When Spur Corp CFO Cristina Teixeira returned from the Berkshire Hathaway AGM in Omaha she couldn’t help but reflect on Warren Buffett’s enduring vitality and wonder about his secret to a long life.
In his 90s, Buffett sat on the stage answering questions with ease, sipping Cherry Coke and snacking on fudge. He is known to be loyal to his daily McDonald’s order. One wonders: if he’d discovered Spur burgers, would they have become part of his routine?
Berkshire Hathaway’s top three investments are in Apple, American Express and Coca-Cola, but the multinational holding company also invests in food and quick-service restaurant businesses. It doesn’t disclose the exact percentage of food and restaurants in the portfolio, but it’s thought to be 15%-16%, including its 10% stake in Coca-Cola — which Buffett calls one of Berkshire’s best long-term investments.
The estimated return on equity on its stake in the Kraft Heinz Co (food and beverage) is 5.6%, with net income of $2.74bn a year. Its sale of Restaurant Brands International (owner of Burger King and Tim Hortons) was the only major exit from restaurant brands to date. Buffett’s involvement in Burger King was never a long-term equity investment but a high-yield financial play, and after he sold out the capital was redeployed elsewhere. Berkshire bought into Domino’s Pizza last year and famously acquired Dairy Queen in 1998 for $585m — a business with a strong franchise model and loyal customer base. (Buffett is known to be a fan, particularly of its Blizzard soft serve.)
Buffett, widely regarded as the world’s most successful investor, is known for favouring businesses that are simple, defensive, cash-generative and built to last — ideally, companies with little debt and with strong competitive moats. Would Spur Corp fit the bill?
Teixeira and CEO Val Nichas came away from the Berkshire Hathaway AGM with a renewed appreciation for Buffett’s long-term view. The biggest lesson was: “Don’t rush. Be prepared, but when the opportunity comes, act decisively. Don’t do deals for ego — do them because the asset can grow with you.”
Spur is no longer just the Spur brand, though it remains the powerhouse, contributing about two-thirds of group sales. The portfolio now includes Panarottis, RocoMamas, John Dory’s, The Hussar Grill and most recently, Doppio Zero.
Spur has maintained a strong dividend track record and is highly cash-generative, even if things went briefly awry during Covid. It’s worth noting that the annual dividend declaration of 127c a share in 2022 was fattened to 213c a share in 2024, with Spur’s cumulative increase in cash distribution over two years sitting at about 67.7%. The group’s free cash flow is about R300m a year.
Buffett looks for businesses with a durable competitive advantage — and Spur’s strong brand portfolio, operational discipline and proven franchising model tick many of his boxes. It’s a leader in the South African casual dining market, with a growing presence in neighbouring countries.
Franchise models, particularly those with healthy margins and low capital requirements, are typically attractive to investors such as Buffett. They provide scalability and tend to deliver consistent free cash flow. Berkshire would not be interested in very trendy or unproven concepts — such as brands with volatile earnings or high operational complexity that require constant reinvention to stay relevant.
Broadly, I don’t think the expansion away from Spur has detracted from the group’s margins
— Umar Kagee
Spur has long held the attention of two of South Africa’s top fund managers — Allan Gray and Coronation Fund Managers. Coronation has held a significant stake since 2008, crossing the 10% ownership threshold in 2014. It now owns 24.8% on behalf of clients.
“If you look at quick-service restaurants and casual dining restaurants, I think it’s a fair bet that in 10 years that industry will still exist,” says Siyabonga Mseleku, investment analyst at Coronation. He says Spur ticks many of the boxes Buffett looks for. It’s a capital-light business, with high margins and strong free cash flow.
Allan Gray, another major shareholder, has held Spur shares on behalf of clients since 2001 and owns more than 10%. It’s a good company — simple, cash-generative, with low financial risk and a solid dividend, says Allan Gray investment analyst Umar Kagee.
Kagee says that while some smaller acquisitions haven’t moved the needle, RocoMamas has grown meaningfully, and it’s early days for Doppio. RocoMamas and Panarottis each accounted for 10% of local sales, according to the latest financials.
“As shareholders we do emphasise that companies we invest in must think carefully about their mergers & acquisitions strategy. We pay a lot of attention to the price they’re paying for these businesses,” he says, adding that there’s nothing worse than overpaying for an asset and then needing to spend years fixing it.
“Broadly, I don’t think the expansion away from Spur has detracted from the group’s margins. The bigger issues are the economic challenges that South Africans face,” says Kagee.
So why no private equity bids or takeover tilts? Despite Spur’s qualities, it hasn’t attracted significant private equity interest. Grand Parade Investments once held nearly 10% before selling out in 2022.
Mseleku says private equity often looks for turnaround opportunities or value unlocks. But Spur has been well run for most of its existence. It grew rapidly in the early 2000s and slowed a bit in the 2010s, but performance has since improved. There hasn’t been a “fixer-upper” angle.
Also, the group’s brands might not be that easy to internationalise, nor is the group trading at much of a discount, so there is not much opportunity for a value unlock.
Could Spur ever go global like Nando’s? Element Investment Managers CEO Keith McLachlan is cautious. “Yes and no. Not all brands export well. The moment you move internationally, you lack the critical mass and existing brand equity you have at home — you’re starting at zero again. I would argue that Spur’s brands mostly do not export very well.”
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