THE BEVERAGE C O M PA N Y
THE BEVERAGE COMPANY
More Cheers for The BevCo PRODUCTION: Karl Pietersen
Just two years into its life, The Beverage Company has already taken the number two spot in the soft drinks manufacturing industry in South Africa. With a fierce product portfolio, a number of high -quality manufacturing facilities, a national footprint, and an inspired workforce, this is a business that looks set to sparkle now and in the future. 2 / www.enterprise-africa.net
1. TBC Conference 26.9.18 Day 1 (1)
INDUSTRY FOCUS: MANUFACTURING
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Just like hard drinks, soft drinks in South Africa is a tough business. There are many businesses competing for valuable market share. Water shortages arising from bad droughts in 2017 amassed pressure onto what is already a tight market. Smaller manufacturers struggled to compete and only the biggest and best managed to stay afloat. Leading the way in the market is Coca-Cola, or ‘big red’ as the market refers to it. Like almost all of the markets it is active in worldwide, Coca-Cola commands more than 40% of the market – when you reach for a soft drink in Africa, the likelihood is, you reach for a Coke product. But, in the future, that could change. Smaller players are looking at ways to bolster their position. Some have amalgamated in an effort to compete more effectively, and one in South Africa has mixed together a number of national players to create a truly unique cocktail, capable of claiming market share. That player is The Beverage Company (The BevCo). Headquartered
Michael Benjamin CEO
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in Isando, Johannesburg, The BevCo was established in 2018 after the acquisition and merger of Little Green Beverages and Softbev. Little Green Beverages was founded in 2006 and Softbev in 2015. Within Softbev is Shoreline Sales and Distribution and Quality Beverages, and acquisition of these two companies has helped to push The BevCo’s product portfolio into a really strong place. CEO Michael Benjamin was appointed to lead a growth strategy at Little Green Beverages in 2017 after Ethos Private Equity, Nedbank Private Equity and management had taken on the business from its founders. He quickly went about assessing the market and searching for opportunities to build a national player. “The genesis of all these ideas comes well before they enter the public space,” he tells Enterprise Africa. “Over a period of years, there have been a number of people hypothesising on whether you could consolidate a number of regional players and put together a business with a powerful national footprint that utilises capability and shared insights to accelerate
development. Many have tried but this is probably the first time it’s come to be. We started working on it around two years before the first acquisition. There was a number of people in the party and I came onboard around November 2016 after chatting loosely about what could be done. “I was asked what I thought of the idea and invited to come and look at the numbers, sites, and people. Eventually, I was asked to come onboard and I said I would be happy to alongside other investors including private equity, banks, management and other stakeholders.” On 24 April 2017, it was announced that The BevCo had acquired Little Green Beverages and this moment was a flagship in the early development of the business. Jonathan Matthews, Partner at Ethos Private Equity said: “Ethos invests for growth. Under our stewardship, LGB’s business processes, people and brands will receive enhanced focus and investment to further improve products and deliver value to customers and investors.
