SPECIALITY
Continued revenue and
trading profit growth was
extremely pleasing following
our strong performance
in 2007. The effects of
the consumer downturn are
not fully reflected, however,
as most consumers were
not hard hit by higher
interest rates until the
end of the 2007 calendar
year.
Industry factors
Patley’s supplies major
supermarket chains and
cash and carries, but the
underlying customer for
our range of leading food
brands is the middle- and
upper-income salary-earner.
In a downturn, these customers
change their priorities.
They don’t stop buying
their favourite brands.
They economise by eating
at home rather than eating
out. This trend was beneficial
for our business.
Rather than experiment
during a downturn, higher
income consumers tend to
stick to their favourite
food brands. We supply
tried-and-trusted favourites.
So the tighter economic
environment again had an
upside for our brand basket.
As a result of high commodity
prices and worldwide shortages,
Speciality was affected
by double-digit price increases.
Media coverage was constant
and high awareness proved
helpful during negotiations
to pass on persistent price
rises.
Increased social mobility
and the creation of a new
black middle class add
to our consumer-base.
Operational factors Relocation
of Johannesburg operations
to larger premises at Crown
Mines enabled us to cope
with rising demand while
achieving new efficiencies.
Warehouse space has doubled
to 11 000m2.
Our Cape Town business
also moved to new premises.
Warehouse space is up from
1 300m2 to 3
400m2.
The Crown Mines facilities
include ultra-modern refrigerated
and air-conditioned storage
rooms. New facilities helped
us capitalise on growth
opportunities in chilled,
frozen and confectionery
lines.
Testing sales targets
were set and exceeded.
The R500 million-mark was
achieved for the first
time.
Innovations/investments
No major capital investments
were made. The most significant
innovation was a new approach
to customer service at
selected supermarkets.
Field marketers now complement
the work of sales representatives.
Each field marketer has
dedicated responsibility
for a specific supermarket
or group of stores. They
ensure optimum shelf utilisation
for our brands, identify
fast-moving lines, assist
supermarket staff with
inventory management and
gather market intelligence.
Information from each
store is collated to help
us identify trends and
make smarter, faster ordering
decisions. There are 24
field marketers in Greater
Johannesburg, five in Western
Cape and two in KwaZulu-Natal.
Significant sales gains
accrued in all these areas.
Risks
Exchange rate risk is
constant as most of our
brands are imported, but
management has many years’
experience in this risk
area. Forward cover is
always taken.
We supply South Africa’s
largest supermarket chains.
Six customers account for
four-fifths of sales. This
level of concentration
is unavoidable as these
majors dominate food retailing.
The risk of customer loss
is mitigated by long-standing
relationships and our record
for reliability and value.
The upside is that our
debtor’s book is relatively
secure. Even in a severe
downturn there is little
risk of major groups becoming
insolvent.
International merger and
acquisition activity can
result in the loss of brands
as a merged company may
withdraw brands to pursue
their own distribution.
We balance our vulnerability
by investing in the development
of our own brand, Gold
Crest.
To reduce the risk of
agency loss still further,
we become a brand-building
partner with our principals.
We aggressively promote
brand awareness. Our above-the-line
advertising spend and marketing
investments rose more than
30% last year.
Sustainability factors
The training budget continues
to rise. A dedicated HR
professional has been appointed
for the first time. The
development of our people
is a priority and jobs
growth (up from just under
300 staff to 350 in 2008)
has helped us create a
discernible career path
for top performers.
Our force of field marketers
was created by internal
training and the development
of staff with an initial
grounding as merchandisers.
Brand and key account managers
are being appointed from
the ranks of successful
field marketers and sales
representatives.
Growth enables real succession
planning. A second tier
of managers is now in place.
Decisionmaking responsibilities
are being spread. A new
generation of executives
has direct exposure to
customers and brand principals.
