made in South Africa.

Some fast food restaurants provide consumer advice on healthy living on their website

as part of service differentiation.

Customer Relationship Management (CRM) Strategies

The restaurant industry is using various customer retention strategies. Examples of

customer loyalty programs are free drinks for children and special meals to attract

consumers to restaurants. Some food and beverage firms recognize birthdays and offer

free desserts.

According to Maumbe (2010), “Making restaurants family oriented is a key strategy

used for customer retention and market share expansion. Some new food and

beverage outlets have launched coupons whereby after purchasing a certain number

of items, customer qualifies for a free item”.

Such deals are attractive for large families who would normally buy more than one item

for their meals. Some pricing special deals tend to target students who consume food

in large numbers or in a group setting.

Corporate Social Responsibility (CSR) Strategies

The strategy comprises three main areas, management control, skills development,

preferential procurement, socio-economic development, and employment Maumbe

and Van Wyk, (2008)

The restaurant industry‟s BBBEE charter specifies the targets and milestones that have to

be met depending on the size of the firm. For instance, the appointment of females as

Board of Directors is one of the key strategies used by food and beverage firms to meet

their BBBEE requirements. Training and professional advancement of the restaurant

23

crew is also a vital strategy for meeting targets on BBBEE score cards Maumbe and Van

Wyk, (2008). In South Africa, food and beverage outlets have the responsibility to craft

unique strategies needed to meet BBBEE requirements as detected by the BBBEE

Charter. The ability to meet BBBEE targets is key to operating a successful food and

beverage firm in South Africa.

South African Food and Beverages Industry Challenges

Strong Rand

The South African Government under pressure from Trade Unions and large

manufacturing companies are constantly trying to stabilize the South African Rand.

According to the Trade Unions and large industries a weaker and stable Rand will

increase employment among South Africans. A weaker South African Rand and

especially an unstable Rand means that South Africans has to pay premium prices for

basic living expenses therefore contradictory to the popular belief that a weaker Rand

is beneficial for South Africa. South African restaurants are highly dependent on

disposable income of the South African consumers. At the same time restaurants also

have to compete with international new entries to the South African market which have

the benefit of stronger currency backings.

Political stability

The South African political system affects the entire South African Food and Beverages

Industry and determines the context within which businesses operate. Central

government and local authorities are major employers in South Africa; in many towns

they are the biggest employers. A change in policy can have major effects on the local

economy and on the South African Food and Beverages Industry.

Government departments frequently consult pressure groups about new regulations

and legislation. Pressure groups exist to influence government and politicians. Their

activities can also have a major impact on industries and individual firms, for example

the attempt by animal rights activists to prevent live exports of cattle. South African

24

Food and Beverages Industry has to be prepared to deal with the effects of pressure

group campaigns and to counter propaganda.

The South African political environment must be seen more and more as part of a wider

international context. An example can be seen in the European Union, which often has

more a different political bias from that of its member countries. Obligations under

international treaties must also be met, such as compliance with trade rules.

In the recent months the ANC Youth League leader, Julius Malema has been very

outspoken about the political and social dissatisfaction among the black youth of

today. A growing call for social and economical justice among the economical

oppressed can no longer be ignored. Restaurants in South Africa are one of the largest

employment industries today and growing pressure is being placed on restaurants to

provide better work conditions, salaries and opportunities for previously disadvantaged.

Among the complaints of the South African Youth is education and today 17 years after

independence the education system has failed the majority of them. This has a

detrimental impact on the availability of qualified and trainable staff.

The Growing Problem of Obesity

The Restaurant sector is blamed for selling unhealthy cheap food that encourages

people to overeat. The so called fast food restaurants are known to create a false

sense of abundance by providing a ready supply of condiments or items that cost the

restaurant almost nothing.

The South African Food and Beverages industries are also characterized by overworked

and over-managed young workers who work low wage jobs Schlosser (2004) and are

lured by free lunches. With the problem of obesity rising, the South African Food and

Beverages Industry is under attack for negligence despite the fact that it remains

unclear that fast food cause obesity Collins and Baker ( 2009). Nonetheless, the obesity

problem persists and remains a huge challenge for the restaurant industry in South

Africa and globally.

