Lucky Star-THE SOUTH AFRICAN INVESTOR
How exactly does Lucky Star Pilchards make its money?
and Why is hake much more expensive than pilchards?
Lucky Star has 80% market share of the South African Pilchards market.
Pilchards are caught and then frozen at cold storage facilities before transfer to canning facilities.1. Anchovy,
2. Round herring and
The TAC for Pilchards has decreased by approx. 200 000 tons in the past 6 years as concerns rose
TACs aim to ensure that a specie is fished in a sustainable manner to allow the population to
Table: DAFF Pilchard TAC limits (2012-2019)
In the face of falling local supply of Pilchards
Lucky Star is moving away from the fishing part of the business and focusing on canning Pilchards.
The company will purchase its Pilchard needs from North Africa and other parts of the world.
The company has in the past 3 years purchased volumes of 106224, 103885 and 63189 tons respectively as the DAFF reduced local Pilchard TAC.
Graph: Local Pilchard TAC and Lucky Star imports of fish.
Cuts in Pilchard supply affect the production and sales volumes
The move to procure Pilchards internationally has helped stabilise Lucky Star's production and sales volumes while smaller competitors such as Premier Fishing and Brands JSE:PFB have reported falling volumes.
Lucky Star measures its sales in terms of millions of cartons sold and has averaged 8.7 million in the past 7 years.
When the TAC was cut sharply in 2017 the company was caught off-guard and had to sell below 8 million cartons.
For 2018 and 2019 the company purchased Pilchards overseas to restore production and sales volume to pre-2017 levels.
Table: Lucky Star sales volume and Rand amounts
Lucky Star price increase was marginal in 2019 as the company looked to make the product attractive to a depressed consumer base in the midst of the countryís poor economic growth.
You will find that Oceanaís other divisions (Hake, lobster and others) work in a similar manner to Lucky Star Pilchards in terms of
So why does hake sell more than Pilchards?
Pilchards reach sexual maturity and therefore reproduce at around 1-2 years whereas for Hake it is 4 years.
Because Hake takes that much longer to reproduce, the number that can be caught per annum is set smaller than pilchards to allow the specie to recover.
Our methodology at TheSAI
When analysing a company, we try and understand
The financial statements of a company only tell half the story and report what happens.
In Lucky Starís case