Spur Case Study


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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.

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Spur Case Study

  1. 1. SPUR CASE STUDY By JJ BindemannFor AAA School of Advertising Date: 29 October 2011
  2. 2. IndexIntroduction pg 2The History and Background Pg 2Outlook for the future pg 8Market analysis and consumer insights pg 10Competitive Strategies pg 17South African Food and Beverages Industry Challenges pg 23competitors pg 29Positioning of the Spur pg 31Promotions and advertising pg 31Consumer Promise Pg 31Product Elements Pg 34Distribution, Procurement & Logistical Management Pg 37Pricing Strategy Pg 37Brand equity Development & Management: 38 Pg38Brand Hierarchy for the Spur Corporation Restaurants39 Pg39Questions related to case study: 41 Pg41Future Recommendations: 42 Pg42Reference List P45 1
  3. 3. INTRODUCTION:As a South African there is a handful of things you miss when you live abroad and thegreatest pride overcomes you when you stumble upon a product from your mothercountry, and one of those is our Spur restaurants. Some critics may argue that AllenAmbor was lucky and that the market was just ready for a steak house when heopened up. This might be true but over the years many new comers entered themarket 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, forfuture marketing or Brand Management courses.THE HISTORY AND BACKGROUND: Spur Corporation is a truly South African multi brandrestaurant business listed on the travel and leisure sector of the JSE Limited. The SpurCorporation consists out of 3 restaurant brands namely: Spur Steak Ranches, PanarottisPizza Pasta and John Dory‟s Fish & Grill. The group provides consumers with areasonably 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. 2
  4. 4. Over the 4 decades the Group has excelled to grow into one of the most recognizedbrands in the country and today the Spur is proudly know as the official restaurant ofthe South African Family.In December 1990 the second restaurant brand, Panarottis Pizza Pasta was created onthe same principal that made the Spur Steak Ranch a household name. Like somecritics may say again, Panarottis opened its door just at the right time to capitalize onthe growing popularity of Pizza and Pastas.John Dory‟s Fish and Grill , a KwaZulu-Natal based franchise comprising of seven outletswas drawn into this stable by the Spur Corporation‟s purchase of 60% shareholdingwithin John Dory. Today the Spur Corporation owns 65% shares of the Mediterraneanculture and charismatic John Dory Fish & Grill.The Spur Group was listed on the JSE in 1986 with a total of 43 franchised Spur SteakRanch outlets. In 1999 major restructuring was needed to reform the Spur Corporationas we know it today. The Spur Corporation is an investment holding company. Throughits subsidiaries, primarily the Spur Group (Pty) Ltd, John Dory‟s Franchise (Pty) Ltd, SteakRanches International BV, Spur Corporation UK Ltd and Spur Corporation Australia PtyLtd, the group carries on the business of franchisor in the family sit down restaurantmarket. 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 inAccording to the Spur Corporation (2011)1their success is greatly due to the love shownby all stakeholders, the franchisees, staff, shareholders and the South African public forthe Spur Brand. The stakeholders comprises largely out of the franchise businesses of its 3
  5. 5. 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 inthe recent years and passed the 300restaurant mark in early 2006. By 30thJune 2010 this had increased to 359.There are 245 Spur Steak Ranches and50 Panarottis Restaurants and 26 JohnDroy Fish & Grill outlets. Internationallythe group has 32 Spur Steak Ranchesand 6 Panarottis Pizza and PastaRestaurants 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 middleincome market in South Africa – the prime target group of the Spur – has lead toopportunities for restaurants in new areas as population demographics has shifted.”The development of new shopping malls and entertainment centers also createsopportunities for expansion while restaurant re-location and refurbishments provides anopportunity to increase customer volumes. According to Spur Corporation (2011) “Spuris 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 consolidatetheir UK operations by appointing a full time executive to head the group‟s operationsin the UK as this is expected to improve their performances. 4
  6. 6. According to Spur Corporation (2011 “The Spur will focus primarily on Africa where newrestaurants are expected to be opened in Malawi, Tanzania, Namibia, Nigeria andMauritius.” They also plan to strengthen their footprint in South Africa with 11 Spur‟s, 2Panarottis and 2 John Dory restaurants.According to Spur Corporation (2011, Spur‟s vision is to be the best family sit-downrestaurant in the markets in which they trade. Their mission is to be dedicated at alltimes to their customers and employees and to provide a “taste for life” for theircustomers 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 andJohn Dory‟s Fish & Grill have capitalised on the increased spending power of the rapidlygrowing middle class in South Africa.They plan to continue their restaurant expansion across Spur Steak Ranches, PanarottisPizza Pasta and John Dory‟s Fish & Grill in South Africa, while growing our internationaloperations 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, newopportunities arise as the population demographics of the country shift. The opening ofshopping malls and entertainment destinations always create scope for new outlets,while restaurant relocations and refurbishments also provide an opportunity to increasecustomer volumes, according to Spur Corporation , 2011.Spur Corporation assists franchisees in a number of areas both before and afteropening. Initial support includes compiling a business plan and cash flow forecast,assistance in choosing a site and negotiating a lease, as well as operational guidancewith the opening and initial running of the restaurant. The well-trained, motivated andexperienced operations team provides ongoing backup, support and assistance tofranchisees. The team is responsible for upholding the high quality of the brand and itsproducts, as well as assisting the franchisee in all aspects of building and maintaining asuccessful business. Support is also provided by way of the evaluation and training of 5
  7. 7. employees, integrated information systems and the Spur Corporation marketing plan.Regular restaurant visits ensure that the Spur‟s high operational standards, externalhealth and safety regulations and their customers‟ demands for quality and service aremet and maintained.Being part of the South African culture for so many years the Spur Corporation and itsaffiliations have a strong social awareness philosophy and a commitment to improvetheir quality of life of disadvantaged South Africans. The Group assists in the upliftmentof communities primarily through sport. Internally the focus is on people developmentand the creation of a stimulating work environment which supports the group‟s missionof making Spur a great work place.Through the years Spur has been committed to sustainability practices to ensure thelong-term success of the group. More than 140 sport and recreational events wassponsored by the Spur during 2010 – examples of these events are: Spur SoccerMasidlale, , Junior Rugby Development, The Spurannual charity golf tournament, the Teddy Bear Clinicand Reach for a Dream events.According to Spur Corporation (2011 “it recognizedthat these practices are becoming a businessimperative and no longer a Nice to have.” Inanswering this they have established a sustainabilitycommittee, whose mandate is to establish Greenpolicies and to assist management in developing asustainability strategy for the group.The Spur Group‟s sustainability strategy is based on three segments: 6