25

Social Inequality

According to Econobee (2009), the sector challenges are two-fold; the need to

become more inclusive, and globally competitive. Promoting inclusiveness requires

greater participation in economic activities and decision making by disadvantaged

groups such as blacks, coloureds and Indians in the sector. The challenge for South

African Food and Beverages Industry is to achieve certain targets on the score card

identified by 4 of the 7 focal areas of empowerment and transformation namely

ownership, management control, employment equity, skills development, enterprise

development, preferential procurement, and socio-economic development that are

designed to address historical imbalances in access to opportunities and benefits.

Food Safety Legislation

South Africa has had its fair share of food scares. There are numerous press reports on

incidents of contaminated food ranging from chickens to beef to unhygienic kitchen

conditions.

According to Mergenthale (2009) “Such reports have evoked widespread concern

about food safety. Supermarket chain, Woolworths, has established a cold chain of

organic or hormone and antibiotic-free products to promote safety. In South Africa,

food safety regulations and legislation are weakly enforced and this is fairly common

in other African countries “.

Food safety administration is controlled by provincial and local government authorities

in South Africa. Food safety lapses have been associated with outbreaks of foot and

mouth, E-coli, and Rift valley fever, among others. In South Arica and other developing

countries, beef, dairy, poultry, and fruit and vegetable supply chains are major sources

of food risks. Food safety concerns from disease outbreaks and traceability continue to

afflict global food markets Mergenthale (2009) “The challenge is not the lack food

safety legislation, but its enforcement.”

26

Production Risks: Energy and Water Problems

South Africa is facing serious electricity shortages that have resulted in load shedding

and blackouts. The rapid pace of economic development has outstripped the

country‟s capacity to provide reliable energy supplies. According to Wolson (2007)

“Intermittent energy shortages started in 2005 and have worsened overtime. Policy

makers have blamed South Africa‟s economic boom as the major cause for the energy

crisis. Short-term solutions have led to cuts in supplies to neighbouring countries such as

Zimbabwe, Botswana, and Mozambique.”

The South African Food and Beverages Industry is one of the sectors severely

threatened by the electricity shortages. Food and agricultural products are unique in

that they are perishable, rapidly loose quality, and spoil easily resulting in loss of

freshness and safety hazards to the South Africa Food and Beverages Industry food

supply chain. According to Collins & Baker (2009) “Irrigated crops face the risk of yield

losses while food marketing firms faces uncertainty due to product grading and quality

variations” . The lack of dependable energy supplies is compounded by concerns

about South Africa Food and Beverages Industry supply chain exposure to

contaminated water supplies. Marketing contaminated vegetables and meat products

from livestock that graze on pastures located on contaminated water sheds are a

source of anxiety for the food industry.

Energy usage of the restaurant industry

16%

21%

1%

6%

38%

15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

0 1 2 3 4 5 6 7

Lighting

Heating, Ventilation and Cooling

IT Equipment

Water Heating

27

The problems of electricity and water, both key inputs in the South Africa Food and

Beverages Industry supply chain are a cause for concern and require long term solution

from policy makers.

Restaurant Waste Disposal and Environmental Degradation

The South African Food and Beverages Industry present some threats to sustainable

environment management. Waste packaging materials used by customers cause

environmental degradation. In-store recycling is not a major phenomenon although

McDonalds has initiated its own in-store recycling programs in South Africa. These

initiatives are likely to have a major impact if extended to other South Africa Food and

Beverages outlets.

All restaurants need to step up action on handling and disposal of behind the counter

waste, promote reusable items, and minimize solid waste. Although agriculture

biotechnology is a major global challenge, it seems there is no robust demand for

ethical products from South African consumers according to Maumbe (2010).

Lack of Hygiene, Slow Customer Response, and Standardising

The South African Food and Beverages Industry still face serious problems of hygiene,

slow response time, and standardising. Regarding hygiene, some fast food outlets serve

food that is prepared by workers without gloves or by people who operate tills and

handle bank notes at the same time. It is common for consumers to stand in long

queues and be served their food after prolonged waiting period defeating the

meaning of the term “fast food”.

In contrast, some restaurants pre-prepare food in advance to cut down order

processing time but that compromises product freshness. South African consumers

complain about small portion sizes and not getting value for their money. Some

discerning consumers are also concerned about the use of biotechnology products,

which raises ethical and moral questions about the environmental, medical, and

human welfare impacts.

