SYLKO
SYLKO
Sylko Stronger Than Ever At
70 years
PRODUCTION: Manelesi Dumasi
In the year of its 70th anniversary, Sylko is a company going through major changes, positioning itself for a strong future in a new factory and with a new owner. Product development and innovation remains at the heart of the business and CEO Michael Attwood tells Enterprise Africa that despite economic woes in the country, now is an extremely exciting time for the business.
INDUSTRY FOCUS: MANUFACTURING
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Durban’s Sylko is a partner of good times. Manufacturing and distributing paper plates, foils and household kitchen supplies, the company had grown to become the preferred supplier to braais, picnics, parties and get-togethers all over South Africa. A winner of product of the year awards, with regional offices around the country, and with an extremely strong brand, Sylko is enjoying an exciting period. When Enterprise Africa spoke to Sylko back in November 2016, the company was focussing on product innovation to provide inspiration during a tough economic climate. Then-CEO Grant Attwood spoke of his happiness with the company’s innovative ‘2x Deeper Paper Plates’, winner of a Nielsen product of the year award in the food serving category. Since then, Grant has made way for brother and COO Michael to take the helm. He was named MD in May and is overseeing a period of positive change. Recently, Sylko’s performance and contribution to the economy was recognised when the company was purchased by the Twinsaver Group. Owned by the Attwood family since 2000 and trading in SA since 1947, Sylko has a sterling reputation for business excellence. The transaction with Twinsaver has resulted in
renewed focus for Sylko and Michael Attwood is buoyant. TWINSAVER ACQUISITION “I’m upbeat about the whole thing,” he says. “I’ve been involved the whole way through and it has taken a long time but we’re at a point where we look back and consider the whole process a good thing. It gives more opportunities for people, for the brand, and for the business in general. The nature of a smaller, privately owned family business was that we found it challenging to raise capital, but now we have ample backing and we have many more resources available for leverage.” The sale has now achieved all regulatory approvals and has been completed with both parties looking forward to a prosperous relationship. For Sylko, the next step is overcoming any short-term challenges associated with the purchase and integrating culture with Twinsaver. “Change in large format is never easy,” Attwood admits. “We didn’t ever think it would happen without interesting developments. At the same time, we were very fortunate that we could almost pick and choose who we sold to as we’ve had several offers over a number of years but never progressed them as they’ve never been the right fit in terms of business focus
and looking after staff. With Twinsaver, they ticked all the boxes. They were very complimentary of the business and excited with the opportunities we present. It wasn’t about us coming into the group from a position of weakness but more about us coming in as a valuable partner and since the acquisition, we have been treated as such. It’s likely that there will be changes but we have been fully consulted with all of those and it’s constantly reiterated that we’re not changing for changesake but changing for a better group performance.” Key elements of the deal for Sylko were the capabilities that Twinsaver has in the corporate market. Currently, Sylko is highly focussed on the ‘household’ market, selling mainly through established national retailers but Twinsaver provides an opportunity for expansion into other commercial sectors. “Twinsaver gives us a focus on business-to-business, not formal retail but the likes of hotels, hospitals and similar trades so we foresee growth coming from there as we’ve never focussed on that area and Twinsaver has a lot of traction,” says Attwood. He adds that the reaction of staff to the sale has been hugely positive and the ongoing dialogue between management and employees has helped to smooth the entire process.
“You Think it ! We Move it !” TMC logistics started in 2010, and has over 18 years’ experience in the distribution sector. TMC is a family business that drives this focus through in its ethics that we look after our customers as a family; we look to provide our customers with distribution solutions and the most cost effective and efficient way to their customers as an extension to their business. With Sylko as a strategic partner we understand there logistics needs and their customers’ expectations and together as a partnership we have grown. We look forward to the new venture and the new challenges ahead with this new merger and wish Sylko an abundance of success going forward and are happy to be a part of this journey. Arriving at one goal is the starting point to another. ~ John Dewey ~
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SYLKO
“The trust that has been built over the years between management and staff; firstly with my father, then my brother, now me; has helped tremendously. It’s the responsibility of senior members of staff to insulate the staff and business in these times of change and constant, transparent communication is vital.” PROSPECTON - CORNUBIA Earlier this year, Sylko moved its manufacturing centre from Prospecton, across Durban to Cornubia, to an all-new purpose-built facility. The company is a large-scale manufacturer of disposable and recyclable household foils, paper and plastic tableware, food wraps, baking accessories and many more products, and so the move to a new factory had to be precise and efficient. Thanks to effective planning, the move went off
without a hitch and there was very little business disruption. “The decision to move came about 18-months before the expiration of our lease on our former premises,” Attwood explains. “We managed to find a developer who would develop a building for us and that was completed in October 2016. We talked with all of our staff in February 2016 and made sure that everyone was happy with the move as it was an extra 40km travel. We were involved in the build of the property to ensure it suited our needs exactly, and it was finished in December 2016. We moved in in March 2017 and the move only took a couple of weeks. We planned everything very well and we had built up stock before we shut down the old factory, decommissioned the machinery and moved everything across.”
