The BevCo on a Marathon Journey to Success

06 June 2019 | Latest News

Operating in the highly-competitive soft drinks manufacturing industry in southern Africa is no easy business, and only those with a clear and considered strategy succeed. A relatively new player to the market, in its current form, The Beverage Company is looking to constantly grow by offering a range of ‘local hero’ brands combined with globally recognised champions. CEO Michael Benjamin tells us more about the company’s establishment, growth, and ambition during these tough economic times.

A leading soft drinks manufacturing business 
in South Africa is coming up with a plan that will delight customers by delivering a range of locally prominent brands combined with internationally-recognised staples. A forward-thinking and modern organisation, The Beverage Company (The BevCo) was officially established in 2018 after the merger and acquisition of several regional players, creating a nationally significant business.

Headed by industry veteran Michael Benjamin, The BevCo has, in a short period of time, utilised the existing infrastructure at its disposable to create a powerful South African business with exposure across all of the southern African nations.

Right now, there are plans bubbling away behind the scenes that will see The BevCo grow further to take on some of the mighty names in the highly competitive industry, while all the time remaining sustainable and responsible.

STRENGTH IN DEPTH

In 2018, after years of planning and strategizing, The BevCo was launched after a consortium, led by Ethos, acquired Little Green Beverages (LGB) and Softbev, two of the country’s large manufacturers and brand owners. LGB was strong in the Eastern Cape, Mpumalanga and Gauteng, and Softbev was strong in KZN, the Western Cape, and Gauteng through its subsidiaries Shoreline and Quality Beverages.

With the acquisitions came important brands including Coo-ee, Jive, Refreshhh, Reboost, 7UP, Capri-Sun, Mirinda, Mountain Dew, Pepsi and Pepsi Max.

This created a platform from where The BevCo could become an able challenger. Today, the business has more than 1000 employees across ve manufacturing locations in all of South Africa’s major metros.

CEO Michael Benjamin, a big sports fan, talks to Enterprise Africa about the ambitions of this young and vibrant company, using the marathon as his analogy.

“I don’t sleep happy at night knowing we are number two. Others are looking to take our share, so we always need to be growing our business – if you’re not growing then you’re dying,” he says. “I would love to be number one but we have to stand back and look at whether that is a realistic dream in a five year period – and in that time frame it is unrealistic. By any measure, Coca-Cola is the leader in the market. I always say it’s like running a marathon. If you can run the marathon in four hours, that is great. But if you want to get to world-class levels, there are many hurdles to overcome. As you get quicker and quicker, things become slightly easier. That is the journey we are on. We need to concentrate not only on market share but our building blocks of penetrating each market, making our brands relevant, investing behind the scenes – whether that is refrigeration, communication, or ensuring product quality. By doing all the right things, we will get to grow the business, but you can’t preordain growth or market share. There is a realisation that we are going through the hard yards and you can’t wave a wand to achieve success.”

PACEMAKERS

A strategic decision was taken a long time in advance of the founding of The BevCo to ensure that the whole organisations stays thirsty for success. This decision saw an Exco and management team appointed that has impressive industry experience but has not been fatigued. It is packed with energy and has been given freedom to go out and build on a robust platform.

“Within these businesses, there are incredible entrepreneurs and entrepreneurs tend to move with speed – we don’t want to lose that,”says Benjamin.

“The collective leadership has a very sough-after track record,” he adds. “We haven’t gone for ivory tower people; we have gone for people who have run operations and are specialists in their fields. We have a number of people who are midway through their careers and have plenty of time left yet where they want to achieve rather than seeing this as their swansong.”

By making the entire leadership team shareholders, The BevCo has ensured that its top people are invested in results. “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,” says Benjamin.

Ensuring that a forward thinking approach is instilled throughout the organisation, leadership takes the time every quarter to get out to each of the company’s sites and talk to employees face to face, in a transparent manner, to further understand performance statistics and look at what is working and what is not. This is all part of a wider vision for the business. “It all comes back to our purpose,” explains Benjamin.

“If we get it right, each employee will improve the financial situation for their family through investment in skills and their own learning. If this happens, it will improve returns to shareholders, and that will help us build an African legacy of true excellence.”

TRUE EXCELLENCE

The BevCo brings an unrivalled product portfolio to its clients. Choice is a key factor in its offering for consumers and, between its local heroes and global champions, customers are given excellent variety. But the portfolio is never finished, and Benjamin admits much is happening behind the scenes to develop the product range.

“It doesn’t take a rocket scientist to work out that there is a massive shift in global consumer trends and these impact our local trends. For us to stay relevant, we believe we need to gain a bigger portfolio. We have a number of categories we are very actively looking at. To give you an indication, R&D will be quadrupled next year and that should indicate, from a strategic point of view, our level of investment and belief in what we need to do to stay relevant.”

Without revealing exactly what sort of brands are being investigated, Benjamin says that the company is extremely interested in global trends and will invest accordingly.