  8. 8. Economic:According to the Spur Corporation (2010)Annual Report their strategies are critical toinclude the identification and expansion into new markets, capitalizing on all feasibleopportunities within the local market, increasing the utilization of existing manufacturingand production capabilities, increasing customer frequency and spend and ensuringfinancial feasibility of the Group.Environmental:The strategy will answer issues with waste management, sustainable energy, watermanagement and biodiversity. According to Spur Corporation (2011) energy in theform 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 accordingto the Spur Corporation (2011 “Consideration is being given to expanding thesestrategies with particular focus on skills development within and external to the groupand giving back to the communities.” For years Spur has been part of the communityand one of their greatest successes is to promote from within their own company.Several directors and Executive Management have started out their career on thefloors of a Spur. This reflects the family values of the Spur Corporation.According to Spur Corporation (2011 “Second only to trademarks, people are its mostvalued and important asset.” The Spur aims to attract, develop and retrain highlyenergized individuals. Over the last few years increased focus is being placed oncreating a more sustainable work environment. Recent policies compiled will focus onskills development and the basic conditions of employment. According to SpurCorporation (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.” 7
  9. 9. This is a reflection on the strenuous shortcomings of qualified personal for the restaurantindustry.To address the shortcomings of skilled labour and customer service excellence, which isa vital part of the service delivery, an in-house training unit is being created to ensurethat franchisees and their staff members, together with head office employees, acquirethe skills to perform in line with the groups high standards. A wide range of trainingcourses are offered to franchisees at training centers in Cape Town And Gauteng.According to Spur Corporation (2011 “during the past year 7 624 delegates attendedinternal and external workshops. In addition classroom training is supplied with practicaltraining at a number of accredited training restaurants in Gaugeng, KwaZulu Natal andthe Western Cape for new franchisees and management.Financial assistance by the Spur Corporation is provided to employees for skillsdevelopment. This includes external courses, part time studies at universities and othertertiary institutes. Several employees are current registered for degrees, diplomas andcourses through a number of independent institutes. This financial assistance isextended to employees dependants for primary and secondary educationalrequirements.Incentive bonus schemes which are based on groups and individuals performancesincludes a share incentive scheme which was introduced in December 2004 to allowmanagement to participate in the growth of the Spur Corporation and to assist thegroup in retaining directors and management of the highest caliber.Outlook for the futureAccording the Spur Corporation (2011Van Tonder said “although consumer optimismhas improved in recent months, heavy debt burdens, increasing fuel, utility and foodprices and the anticipated increase in inflation remain a challenge.”In today‟s economic environment, sales growth of their restaurants will be driven byvalue added and innovative promotions so that franchisees profitability is well 8
  10. 10. managed and Spur remain competitive by tailoring their menus to meet theircustomer‟s demands.Spur recently launched their smaller format Spur restaurant model which enabled thebrand 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 SpurExpress outlet in Gaborone (Botswana).Over the past year several rumors appeared in the media claiming that Spur might buyFamous Brands. In March 2011 according to Spur Corporation (2011)Van Tonder said itwas highly unlikely that Spur would buy additional restaurant brands. “We areexpanding our off-shore interests so it‟s likely some of the cash pile will be used forinternational operations.” This was contradicted by the Spur Corporation‟s acquisitionof 60% stake in Cappuccino‟s, the café and pizzeria restaurant franchise, forapproximately R25 million in cash. Cappuccino‟s currently operates 15 franchiserestaurants, with the majority of the outlets being in Gauteng. This contradicting actionis a reflection of a shift in priorities of the Spur group due to the internationaleconomical turndown.The past years market conditions suppressed trading conditions in the local restaurantenvironment and in the international markets in which the group operates. The risingfood, fuel, retail renting prices and emerging food shortage within South Africa remainsa relevant constant threat to the group.According to Spur Corporation (2011Van Tonder said, “the turnover was up only 6% toR175m, but operating profits came in almost 20% higher at R66m.” 9
  11. 11. The Spur Corporation addresses these environmental threats by creatively andinnovatively designing menus and recipes to be cost effective and highly profitable.The Spur group also invested in stabilizing their purchases through the acquisition of bulkproduce through cost effective channels and outsourcing distribution. To address therise in rental costs the Spur continuously negotiates on behalf of its franchisees and usesits bargaining power, since the group has Panarottis and the Spur trading within thesame 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 andbeverage market for the share of wallet. Spur is very clear that they considerthemselves as a sit-down family restaurant. Within this market there is a vast amount ofcompetitors. Spur as by definition even though they do provide sit-down service couldbe classified as a fast food restaurant. This places Spur in the unique predicamentwhere it enjoys very nigh brand awareness and strong brand knowledge but with all theadvertising and marketing it is a very good fast food restaurant and a nice family SteakHouse therefore this study will consider the entire food and beverage industry as acompetitive factor.The South African restaurant industry i.e. market structure and competitive strategiesThe food and beverage industry in South Africa is evolving and it comprises out ofindependent restaurants, coffee shops, franchised restaurants, fast food outlets, largesupermarket chains, informal traders as well as independent food caterers and othercatering services providers.Over the last twenty years the restaurant industry in South Africa (SA) has beenreengineered. According to Maumbe (2010) Due to globalisation, urbanisation, anincrease in the black middle-class, and women in the workplace, the food andagricultural supply chain, consumption patterns of the population, and food industrycompetition has altered In addition, Maumbe (2010) recently claimed that the South 10
  12. 12. African restaurant industry is making use of a combination of vertical and horizontalmarket 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 fastfood by South Africans. In 2009, the take-away and fast food restaurants showed astaggering 8.1% growth Maumbe (2010) Customary home-cooked meals tend todecrease, seeing that both household incomes and standards of living rise, morepeople are eating fast foods and at restaurants. Globalization and westernization ofdiets is also driving food consumption patterns ( Pingali, 2007). As a result theconfiguration of the restaurant industry structure has changed notably. For instance,the industry used to be dominated by oligopolistic market configuration, however inrecent years a more multiplicity structure has evolved i.e. multi-national and regionalfranchises, independent food caterers, and informal traders. Even though most SouthAfrican restaurant industries are coordinated as franchises, others are owned byindependent entrepreneurs that have thrived under the Broad-Based Black EconomicEmpowerment (BBBEE) Act of 2003 Maumbe&Van Wyk(2008) 11