28

Conclusions

Twenty years ago hardly anybody in South Africa knew what basil pesto was. Today

irrespective of the consumers demographic or geographical position, knows not just

what basil pesto is but has a vast knowledge of culinary arts. This is due to DSTV‟s

cooking channels and other media influences. Therefore expectations from the South

African consumers are very high.

The over-populated market environment creates a very competitive and unstable

business environment. Large international and local franchises enjoy great brand

awareness and marketing budgets but this does not necessarily guarantee success

within the industry. Consumers frequently visit food and beverage outlets not

necessarily because they hungry but for the experience therefore to differentiate the

restaurant from other competitive restaurants vast investments is required to ensure a

completely satisfied consumer experience.

The South African Food and Beverages Industry in South Africa have transformed food

production, marketing and consumption patterns. The industry has added tremendous

diversity to the available restaurant food products thereby changing the traditional

consumption patterns of ordinary South Africans. The restaurant industry is undergoing

restructuring that is characterized by a proliferation of regional and global franchises,

and the entry of challengers such as Fast Food chains, independent food caterers and

informal traders that are competing with well-established restaurants.

29

COMPETITORS:

Due to Spur‟s product offering and style of service it competes with a wide variety of

competitors for the share of the consumers wallet ranging from steak houses to burger

take-aways. Spur Corporation essentially operates a franchise style business strategy

which is targeting the South African middle class family market. Therefore the two most

aggressive franchise operating companies who offer similar product ranges with a

similar pricing structure (value for money) is Famous Brands Limited and Taste Holdings.

Famous Brands share most of Spur‟s common retail space and have a wide family

orientated brand. Taste Holdings is relatively a new comer to the market but has shown

strong challenger potential.

Famous Brands Limited – The leading competitor in the market.

Famous Brands Limited its 2000th restaurant this year is planning to open up another 120

out lets according to Cape Times (2011: 31). The company opened is a public

company listed on the Johannesburg Stock Exchange in South Africa. The company is

Africa's leading quick service and casual dining restaurant franchisor. The company's

has 2000 franchised restaurants spread

across South Africa and has grown with over

245 restaurant with in two years. Famous

Brands Limited was previously Steers Holdings

Limited, which was listed on the

Johannesburg Stock Exchange in March

1994, and was later renamed Famous Brands

Limited. The company expanded through

the years by acquiring other fast-food brands and extending its manufacturing.

The group consists of the following: Steers, Mugg & Bean, Wimpy, Wimpy (UK),

Debonairs Pizza, FishAways, House of Coffees, Brazillian Café andBlack Steers The

company also consists of a manufacturing, Famous Brands Limited follows a strong

cobranding marketing strategy and for the future they would look for opportunities

30

within the brands by addressing trading formats. This could be seen where Famous

Brands launch its new forecourt format for Mug & Bean.

Famous Brands continuously advertise and promote their products to a very similar

market segment. Famous Brands Wimpy positioned themselves also as

a favorite family sit-down restaurant. In the mind of the consumers

Spur‟s and Wimpy‟s offer very similar services and products.

TASTE holdings – the challenger competitor

TASTE Holdings with 246 outlets are the owners of Maxi‟s, Scooters Pizza St Elmo‟s. Over

the last years, TASTE Holdings has shown great growth and are challenging the larger

franchise brands. According to Cape Times 2011 “the group posted a 27 percent rise in

system wide sales to R416 million and a 23 percent rise in reven ue to R113.4m”

According to Cape Times (2011: 31) Carlo

Gonzaga said the group will continue to focus

on the vertical integration of the food business

and in the long run they want extend their range

of food product by the company to improve on

the quality and price for it‟s franchisees. Their

strategy will include implementing a distribution

and warehousing capacity.

TASTE Holdings continues to take a reasonably

large portion of the disposable income from Spurs target market. Even though TASTE

Holdings brands are lesser known the growth rate of their new outlets will soon make

them a leader in the market. Maxis and Schooters Pizzas focus on value for money

strategies whereas St Elmo‟s have a strong value for family strategy.

The threat of larger international competitors are a reality which Spur will have to

address. Tricon are planning to reintroduce their Pizza Hut brand to South Africa.

