Chet Chemicals

CHET CHEMICALS

CHET CHEMICALS

Household Giants

Eye African Expansion PRODUCTION: Timothy Reeder

Established in 1965 with the aim of manufacturing day-to-day household products, Chet Chemicals manufacturing facility in Kempton Park, Johannesburg, now produces between 200 and 300 metric tons of liquids and powder detergents per day. Chet has contract manufacturing relationships with, among others, Unilever and Tiger Brands, and now looks to take its model even further afield.

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Chet Chemicals constitutes the household and toiletries arm of Libstar Operations, and manufactures a vast array of products including bleach, dishwashing liquids, fabric softeners and laundry detergents. It manufactures for a number of major SA retailers in the household field, while Sealed Air/Diverse and GNLD make up the final two of its four major contract manufactures.

Headquartered in Johannesburg, Libstar itself began life in 2005, as an investment holding company investing in companies operating in the Fast Moving Consumer Goods (FMCG) industry. The company focuses mainly on the food, beverage,

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household and personal care segments of the market. With the Group consisting of 22 business units that operate nationally across 31 sites located in Gauteng, Mpumalanga, Kwa-Zulu Natal, Western Cape and Eastern Cape provinces, Libstar has annual net revenues in excess of R7bn.

Libstar believes wholeheartedly in what it terms simply the ‘power of partnership’. It is aware that its work does not take place in a vacuum, but in a vibrant mesh of relationships with customers, employees, suppliers, partners and communities. Libstar seeks to ensure that it always follows through on what it says, believing that its positive actions lead

to stronger partnerships while promoting productive teamwork, thus keeping its various business concerns in positive territory.

Following this lead, it has been Chet’s ability to partner with the most well-known Retailers and their brands that has been a key factor in its success, and the growth in scope of its capabilities. Sales Director Ross Rossouw takes us through the importance of these relationships to Chet’s burgeoning status in the market. “Our relationship with Unilever and Tiger Brands, as well as the Retailers in South Africa, is very well suited to our assets.

“In the early days, we had to look at those guys in order to optimise our volumes and as such

CHET CHEMICALS

make it a viable option for us - to keep our costs down, and to enter the major South African retailers. As a result, we’ve always had a good relationship with them.

“Unilever is currently busy commissioning an upgraded plant, which may see our contract work for them reduced. We therefore have to have plans in place to make up this potential shortfall in business, but they know that as far as accreditation and quality of product are concerned that they can fully trust in us to help them out from time to time.

“In the field of contract manufacturing in South Africa Chet Chemicals has been an ever-present for over 40 years,” Rossouw goes on, “and so we’ve obviously earned our stripes. This endurance has been down to our focus on the

quality and the service level we have offered over this time. We have been and remain successful because we manufacture a quality product which adheres to specifications that is what gives us the edge.”

This responds perfectly to one of the central pillars of Libstar’s overall mission; to enable its companies to create consumer, shopper and customer demand for world-class quality products and services executed perfectly, on time, in Africa and beyond.

As Libstar again recognises, Chet’s field of industry is not a vacuum; instead it finds itself surrounded by similar partnerships being constructed all the time and other firms looking to impose themselves upon the market. This must, therefore, lead to it being an extremely competitive business.

“Unbelievably so,” confirms Rossouw. “At all times you have to be extremely careful because you don’t want to step on anyone’s toes, but competitors are gaining market share at such a rate that business can lose value and it can be a real struggle.

“It is good for us in some ways however, and certainly keeps us on our toes in terms of keeping ourselves ahead of the rest. Obviously, it is good for the consumer too, as this competitiveness translates to more attractive pricing of goods.”

When it comes to investment in new machinery for Chet, this is targeted in particular at the bleach side of the business, one of the key weapons in Chet’s armoury as Rossouw explains. “If you break up our business, household is defined

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INDUSTRY FOCUS: CHEMICALS

as laundry and Household liquids, which bleach is then also part of. We also make a thick bleach, however, which is an all-purpose cleaner.

“This is the machine that we are replacing, and the upgrade has been made necessary purely due to the demand we are experiencing for this product. We have been growing in double digits for the last two or three years so we have simply outgrown the capacity of the current machine.”

