The company has struck an alliance with US oil major Chevron (Caltex), which was looking to exit the convenience retail business. “Chevron wanted to concentrate on fuel,” says Fruit & Veg City MD Brian Coppin. “And it wanted a retail partner who would grow its convenience channel for it.”
Chevron's 188 Star Mart shops will be rebranded Freshstop. The product range — which was really just “cokes, smokes and chips”, says Coppin — will be revamped, and will include, unsurprisingly, more fresh produce. “We have the infrastructure, and the expertise — we've done the hard yards on fresh.”
Eight stores have been converted, and Coppin expects that 20 will be open by Christmas, and 150 within three years.
Turnover in the first eight stores is up by 50%-60%.
This deal follows similar relationships established between Woolworths and Engen, and between BP and Pick n Pay. Total and Sasol are now the only fuel retailers without an established retailer running their front shop.
Coppin notes that the business has been built on franchising, and this will be carried through to the Freshstops. “They will be owned by the garage owner and we will earn franchise fees.” Chevron will be paid a royalty.
Fruit & Veg City has come a long way since it was founded by Brian and Mike Coppin 16 years ago. Pick n Pay tried to acquire the company in late 2005, but in 2007 the Competition Commission recommended against the acquisition.
The brothers had spotted a gap. The big retailers, gearing up for growth, were investing a fortune in distribution centres. Says Coppin: “While they were waiting for economies of scale to kick in, they left a gap wide enough for two entrepreneurial cowboys to drive straight to the farmer's gate, load the truck, pay cash and offload straight onto the shelf — at half the price.”
For 12 years the group operated only its core Fruit & Veg City stores. In 2005 turnover was R1,5bn/year, which has now doubled. Today the company operates 100 stores and owns four distinct brands: Fruit & Veg City, Freshstop, the Food Lover's Market and The Food Lover's Café. “We didn't set out to develop four different brands,” says Coppin. “We went from one store to the next and one idea to the next, trying to stay true to what we thought we knew.”
The Food Lover's Market was the second brand in the portfolio. In 2004 the SA economy was growing and words like “fresh”, “organic” and “convenience” became buzzwords. “We knew that just offering the best value wouldn't cut it anymore.”
Coppin put together a team that travelled the US, UK and Europe looking at the best retailers in the world and how they handle their bakeries, butcheries, cheese, sushi, hot food and other fresh food departments. Building a 3000m² store costing R18m, with 250 staff selling only fresh food in huge quantities, had never been done in SA before.
“It was our biggest single investment and the biggest role of the dice we have ever undertaken.” The first Food Lover's Market opened in Cape Town in December 2005. “We had to invest heavily in food specialists, an R&D department, kitchen facilities and supply-chain infrastructure to establish these stores around the country.”
The Food Lover's Café was the next stop for the brothers. They were approached by a developer who was building apartments in Cape Town's CBD.
“He had a great site for us — surrounded by offices and apartments. But it had no parking, so we had to rethink our strategy,” says Coppin.
Investments have also been made into a dried fruit & nut company, a fruit import and export business and three meat pack houses. Says Coppin: “We want to be as big a player in meat as we are in fruit and vegetables.”
The investments are part of the strategy to keep costs down. “We want to go back into the supply chain — that way we ensure that we keep control of the margin.”
Growth has been funded by cash, and by the franchising model. “We could not have grown like this without franchising,” says Coppin. He has no plans to list.
It appears the Competition Commission did the SA retail market a favour.
Source: Financial Mail
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