  13. 13. 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. 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 2010Buyer Bargaining Power ofBuyers Potential Entry 1. Regional franchises Industry Rivalry 1. Relatively high initial has the market power 1. Very High capital outlay 2. Many suppliers 2. Low pricing 2. Growing industry very 3. Very low operator power fast brand loyalty 3. Low profit 3. Scale of economies is 4. Switching costs is low margins important (e.g. distribution 4. Market 4. Logistics in South channels) overpopulate Africa is expensive d 5. BBBEE greats new opportunities for new entry’s Threats of substitutes 1. High meal solutions options 2. Switching costs is low for customers 3. Regional franchises control the market market 12
  14. 14. Overall the restaurant industry has become increasingly global and highly competitivefood and beverage industries are gaining a competitive advantage by using acombination of strategies. According to Maumbe (2010). These strategies include co-branding, employee empowerment, international as well as domestic franchises andinstalling information and communication technologies (ICT).An example of co-branding includes filling stations and fast food companies that aremaking joint investments, thereby operating as one. This allows them to raise consumerawareness of their food services as well as expand sales. It is crucial for success thatSouth African restaurant industries implement BBBEE agreements. Not only does thisimprove employee empowerment but may also be used as a competitive edge. TheFranchising Association of South Africa (FASA) is the governing body for franchisees inthe South Africa. In the food and beverage industry, FASA supervise competition andbest interest issues for the small to medium and micro-enterprises (SMME). Finally ICT, ifimplemented properly, can be a valuable competitive and communication tool.Structuring ICT plays a fundamental role in facilitating the search characteristics of foodproducts, the making and processing of food orders, and the expansion ofcommunication channels with industry suppliers and other key stakeholders.Consequently this would influence the flow of market information thereby loweringcosts in the restaurant food supply chain.EconomicThere is no doubt that the food and beverage industry and economy has a synergeticrelationship.In 2007, the total income for the food and beverages industry was R26 604 million. Itwould 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 incomein the food and beverages industry, next was the fast food outlets (29%) and thencaterers and other catering services such as „ready made‟ meals (25%) (Statistics SouthAfrica, 2007). Also in 2007, the food and beverage industry in South Africa employed181 373 people. A further break down showed that restaurants and coffee shops 13
  15. 15. employed 92 500 people, constituting the largest percentage (51%), followed bycaterers and other catering services with 54 412 (30%) and finally fast food outlets with34 461employees (19%).The strategic importance of ICT according to Maumbe (2010) in the South African foodand beverage industry is demonstrated by aggregate expenditure of R382 million perannum (30%) on computer technology and software, second to plant and heavyequipment R679 million in 2007. The trend on national ICT investment indicates risingimportance of ICT as a source of competitive advantage in the South African businesssector and food and beverage industry in particular.Before the international economic crisis, South Africa was ranked 25th by the GlobalCompetitiveness Report out of 75 countries, and had a sound economic growth rateestimated at 4% per annum. International multi-national food service chains such asMcDonalds and KFC have invested in South Africa. According to Maumbe (2010) “Thismay be attributed to South Africa‟s progressive stable political situation, soundeconomic growth rate under a stable African National Congress (ANC)-ledgovernment and its competitive and advanced business environment. This growingconsumerism provides major investment incentives to global food and beverage firms.”South Africa was isolated during the apartheid regime from the international businessworld. The end of apartheid meant that international companies could penetrate thehighly profitable South African market since it was socially acceptable. The companieswho entered the market the soonest capitalized on the well developed infrastructureand economical environment created by the old South African regime.Market structureSouth Africa has a well-developed food and beverage industry with various marketstructuring. 14
  16. 16. Regional and global multi-national corporation franchises:The franchise food and beverage chains include global multi-national corporations aswell 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 sharein the food and beverage industry according to Maumbe (2010), of which the later twoare the foremost. The leading regional franchises have outlets located in all the majorcities in South Africa and have entered the fast food market in other African countriesas well. For instance, the Famous Brands Group operates over 2000 outlets in SouthAfrica and 15 other African countries. .The global multi-national corporation franchises (GMNCF) are the main competitors inSouth Africa‟s developing food and beverage market. The two leading franchises areTricon Global Restaurants [TGR] (i.e., KFC and Pizza Hut) and McDonalds. The TriconGlobal Restaurants chain offers its traditional chicken meals and pizzas. McDonalds onthe other hand is a major global fast food chain, however it does not occupy adominant market share in South Africa‟s competitive food & beverage industry. TheGMNCF competes with the regional franchises which dominate the domestic marketand are now expanding into global markets.Supermarket food chains:Supermarket chains have gain access to the market segment which traditionally usedto be dominated by franchised fast food operations and are aggressively selling hotmeals to urban consumers. According to Anon, (2011a ) the main supermarket foodchains in South Africa are Pick ‟n Pay, Shoprite Checkers, while Woolworths has focusedon a growing organic food market niche.A recent investigation in China (Yu and Abler, 2009) indicates that rapid economicgrowth leads to structural changes in food demand and, as incomes rise, it shiftsconsumer preferences away from grains towards meat and dairy products. SouthAfrica‟s rapid economic growth, the preference for American-style cuisine,urbanization, and rising consumerism are all factors which have resulted in the 15
  17. 17. appearance of new supermarket chains and independent restaurants that markettake-away foods according to Maumbe (2010).Contract food caterers:The Contract food caterers sector is fairly concentrated and is dominated by relativelyfew large catering companies and the leading caterers (based on the number ofcontracts) 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 themiddleman. This group include individual street vendors operating on the roadside,main public transport terminuses, and other designated or non-designated places forselling food.According to Maumbe (2010) I”n most urban areas, such informal traders rent spacefrom local municipality “and sell hot burgers, sandwiches, and pies to passers-by. Thisfood service segment is a major part of the so called “second economy” in localtownships.Global and domestic forces:The restructuring of South African food and beverage industry is being influenced bythe global and domestic forces of change according to Maumbe (2010) . At theglobal level, major trends driving food and beverage industry are demanding efficientmarketing, product consistency price stability, safety and nutrition, and predictableproduct availability. (Jekanowski, 2001). In South Africa, similar trends are affecting thefood and beverage industry including many new entrants, co-branding, ICTdeployment, customization, health consciousness, multi-franchising, service 16
