I meet with Fruit & Veg City founders,Brian and Michael Coppin, just a few hours before they’re set to open a newstore in Lenasia. These days, it’s a process that runs without a hitch andLenasia allows them to mark off the 98th store on their target list of 200stores by 2010. But for all their casual relaxed attitude, there can be nodenying the hard work that the Coppin brothers have put into making Fruit & Veg City what it is today.
Their story starts in 1993, when the firstFruit & Veg City opened in Cape Town; but to understand what’s made themsuch a success, one needs to go further back. The Coppin family has a longhistory in retail. Coppin
senior was a director of OK Bazaars for around 40 years and the brothersfollowed in his footsteps, working their way through the ranks to traineemanagers and then managers within the group.
But experience in an industry doesn’talways equip you to run your own business, as Brian and Michael discovered in1983. “We knew a lot about running retail stores and in ’83 we left to open twoof our own supermarkets. But we were trying to take on big retailers with whatwas essentially a small café. We were young, probably had more balls thanbrains, and the venture didn’t work,” explains Brian.
The brothers were sufficiently undeterredby this early failure to pluck up the gumption to approach a creditor who hadlost money in their previous business, and convince him to reinvest in theirlatest venture – a pre-packed fruit and vegetable business. “Somehow weconvinced him it was a great way to make his money back, and he took a share inthe business,” says Michael.
The company started out small, supplying asingle retail outlet, before building up some capital which allowed the Coppinsto open their own retail outlet. “That was the first Fruit & Veg City,which was created when we bought an existing business called The Carrot King,and converted it,” says Brian.
The business was successful from the wordgo. At the time, their vision was to have one store only that provided fruitand vegetables exclusively. “We recognised the importance of remaining focusedon one thing at that time,” says Brian, adding that they had identified a gapin the market for such a store.
Michael adds: “At the time the supermarketshad the bulk of the fruit and veg business and there were no really big playerswho were only doing fruit and veg, so that’s where we concentrated. Back then,we didn’t have bakeries, nuts, meat – anything other than fresh fruit andvegetables. That was our focus.”
But in spite of the absence of other bigplayers in the fruit and veg market, the large retail chains representedcompetition enough, and the Coppins needed a strategy to establish a footholdin the market.
Drawing on relationships they had built upwith suppliers, they sourced their stock directly from the farmers and frommunicipal markets. “We were very aggressively priced from the start, whilestill focusing on quality and range. We bought the best we could get but wesold it at the best possible price and this meant we were able to price ourgoods between 20% to 25% below the supermarket prices,” explains Brian.
Their pricing structure was made possibleby the fact that Fruit & Veg City has no rebate system and runs very lowcost distribution centres. “They’re run at about 4, 5% margins,” says Brian,“and we continually focus on cost containment.” Typically, distribution centresmake the profit, with a mark-up of around 25% but with their own centre from theirpre-packed business, the company was able to cut out the middle man.
The Coppins ran the Access Park store for18 months before going on to open three more stores in the Cape. Michaelexplains some of the challenges this growth spurt precipitated: “In those earlydays we were running everything ourselves and it took time to get the modelright. Running one store is very different to running a business with four orfive stores. It means training up managers and making sure that controls are inplace that ensure things are run according to your system.”
Brian adds: “I think the biggest challengewas controlling wastage and culling. We wanted to have big, colourful displaysof fruit and veg but if you couldn’t turn the product fast enough, you’d end uphaving to throw away.” He adds that culling and wastage typically accounted fora 5% loss of product, already below industry average.
If the company was not able to keep stockwastage levels down, its pricing would be adversely affected and it would loseits competitive edge. Taking the bull by the horns Brian and Michaelimplemented a system that other industry players believed to be practicallyimpossible. “We did stock take once a week, instead of once a month or onceevery three months,” says Brian.
Although franchising was not a route they’doriginally planned on, the company’s reputation was growing and its nextdevelopment phase steered it towards these unchartered waters. Brian explains:“Someone from Port Elizabeth approached us in 1995, wanting to open a Fruit& Veg City there. At that time we were only in Cape Town and we only hadcompany-owned stores. But we felt that the model was right and the distributioncentre was running smoothly by that time. We’d overcome the teething problems –so we went for it.”
On the back of its successful PortElizabeth franchise venture, Fruit & Veg City opened franchises in EastLondon, Durban, Bloemfontein and Pretoria. “Initially we took it slowly, onlyopening two or three a year for the first five years and then we really startedpushing it.”
Franchising brought with it a whole new setof challenges. “The biggest challenge in franchising is to get a franchisee tolisten. Any franchisor will tell you the same thing,” jokes Michael, addingthat they needed a system of controls to ensure that standards were met byfranchisees.