31

POSITIONING:

Spur has positioned itself for more than 40 years as a family style sit-down restaurant in

South Africa. Very little has changed and due to the success they had over the years

Sue Biller is of meaning that this is the success of Spur.

South Africa‟s Family Restaurant.

Spur positioned itself as a family restaurant for the growing middle class market.

PROMOTIONS:

“Nothing satisfies us more than pleasing you our customers.”

Consumer Promise

According to Spur Corporation (2011) “Food is our passion. Welcoming you is our

pleasure. And our greatest reward is presenting our delicious meals. Whether it‟s a Spur

Burger, Panarottis Pizza or John Dory‟s Catch of the Day, our food is prepared to please

and fulfil. Big on quantity, big on aroma and especially big on taste. When you meet at

your home from home you are treated as family. We never hold back on our portions,

our laughter, or our welcome. Nothing satisfies us more than pleasing you, our

customer. This is our simple philosophy.”

Van Tonder (2011) “Value proposition remains strategically focused”

Spur Corporation again showed its resilience in overcoming challenging trading

conditions in the restaurant economy locally and internationally to post a competitive

financial and operational performance. While lower interest rates, higher real wage

increases in several sectors, declining food price inflation and stabilizing fuel prices have

been positive for consumers but household debt levels are high and consumers remain

under financial pressure.

In this continued tight trading environment they have capitalized on the strength of

their brands and the loyalty of their customers through value added marketing

campaigns.

32

According to Spur Corporation (2011) “Their marketing

department, which employs 22 staff members, has an

extremely important role in interacting with each and

every one of the restaurants, not only on a local

advertising-needs basis, but also regarding the myriad

of enquiries and interactions involved in

communicating on television and radio and other

national promotions. Together with our advertising agencies, DraftFCB Cape Town (Spur), JWT

Cape Town”

Through the years their brand equity remained strong, for Spur performing well in the

Sunday Times research findings. Their brand strategy remains focused on creating South

Africa‟s “Most Liked Home Grown Brand Icon”. DrafrFCB creates each year 6 – 8

campaigns for the Spur from which 6 would be promotional and 2 normally branding

campaigns.

The media choice for the

communication is TV, Radio and

outdoor billboards. Traditional media

will maintain the focus but a strong

increase in digital media with CRM will

be seen in the future. According to Sue

Biller Spurs advertising and promotional

campaigns revolves around the

universal family values and the value

added benefits of Spur. Convenience and the Spur experience is a central theme of

their campaigns.

According to Sue Biller, the account director at

DraftFCB, who is responsible for Spurs advertising

campaigns the Value Added Campaigns continued

to deliver positive results in terms of growing turnover

and building brand equity and this strategy will be

33

continued. Sue Biller also mentioned that the Spur “Monday Night Burger” promotion

which was aimed at the student market has delivered excellent results and has been

instrumental in ensuring a return to positive foot count growth for the brand.

During the past year Spur also launched its breakfast campaign to attract the business

sector for early morning breakfast. According to Sue Biller this was also a great success

and most probably will be continued in the future.

The Spur Unreal Breakfast promotion has

created an additional revenue stream and

captured market share from other national

chains who have previously dominated the

market.

Spur has launched their Spur Family Card

loyalty program as well as a gift card program which is expected to further entrench

customer loyalty and benefit restaurant turnovers. Brand loyalty will be driven through

these aggressive marketing campaigns. According to Sue Biller consumer relationship

management systems will play a central part of future promotions and marketing for

the Spur.

Managing director, Pierre van Tonder, said cording to Spur Corporation (2011) the

group‟s performance benefited from new restaurant openings locally and

internationally, the launch of the Spur Family Card loyalty program and value-based

promotional campaigns. "It is also pleasing that we have seen an increase in the

frequency of customer visits across our three brands."

Last year, new websites for Spur and Panarottis were launched and have shown an

increase in digital activity, including direct website access and Facebook involvement.

They continue to invest in improving their store management, franchise agreement and

operations reporting systems, in order to assist with the managing of operational

34

standards. The development of their data warehouse is progressing and they have

started delivering meaningful statistics to their franchisees, operations teams and

marketing department to assist them in their decision making.