  18. 18. differentiation, and employee empowerment. Irrespective of food and beverageindustry location, success belongs to those firms that can prepare food better, fasterand safer than competitors. The food and beverage industry are generally quick toadapt to constantly changing taste and preferences of their customers.In the US, the food and beverage industry answered a growing consumer demand forhealthy diets by offering salads and vegetarian options. According to Maumbe (2010)Global trends indicate that food and beverage industry competitive strategies dependon a combination of factors such as culinary experiences, strategic industry alliances,and global food market developments.Competitive StrategiesFranchising StrategyThe South Africa‟s food and beverage industry is dominated by the regional and globalfranchises. South Africa has an extensive franchise restaurant chain that serve widevariety of meals. According to Maumbe (2010) “About 90 percent of franchises inSouth Africa have been locally developed while 10 percent were developedinternationally. Franchising industry contributes about 12 percent to Gross DomesticProduct (GDP) in South Africa.” Approximately 165 franchisers and affiliates areregistered with the Franchise Association of South Africa (FASA) and over 6000franchisees. The franchising strategy aims to overcome stiff competition betweenregional and global franchises.Market Coordination StrategiesThe South African food and beverage market is highly influenced by the backward andforward linkages into agriculture and retailing.Partnerships have been forged between food and beverage outlets and otherstrategic industry partners such as farmers, specialist retailers (e.g. bakeries, butcheries, 17
  19. 19. and green groceries) and wholesalers. Specialist retailers are the main suppliers torestaurants. Dry groceries are often purchased through catering wholesalers, whileperishables and frozen products are purchased directly from the manufacturers ordesignated distributors. The effective coordination of each link in the South Africa‟sfood and beverage industry food supply chain is critical as it affects key strategic issuessuch as food security, food safety, nutrition, health, corporate social responsibility andenvironmental 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 outletssign product specification contracts whereby producers promise to deliver certainquantities and quality of their products. On the other Maumbe (2010) said hand thefood and beverage outlets pledge to buy the delivered amount at the stipulated price-quality relationship. Rigid supply schedules are usually maintained to minimizemarketing risks associated with the nature of food products.In market specification contracts, the food and beverage outlets provide bothmanagerial and financial support to farmers. In addition, the buyer specifies thevarieties of the food products to be grown. These types of contracts are commonlyused by GMNCF such as McDonalds, KFC‟s and Tricon Global International. Maumbe(2010) found that supermarkets in Gauteng province of South Africa use dualprocurement strategies involving direct purchase from farmers and sourcing from Fruitand 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”. Thedevelopment of centralized distribution centres in South Africa ensures that standardfood or meal solutions are delivered to numerous outlets around the country. Although 18
  20. 20. food and beverage outlets have different operator owners, the basic requirement forthe franchisor is to market a uniform product across the chains at all times. AccordingNagengast and Appleton (1998) “The relationship between farmers, wholesalers, andfood and beverage outlets across the county is typical of vertical market coordinationwhile the collaboration among franchised outlets is characteristic of horizontal marketcoordination”. Both forms of market coordination mechanisms are widely used in foodand beverage industry in the supply chains for dairy products, meats, and freshproduce (Gibbons, 2004). The potato supply chain is the „mainstay‟ of the food andbeverage industry globally Nagengast and Appleton, (1998). Most of the popular foodand beverage outlets franchises in South Africa (e.g., KFC, Nandos, Chicken Lickenetc.) are vertically linked with producers through centralized wholesalers.Maumbe (2010), founded that “Vertical and horizontal coordination strategies yieldseveral benefits to the food and beverage industry such as assured supply, buildingtrust-based supply chains, the ability to market quality products, and reduction inprocurement costs in the long term. “Co-branding StrategiesIn Co-branding it is expected that the alliance will generate profits for both parties. Inmany cases this can cut down on expenses, especially advertising costs.There are a number of co-branding efforts in food and beverage industry in SouthAfrica. For instance Maumbe (2010), found that Engen and Wimpy co-branding onnational highways, they are advertised together and both benefit from each other.Secondly, Steers, Fish Aways and Blockbuster video co-brand their products. Byproviding convenience and variety this grouping is bound to become a lazy nightdestination point. McDonalds co-brands its products with McCain which supplies thepotatoes that are used to make the McFries. 19
  21. 21. Product Differentiation StrategiesThe South African Restaurant industry is faced with stiff competition from the majorsupermarkets (e.g. Spar, Shoprite Checkers and Pick‟n Pay), other retail chains,convenience stores, independent food caterers and informal traders. The Restaurantindustry competes with supermarkets which offer ready meals daily to urbanconsumers. Maumbe (2010) stated that this is a “growing challenge posed by theincreasingly 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 SouthAfrica. Most consumers perceive branded products and their product extensions assuperior quality products. In South Africa, KFC is considered a top-brand with a hugefollowing of loyal customers. KFC attracts a large customer following and is perceivedas the most popular fast food restaurant chain in South Africa (Brand and BrandingAward).The second driver of product differentiation in food and beverage outlets industry isdiversification of menus to cater for different socio economic, religious, and culturalgroups. The practices of upsizing meals, adding extensions to meals and bundling mealsolutions (e.g. providing toys at a cost on children happy meals) are common in SouthAfrica. Pingali (2007) argues that globalization and growing urban middle class has ledto rise in fast food consumption and convergence toward Western Diets. As alreadymentioned, supermarkets are entering the arena offering stiff competition by wideningmeal solutions and diet choices. As dual income households rise, the demand formeals for school children has increased creating further expansion in meal solutions anddiet offerings.A third driver of product differentiation is the sale of healthy products. There is agrowing awareness among South Africans about the benefits of healthy eating. Ashealth conscious consumers increase, the food and beverage outlets industry is beingforced to adapt. Global trends towards lighter meals, low salt, fat-free, no sugar, and 20
