Fresh into ideas
The concept behind Fruit and Veg City has struck a chord with the public in South Africa. Graeme Liebenberg talks to Gay Sutton about a massive expansion that could see healthy fresh produce on sale at petrol station forecourts across the country.
Around 16 years ago, brothers Brian and Mike Coppin had a bright idea, one that was destined to revolutionise food retail in South Africa and generate considerable global interest. At that time, convenience stores and fast food outlets generally meant processed food and low quality. The idea of the Coppin brothers was based on fresh food and healthy living, and has taken off in a big way. Today, Fruit and Veg City (FVC) has 101 retail outlets, employs more than 7,000 people and sells over 2,000 tons of fresh produce a day outside South Africa via its export division. And right now, the company is poised on the brink of another big phase of expansion.
The concept behind this meteoric rise was to create a store that sold the best quality fresh fruit and vegetables direct from the market at the best possible price. The launch of the first Fruit and Veg City in Access Park, Cape Town, heralded an astonishing if not intimidating period of growth. “The success of the business has been exponential, and almost by default rather than being planned,” explains Graeme Liebenberg, head of franchising and business development. “People saw what we were doing and began approaching Brian and Mike saying they were interested in doing a similar thing. Within 2 years we had begun franchising the concept.” Today, 80 per cent of the stores are franchised and the remaining 20 per cent are company-owned.
That first outlet in Cape Town quickly took shape and became the Fresher Food store brand, aimed at high-density areas such as value malls and busy high streets, where large numbers of people would be passing by. The focus of the store was on healthy eating, selling a wide variety of fresh food, smoothies, sandwiches, fresh baked products, cheeses and fresh meats.
“Then, as always, the habits of the consumer started to change,” Liebenberg says, “and a section of the public began looking for a much more rewarding shopping experience. That was how the Food Lover’s Market idea came about in 2005.” The Food Lovers Market is FVC’s premium store brand. Generally larger in size, it offers a huge diversity of products, from the most exotic of fruit to a connoisseur range of cheese and sushi, turning food shopping into a pleasurable experience, an outing rather than a chore.
The final link in the chain is the Freshstop store. A new take on the old convenience store (c-store), the Freshstop is a small outlet providing FVC’s hallmark fresh and healthy produce. Following a groundbreaking agreement with Chevron, the holding company for Texaco and Caltex, the brand now looks set to sweep across the petrol station forecourts of South Africa.
The origins of the deal go back to a decision by Chevron to concentrate on its core competence, pumping petrol, and to outsource the retail shops at its forecourts. Searching for a suitably profitable and enticing replacement for the existing shops, Chevron came across FVC’s Food Lovers stores. It examined FVC’s track record, and invited the company to take part in a forecourt trial, attracted by what could be a world first—introducing fresh and healthy food to the forecourt.
“They gave us four forecourts on which to pilot the store,” Liebenberg explains, “and the results over one quarter were phenomenal. The worst performing store showed a growth of 35 per cent, while the best was at 102 per cent. And that was in a declining market, so the real growth was probably 10 to 20 per cent more than that.”
The terms of the deal with Chevron are that FVC is the approved partner for the retail side of the business. But at each individual forecourt, the decision over who will provide the brand and infrastructure for the retail outlet is down to the forecourt franchisee. “And we don’t want to muscle them into it,” Liebenberg explains. “We want them to make an informed choice. After all, we do offer an excellent commercial proposition.”
FVC plans to have 20 stores up and running by the end of this year, 50 by the end of next year, and to convert the balance over a longer period. Once this is completed, FVC should ultimately be franchising to 100 to 200 petrol stations across South Africa, effectively doubling the company’s current retail presence.
The vision, though, does not end there. Traditionally, people buy ‘chips, cokes and smokes’ at a petrol station. FVC believes that if it can sell fresh and enticing food at only marginally higher costs than the big supermarkets, which may be a considerable distance away, then customers will begin buying more when they stop to top up on fuel. “I believe the c-store sector could really change the face of retail shopping,” Liebenberg says. “It could become so successful that the next stage will be to double the size of the store so that it becomes the local supermarket, rather than a convenience store.”
