26 January 2012

Zimbabwe: Schweppes Focused On Growth, Profitability

interview

MAZOE Orange Crush came third in last year's Superbrands selection. The owners of the brand, Schweppes Zimbabwe, have also launched the biggest Employee Share Ownership Trust of 31% of the company's total shareholding. Our senior business reporter Happiness Zengeni spoke to Schweppes Zimbabwe CEO Charles Msipa to get an insight into the operations of the company.

HZ:Taking out Mazoe Orange Crush, what is the performance of the other cordials in terms of sales?

CM: Our syrup cordial sales have been growing year on year, with 123% growth in 2011 compared to 2010. Similar to the orange crush, they deliver a lot of value for consumers from the 1:4 dilution ratio, which means that one two litre bottle makes 10 litres of refreshing beverage. They also come in five popular flavours; blackberry, raspberry, cream soda, peach and naartjie, which makes them a good alternative for the orange crush.

HZ: What percentage is currently going to exports and what are the major export markets?

CM: We have a very negligible percentage of exports to Botswana. We are currently focused on supplying the local market. However, once our plant upgrade is complete, we will have additional capacity to increase the range of products that we supply to domestic consumers and in addition, develop a good exports market for locally-produced beverages.

HZ: What is the current capacity utilisation of the plants and what is the daily or monthly output?â-¯

CM: Capacity utilisation is currently 50%. Our plant produces approximately 7 500 bottles per hour on average

HZ: What have been your peak volumes?

CM: Our peak season is from August to December. Though we had a soft start due to generally colder than usual weather in August, overall performance was good, with a growth of 29% over 2010 peak volumes.

HZ: What, in your view, can be done to lift the beverages sector in Zimbabwe, seeing that there is only one major supplier who at the moment is undersupplying the market.

CM: The beverages sector has various categories, from cordials, water, juice, dairy, soft drinks, energy drinks and flavoured drinks, amongst others. As such, there are various manufacturers and distributors supplying these products locally. Furthermore, it is a fact that recapitalisation of the manufacturing industry in Zimbabwe has been led by the beverages sector.

Schweppes Zimbabwe Limited has invested US$14,5 million on a plant upgrade. This will enable us to supply the market with more innovative juice-containing products and drive exports into selected markets in the region. Competitiveness in our sector hinges on innovation both in product and processes, in keeping with changing consumer tastes and international standards.

HZ: Has the group been able to get enough throughput locally to run the units profitably?

CM: The volume growth we have experienced has been driven by domestic demand. Despite the increase in volumes, profitability has been eroded by escalating cost of goods, mainly resin, juice and sugar. We are focused on finding alternative supply sources where possible.â-¯ Internally, we have various projects that are in progress to optimise operating processes, systems and procedures in order to reduce the cost of goods.

HZ: Is that the original model of the plant? Has the source of raw materials changed and who were the major customers before? If the variables in the model have changed ie the raw material suppliers or market has changed, what have you done to make the business stay alive?

CM: Schweppes Zimbabwe Limited utilises international quality standards in the production of beverages. This requires use of the very best raw materials and collaborative relationships with all our suppliers to ensure consistency in quality.â-¯ All our raw material suppliers are accredited by the Coca-Cola Company. Our procurement systems are designed to deliver the best quality raw materials at the most favourable costs, with international standards as our benchmark. The Coca-Cola Company mark on any product is a seal of quality.

HZ: What is the monthly maintenance cost of the plant?â-¯

CM: It ranges depending on the production schedule and unforeseen circumstances. With the plant upgrade which has resulted in a lot of changes in the plant beginning last year, the costs have been fluctuating. As we complete installation of our new line, our production efficiencies will increase, so the maintenance costs should come down significantly.

HZ: What are your forecasts and targets for the year for the business?

CM: Like most organisations, we are focused on growth. We intend to improve on our 2011 performance both in terms of volume and profitability. We will achieve this through innovation in product, processes and systems, operational excellence and human capability development. We will leverage on our system's strengths as part of the Coca-Cola Company to deliver value to all key stakeholders.

HZ: What has the company done in order to market Mazoe as a wholly-Zimbabwean product?

CM: Mazoe is a product of the Coca-Cola Company manufactured by Schweppes Zimbabwe Limited. The brand is managed in the context of the franchise agreement that exists between the two organisations. Research has shown that Mazoe continues to be synonymous with cordials in Zimbabwe and is well known as a high quality Zimbabwean product. To drive Mazoe's local brand heritage, the company has been an active participant of the Buy Zimbabwe initiative which was launched last year.

HZ: Has the employee share ownership scheme not created a complicated shareholder matrix as there is no clear-end shareholder?

CM: The shareholding is quite simple, with Whaterton Investments holding 51% ownership and Delta Beverages holding 49%. Whaterton Investments comprises a 31% Employee Share Trust and 20% Management ownership. All parties are duly represented on the board, whose members protect the interests of the various shareholders.

HZ: Can you just provide a brief background into your person?

CM: Charles Msipa is man with 18 years of experience in diverse roles and geographies in the beverages sector. After having worked in the legal field as an associate attorney within a Harare law firm, I joined the Coca-Cola Company in 1992 and worked on a variety of assignments, including public affairs within the TCCC Central Africa Region, field sales and marketing in Zimbabwe, Zambia and Malawi, as well as in the Coca-Cola North America northeast region. I joined Schweppes Zimbabwe Limited as sales and marketing director in 2005 and was appointed managing director in 2006.

HZ: How would you describe your normal working day?

CM: My day typically begins at 4am. However, I am in the office by 7.30am, at which point I go through my diary and catch up on emails from the previous day. This also includes reports on sales performance from the previous day, with a month to date summary or performance versus plan (summary). I also catch up on local news, both electronic and printed. I then proceed to attend to all issues as planned for the day, which involves meetings and updates with various stakeholders, which include the local Coca-Cola team and business unit teams in Kenya.

I also attend to some long term projects which I am spearheading in between updates and consultations on various issues with my direct reports. I also actively participate in various industry forums and a few boards, so it is essential that my day is planned well in advance.â-¯â-¯ Throughout the day, however, I have an open door policy and make myself available to all employees and stakeholders as required.

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