  22. 22. low-carbohydrates have filtered among South African consumers. Although healthconscious consumers prefer low calories, they are usually unwilling to compromise onflavour. In response to the above changes in consumer attitudes and lifestyle, theSouth African food and beverage outlets industry has devised strategies for healthyfood products. For instance, McDonalds South Africa has introduced healthy optionssuch as salads, fruit and low-carbohydrate options. According to Maumbe (2010),“Nando‟s promotional strategies are aimed at raising awareness of its wide range ofhealthy options. KFC has introduced lower-fat wraps”. In addition to the l diet trend,South African consumers are demanding more natural foods. Customers are seekingproducts that are organic, wholesome, and unprocessed. In response, Woolworthsadopted a strategy to promote its organic product range. The demand for its Kauaibrand is growing as consumer preferences for fresh produce without chemicals orpreservatives have increased. According to Statistics South Africa (2011) Chicken andfish consumption has also increased while red meat consumption has declined.Consumers aremore discerning in South Africa, and the food and beverage outletsindustry has responded to the shift toward health consciousness. A number of SouthAfrican food and beverage firms have adopted healthy product strategies topenetrate market segment of health conscious consumers. .Service Differentiation StrategiesThe South African food and beverage industry competes on a number of frontsregarding service offering. The service differentiation strategy revolves around mealvariety (e.g. kids meals, grilled, fried, salads, etc), drive-through facilities, home deliveryof meal orders, family friendliness, operating hours, convenient locations, and customercare. Most restaurants are smoke-free zones following legislation to ban smoking inpublic 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 hugeopportunities for the Restaurant industry.” In South Africa, local products are beingmarketed using the “Proudly South African” label highlighting the popularity of buylocal campaigns as global communities strive to protect local food economies andlocal jobs. Consequently, consumers and other advocates of locally integrated food 21
  23. 23. economies tend to associate such national campaign with products and servicesmade in South Africa.Some fast food restaurants provide consumer advice on healthy living on their websiteas part of service differentiation.Customer Relationship Management (CRM) StrategiesThe restaurant industry is using various customer retention strategies. Examples ofcustomer loyalty programs are free drinks for children and special meals to attractconsumers to restaurants. Some food and beverage firms recognize birthdays and offerfree 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 itemfor their meals. Some pricing special deals tend to target students who consume foodin large numbers or in a group setting.Corporate Social Responsibility (CSR) StrategiesThe strategy comprises three main areas, management control, skills development,preferential procurement, socio-economic development, and employment Maumbeand Van Wyk, (2008)The restaurant industry‟s BBBEE charter specifies the targets and milestones that have tobe met depending on the size of the firm. For instance, the appointment of females asBoard of Directors is one of the key strategies used by food and beverage firms to meettheir BBBEE requirements. Training and professional advancement of the restaurant 22
  24. 24. crew is also a vital strategy for meeting targets on BBBEE score cards Maumbe and VanWyk, (2008). In South Africa, food and beverage outlets have the responsibility to craftunique strategies needed to meet BBBEE requirements as detected by the BBBEECharter. The ability to meet BBBEE targets is key to operating a successful food andbeverage firm in South Africa.South African Food and Beverages Industry ChallengesStrong RandThe South African Government under pressure from Trade Unions and largemanufacturing companies are constantly trying to stabilize the South African Rand.According to the Trade Unions and large industries a weaker and stable Rand willincrease employment among South Africans. A weaker South African Rand andespecially an unstable Rand means that South Africans has to pay premium prices forbasic living expenses therefore contradictory to the popular belief that a weaker Randis beneficial for South Africa. South African restaurants are highly dependent ondisposable income of the South African consumers. At the same time restaurants alsohave to compete with international new entries to the South African market which havethe benefit of stronger currency backings.Political stabilityThe South African political system affects the entire South African Food and BeveragesIndustry and determines the context within which businesses operate. Centralgovernment and local authorities are major employers in South Africa; in many townsthey are the biggest employers. A change in policy can have major effects on the localeconomy and on the South African Food and Beverages Industry.Government departments frequently consult pressure groups about new regulationsand legislation. Pressure groups exist to influence government and politicians. Theiractivities can also have a major impact on industries and individual firms, for examplethe attempt by animal rights activists to prevent live exports of cattle. South African 23
  25. 25. Food and Beverages Industry has to be prepared to deal with the effects of pressuregroup campaigns and to counter propaganda.The South African political environment must be seen more and more as part of a widerinternational context. An example can be seen in the European Union, which often hasmore a different political bias from that of its member countries. Obligations underinternational treaties must also be met, such as compliance with trade rules.In the recent months the ANC Youth League leader, Julius Malema has been veryoutspoken about the political and social dissatisfaction among the black youth oftoday. A growing call for social and economical justice among the economicaloppressed can no longer be ignored. Restaurants in South Africa are one of the largestemployment industries today and growing pressure is being placed on restaurants toprovide better work conditions, salaries and opportunities for previously disadvantaged.Among the complaints of the South African Youth is education and today 17 years afterindependence the education system has failed the majority of them. This has adetrimental impact on the availability of qualified and trainable staff.The Growing Problem of ObesityThe Restaurant sector is blamed for selling unhealthy cheap food that encouragespeople to overeat. The so called fast food restaurants are known to create a falsesense of abundance by providing a ready supply of condiments or items that cost therestaurant almost nothing.The South African Food and Beverages industries are also characterized by overworkedand over-managed young workers who work low wage jobs Schlosser (2004) and arelured by free lunches. With the problem of obesity rising, the South African Food andBeverages Industry is under attack for negligence despite the fact that it remainsunclear that fast food cause obesity Collins and Baker ( 2009). Nonetheless, the obesityproblem persists and remains a huge challenge for the restaurant industry in SouthAfrica and globally. 24