“Health and wellness is certainly a focus,” he says. “There are unique challenges with water quality in Africa and so some categories are about sustaining life rather than just refreshment. There are other categories that surround meal replacement. There are categories that have a growing awareness around packaging and carbon footprints – we are looking at a wide range of options.”

True excellence in the product range can only be achieved if true excellence is chased across the company’s manufacturing base. With sites in Johannesburg, Cape Town, Durban and East London, The BevCo has South Africa well covered and will not look to invest into further premises at this time.

However, true excellence is an ongoing and everchanging journey, and so The BevCo is looking to make the most of its existing infrastructure, expanding and improving what is already in place.

“We are looking at expanding our ve manufacturing facilities,” details Benjamin. “All of our sites have different areas where they are strong and weak. We have identi ed pockets of excellence which we think we can share and use to improve the operating level of the business. We are putting in canning lines which gives us exibility for innovation and materially improves our canning volume - these can be put in on existing sites. There is not a strategic need to go and expand our footprint, and subsequent costs, when we do have the facilities that we can grow and evolve.”

With reduction in plastic usage on the radar for all manufacturers, the canning line comes at the prefect time for The BevCo. Aluminium cans are fully recyclable, strong, adaptable and have the ability to sustain carbonation.

“Anytime a commercial imperative meets a sustainable imperative, you’ve got a winner for business,” says Benjamin. “The canning line gives the ability to play in a wider market, it gives us the ability to be better with recyclable material, and it delivers efficiency. We were one of the first companies, if not the first, to go into recycled PET and the challenge there is putting in carbonation that lasts. Sustainability for us is not only in packaging.”

He goes on to explain how a wider sustainability drive is helping the company to become efficient at a world-class level.

“Cape Town is known for its water scarcity. We managed to move our water ratio down from 1.8 litres per litre produced to 1.3 litres which is globally world-class. We use new software which monitors our sustainability with water, electricity, wastage and more. The result has been all of the gures being driven down. Even decisions like where we position our distribution centres have been made with sustainability in mind.

Truck volumes, distances, centre of gravity – everything is done to ensure we align a commercial imperative with a sustainability imperative.”

Structuring in this way has helped the company to expand its presence across southern Africa, with demand for its brands continuing to grow. Already available in Namibia, Botswana, Zambia, Lesotho, Eswatini and Mozambique, The BevCo will undoubtedly look for further opportunities on the continent.

“It’s no secret that there is population growth around Africa and with that comes available disposable income and a broader range of choice which we can create that might not be available in those markets,” says Benjamin. “Because of this, growth in Africa and bolstering exports into Africa is most de nitely part of our strategy. All of the original entrepreneurial businesses have developed really strong relationships with a number of role players in these markets, and they are committed to a growth agenda.”

TAXING SUGAR PROBLEM

While The BevCo has achieved much in its short life, there have been challenges that needed swift and decisive action
– primarily the Sugary Beverages Levy, introduced in April 2018.

Known as the ‘sugar tax’, the idea is to help reduce health concerns in South Africa that are attributed to over consumption of sugary goods. As the sub-Saharan African country with the highest rate of adult obesity, the country certainly has work to do. The sugar tax was fixed at 2.1 cents per gram of sugar content that exceeds four grams per 100ml, from 1 April 2019 this has increased to 2.21 cents per gram of sugar. The first four grams per 100ml are levy free and fruit juices are exempt. Initially, there was major concern among manufacturers that the tax would hit the bottom line hard, but for those that were prepared and willing to innovate, a concern has become an opportunity.

“For me, that was a major shock in the industry ” remembers Benjamin.“We had to decide on a strategy in a very tense operating environment. We did a lot of testing in the background and we engaged widely with stakeholders. We eventually took what we considered to be a calculated bet by diverting all of our R&D to developing our underpinning consumer promise of offering as good a taste as any competitor, at a better price. We worked hard to make sure we stuck to the taste promise. In November, we put reformulated products into the market one by one, six months ahead of the sugar tax, to see how they interfaced with consumers. Market testing is one thing but many things fail when consumers finally come into contact with them, but we had no adverse feedback or anything else. When the sugar tax came about, we were very comfortable with our ability to deliver a product that consumers wanted. On the 31st of March, we closed production for a day so there was absolute clarity between pre and post sugar tax with us only producing below the levels required for the authorities.”

This success was almost unmatched by The BevCo’s competitors. Preparation, innovation, and ongoing communication with customers allowed the company to deliver exactly what the market required. “It has certainly given me a boost as I know that we can try new things and be successful,” says Benjamin.

Now, The BevCo is going even further and exploring ways to constantly adapt the product portfolio so that health conscious, taste conscious, and value conscious consumers are all satisfied.