THE BEVERAGE COMPANY
Together with management, Ethos has identified opportunities to grow LGB and unlock further performance, service levels and value. To support this growth strategy, executive leadership has been re-aligned and bolstered with key hires.” Collectively, LGB and Softbev boasted some powerhouse brands, some recognised globally and some known locally. At the heart of The BevCo’s plan has always been to give customers choice. Local hero brands including Cooee, Jive, Refreshhh and Reboost are complemented by a range of Pepsico beverages global champions including 7UP, Capri-Sun, Mirinda, Mountain Dew, Pepsi and Pepsi Max. The BevCo also manufactures and bottles on a contract basis for a number of highprofile retailers. “We thought these businesses had very strong brands; brands that resonated with local consumers. Our plan is not to acquire companies and then put in one ubiquitous brand we will keep the local hero brands,” ensures Benjamin. “The first acquisition which was Little Green Beverages, who were strong in the Eastern Cape, Gauteng and Mpumalanga. The next transaction closed in August 2018 and that was Softbev including Shoreline – strong in KZN – and Quality Beverages
// IT’S NO SECRET THAT SOUTH AFRICA HAS HAD A TOUGH ECONOMIC TIME WITH MANY HEADWINDS AND THAT MEANS PEOPLE HAVE TO FIGHT HARDER FOR THEIR SHARE OF REVENUE //
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– strong in the Western Cape and Gauteng. Johannesburg is the most populous region, with the most disposable income so clearly that was a must-win market. “Softbev was home to a number of strong brands but there was no automatic guarantee that we would gain all of the brands. We were in negotiations with PepsiCo and CapriSun and the others around aligning what our vision was and where we thought we could materially stepchange the brands. From their side, they were worried about performance and credibility in the market. For us, our vision has always been around promoting local heroes and global champions, and that gives us a unique capability that other beverage companies do not have. We have competitors who have local hero brands
and others who have global champions, but no one has the portfolio diversity that we have,” he adds. Now, the fizz has settled and The BevCo is established within the local communities that it targets so heavily. Strategic planning has been ongoing, company assets have been streamlined, and the smaller businesses that came together are reaping the rewards. “They were all relatively successful,” says Benjamin. “They had good and bad years, they were competing against Coca-Cola and they didn’t always have the financial muscle to compete effectively. With beverages, there is also the cost of distribution – to a point you can make money but after that you become disadvantaged. Continues on page 58
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SUSTAINABILITY, INNOVATION and ENVIRO-FRIENDLY OPPORTUNITIES It is our intention to be a supplier that looks at the Safest and most economical way to wrap a pallet. This does not mean that we must be the cheapest per roll or per kilogram, rather we want to offer a package whereby the full value of packaging is achieved. This means that we can offer the knowledge of how plastic and the wrappers should be run, without having to rely on the OEM to always be on site to do adjustments. As plastic specialists we are backed by our NEWTON TEST CENTRE who are on hand to offer solutions to all types of packaging and machinery. With the use of technical development Taigan has been able to offer innovation through the fact that we have moved from a 3 layer cast stretch film to now being the Company that offers 33 and 55 layer NANO stretch film to the South African market, a feat that no other manufacturer can match. This development was made in order to look at reducing the amount of plastic required to wrap a pallet without detracting away from the importance of why wrapping is being used. It is not a sake of downgauging to protect manufacturers margins, it is done to improve packaging by using high tech raw materials that allows for NANO technology to be successful worldwide. Sustainability is a key influence for any market. The understanding that if we did not look at improving efficiencies in extrusion and the correct use of raw materials, this would leave us at a stagnate situation. It is for this reason and the belief that for us to succeed, new equipment such as 2 more 55-layer NANO CAST LINES are on order or being installed, thus offering a monthly extrusion tonnage of 10000 tonnes. Traceability also has developed with NANO extrusion and we are able to track the exact extrusion conditions of each roll and at what position on the shaft by checking the BARCODE in each roll core. This information gives the DNA of each roll extruded and supplied to our customers. Rolls of our NANO film is protected by individual cartons, although this might seem a bit expensive handling conditions are eliminated, and no waste occurs due to damaged edges. NANO film is 100% recyclable. The film is OXO degradable which means it is not BIODEGRADABLE, but the portions break down into smaller pieces which makes it easier to recycle. When we supply our hand wrap rolls it is our intention to create a footprint whereby we look to recycle the returned core and offer a savings to the customer. Our hand wrap cores are manufactured in Green for identification. NANO film is ENVIRO FRIENDLY as it is manufactured to offer thinner film which means less plastic is needed to contain a pallet of goods. The correct use of raw material in extrusion by adding layers such as 33 or 55 allows for the strength and puncture to be maintained and the integrity of the film to be no compromised. This is a first for our country and we are market leaders to promote our social responsibility. The importance of correct wrapping needs to be understood. Stretch film has been developed to hold goods on a pallet in the SAFEST way but by overstretching the film can result in unstable pallets of goods being transported. It is for this reason that we offer load RETENTION testing at each trial so that we can determine the correct amount of plastic to apply and at the correct cycle which should achieve a maximum stretch value of 5.5 – 6um around a pallet. Thinner or thicker offer other challenges such as waste or falling loads. The correct settings on automatic wrappers are the key to offering effective cost savings. A full cost analysis is always conducted by our team to set standards and hold us accountable for our product performance . OUR GOALS : -
