CONCORD R E F R I G E R AT I O N
CONCORD REFRIGERATION
Concord Stays Cool
Amid Tough Trading Environment PRODUCTION: Karl Pietersen
Durban’s Concord Refrigeration is working with industry-leading corporate clients to deliver a first-class retail experience for customers. A manufacturer of refrigerated and heated supermarket display cases, Concord is increasing capacity at its factory while improving its environmental credentials. Managing Director Wernhard Barnardo tells Enterprise Africa more about the success of this 50-year old company in difficult market conditions. www.enterprise-africa.net / 3
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The ‘Big 5 food retailers’ in South Africa account for more than 60% of all food retail sales. Shoprite, Pick n Pay, Spar, Woolworths and Cambridge Food have a combined store network of more than 5000 stores and attract millions of visitors every year. Whether you’re in the far-flung southern corner at Cape Agulhas or way up north close to the border in Musina, you’ll be able to find one of these retailers. At the heart of all of their food offerings is being able to deliver fresh food, quickly, at low cost. But how can you keep fresh food chilled, frozen food cold, hot snacks warm, and all displayed in an attractive and convenient manner – especially across a major network? It’s not easy, but Concord Refrigeration – established in South Africa in 1969 – has the answer. A manufacturer of refrigeration cabinets specifically designed to meet
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the needs of the retailer, this business is geared for efficiency and quality. But it hasn’t been easy for Concord to position itself among the top businesses in the industry. Challenging economic conditions and a depressed and everchanging retail environment have forced Concord to adapt in order to continue growing. Managing Director Wernhard Barnardo talks to Enterprise Africa about how Concord Refrigeration – a division of Southey Holdings – is changing to take on a modern challenge. “No one goes through a recession and a retail industry being under such pressure without having to make changes,” he says. “A lot of the changes that have been seen at Concord over the past two years, came as a result of the downturn in the retail development space in South Africa. Even at the beginning of last year we went through two quarters of negative growth and
into recession. We are directly impacted by that because as soon as the retailer slows down with their rollout, we don’t have work to do. From 2016/17, there was a turndown into 2017/18 in terms of overall volume. We saw it coming so we had to scale down to ensure our cost structure made sense in a smaller market. We managed to do that successfully and we are looking very good at the moment.” The company manufactures the entire storage and display cabinet, mainly for national supermarket chains. All of the cutting, welding and bending happens inhouse at Concord’s facility, north of Durban. The company also handles installation on site and assembles everything by hand to keep control over quality. Working closely with the retailer’s chosen refrigeration contractor, Concord has become a vital component in the delivery of a successful shopping experience.
CONCORD REFRIGERATION
// FOR US, WORKING CLOSELY WITH SUPPLIERS TO DELIVER THE TOP LEVEL OF SUPPORT TO CLIENTS IS NONNEGOTIABLE // A plan for future growth has already been developed for Concord and Barnardo explains that it will involve increasing capacity and automating more processes to maintain quality standards. “Several cabinet manufacturers in our sector have closed their doors in the past 18-months. There will always be treading of a fine line, but we have proven that it is possible,” he says. “A lot of people are looking at automation to become competitive. Our company has grown organically over many years and, as a result, we are quite a manual operation. There are only small individual sections of the factory that are automated. Our competitors from around the world
have highly automated production. Ultimately, we see Concord getting to that sort of arrangement in the next five years. We would like to have a large level of automation on the pre-assembly foaming operation and also on the component manufacturing operation. We have already had that scenario designed and quoted, and we are ready to press the button on the project. We are just waiting for the timing to be perfect as, after you invest more capital, you become more vulnerable to a downturn in turnover, so timing is critical. In terms of what we need to do, everything has been designed and we know exactly what we need to do. The first step in the process has already been taken and that was moving us to a new, bigger, more open warehouse facility. The layout has been completed with that final design in mind and everything can be easily bolted on. Material flow has been improved, our energy footprint has been dramatically reduced, and we are ready to increase our capacity. We now have a clear roadmap ahead of us for automation and it will happen as and when we feel the timing is appropriate.”
