Zambeef continues retail expansion despite economic headwinds

Zambeef, which describes itself as “the largest vertically integrated food retailing brand in Zambia,” has reported total revenue of ZMW3.1 billion (USD210 million) for its 2019 financial year (the 12 months to September 2019), with its retail operations accounting for almost two-thirds of this. Zambeef’s retail revenue rose by 20.4% year-on-year, to ZMW2.0 billion (USD136 million).

According to a statement issued by the company, “As we had anticipated, 2019 proved a challenging year for the group, driven by difficult economic and market conditions that impacted negatively on the group’s financial performance, particularly in the first half of the year. Set against this challenging macroeconomic backdrop, the group’s results were reassuring, especially in the second half of the year.” Electricity supply constraints remain an issue (caused by severe drought in a country where hydroelectricity is the main power source).

Founded by Irishman Francis Grogan and Zambian-born Carl Irwin in 1994, Zambeef grew rapidly after entering into a partnership with Shoprite when the latter entered the Zambian market a year later. It currently operates butcheries in 38 Shoprite supermarkets in Zambia, in addition to 31 in West Africa (Nigeria and Ghana).

During FY2019, the number of Zambeef retail outlets in Zambia rose from 140 to 157, as it continued to expand into the provinces. These operate under the Zambeef, Zambeef Macro, Novatek, and Zamshu banners. It is also a major producer of beef, pork, and poultry products, as well as a dairy processor (under the Zammilk brand), a cultivator of cereals (mainly soy, maize, and wheat), a miller, a baker, and a tanner, exporting to around a dozen countries in Southern, Central and Eastern Africa.

The Sagaci Research View: Zambeef is currently in the midst of a generational transition – Irwin retired in 2018, while Grogan was replaced as CEO by deputy managing director Walter Roodt at the end of last year. However, instead of retiring (as planned), Grogan is now serving as interim chief financial officer in the wake of the sudden resignation of Craig Harris in February 2019 (in spite of the fact that Grogan’s expertise is largely on the operational side of the business).

Currency weakness (the Zambian kwacha is currently at a multi-year low against the US dollar as the covid-19 outbreak batters commodity prices) and an uncertain domestic economic outlook, combined with this managerial uncertainty, are the main reasons why Zambeef’s share price is currently at an all-time low on the London Stock Exchange’s Alternative Investment Market.

To view Zambeef’s FY2019 annual report, click here