If proof is needed that a well-executed, innovative idea can still succeed in the harsh world of food retail, Fruit & Veg City provides it in abundance. From a humble start 19 years ago in one store in Kenilworth, Cape Town, the retailer has grown into a company its MD and cofounder, Brian Coppin, says will achieve turnover of R5bn this year.
Pick n Pay saw Fruit & Veg's potential when it made a bid for the company in June 2006, but the competition commission ruled against the deal eight months later. "We saw a lot of potential synergy with Pick n Pay," says Coppin. "But in retrospect I am glad the deal was blocked. We are still having a great deal of fun growing our company."
Fruit & Veg certainly has grown since 2006, when, says Coppin, turnover stood at about R1,6bn. At R5bn in 2012, turnover will have grown at about 20%/year since 2006, ahead of the major listed food retailers' average of about 15%/year over the same period.
Fundamental to Fruit & Veg's success has been its focus on offering the best in fresh food at value prices. "Our business model is also flexible and enables us to shape stores to fit a broad spread of LSMs," says Coppin. "We have stores in areas as diverse as Sandton and Vosloorus."
Fruit & Veg's footprint is still small, comprising about 100 stores in SA, and three each in Namibia, Zimbabwe and Reunion. Stores in Mozambique and Ghana will be added soon. "We are opening about eight to 10 stores a year in SA and five to seven in the rest of Africa," says Coppin.
Branding of stores is also undergoing a makeover. New stores are under the upmarket Food Lover's Market brand and all existing Fruit & Veg City stores are being rebranded, says Coppin.
Adding a new dimension to its operations, Fruit & Veg has also entered the franchised convenience store sector through a joint venture with Caltex. "Our [Star Mart] stores were not performing," says Caltex products GM Teresa BoothOliveira "Fruit & Veg has the ability to deliver and support convenience stores offering fresh produce, meat, fish, a delicatessen and even up-market meals."
Fruit & Veg's solution was conversion of Star Mart stores and unbranded stores at Caltex filling stations into Fresh Stop stores. It has been opening these at a rapid pace since February 2009. "There are now 86 Fresh Stops and we will reach 100 by October," says Fresh Stop director Joe Boyle
"Initially Caltex's name was the draw card," says Boyle. "Caltex customers are now remembering the Fresh Stop name." Booth-Oliveira says a Fresh Stop store generates about 50% more sales than the Star Mart it replaced and fuel sales are boosted by up to 12%.
The venture with Caltex has the makings of a substantial business. Monthly sales of the average Fresh Stop store are about R650000, says Booth-Oliveira. Across 100 stores it adds up to over R700m/year. The target is to have Fresh Stop stores at about 500 of Caltex's 860 filling stations, says Boyle.
In its efforts the venture has solid support from the department of trade & industry (DTI). "They offer our black franchisees grants of up to R500000 to cover conversion costs," says Boyle. "That's almost half the cost of a typical store conversion." There are currently 27 applicants for DTI grants, he adds.
There is no doubt that Fruit & Veg has the makings of a successful listing. But the time isn't ripe. "We have in the past considered a listing," says Coppin. "Right now it is not even on our radar."
Source: Financial Mail