Snack manufacturer master of reinvention
The saying adversity breeds opportunity is relevant to almost all entrepreneurs in South Africa, but none more so than Theo Bakkum.
The Managing Director of Awesome Snacks has had a turbulent decade to say the least.
But, it is the way in which he overcame the challenges presented which saw him crowned the Sanlam / Business Partners Medium Business Entrepreneur of the Year ®.
A new beginning
Bakkum held a number of directorships at Simba before becoming the Managing Director of National Brands’ Willards.
A restructuring process however, saw him being retrenched. Bakkum pursued a couple of business opportunities and in 2003 Awesome Snacks was born.
He explains that the four partners were all executives within the snack industry and just happened to be available at the same time. Today, three of the founders manage the business with an iron fist and their success in the market has been remarkable.
The Germiston based business produces a number of naks and curls, as well as powdered drinks.
Bakkum recalls how the company initially decided to pursue the retail sector as this was the arena they used to play in.
Awesome Snacks brought back the Ghostbusters brand and they struggled to keep up with the demand this old favourite created.
Unfortunately for them, Simba did not appreciate the move and the rights to use the brand were revoked.
Bakkum says that it was probably management’s legacy which lead to the business’ initial ups and downs: “We went into retail and nearly went under. We had to realise that we were no longer executives but small business owners.
“I also think we were arrogant. We had the Ghostbusters brand and we did not expect Simba to retaliate. We also underestimated the strength of Simba and Willards and that the market would not necessarily accept a new brand.”
All of a sudden, a successful business was in severe trouble and Bakkum says that they had no choice but to change direction.
“We were basically too small for the formal sector – we did not have the critical mass. Ironically, the informal sector is much bigger so we did the right thing (by focussing on this market segment).”
Awesome Snacks started producing their own branded products, hoping that the masses of school children they were targeting would accept their naks and curls.
They soon found however that this market is somewhat different to the formal, corporate market they were used to and Awesome Snacks needed to adapt.
“A nak is a nak,” Bakkum says. “We needed something extra.”
They secured the rights to use the WWE wrestling characters as well as some of the heroes from the Marvel comic franchise. Success was inevitable and today, the company moves about 350 tons of product each month.
There are a number of smaller snack manufacturers that operate in the informal sector and Bakkum has come to learn that understanding the market is the biggest key to success.
“Price is very important, as is the consistency of the product. It is very difficult to move these consumers across to your product because they do not want to take a chance.
“They have a limited amount of disposable income and they do not want to be disappointed with a purchase. But, once you have done it you have a customer for life.”
Awesome Snacks uses freelance sales consultant to move their goods through about 200 independent wholesalers throughout the country. From there, informal traders mostly sell their products.
Bakkum says that keeping the wholesalers happy is extremely important because they are repeat, cash customers. This element has also helped the business significantly as cash flow was boosted through the repositioning strategy.
Similarly, the business has invested in good machinery to ensure that production lines run smoothly and that product quality stays consistent.
While Awesome Snacks has successfully penetrated the informal market, recent developments showed them that diversification was needed.
Bakkum explains that the World Cup and the recent teachers strike saw volumes drop because their target market was not at school.
The company has now secured a deal to supply the Woolworths chain with its house-branded naks and curls. Bakkum expects that eight new production lines will be on offer within the next six months.
This will boost the business’ R80 million turnover and should increase the 162 staff members currently on the payroll.
Awesome Snacks has successfully penetrated the mass market and it believes that there is still a lot of room for growth.
Bakkum says that there are many other SMEs who could follow suit: “I think the big corporates do not understand this market and that their overhead structure is too big to effectively compete in the market – they do not understand the (importance of the) costing structure.”
He explains that gaining market share is a slow process and that you need to chip away at it daily to increase the business’ footprint.
At the same time, Awesome Snacks rules it financial aspects with an iron fist.
“We look at our cost structure and micro manage the business. I can tell you at any time what the cash flow status is.
“We also manage our production numbers every day, as well as our stock on hand and debtors books. And, as partners we do not pay ourselves exorbitant salaries. We don’t have an overdraft facility and we don’t spend what we don’t have.”
He advises entrepreneurs not to overcapitalise if they operate in the informal sector as the daily business reality can quickly change through external factors such as a strike for example.
“There are opportunities for SMEs but you need to know what you’re doing.
You need to put a business plan together very carefully but then you need to live it. When it comes to (using) your own money, you better have thought about it long and hard.”