  26. 26. Social InequalityAccording to Econobee (2009), the sector challenges are two-fold; the need tobecome more inclusive, and globally competitive. Promoting inclusiveness requiresgreater participation in economic activities and decision making by disadvantagedgroups such as blacks, coloureds and Indians in the sector. The challenge for SouthAfrican Food and Beverages Industry is to achieve certain targets on the score cardidentified by 4 of the 7 focal areas of empowerment and transformation namelyownership, management control, employment equity, skills development, enterprisedevelopment, preferential procurement, and socio-economic development that aredesigned to address historical imbalances in access to opportunities and benefits.Food Safety LegislationSouth Africa has had its fair share of food scares. There are numerous press reports onincidents of contaminated food ranging from chickens to beef to unhygienic kitchenconditions. 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 authoritiesin South Africa. Food safety lapses have been associated with outbreaks of foot andmouth, E-coli, and Rift valley fever, among others. In South Arica and other developingcountries, beef, dairy, poultry, and fruit and vegetable supply chains are major sourcesof food risks. Food safety concerns from disease outbreaks and traceability continue toafflict global food markets Mergenthale (2009) “The challenge is not the lack foodsafety legislation, but its enforcement.” 25
  27. 27. Production Risks: Energy and Water ProblemsSouth Africa is facing serious electricity shortages that have resulted in load sheddingand blackouts. The rapid pace of economic development has outstripped thecountry‟s capacity to provide reliable energy supplies. According to Wolson (2007)“Intermittent energy shortages started in 2005 and have worsened overtime. Policymakers have blamed South Africa‟s economic boom as the major cause for the energycrisis. Short-term solutions have led to cuts in supplies to neighbouring countries such asZimbabwe, Botswana, and Mozambique.”The South African Food and Beverages Industry is one of the sectors severelythreatened by the electricity shortages. Food and agricultural products are unique inthat they are perishable, rapidly loose quality, and spoil easily resulting in loss offreshness and safety hazards to the South Africa Food and Beverages Industry foodsupply chain. According to Collins & Baker (2009) “Irrigated crops face the risk of yieldlosses while food marketing firms faces uncertainty due to product grading and qualityvariations” . The lack of dependable energy supplies is compounded by concernsabout South Africa Food and Beverages Industry supply chain exposure tocontaminated water supplies. Marketing contaminated vegetables and meat productsfrom livestock that graze on pastures located on contaminated water sheds are asource of anxiety for the food industry.Energy usage of the restaurant industry 45% 40% Lighting 38% 35% 30% 25% Heating, 20% 21% Ventilation and 15% 15% Cooling 16% 10% IT Equipment 5% 6% 0% 1% Water Heating -5% 0 1 2 3 4 5 6 7 -10% 26
  28. 28. The problems of electricity and water, both key inputs in the South Africa Food andBeverages Industry supply chain are a cause for concern and require long term solutionfrom policy makers.Restaurant Waste Disposal and Environmental DegradationThe South African Food and Beverages Industry present some threats to sustainableenvironment management. Waste packaging materials used by customers causeenvironmental degradation. In-store recycling is not a major phenomenon althoughMcDonalds has initiated its own in-store recycling programs in South Africa. Theseinitiatives are likely to have a major impact if extended to other South Africa Food andBeverages outlets.All restaurants need to step up action on handling and disposal of behind the counterwaste, promote reusable items, and minimize solid waste. Although agriculturebiotechnology is a major global challenge, it seems there is no robust demand forethical products from South African consumers according to Maumbe (2010).Lack of Hygiene, Slow Customer Response, and StandardisingThe South African Food and Beverages Industry still face serious problems of hygiene,slow response time, and standardising. Regarding hygiene, some fast food outlets servefood that is prepared by workers without gloves or by people who operate tills andhandle bank notes at the same time. It is common for consumers to stand in longqueues and be served their food after prolonged waiting period defeating themeaning of the term “fast food”.In contrast, some restaurants pre-prepare food in advance to cut down orderprocessing time but that compromises product freshness. South African consumerscomplain about small portion sizes and not getting value for their money. Somediscerning consumers are also concerned about the use of biotechnology products,which raises ethical and moral questions about the environmental, medical, andhuman welfare impacts. 27
  29. 29. ConclusionsTwenty years ago hardly anybody in South Africa knew what basil pesto was. Todayirrespective of the consumers demographic or geographical position, knows not justwhat basil pesto is but has a vast knowledge of culinary arts. This is due to DSTV‟scooking channels and other media influences. Therefore expectations from the SouthAfrican consumers are very high.The over-populated market environment creates a very competitive and unstablebusiness environment. Large international and local franchises enjoy great brandawareness and marketing budgets but this does not necessarily guarantee successwithin the industry. Consumers frequently visit food and beverage outlets notnecessarily because they hungry but for the experience therefore to differentiate therestaurant from other competitive restaurants vast investments is required to ensure acompletely satisfied consumer experience.The South African Food and Beverages Industry in South Africa have transformed foodproduction, marketing and consumption patterns. The industry has added tremendousdiversity to the available restaurant food products thereby changing the traditionalconsumption patterns of ordinary South Africans. The restaurant industry is undergoingrestructuring that is characterized by a proliferation of regional and global franchises,and the entry of challengers such as Fast Food chains, independent food caterers andinformal traders that are competing with well-established restaurants. 28
  30. 30. COMPETITORS:Due to Spur‟s product offering and style of service it competes with a wide variety ofcompetitors for the share of the consumers wallet ranging from steak houses to burgertake-aways. Spur Corporation essentially operates a franchise style business strategywhich is targeting the South African middle class family market. Therefore the two mostaggressive franchise operating companies who offer similar product ranges with asimilar 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 familyorientated brand. Taste Holdings is relatively a new comer to the market but has shownstrong 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 120out lets according to Cape Times (2011: 31). The company opened is a publiccompany listed on the Johannesburg Stock Exchange in South Africa. The company isAfricas leading quick service and casual dining restaurant franchisor. The companys 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 throughthe 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 Thecompany also consists of a manufacturing, Famous Brands Limited follows a strongcobranding marketing strategy and for the future they would look for opportunities 29
  31. 31. within the brands by addressing trading formats. This could be seen where FamousBrands 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 competitorTASTE Holdings with 246 outlets are the owners of Maxi‟s, Scooters Pizza St Elmo‟s. Overthe last years, TASTE Holdings has shown great growth and are challenging the largerfranchise brands. According to Cape Times 2011 “the group posted a 27 percent rise insystem 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 reasonablylarge portion of the disposable income from Spurs target market. Even though TASTEHoldings brands are lesser known the growth rate of their new outlets will soon makethem a leader in the market. Maxis and Schooters Pizzas focus on value for moneystrategies whereas St Elmo‟s have a strong value for family strategy.The threat of larger international competitors are a reality which Spur will have toaddress. Tricon are planning to reintroduce their Pizza Hut brand to South Africa. 30