“Take energy drinks which are growing in popularity globally – we see now as the perfect time to reformulate and offer a healthier drink that still matches what consumers want in terms of taste, mouthfeel, tanginess. In October last year, we took our biggest energy brand, Reboost, and reformulated it from 12 grams of sugar down to four, and 88% of people preferred it. We were able to go into peak with the same full-body mouth feel, at a competitive price point, which is better for the consumer. It stood up against the tests and has been a real success,” says the CEO.

SPARKLING WHILE OTHERS GO FLAT

Demonstrating the typical entrepreneurial fashion that Benjamin wants to ow throughout The BevCo, the CEO is not willing to let a slow South African economy put a dampener on the company’s growth prospects.

The country has not posted significant growth gures for almost a decade, and has also been through several technical recessions. But with the political situation now seemingly stable, and with business very much at the forefront of government’s approach to economic development, now is a good time for companies with a strong strategy.

“There are headwinds but that is no excuse. There have been headwinds over the past few centuries and people have found ways to thrive, growing really sustainable and powerful companies. I can’t see why we wouldn’t be able to do that,” says Benjamin.

“Anytime there is an election, there is a degree of uncertainty but that normally passes. There are not normally massive changes, and I don’t think there has been in South Africa. Getting the election out of the way is business positive, people now have a degree of certainty and direction. President Ramaphosa has been clear on many fronts, especially being business friendly, but that doesn’t mean that everyone is. There has been an acknowledgement that government can’t provide growth, employment and everything. Business will be the engine, whether it’s large or small and medium enterprises. People know that it’s now worthwhile investing – we de nitely know that. Our canning line represents many millions that are being put into the ground because of our long-term belief in the returns.

“Leadership is South Africa has to stand up and realise that we can’t wait for someone else to help us. We have to create individual businesses that behave ethically, drive growth, allow for inclusion of everybody, and behave like first-world organisations – as trends move, we can’t get stuck in the past,” he adds.

It is this attitude of success during difficult times that help positivity to continue. “We are outperforming the industry,” states Benjamin.

“We have a rallying call about rising up. We rise up ahead of the economy, we rise up ahead of the industry, and
we rise up ahead of our own previous results. That has resonated quite well and we are on track to achieve our business case. Anytime you go through M&A you are worried that people have prepared their business for sale, and in FMCG you can stock the market. We seem to have navigated the initial nine months well but we are concerned about the economy going forward. The amount that we have had to do to protect bottom 
line has been considerable and we expect it to carry on like that. But, we see the resilience needed to do this as a competitive advantage. When there are headwinds in the economy, not many people are successful, so we see it as an opportunity,” he adds.

COMMUNITY COMMITMENT

Despite having a national footprint and a major workforce, The BevCo remains a committed, proudly South Africa business with customers, consumers and communities at its heart. The goal of the business has never been to install a corporate feel into daily operations.

It has never been suggested that a ubiquitous power brand should take over all manufacturing and distribution; in fact, the opposite is true – The BevCo wants to keep a plethora of local hero brands available to ensure it has a stake in a wide range of communities around southern Africa.

“One of our driving forces remains relevance in the local communities,” states Benjamin.

Just one example of how the company has excelled with community upliftment came after The BevCo partnered with South African golfing star Ernie Els to contribute towards support for children living with autism. For every 500ml bottle of Refreshhh water sold, The BevCo donates 25c to the Els for Autism Foundation.

“We want to find ways to contribute that are relevant to our communities and impacts on them. The autism prevalence rate is exceptionally high and is growing globally. It has no boundaries in economics, race, age or anything else.

There is a centre in Braamfontein that is focussed on helping people with autism and we saw that as a very tangible way to show commitment locally to something more than just profit,” Benjamin explains. The BevCo has also established The Beverage Company Education Fund which awards scholarships to disadvantaged students. 39 young people who were struggling to access education will benefit from the fund in 2019. In the future, this investment will continue, reaching R750,000 by 2020.

In the future, The BevCo is without doubt a business to watch. Ambitious, innovative, nimble, ethically driven,
and committed to South Africa, a plan has been made for every scenario. The ultimate goal is to play a more significant role in the industry in Southern Africa, and currently everyone in the business is satisfied with progress.

“Looking at the level of innovation since the acquisition of LGB, we’ve probably averaged around one per day, whether it’s pack size, avours, sugar tax reformulations, source of water supply – that is an incredible rate,” says Benjamin.

It’s difficult to find drawbacks in this exciting young business. With soft drink consumption, and associated effects on health, under a greater spotlight than ever before, only those that do things right will be truly successful.

“We have an extraordinary team of highly-competent, highly-experienced individuals who are passionate about the business and committed to our strategy. Plus, we have a portfolio of much-loved brands which o er excellent quality at an affordable price. We also have hugely supportive shareholders (in Ethos and Nedbank) who have partnered with us – both financially and strategically – and share our strategic vision and vigour.

“Yes, it’s going to be hard work. But we are resilient and accustomed to rolling up our sleeves,” Benjamin concludes.

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