FVC’s business is built around a well established and highly successful infrastructure. Fresh fruit and vegetables are purchased from the local markets by a team of highly experienced and knowledgeable buyers working in conjunction with the franchisees —who are encouraged to attend the markets with them. Over the 14 years since its inception, FVC has grown to become the largest buyer of fresh market produce in South Africa, and this delivers significant economies of scale, helping to keep costs down. Meanwhile, its buyers have also developed close working relationships with the farming community. “Many farmers would rather do business with us because of the way we do business and the way we treat them.”
A network of six distribution centres operates around the country and each one of these also runs a kitchen where the sandwiches are made fresh every day, using the best fresh produce.
One of the big risks in the fresh food industry, of course, is the loss of profit due to wastage. “And this is something that differentiates us from our competitors. For one thing, our buyers are very experienced and can see exactly where a product is in its lifecycle, so they do not purchase produce that is over-ripe and will go off quickly. The other thing is, we do is pay great attention to how we display the produce,” he says, “and this can be down to the small details such as the amount of sunlight a product receives. In South Africa, temperature is critical, so we have special sprinklers built into our stores that cool the food effectively and efficiently. It’s a very good alternative to air conditioning.”
The company is also meticulous in calculating consumer purchasing trends and advising its franchisees on what they should be buying. While its stores are managed on a weekly basis, the sales figures are collected and processed daily, so that over the period of a week any wastage or change in buying trends becomes visible. “We can then address the issue before it becomes a cancer,” he says. Where inevitable wastage does occur, FVC has developed a community-oriented method for dealing with it. The food goes to the homeless and to orphans, through a charity, Food Bank SA, which collects the food directly from the stores.
This hugely successful format has attracted considerable attention from abroad, all of it from individuals or companies who wish to operate the brand under franchise. The company currently has five outlets up and running in Namibia; there is a store planned for war-torn Angola; and there will be one opening very shortly in Zimbabwe, where food shortages are now reaching a critical stage. Meanwhile, a Food Lovers Market is operating in Australia; there are two stores opening in Mauritius and Réunion, with two more planned in Botswana; and there is considerable interest in the brand from Europe.
Although the company has experienced rapid growth, it prides itself on retaining the family touch. “Many big corporations lose the personal touch and become bureaucratic. But with our company, the managing director is effectively a phone call away from everybody. And we survive and thrive by listening to the customer. Those who are too corporate-focused can’t listen to the customer.”
For FVC, building a good relationship with the customer is of ultimate importance, and this is drilled into every member of the company. “Everyone today is looking to be treated in a special way, to feel that they are more than just a number. Yet the world is opportunistic; people aim to make as much cash as they can and then move on. But that behaviour is not going to ensure any kind of loyalty—what we want to do is encourage people to try our products, with the hope of converting them and then retaining them. So we encourage our franchisees to build relationships with the consumer, and make a smaller short-term profit in order to gain a long-term customer.”
The fresh produce market, around which FVC is structured, is perhaps one of the earliest commercial entities known to man. “The market is a micro-economy in its own right, and is essentially a micro-aspect of capitalism and the free market system. But globally, these markets are now under pressure,” Liebenberg says.
The trend now is for retail giants to bypass the markets and secure their supply directly from the farmers. This makes economic sense for the retailers but it can be dangerous. The giants can act almost as a monopoly, pushing prices down to such an extent it becomes hardly viable to farm the land. Farmers tie all their produce to one single customer, which makes them vulnerable; meanwhile, the markets are starved of produce and the livelihood of many smaller traders is threatened.
In South Africa, FVC is now the largest buyer of fresh produce from the markets, and is determined to continue purchasing in this way, delivering cost reductions to its customers through better buying, better handling and distribution of fresh produce and improved marketing strategies. “But I do think governments worldwide are going to have to improve the fresh produce markets because so many people and so many informal traders depend on them,” Liebenberg says.
Fruit and Veg City has shown it has a winning format which continues to spur phenomenal growth. But could it ultimately challenge the stranglehold that the likes of Wal-Mart, Tesco and Asda have on the consumer and on the farming community? Time alone will tell, but if the success of the past 16 years is anything to go by, the company may well be able to give them a run for their money.