  32. 32. POSITIONING:Spur has positioned itself for more than 40 years as a family style sit-down restaurant inSouth Africa. Very little has changed and due to the success they had over the yearsSue 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 PromiseAccording to Spur Corporation (2011) “Food is our passion. Welcoming you is ourpleasure. And our greatest reward is presenting our delicious meals. Whether it‟s a SpurBurger, Panarottis Pizza or John Dory‟s Catch of the Day, our food is prepared to pleaseand fulfil. Big on quantity, big on aroma and especially big on taste. When you meet atyour 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, ourcustomer. This is our simple philosophy.”Van Tonder (2011) “Value proposition remains strategically focused”Spur Corporation again showed its resilience in overcoming challenging tradingconditions in the restaurant economy locally and internationally to post a competitivefinancial and operational performance. While lower interest rates, higher real wageincreases in several sectors, declining food price inflation and stabilizing fuel prices havebeen positive for consumers but household debt levels are high and consumers remainunder financial pressure.In this continued tight trading environment they have capitalized on the strength oftheir brands and the loyalty of their customers through value added marketingcampaigns. 31
  33. 33. 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 othernational promotions. Together with our advertising agencies, DraftFCB Cape Town (Spur), JWTCape Town”Through the years their brand equity remained strong, for Spur performing well in theSunday Times research findings. Their brand strategy remains focused on creating SouthAfrica‟s “Most Liked Home Grown Brand Icon”. DrafrFCB creates each year 6 – 8campaigns for the Spur from which 6 would be promotional and 2 normally brandingcampaigns. 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 valueadded benefits of Spur. Convenience and the Spur experience is a central theme oftheir 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 32
  34. 34. continued. Sue Biller also mentioned that the Spur “Monday Night Burger” promotionwhich was aimed at the student market has delivered excellent results and has beeninstrumental 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 businesssector for early morning breakfast. According to Sue Biller this was also a great successand 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 Cardloyalty program as well as a gift card program which is expected to further entrenchcustomer loyalty and benefit restaurant turnovers. Brand loyalty will be driven throughthese aggressive marketing campaigns. According to Sue Biller consumer relationshipmanagement systems will play a central part of future promotions and marketing forthe Spur.Managing director, Pierre van Tonder, said cording to Spur Corporation (2011) thegroup‟s performance benefited from new restaurant openings locally andinternationally, the launch of the Spur Family Card loyalty program and value-basedpromotional campaigns. "It is also pleasing that we have seen an increase in thefrequency of customer visits across our three brands."Last year, new websites for Spur and Panarottis were launched and have shown anincrease in digital activity, including direct website access and Facebook involvement.They continue to invest in improving their store management, franchise agreement andoperations reporting systems, in order to assist with the managing of operational 33
  35. 35. standards. The development of their data warehouse is progressing and they havestarted delivering meaningful statistics to their franchisees, operations teams andmarketing department to assist them in their decision making.Discussing the outlook for 2011 in the Spur Corporation (2011), Van Tonder said ,whilethe economy should continue its slow recovery, consumer spending is expected toremain muted in the year ahead.“In this environment we need to ensure our brands continue to offer an attractive andaffordable proposition, that franchisee profitability is well managed and that we remaincompetitive 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 thebrand 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 - lifestyleOver the years Spurs have created their ownunique friendly and lively atmosphere weather youare travelling by car or by plane it is always afriendly fact to see. According to SpurCorporation (2011) “each Spur restaurant isdesigned to cater for the whole family, fromcomfortable, spacious seating for adults to 34
  36. 36. 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 safearea.” The Spur is essentially more than just a restaurant you go to with friends, familyand/or co-workers – it‟s a lifestyle. It is not impossible to create your own restaurant as arestaurateur but the Spur has monopolized this very particular atmosphere in the heartsand minds of the consumers.Intellectual propertyWhether you are a hungry potential guest or a hungry restaurateur Spurs formula ofsuccess attracts your attention. Spur operates predominantly as a franchise operation,with each individual outlet owned and operated by independent franchisees. Spur hasused this model for years which has proved to encourage entrepreneurship andbusiness success. According to Spur Corporation (2011), “Spur takes pride in theirintellectual property and operational know-how and actively assists franchisees throughoperational assistance and continuous training.” The lessons Spur has learned throughthe years at great expense us their greatest asset. In today‟s financial world very fewentrepreneurs could have thought starting up a business without financing and one ofthe convincing factors for financial institutes are the fact that Spur has the intellectualknow-how to exponential success.A menuSpur has been the greatest influence in South African‟s culinary perception until DSTVFood Channel. For example a milkshake is not a milkshake if it is not made the way Spurmakes 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 35
  37. 37. 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‟shigh food costs and food shortage the Spur offers any entrepreneur the opportunity touse their bulk purchasing bargaining power.Operational supportThe well-trained, motivated and experienced operations Spur team provides ongoingbackup, support and assistance to the franchisee. According to Spur Corporation(2011) “The team is responsible for upholding the high quality standards of the brand aswell as assisting the franchisee in all aspects of building and maintaining a successfulbusiness.” Spur also provides ongoing support in the form of evaluating and training ofstaff, products from our Central Kitchens, an integrated information system and SpurMarketing.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 thecompetitors 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 businessstands out in your community. “ Spur aims to improve customer satisfaction and toincrease sales and profitability through creative brand management and innovativeproduct development, market research, advertising, sales promotions, public relationsand local marketing. 36