Discussing the outlook for 2011 in the Spur Corporation (2011), Van Tonder said ,while

the economy should continue its slow recovery, consumer spending is expected to

remain muted in the year ahead.

“In this environment we need to ensure our brands continue to offer an attractive and

affordable proposition, that franchisee profitability is well managed and that we remain

competitive by tailoring our menus to meet customer demand.” Spur Corporation

(2011)

PRODUCT ELEMENTS:

The Spur Steak Ranch, the much-loved family restaurant, as we all got to know the

brand consists out of the following product elements: atmosphere, menu, marketing,

intellectual property and operational support. Spur Corporation is a intellectual

property company and although this would

be the last product element we would

consider. For most of us the Spur is a family

restaurant which serves mainly burgers and

steaks.

Atmosphere - lifestyle

Over the years Spurs have created their own

unique friendly and lively atmosphere weather you

are travelling by car or by plane it is always a

friendly fact to see. According to Spur

Corporation (2011) “each Spur restaurant is

designed to cater for the whole family, from

comfortable, spacious seating for adults to

35

designated children‟s activity areas. Parents can relax while enjoying a delicious meal,

knowing that their children are in an environment where they can have fun in a safe

area.” The Spur is essentially more than just a restaurant you go to with friends, family

and/or co-workers – it‟s a lifestyle. It is not impossible to create your own restaurant as a

restaurateur but the Spur has monopolized this very particular atmosphere in the hearts

and minds of the consumers.

Intellectual property

Whether you are a hungry potential guest or a hungry restaurateur Spurs formula of

success attracts your attention. Spur operates predominantly as a franchise operation,

with each individual outlet owned and operated by independent franchisees. Spur has

used this model for years which has proved to encourage entrepreneurship and

business success. According to Spur Corporation (2011), “Spur takes pride in their

intellectual property and operational know-how and actively assists franchisees through

operational assistance and continuous training.” The lessons Spur has learned through

the years at great expense us their greatest asset. In today‟s financial world very few

entrepreneurs could have thought starting up a business without financing and one of

the convincing factors for financial institutes are the fact that Spur has the intellectual

know-how to exponential success.

A menu

Spur has been the greatest influence in South African‟s culinary perception until DSTV

Food Channel. For example a milkshake is not a milkshake if it is not made the way Spur

makes it. A restaurant is not a restaurant if it does not have a Dom Pedro. For years a

Cappuccino was coffee with cream the way

Spur makes it. There is no onion rings like Spur

onion rings.

There‟s something to suit everyone‟s taste at

Spur, from the young to the young at heart. The

menu boasts an array of feasts, from supreme

36

steaks to top-quality ribs and mouth-watering burgers, to name but a few.

They take pride in their value-for-money meals and exceptional service. With today‟s

high food costs and food shortage the Spur offers any entrepreneur the opportunity to

use their bulk purchasing bargaining power.

Operational support

The well-trained, motivated and experienced operations Spur team provides ongoing

backup, support and assistance to the franchisee. According to Spur Corporation

(2011) “The team is responsible for upholding the high quality standards of the brand as

well as assisting the franchisee in all aspects of building and maintaining a successful

business.” Spur also provides ongoing support in the form of evaluating and training of

staff, products from our Central Kitchens, an integrated information system and Spur

Marketing.

Marketing to your community

Recent studies regarding brand equity

and the influences it had on consumer

loyalty proved that brand awareness is

the main factor in decision making of

purchase. In modern South Africa

restaurants are on every corner with wide

variety of menus to choose from therefore

to differentiate yourself from the

competitors Spur offers a great marketing platform. According to Spur Corporation

(2011) “Spur Marketing, situated in Cape Town, will assist with the conceptualization,

design, production or media placement of your advertising ensuring your business

stands out in your community. “ Spur aims to improve customer satisfaction and to

increase sales and profitability through creative brand management and innovative

product development, market research, advertising, sales promotions, public relations

and local marketing.

37

DISTRUBUTION, PROCUREMENT & LOGISTICAL MANAGEMENT:

Spur has a centralized distribution and procurement strategy which forms a key part in

the success of Spurs. This strategy ensures efficient, stable supply of consistent quality

products to customers which at the same time limit the financial risk related to key raw

material prices to the franchisee body. Due to production efficiencies margins in the

manufacturing divisions improved due to a reformulation of certain products and more

stable food prices. Sales of their retails sauces continues to grow due to brand

awareness with several new products launched during the past year. The spur

conducts regular supplier audits to increase food safety standards and transparency.