Unusually, Fruit & Veg franchisedstores are not treated any differently to company-owned stores. They are allvisited once a week by the regional manager, who scores store managers and franchiseeson a number of performance indicators like quality, freshness and cleanliness.“These scores are amalgamated by head office weekly and sent out, and thosestores that are at the bottom of the scale for their region will get morevisits from the regional manager until things are up to par,” explains Brian.
In spite of the challenges it posed, hefeels that going the franchising route was worthwhile. “It got us to the pointwe are now where we have 100 stores, something we wouldn’t have been able to achieveif we were financing the growth ourselves,” he says.
But while the brothers were happy tofranchise stores in the country’s smaller centres, they had other plans
“From the start we decided that if we weregoing to open in Johannesburg, all the stores would be company-owned like theyare in Cape Town, and we’d build a second distribution centre, specifically forthe Johannesburg market,” says Michael, who moved to Gauteng for five years tosee the project properly implemented.
The first Johannesburg-based store – andtheir most ambitious venture to date – was opened at Bruma Lake in 1999. “Weinvested a great deal of money in that store and took a big risk. It was by farthe biggest store we’d ever attempted,” says Brian. But the returns were morethan pleasing. In the first four days, the store’s turnover hit the R1 millionmark.
What followed was a huge growth spurt.Today, the company has 20 corporate stores, 78 franchises, a turnover of R2, 1billion and 6 500 employees. In spite of the growth, the company structure hasremained remarkably flat.
Brian is the MD, Michael handles the roll-out of new stores and they areassisted by an operations director, a financial director, an admin team andseven regional managers. Many franchisees own more than one store and some siton the company’s board. Although its growth has meant more controls need to beput in place, Fruit & Veg City has been careful not to lose its competitiveedge in price. “We are still the biggest buyers on the municipal markets wherewe get between 40% to 60% of our goods, while our competitors get around 90% to95% of their supply direct from the farmers. The markets are still the biggestdetermining factor of price so keeping our finger on the pulse there means wecan anticipate price changes – and react to them – far more quickly than ourcompetitors,” explains Brian.
“Because all the store managers andfranchisees are at the markets every day, and integrally involved in thebuying, the entire company is able to read where the market is going as ithappens. And we don’t have to wait to put the new prices into the system andthen notify everyone of the change – our reaction times are immediate.”
Over time, Fruit & Veg City hasexpanded its product range, shifting its focus from fruit and vegetables to allthings fresh. “We have never wanted to be – and don’t believe we are now – justanother supermarket, but over time we started to evolve beyond fruit and veginto other fresh produce, things like fresh fruit juice, meat, deli, cheese andbaked products. These are known as our Fresher Food Stores and they form thecore of our business,” explains Brain.
This led to a new vision – to be a firstclass destination for all fresh produce. “But while we were experts at fruitand veg, we knew we had to do some homework on the other segments, so weconducted extensive research overseas, sourcing the best ideas and people wecould find.”
Inspired by what they saw, the brothersreturned home to open the first Fruit & Veg City Food Lovers Market inHillfox, a milestone store that boasts 3 600m2 of fresh food options. Threetimes the size of a normal store, the Food Lovers Markets opened up a whole newsegment for the company, complete with bakery, butchery, cheese, deli counter,pizza, pasta, fresh fish, sushi and chocolateries. “Some of these stores nowalso have a limited essential grocery range,” says Brian.
There are 12 Food Lovers Markets open todate, and the company draws on the expertise of specialists in each ‘fresh’department to ensure the smooth opening and roll-out of new stores.
FreshStop Stores followed, addingfree-standing counters that focus on fresh, healthy takeaways and smoothies tothe company’s mix. Situated mainly in the Western Cape at the moment, plans areafoot to roll out these stores elsewhere in the country. “It’s a great summerbrand but it has its challenges in winter, which is something we’re workingon,” says Brian.
The company’s buying power, particularly inimporting products from overseas, led directly to the formation of itsinternational import/export arm in 2005. “We’ve also become quite a bigexporter as well, to countries like Spain and Russia. And if anything affectscash flow and forces you up a learning curve, it’s exporting!” says Brian. Butthe venture is worthwhile and this year will do a R200 million turnover, withexporting making up 80% of that amount. In May this year, the company openedits first overseas store in Sydney, Australia. “We have partners there and weown 50% of the business, so we go over there once a month and the plan is toroll out more stores once this one has found its feet. It’s a very similarmarket to ours,” says Brian.
Fruit & Veg City is still rolling outten stores a year and the Coppins are adamant that there are opportunities tobe found in the current economic conditions. “We’re a value-driven business sowe expect to see more customers – not less – when times get tough. We startedduring difficult times so this is not new territory,” says Brian, concluding,“This year we’re trading 23% up on last year.”