Branded fast-moving consumer goods group AVI is widely regarded as one of the best-run companies on the JSE. The clearest evidence of this is its operating margin, which at almost 25% is among the highest for any food producer in the world, ahead of global giants such as Unilever, Nestlé and PepsiCo.
That is remarkable, given that AVI lacks their scale, global distribution networks and procurement muscle. It is even more impressive because the group has achieved it in a mature, low-growth South African economy with a financially stretched consumer.
It is therefore little surprise that global snacks giant Mondelez once sniffed around AVI’s Snackworks division. The international confectionery and snack powerhouse ultimately walked away, but not before adding insult to injury by hiring AVI’s then CFO, Owen Cressey.
The interest made strategic sense. Snackworks houses one of South Africa’s strongest biscuit and snacking portfolios, led by the Bakers and Willards brands.
This division and Entyce Beverages, which owns household names such as Five Roses, Freshpak, Frisco, Ellis Brown and House of Coffees, form the core of AVI. In 2025, they contributed about 82% of group operating profit, up from 59% in 2018. The investment case has therefore become increasingly concentrated around them.
The paradox is that AVI’s share price has gone backwards over the same period, even as headline earnings rose from 543.1c to 729.1c a share with little volatility. Operationally, AVI has been a model of consistency. The market, however, has not rewarded it with a stronger rating.
The likely explanation is that investors are less enthusiastic about the source of the profit growth. AVI has lifted earnings largely through pricing power and margin expansion rather than volume growth. Entyce’s operating margin rose from 20.7% in 2018 to 30.5% in 2025, while Snackworks improved from 17.8% to 23.1%.
The trade-off is visible in formal retail market shares. In Entyce, Five Roses slipped from 31% in 2018 to 29.3% in 2025, Freshpak from 57.3% to 51.8% and Frisco from 21.1% to 16.5%. In Snackworks, Bakers Sweet fell from 41.2% to 35.4%, Bakers Savoury from 14.3% to 12.7% and Willards from 18.6% to 14.8%.
South Africa’s consumer market is becoming increasingly two-tiered, with formal retail no longer telling the whole story
This suggests that AVI is willing to lose some price-sensitive consumers to cheaper alternatives if defending that volume would require excessive discounting and margin destruction. Instead, it is leaning into its loyal customer base that’s still prepared to pay a premium for its brands.
Notably, the margin gains are not just the result of price increases. They also reflect tight cost control, procurement gains, production efficiencies, automation and restructuring. In the latest half-year, AVI also pointed to innovation-led volume growth in categories such as creamer and biscuits, along with more affordable formats and smaller pack sizes aimed at constrained consumers.
That matters, because South Africa’s consumer market is becoming increasingly two-tiered, with formal retail no longer telling the whole story. AVI says informal channels are growing in importance and in parts of Entyce already account for more than 30% of sales. Smaller packs are therefore not just a margin tool. They are a route into spaza shops, wholesalers and lower-income buying occasions where affordability matters most.
This also means formal market share data can be misleading. At the interim results presentation, CEO Simon Crutchley argued that AVI has gained volume in informal channels, while some of the formal retailers it supplies have themselves lost share. Still, he was clear that AVI is willing to sacrifice market share where necessary to protect the profit pool, provided it does not damage the underlying business. The longer-term risk is that, if pushed too far, this discipline could give cheaper challenger brands too much room to grow.
The smaller divisions had mixed fortunes. I&J’s catch rates improved in the first half of 2026 off a weak base, but abalone remained under pressure from weak Asian demand, oversupply and constrained pricing. The personal care unit protected profitability well, lifting operating margin from 18.3% to 20.3%, but remains exposed to intense competition and weak demand. Footwear and apparel recovered some margin, with Spitz showing decent volume growth, but Kurt Geiger and the broader clothing market remain exposed to heavy discounting.
AVI would probably be a cleaner investment case with a more streamlined portfolio built around Entyce and Snackworks and perhaps supplemented by bolt-on acquisitions. The difficulty is execution. Selling I&J, cosmetics or fashion assets at attractive prices is not easy, especially when some are cyclically challenged. Buying new high-quality brands is just as difficult. As Crutchley put it: “We are looking, as we always do, at acquisitions, but they have to be high quality. One day, hopefully, we will find something.”
AVI is therefore not the most exciting investment story on the JSE, and investors will reasonably ask how much runway remains in the margin expansion story. But it remains a high-return, cash-generative branded goods company with resilient earnings and a dividend yield of about 7%. If that dividend can grow at, or slightly ahead of, inflation over time, the total return proposition is respectable. And given the quality of the brands, it is not impossible that another global giant eventually comes knocking.
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