This type of expansion is necessary as Concord looks to continue servicing its national clients that are growing into Africa, while maintaining its ability to successfully deliver for individual customer requirements. PROUDLY SOUTH AFRICAN Founded in 1969, originally named Halls Refrigeration, Concord Refrigeration is celebrating its 50th anniversary this year. Only a handful of manufacturing companies make it to the half-century milestone, and this cannot be achieved without an unerring focus on quality. Concord has not always been involved in the manufacture of retail cabinets, but throughout its history it has developed a reputation for delivering products that meet international standards. “Concord has gone through a lot of change. We haven’t always made the product we are making now – we have made everything from commercial refrigeration equipment to catering equipment for hotel chains. From there it evolved to the manufacturing of beverage coolers and under-bar fridges and freezers before we started making full commercial refrigeration units for the
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// YOU MUST BE ABLE TO CUSTOMISE FOR THE CLIENT – IT’S A KEY CAPABILITY REQUIRED IN THIS INDUSTRY // supermarket industry and the big key clients in that sector,” explains Barnardo. “Making units for the likes of Shoprite and Pick n Pay really helped Concord to get off the ground. We make all types of cabinet – hot, ambient, chilled and freezer cabinets all for the big retail groups. We work with all the big corporates and a big part of what we do is also working with the franchisees and smaller independents. Our big corporate clients include Shoprite, Checkers, Spar, Pick n Pay, Boxer, Choppies, Food Lovers Market and many more. These customers work on a much bigger scale than a smaller butchery chain for example, but we strive to serve all our clients’ needs.” From its home at Phoenix Industrial Park in KwaZulu-Natal, Concord serves clients all over the country, and into southern Africa but the company refuses to open offices in other regions, demonstrating its 50-year experience, knowing what works and what doesn’t. “We are located in Durban and this makes us very competitive in KZN and the northern regions of the country. We also pick up a lot of nice business in the Western Cape as everything is offered on a tender basis,” says Barnardo. “In the past, we have opened up satellite sales offices in other parts of the country but we didn’t see a massive benefit. The manufacturing facility is the heart of our business and we see much more benefit in aligning ourselves with quality refrigeration contractors and partners around the country. We would prefer to appoint agents to assist us around the country.” Concord Refrigeration offers
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warranty to all customers on all products and so the need for a countrywide presence is big. Typically, these warranties are serviced by trusted refrigeration contractors that Concord works with frequently. This helps the company avoid the need for a service team travelling nationally on a regular basis. “We install the cabinets, they install the refrigeration system, and together we link up to the cabinets. When it comes to a warranty call out where a quick turnaround is needed, it’s much better for the client, and for us, for the warranty to be serviced by the refrigeration contractor who installed the plantroom because you have to go to site to figure out if you have a problem with the cabinet or with the controls. Sending out one technician that is able to service everything is faster and better for everyone. Even if the problem is a fault with the cabinet, it is likely that the refrigeration contractor will be needed to rectify the issue. “Overall, we find that this system works quite well and our competitors have moved away from this as it can be expensive in a market where every percentage counts. For us, working closely with suppliers to deliver the top level of support to clients is nonnegotiable,” insists Barnardo. ONE-STOP SHOP A key selling point for Concord, and something which it has started emphasising more and more, is its ability to be fully flexible with the products and services it offers. Whether the customer is a multi-national mega corporate or a three-store franchise business, Concord can customise its service for each scenario. “That is a major requirement in this industry,” admits Barnardo. “If you work with the big corporates, it’s easier as their development team will design a
specification that will be rolled out across all new stores. All of the big corporates have a development team that will put together specification for their rollout – it includes everything from the finish of the cabinet to the lights that are installed. We work closely with them in developing that specification so that it can be rolled out seamlessly. “When you work with individual retailers or smaller franchise owners, they have their own designs so you must be able to customise for the client – it’s a key capability required in this industry.” How does the company remain at the forefront of technological developments and ensure it is able to offer its clients the most suitable offering? According to Barnardo, thorough research and development, and always keeping the entire process inhouse. “We have an inhouse R&D team, everything is designed and manufactured inhouse, all the metal components are cut, bent and welded inhouse; even the efficiency elements like the design of the evaporating coil and airflow are planned inhouse and that is our IP which we maintain.” This approach ensures products suit the store they are designed for. In southern Africa, this is vital as the environment requires a stronger cabinet compared to other international markets. “In South Africa, and across other African countries that we export to, we see the need to manufacture very robust cabinets whereas our competitor’s products from around the world show a marked difference in durability. We pride ourselves on a robust and efficient cabinet that is built to last. We are in a tough trading environment so we try to keep all of the IP inhouse and handle all of the design and manufacture so that we can offer customers a full package,” says Barnardo.