The manufacturing and distribution revenues increased by 16.0 percent to R109.0

million. Recently the groups manufacturing facilities were consolidated into 1 facility in

Cape Town. This improved efficiency and cost effectiveness and for R10 milliion a new

warehouse for the Décor production company was established.

For years Spur managed their in-house distribution with the help of smaller distribution

agencies. Recently spur contracted Vecor for the distribution of their manufactured

and product supply to restaurants. According to van Tonder in Spur Corporation (2011)

this had a vast cost saving influence on the company and improved the cold chain

between the production warehouses and restaurants. This is essential for the food

safety and hygiene required for customer satisfaction.

PRICING STRATEGY:

During these past years suppressed trading conditions in the retail market the Spur

brand in South Africa enjoyed had a successful year. Food prices remain relatively

constant during this year but increasing electricity tariffs, rentals and rates makes it

difficult to maintain the Spur‟s value for money pricing strategy .

According to the Spur Corporation “these factors necessitated a menu increase of 7.3

percent for the year. Continuous menu engineering and ongoing reinforcement for

standards through regular training are key elements of the brand strategy going

forward which is added value”.

38

BRAND EQUITY DEVELOPMENT & MANAGEMENT:

Spur Corporation has a working and very active brand management system which is

monitoring the brands equity. In the past they have realist the need to create brand

equity among adult .They have discovered that the market place has a great appetite

combo meals. As a result of research, some innovations items have been added to

their permanent menu. In addition to main meal items, they are about to launch a

range of innovative, extremely tasty desserts, which according to Pierre van Tonder in

Spur Corporation (2011) “they are confident will increase their customer spend per

head and engender continued loyalty to the Spur brand in terms of wanting to taste

the combination of offerings which are available under at Spur.

Bran

d Lin

es

Product Line

Spur Steak Ranch American Style

Steak House

Sit Down Restaurant

Express

Fast Food

Retail sauces and other

condiments

Panarottis Italian Style

Pasta‟s and Pizza

Sit Down Restaurant

Express

Fast Food

John Dory‟s Fish

and Grill

Greek Style See

Food

Sit Down Restaurant

Over the past number of years they have grown their brand to be the dominant player

in the family sit down serviced restaurant industry. According to Spur Corporation 2011

they make certain that in this market their quality is of the highest standard, as is the

Spur‟s value for money. This is the reason why the Spur has increased their market share.

Together with their effective marketing and high quality adult and kids promotional

offerings, has created great customer loyalty and brand approval from the South

African middle class.

39

Brand Hierarchy for the Spur Corporation Restaurants

Source: Spur Corporation 2011

According to the Spur Corporation 2011 “ When addressing issues of branding, it is

pertinent to mention that when publications

such as the Sunday Times do brand research,

they tend to group us with fast f ood

establishments. This is of course erroneous, as

we do not regard ourselves as a fast food

organization, although, we are more than

capable of providing a swift meal for our

customers”

40

The Spur brand has a challenge for the future to positioning within the mind of the

consumers and media as the sit down

serviced restaurant since this the positioning

of the Spur at presented is in the mind of the

consumer is of a fast food restaurant. There

are servile reactions for the perception one of

them is the product offering (Menu) and the

association the public has with franchise and

fast food

Spur is one of South Africa‟s iconic brands

and the perception that it competes within the fast food market has a great deal to do

with its American heritage and speedy service. This perception of Spur being a fast

food restaurant is precisely what gave

Spur its competitive edge. Spur offered a

fast food restaurant with a friendly sit-

down service to the South African

public. This is why Spur succeeded to

exceed customer‟s expectations for

years. The question today is whether

consumer‟s expectations of the Spur

brand are being exceeded. From

individual interviews it has become apparent t hat Spurs consumer promise is not being

met in the minds of consumers. Brand awareness is still a key aspect for the reason why

consumers still support the Spur.

41

QUESTIONS RELATED TO CASE STUDY:

Spur regards themselves as competing in the sit-down restaurant market segment but in

the consumers mind Spur is considered a fast food outlet. Why is this so?