Despite being slightly smaller, according to Attwood the new property is a vast improvement and has allowed for efficiency increases and productivity enhancements. “The new factory is 6400 m2 compared to the old factory which was 7800 m2 so slightly smaller but much more efficient and cost-effective. “We are now using LED lighting through the whole factory and that has the benefit of being environmentally friendly but also a lot cheaper in terms of electricity cost. “Aesthetically, we’re in a much nicer area, it has been newly developed, and it’s very close to the airport in Durban. The building is a considerable upgrade on the old facility, it has a very good working feeling for staff and we now have more space from an admin perspective. “Everything is a little closer
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INDUSTRY FOCUS: MANUFACTURING
together, a little more transparent, everyone is a little more engaged, and the vibe is very good,” he says. ECONOMIC SLOTH Back in November 2016, the confidence surrounding the South African economy was not strong and businesses, including Sylko, were feeling the effects of a weak market. Today, the picture is not much prettier. Since then, the economy has been downgraded to junk status by international credit agencies, the Rand has continued to fluctuate unpredictably, and the situation remains precarious with official stats suggesting that the country is regularly flirting with technical recession. But last year, Grant Attwood remained positive despite the situation and this year Michael maintains that positivity in a challenging environment. “Things have not got any better,” he says. “Technically we’re out of recession and have had some positive GDP growth but in reality it’s been far too little and all indications are that it’s going to continue being very tough for a long time to come. Not to mention the fact that there are serious thoughts that we’ll have another downgrade which would take us into junk status from an international debt perspective and FDI would all of a sudden become more expensive and that has massive ramifications in terms of national repo rates and rates from the bank. So, the state of the economy is no stronger than it was last year and there are a lot of indices that are saying that the economy has decoupled quite significantly from what other developing, similar economies have manged to achieve. The country is not giving investors an abundance of things to be confident about. “Yes, the economy is not good, but we are doing very well.”
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Sylko’s sales have continued and it has maintained strong market share in all of the sectors it operates in. And thanks to the acquisition by Twinsaver, the businesses is now looking at growing its reach. “We have had a good run for the past year. Our products in general are not purchased at the absolute lowest of the LSM. I think in general our products are not necessities but they are purchased by more affluent people who haven’t been hit as hard and they remain relatively cheap products so it’s not something that a more affluent customer has to forego.” But it’s not just pricing that has helped Sylko insulate itself from the weak market, it’s also ongoing investment and as we hear so often, those that can invest when times are tough are those that will thrive when times are positive. “We’ve got a lot more focussed on our brand and the attention we give to it. We’ve increased the promotional activity we put behind it and the distribution of the brand. Dealer-owned brands have become very prevalent and we are certainly the dealer-owned manufacturer of choice in our categories and that is fantastic. “Focussing on the brand has given us the opportunity to innovate, for margin enhancement, and for point of difference – which can then be of benefit to the dealer own brands as well. We’ve developed brand equity within the business and that can be used as enhancement for our sellers who can communicate that our products can enhance margins and category growth. “The challenging economy is almost an opportunity because there are less competitors willing to spend money in a saturated market when the economy is struggling but the minute things get better everyone jumps to invest, but those who can perform well in the tough times will be better off when the
tide turns,” says Attwood. But, unfortunately, the future remains unpredictable and despite the success of the business over the past 12-months, Attwood is keen to position Sylko for further challenges to come as retailers continue to feel the pinch. “FMCG and the way that retailers deal with their suppliers has without doubt got more tough. The big retailers are asking us to consider every way we can save on input costs, asking us for every way we can contribute to advertising or promotion, and asking for every way we can contribute to price reductions together with them – and those are tough discussions. The retailers certainly are seeing reductions in footfall and spend, and seeing traffic moving to lower LSM stores,” he says. 70 YEARS STRONG 2017 marks the 70th anniversary of Sylko in South Africa. Starting life as a producer of kitchen products
SYLKO
including wrapping paper, rewound greaseproof paper, crepe, 1ply serviettes and wax paper, the business has grown and diversified to become the industry leader in its chosen markets. But with the company currently being a hive of activity following the sale to Twinsaver, celebrating a milestone birthday has fallen to the wayside. “It’s on the lips of a lot of people” says Attwood “but the sale of Sylko and the inherent uncertainty that comes with that has downplayed that while we work out where brand focus is going. We have pushed it at trade shows and through point of sale positioning, but it’s taken a back seat while we reorient ourselves. When we reach our 75 years, then we will look at a big celebration.” Through the end of 2017 and the start of 2018, the focus for the business will switch back from new ownership and new premises to product development and
innovation, further cementing the company as the market leader. “We are without doubt the market leader in our category,” says Attwood. “Between the dealerowned brands and our own brand, we tend to have 70-80% market shares in the formal retail trade. We have continued to innovate and add new lines as we go. We’re now growing with cups; we’ve introduced different styles and sizes. With plates, we’ve got a plan for a new development to disrupt the market. On the foil side, we’ve got a big innovation for dispensing that we think will be exciting in the not too distant future.” Many South Africans are now used to uncertainty. The economic landscape in the country has become predictably unpredictable and because of this, companies that can position themselves for longterm success rather than shortterm gain are those that will shape the industries in which they play.
Sylko is one of these companies and has proven itself over seven decades. With all of the exciting developments underway, this is a business that will remain a partner of South Africa’s good times for many years to come. “What characterises the good businesses in the South African market is a certain resilience to hardship and an ability to see your way through, understanding that everyone goes through the same hardship but you can’t give in, you must be the best performer,” Attwood concludes.
SYLKO 031 913 9500 consumercare@sylko.co.za www.sylko.co.za
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AFRICA
THE BUSINESS MAGAZINE FOR AFRICA’S INDUSTRY LEADERS
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Issue No.64
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NECSA:
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ALSO IN THIS ISSUE:
SKA / Transnet / Metso / AVBOB
A S F E AT U R E D I N
ENTERPRISE AFRICA
OCTOBER 2017