JSE-listed Famous Brands plans to capitalise on the tomato paste shortage in South Africa through its acquisition of a tomato paste manufacturing plant, Cape Concentrate, in the Coega precinct, in the Eastern Cape, for an undisclosed amount.

Funded from cash reserves, the acquisition was in line with the group’s strategy to build supply chain capability and capacity, the company said in a statement on Monday.

Famous Brands’ group strategic adviser responsible for merger and acquisition activity, Kevin Hedderwick, said the branded food service franchisor intended to expand its customer base for tomato paste beyond supplying its own internal customers.

“The local industry is unable to supply growing demand for the product and some 30 000 t to 35 000 t of tomato paste are imported by South Africa annually to meet the shortfall,” Hedderwick noted, adding that Famous Brands currently imports 1 500 t/y to 2 000 t/y of tomato paste.

The ingredient was used primarily in the company’s Sauce and Spice plant, which currently manufactured sauce products for the group’s 2 600-strong restaurant network, as well as for its retail customers.

Therefore, the acquisition would enhance the group’s capability to manufacture licensed products for its franchise network as well as provide security in respect of a significant menu item and manufacturing ingredient.

Cape Concentrate’s practically unused facility, built in 2010 at a cost of R200-million, was bought out of liquidation at a significantly discounted purchase consideration, below the threshold of a categorised transaction in terms of the JSE’s listings requirements.

“In terms of supply, we are satisfied that we can expediently establish a local supplier network to provide the required raw material volumes. In addition, the plant and premises are in immaculate condition, so we have effectively acquired a turnkey facility at a small percentage of its true value,” Hedderwick commented.

Famous Brands' management intended to model the new business on the group’s empowerment venture, Famous Brands Fine Cheese Company, formerly Coega Cheese Company.