// WE PRIDE OURSELVES ON A ROBUST AND EFFICIENT CABINET THAT IS BUILT TO LAST //
CONCORD REFRIGERATION
ENVIRONMENTAL ASSURANCES Today, a big concern for many in the manufacturing sector is the cost of producing high-quality goods that fall in line with environmental standards. A retail cabinet is made from a mix of plastics, metals, and other materials, and it can use various gases to guarantee temperature consistency. To ensure its products meet the international standards the business is now recognised for, Concord has taken steps to update its manufacturing process so that new, friendlier materials are used. “The insulated body of the cabinet is polyurethane foam injected. We have moved to a green system that doesn’t use Freon as a blowing agent and doesn’t have any negative impact on the environment,” explains Barnardo. “Over the past 12-months we have installed new foaming technology and
we have seen improvements from using this system. We have also developed the capability to offer CO2 on all our cabinets as an alternative to R404. Using CO2 trans-critical systems is a quickly growing trend and requires a design change in the cabinets as the system runs at a significantly higher pressure, requiring different coils and piping. In some cases, an energy saving of as much as 60% is realised by going to a CO2 trans-critical system.” Ultimately, these environmental friendly changes have a lasting impact on the cabinet’s energy efficiency and by becoming more efficient, the cabinet is better for the customer and the environment in many ways. “There is more than one driver behind going environmentally friendly. Part of becoming environmentally friendly is becoming more energy
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// ENERGY EFFICIENCY IS PROBABLY THE BIGGEST DRIVER BEHIND ANY OF OUR DESIGN IMPROVEMENTS // efficient,” Barnardo says. “Energy efficiency is probably the biggest driver behind any of our design improvements across all of our equipment. It’s in many cases the driver behind decision making because, over the lifecycle of the equipment, the energy cost far outweighs the initial cost of the hardware. As a result, a lot of changes have been made which are environmentally friendly and energy efficient. For example, high efficiency
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fans that use very little energy and also create very little heat; the use of modern LED lighting in the cabinet; closing cabinets with glass doors and the use of green polyurethane systems.” INVESTORS IN EXCELLENCE In 2008, the family that founded Concord Refrigeration struck a deal which would see the business acquired by Southey Holdings. Southey has been growing its presence, starting out as a contractor for the mining industry, and today owns a large and diverse range of companies. Marine, oil and gas, contracting, manufacturing, corporate services – Southey Holdings is an organisation recognised as one of the largest and most respected privately-owned groups in Africa. Labelled as ‘investors
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in excellence’, acquiring Concord was an obvious choice as one of the top two companies in its sector and a company with multi-national experience. Barnardo, an engineer who previously served as manufacturing Operations Director in Southey Holdings before joining Concord in 2017, says that Southey’s backing is helpful for stability and forward planning. “We report monthly results and we have certain controls in place e.g. when it comes to managing working capital, which is controlled at corporate level, but they are not involved in the day-to-day running of the business. They expect every company to run independently and stick to their budget. “Because they do have a finger on the pulse through fairly detailed management
accounting, they can foresee potential problems and deal with those as they see necessary. While you do a good job and deliver against your budget, they remain largely uninvolved,” he says. While under the Southey umbrella, Concord has taken home a number of ‘Supplier of the Year’ awards from various retail groups. In the future, the company will look to continue servicing its large key clients in South Africa, and assist these clients as they grow into southern Africa and around the continent. COOL COMPETITION One of the largest threats to Concord is the growing pressure from competition, especially from imported products which come into the market at
CONCORD REFRIGERATION
basement prices. “We see it on a daily basis. We have to compete with a field of international companies who all want to export into Africa through South Africa,” says Barnardo. Manufacturers from the Far East and Europe see the potential for growth as Africa continues to develop and gaining foothold with the big retailers is an easy strategy to grow on the continent. “It’s a big market with a lot of development opportunity and a lot of the retail development on the continent is driven from South Africa. Overseas competitors come into South Africa with very keen pricing and interesting finance models, and that creates a lot of pressure,” admits Barnardo. Combine this with a host of other challenges and the result is a tough
atmosphere for business. “It’s made worse locally by the labour situation we have in the country. Manufacturing is under huge pressure because of imports, cost of materials, a depressed market, and an inefficient, expensive and militant labour force. This makes for a really challenging manufacturing industry – it definitely isn’t an easy sector to work in,” confirms Barnardo. But Concord’s history, its reputation for excellence, and its ability to take on jobs of any size have helped the business to thrive where others have fallen to the wayside. Building relationships with the South Africa’s corporate food retailers and servicing those corporates successfully across the entire country continue to help Concord prosper.
“If I could do it again a hundred times, I would always do it the same way. Our market environment has been tough and that means we have to make hard decisions and act quickly. Getting things right is not easy and we have had to adjust the cost structure that was running previously – it has not been an easy road, but it has certainly been one worth taking. Where we were two years ago and where we are now is completely different and shows what we have done has been right,” concludes Barnardo. For all retail environments, Concord Refrigeration remains the hottest link in the cold chain.
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