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Technical development and training at each site
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Improving on the current packaging and being partners not suppliers – ADD VALUE
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INDUSTRY FOCUS: MANUFACTURING
Continued from page 55 “When we did the deal, we believed we would get a very strong footprint in the major metropolitans and we could use the footprint to drive our growth agenda profitably. We would have had six facilities, but we consolidated two in the Eastern Cape into one. “It is a very competitive environment,” he adds. “There are a number of new entrants and they all have ambition and are all looking for market share. I think that is a great thing as it does keep us honest. There is no one that we can see that can put together the local heroes and global champions across the absolute breadth of beverage categories. That gives us a unique advantage as it means we are able to load more trucks full which gives us a cheaper cost per case to deliver rather than six trucks coming from six different companies.” Taking advantage of economies of scale and improved buying power, the company is now delivering products to most countries in subSaharan Africa. “Currently, we’re in
Eastern Cape Production Plat
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Namibia, Botswana, Zambia, Lesotho, Swaziland, Mozambique, and we were in Zimbabwe before they changed the tax rules,” details Benjamin. This reach, combined with the fantastic product range and significant manufacturing capabilities, makes for a powerful organisation. “We claim to be the leading independent manufacturer and a leader in market share which is supported by BMR and GFK. There are other substantial players but right now we are comfortably the number two beverage company in South Africa,” explains Benjamin. He goes on to state that being second in an industry is not something he is happy about – it doesn’t let him sleep comfortably at night. Having worked for almost two decades in the beverage business, Benjamin’s norm is being in pole position. But, competing with Coca-Cola is no easy task and he is well-aware that the challenge is a longterm one, especially with the economic climate faced by South African businesses right now. “It’s no secret that South Africa has had a tough economic time with many
// US PUTTING IN A CANNING LINE MEANS WE HAVE A PRODUCT THAT CAN TRAVEL OVER LONGER DISTANCES WITHOUT LOSING CARBONATION, WHICH DOES HAPPEN WITH PLASTIC PET BOTTLES // headwinds and that means people have to fight harder for their share of revenue.” To ensure focus is unrelenting and constantly on the company’s core values (growth, recognition, accountability, passion, integrity and teamwork), the owners have installed a young and vibrant management team without losing the entrepreneurial flair that came with the businesses before amalgamation. The
THE BEVERAGE COMPANY
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entire management team is encouraged to get out and talk to employees wherever and whenever possible. “The entire leadership team are shareholders making them invested in the business. It drives a very different decision-making process. They are tied to the credibility of the business and they are invested in the growth agenda. “We have committed to that and every quarter, our exco members
// OUR PLAN IS NOT TO ACQUIRE COMPANIES AND THEN PUT IN ONE UBIQUITOUS BRAND - WE WILL KEEP THE LOCAL HERO BRANDS //
go to every site and talk to people transparently about the performance and what is working and what is not,” says Benjamin. This also allows for the suggestion and development of new ideas – a key part of growth for any business. Going forward, The BevCo has plans for differentiation and expansion, and this innovative approach to business is yielding a positive relationship with consumers. “We are putting in canning lines, using less water, using less plastic, and minimising our carbon footprint. Us putting in a canning line means we have a product that can travel over longer distances without losing carbonation, which does happen with plastic PET bottles. “Our current plan is not to move into alcohol, but it is quite possible
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that we could look at other adjacent categories. We are always looking at new opportunities,” says Benjamin. While ‘big red’ is probably safe at the top of the pile for now, The BevCo is certainly turning the screw. It’s idea of being locally relevant, and very active in communities, while always delivering international quality have helped to develop a business that people think positively about. In the future, the product portfolio will be expanded and this will only mean more growth. “Our driving mantra is about giving consumers choice. If our choices are not good enough then they will migrate and enjoy other things,” Benjamin concludes.
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