This vital new machinery will, according to Rossouw, be commissioned in October of this year, allowing Chet to be up and running with the increased capacity before the end of the year. “We project that it will allow us to serve the current demand, with a continuation of the growth we are

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currently seeing, for around the next five to seven years,” he says.

This division is one of Chet’s focal expansion priorities; as Rossouw goes on to explain the impact of an uncertain climate on the company’s grander ambitions.

“The trading environment in South Africa is very tough at the moment,” he says, echoing the sentiments of the vast majority of major players in the country. “For this reason, you have to spread your investment over a longer period.

“We would love to replace our thin bleach machinery, which is also growing at a phenomenal rate of around 30% year-on-year, and this growth has been sustained for the last three or four years. As soon as it is viable we will be making the same improvements to this section of the business. As we are part of

the Libstar Group these requests go through them for authorisation.

The most recent indications suggest that we will receive it in 2018 and be able to proceed with this next project.”

In addition, Chet is always on the lookout for acquisition opportunities to give another dimension to its expansion plans, taking on board the smaller players and growing the scope of its business. “Libstar is a company that constantly looks for acquisitions to expand their current operations,” says Rossouw, “and we as a company are also doing so, especially where household is concerned.

“We are actually in discussion with one of the smaller South African companies in our field at this very moment. Negotiations and discussions are almost complete with regards to a JV; we just need to dot the i’s and cross the t’s.”

Chet Chemicals is reaching that stage encountered by many a burgeoning, successful South African company, in that it is now seeking avenues by which to expand its footprint beyond the country’s frontiers and into the rest of Africa. Its parent company wants to be the trusted partner and preferred ‘one stop solution’ in providing fast-moving consumer goods to every sector, but crucially it wishes to deliver on expectations beyond its targeted markets in Africa. Such a bid provokes significant opportunities and challenges, as Rossouw goes on to outline.

“At the moment, we are purely a contract manufacturer, which means that we don’t have our own recognisable brand with equity which we can just decide to take into the rest of Africa. As far as the categories in which we operate go, however, there is a big demand in Africa for the majority of them.

While the size or profile of these

CHET CHEMICALS

products may change slightly, we have the capability to make whatever it may be and the get it into market.

“As far as our footprint is concerned, we are already active in Botswana, in Namibia and in most of the neighbouring states, but at this time that is due to the activity of the formal retailers in those countries. A big part of our export business is the distribution channel via retail - for example Shoprite in South Africa has interest in many countries in Africa. We deliver to them, and they then take on the distribution for us.

“It is a very expensive business if you want to set up in a new country. There will be agents there handling the product who naturally will want to take commission, which simply does not make it a viable option for us at this stage. Because we supply a private label, or a house brand, the margins are not as rich as for some other companies who are developing and marketing their own brands.

“We have an alternative game plan, whereby we will identify in these countries perhaps a local producer, and then begin to contract manufacture or contract pack his brands instead as a way around the pitfalls we face. This worked for us in Namibia where we are packing the household range produced by one of the local guys there. Phase one has consisted of household powders, which we have been doing now over a 12-month period, and we’ll be launching phase two at the end of June, where we will also introduce the liquid products within the household range.”

This seems to be the key to Chet Chemicals’ future progression, with South Africa all but conquered in its provision of household wares.

“With regards our South African growth potential I think we are

pretty much there or thereabouts - I wouldn’t go as far to say that the market is saturated but it is not far off. There is not a lot of potential for incremental growth; the growth we see at this stage is the opening of new stores within the retail environment, and it is 100 times more saturated than in the rest of Africa.

“For us to be successful for the next 40 years we will have to start making plans to dominate the African market as a whole, and we are busy with that,” Rossouw begins to sum up. “In five or six years we hope to have good, reliable customers in strategic countries, where we employ our South African model in these new domains, contract manufacturing for somebody with the footprint, the capability and the infrastructure

to distribute the product there.”

Rossouw concludes his thoughts on the company’s future in typical Chet Chemical fashion.

“Building a partnership with companies, or individuals in these countries, to enable us to achieve this - that is where our growth will come from.”

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