According to the case study who is Spur‟s primary target market sand what is Spur‟s

position statement?

How do they plan to penetrate new opportunities within the South African market?

Who do you consider Spur‟s competitors?

What is Spur‟s product offering and what unique benefits are associated with the Spur

brand?

Spur consider their brand as their single largest asset. What do they consider to be their

second most valued asset and what effect does this have on the Spur brand? The Spur

prides itself as a family. What evidence of this could be found within this case study?

The future of Spur‟s marketing campaigns would continue with traditional media. What

according to Sue Biller would be the focus for the future and what legal implications

need to be considered?

According to the research done regarding consumer insights what plays the largest role

in consumer‟s decision on where to dine.

42

FUTURE RECOMMENDATIONS:

The Future of the Spur brand is to be determined by

which decisions the Spur Corporation makes over the

next two years. With the present marketing strategy

focusing on expanding in the new markets

and penetrating the existing South Africans,

Spur has to consider the strength they have

with in the South African market. Spurs

greatest asset is its brand and the perceptions

the South African public has of it. New and

market segments within Southern Africa and

stability

within

Southern Africa offers the Spur brand opportunities

within South Africa market. The greater energy,

employment and foods cost should also be consider

for a sustainable future.

43

Using the Ansoff matrix we could determine what future options would be the most

feasible. The following factors would need to be considered:

Environmental factors such as technological, political, economical, regulatory and

social.

Category factors such as threats of new entrants, buying power of buyers, buying

power of suppliers, current category rivalry and industry capacity.

Aggregate Market factors such as market size, market growth, stage of product live

cycle, sales cycle, seasonability and profit.

Product Development

Redevelop the Spur express to include drive throws and

24 hour services

Develop a Meat product ranges for the retail stores

New Menus for the changing markets needs to portray

a heather menu

Develop a frozen dessert product range for the retail

stores (waffles, ice-creams and cakes)

Diversification

Develop a new brand of fast food outlets to compete

with competitors

Develop a new brand of sit down restaurants for the

romantic middle class

Develop a new brand of bistros for the South African

business community

Develop a Spur road house ( drive-through and self-

service) for the 18 to 35 middle-class market

Market Development

Enter the Angolan market

Develop the non-family middle class market

Enter the South American market

Enter the low income market in South Africa with Spur

express

Enter the new higher income market of South Africa

Market Penetration

Penetrate the market by increasing share of market in volume of outlet

Increase distribution to retail stores

Increase Point of sales at sport events and retail stores

Increase Spur’s promotions in schools activities and universities

Increase Spur’s advertising

Build a stronger relationship with the market

Current New

Products

Cu

rrent

Markets

New

44

Suggestions:

Therefore considering these factors the recommendations are made for the future to

address the challenge to position the Spur Brand as a sit down restaurant and to

protect the market share.

Create a distinctive new format of product offering which will change the brand

associations with fast food. To achieve this Spur will create a brand extension to its

brand profile. The spur we know today will stay the Spur Steak Ranch with an improved

modern menu with the focus on wholesome goodness of South African products to

exceed the expectation of the consumers. Target the middle class family market that

has a “Taste for Life.” This will create greater brand associations with quality and

healthier food and capitalize on the increased spending power of the rapidly growing

middle class in South Africa.

Capitalizing on the growing demand of Westernized fast food with a more frequent

sales cycle and less seasonal fluctuation Spur should create their new brand called Spur

Road House (fast food /drive through diner) which is focused on convenience and

speed. This new brand of restaurant will only be free standing properties owned by the

Spur Corporation in convenient locations. This will address the environmental threats to

the Spur (high rentals, energy and staff costs).

This new brand will be similar to Spurs new smaller outlets which are available in less

densely populated environments. The success of this new brand will be based on the

following four P‟s:

Product: Free standing Spur Roadhouse

Place: First phase: South Africa‟s suburban areas and City Centers

Second phase: On route to popular tourist destinations

Price: Value added strategy with the focus on combination meals

Promotion: To promote Spur Roadhouse, communication will be focused on building

a meaningful relationship with individuals between ages 14 – 35, which

have a Taste for the outdoor Life. The traditional Spur media and

promotional strategies would be included to promote the new

Roadhouses.

45

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