  38. 38. DISTRUBUTION, PROCUREMENT & LOGISTICAL MANAGEMENT:Spur has a centralized distribution and procurement strategy which forms a key part inthe success of Spurs. This strategy ensures efficient, stable supply of consistent qualityproducts to customers which at the same time limit the financial risk related to key rawmaterial prices to the franchisee body. Due to production efficiencies margins in themanufacturing divisions improved due to a reformulation of certain products and morestable food prices. Sales of their retails sauces continues to grow due to brandawareness with several new products launched during the past year. The spurconducts regular supplier audits to increase food safety standards and transparency.The manufacturing and distribution revenues increased by 16.0 percent to R109.0million. Recently the groups manufacturing facilities were consolidated into 1 facility inCape Town. This improved efficiency and cost effectiveness and for R10 milliion a newwarehouse for the Décor production company was established.For years Spur managed their in-house distribution with the help of smaller distributionagencies. Recently spur contracted Vecor for the distribution of their manufacturedand 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 chainbetween the production warehouses and restaurants. This is essential for the foodsafety and hygiene required for customer satisfaction.PRICING STRATEGY:During these past years suppressed trading conditions in the retail market the Spurbrand in South Africa enjoyed had a successful year. Food prices remain relativelyconstant during this year but increasing electricity tariffs, rentals and rates makes itdifficult to maintain the Spur‟s value for money pricing strategy .According to the Spur Corporation “these factors necessitated a menu increase of 7.3percent for the year. Continuous menu engineering and ongoing reinforcement forstandards through regular training are key elements of the brand strategy goingforward which is added value”. 37
  39. 39. BRAND EQUITY DEVELOPMENT & MANAGEMENT:Spur Corporation has a working and very active brand management system which ismonitoring the brands equity. In the past they have realist the need to create brandequity among adult .They have discovered that the market place has a great appetitecombo meals. As a result of research, some innovations items have been added totheir permanent menu. In addition to main meal items, they are about to launch arange of innovative, extremely tasty desserts, which according to Pierre van Tonder inSpur Corporation (2011) “they are confident will increase their customer spend perhead and engender continued loyalty to the Spur brand in terms of wanting to tastethe combination of offerings which are available under at Spur. Product Line Spur Steak Ranch American Style Express Retail sauces and other Steak House Fast Food condiments Sit Down Restaurant Brand Lines Panarottis Italian Style Express Pasta‟s and Pizza Fast Food Sit Down Restaurant John Dory‟s Fish Greek Style See and Grill Food Sit Down RestaurantOver the past number of years they have grown their brand to be the dominant playerin the family sit down serviced restaurant industry. According to Spur Corporation 2011they make certain that in this market their quality is of the highest standard, as is theSpur‟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 promotionalofferings, has created great customer loyalty and brand approval from the SouthAfrican middle class. 38
  40. 40. Brand Hierarchy for the Spur Corporation RestaurantsSource: Spur Corporation 2011According 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” 39
  41. 41. 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 brandsand the perception that it competes within the fast food market has a great deal to dowith its American heritage and speedy service. This perception of Spur being a fastfood restaurant is precisely what gaveSpur its competitive edge. Spur offered afast food restaurant with a friendly sit-down service to the South Africanpublic. This is why Spur succeeded toexceed customer‟s expectations foryears. The question today is whetherconsumer‟s expectations of the Spurbrand are being exceeded. Fromindividual interviews it has become apparent t hat Spurs consumer promise is not beingmet in the minds of consumers. Brand awareness is still a key aspect for the reason whyconsumers still support the Spur. 40
  42. 42. QUESTIONS RELATED TO CASE STUDY:Spur regards themselves as competing in the sit-down restaurant market segment but inthe 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‟sposition 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 Spurbrand?Spur consider their brand as their single largest asset. What do they consider to be theirsecond most valued asset and what effect does this have on the Spur brand? The Spurprides 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. Whataccording to Sue Biller would be the focus for the future and what legal implicationsneed to be considered?According to the research done regarding consumer insights what plays the largest rolein consumer‟s decision on where to dine. 41
  43. 43. FUTURE RECOMMENDATIONS:The Future of the Spur brand is to be determined bywhich decisions the Spur Corporation makes over thenext 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 withinSouthern Africa offers the Spur brand opportunitieswithin South Africa market. The greater energy,employment and foods cost should also be considerfor a sustainable future. 42
  44. 44. 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. Products Current New Market Penetration Product Development Penetrate the market by increasing share of market in Redevelop the Spur express to include drive throws and volume of outlet 24 hour services Increase distribution to retail stores Current Develop a Meat product ranges for the retail stores Increase Point of sales at sport events and retail stores New Menus for the changing markets needs to portray Increase Spur’s promotions in schools activities and a heather menu universities Develop a frozen dessert product range for the retail Increase Spur’s advertising stores (waffles, ice-creams and cakes) Build a stronger relationship with the marketMarkets Market Development Diversification Enter the Angolan market Develop a new brand of fast food outlets to compete with competitors Develop the non-family middle class market New Develop a new brand of sit down restaurants for the Enter the South American market romantic middle class Enter the low income market in South Africa with Spur Develop a new brand of bistros for the South African express business community Enter the new higher income market of South Africa Develop a Spur road house ( drive-through and self- service) for the 18 to 35 middle-class market 43
  45. 45. Suggestions:Therefore considering these factors the recommendations are made for the future toaddress the challenge to position the Spur Brand as a sit down restaurant and toprotect the market share.Create a distinctive new format of product offering which will change the brandassociations with fast food. To achieve this Spur will create a brand extension to itsbrand profile. The spur we know today will stay the Spur Steak Ranch with an improvedmodern menu with the focus on wholesome goodness of South African products toexceed the expectation of the consumers. Target the middle class family market thathas a “Taste for Life.” This will create greater brand associations with quality andhealthier food and capitalize on the increased spending power of the rapidly growingmiddle class in South Africa.Capitalizing on the growing demand of Westernized fast food with a more frequentsales cycle and less seasonal fluctuation Spur should create their new brand called SpurRoad House (fast food /drive through diner) which is focused on convenience andspeed. This new brand of restaurant will only be free standing properties owned by theSpur Corporation in convenient locations. This will address the environmental threats tothe Spur (high rentals, energy and staff costs).This new brand will be similar to Spurs new smaller outlets which are available in lessdensely populated environments. The success of this new brand will be based on thefollowing four P‟s:Product: Free standing Spur RoadhousePlace: First phase: South Africa‟s suburban areas and City Centers Second phase: On route to popular tourist destinationsPrice: Value added strategy with the focus on combination mealsPromotion: 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. 44
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