Schweet – like a pep­per

Tak­ing on the world

Finweek English Edition - - Business Strategy - BRUCE WHIT­FIELD

IT’S A REL­A­TIVELY SMALL, pri­vately held South African com­pany with an in­creas­ingly global reach. Its own­ers are cau­tious about giv­ing pre­cise num­bers, fear­ing com­peti­tors will utilise the in­tel­li­gence to grow their own op­er­a­tions. Pep­padew In­ter­na­tional has ger­mi­nated from a prac­ti­cally bank­rupt en­tity a decade ago to a firm with a turnover of be­tween R100m and R200m – 85% of it from out­side SA.

“We’re four times big­ger than we were three years ago,” says MD Phil Ovens. “And there’s no slow­down in growth. The in­ter­na­tional mar­ket is huge – of­ten we as South Africans don’t ap­pre­ci­ate just how big an op­por­tu­nity there is out­side this coun­try.”

To date the en­tire busi­ness has been based around a sin­gle, sea­sonal prod­uct: Cap­sicum Bac­ca­tum. You’ve prob­a­bly not heard of it un­der that name but you prob­a­bly re­fer to it as a “pep­padew”.

“Pep­padews” ac­tu­ally don’t ex­ist. It’s tes­ti­mony to the com­pany’s brand de­vel­op­ment that con­sumers re­fer to the firm’s core prod­uct by the com­pany name. Now Pep­padew In­ter­na­tional is work­ing to dif­fer­en­ti­ate the prod­uct and com­pany names as it ven­tures for the first time into new prod­uct lines.

Though Cap­sicum Bac­ca­tum is a pep­per in­dige­nous to Cen­tral Amer­ica, its “dis­cov­ery” in the gar­den of a Plet­ten­berg Bay hol­i­day home that once be­longed to a botanist with a pen­chant for ex­otic travel has cat­a­pulted it on to the world stage un­der the brand name Pep­padew. It was West­ern Cape en­tre­pre­neur Jo­han Steenkamp, in whose gar­den the pep­per was found, who cre­ated the Pep­padew brand and iden­ti­fied the com­mer­cial op­por­tu­nity it pre­sented. How­ever, he was forced to sell the dis­tressed busi­ness to Denny Mush­rooms, at the time an in­de­pen­dent en­tity that had been bought out of Ton­gaat Foods by Ovens and eight col­leagues. “It was vir­tu­ally bank­rupt,” says Ovens. The con­sor­tium sub­se­quently sold the mush­room busi­ness sans Pep­padew to AVI four years ago.

“We spent a dis­pro­por­tion­ate amount on mar­ket­ing,” con­cedes Ovens. “We knew the con­cept was good and spent hun­dreds of hours at in­ter­na­tional food shows work­ing out the best way to en­ter new mar­kets.” The prod­uct is cur­rently avail­able in 26 coun­tries – eight of which make up more than three­quar­ters of group turnover.

Each mar­ket is dif­fer­ent and ac­cess­ing it re­quires a unique ap­proach. Ovens dis­cov­ered Europe isn’t a ho­moge­nous state of like-minded con­sumers. Each coun­try has a dif­fer­ent way of op­er­at­ing. France has been the most dif­fi­cult to break into. Ger­many is ac­cessed through util­is­ing its sys­tem of open mar­kets via a pro­fes­sional dis­trib­u­tor. The US is reached through get­ting the prod­uct into spe­cial­ity olive delis, while most su­per­mar­ket groups in Bri­tain carry the prod­uct.

“We recog­nised early on that we were a one-trick pony. So we in­vested a lot of money in de­vel­op­ing a new yel­low pep­per,” says Ovens. The Goldew Pep­per, a hy­brid de­vel­oped from the Cap­sicum An­nuum – and bred in SA – was launched four months ago. It took four years to de­velop: there are no quick wins in de­vel­op­ing new prod­uct. It will also be mar­keted un­der the Pep­padew brand – thus the ob­ses­sion with prod­uct dif­fer­en­ti­a­tion.

The sea­son­al­ity of the prod­uct is prob­lem­atic. The fruit is grown in Lim­popo prov­ince around the Ohrigstad area on farms not far from the Kruger Park. About 70% of pro­duc­tion comes from con­tracted com­mer­cial farm­ers; the rest is fi­nanced through a Sec­tion 21 com­pany called Emerg­ing Farmer En­ter­prises, which pro­vides cap­i­tal and in­ten­sive sup­port to new farm­ers. Com­mer­cial farm­ers can pro­duce be­tween 20t and 30t of the fruit/hectare, while emerg­ing farm­ers (with com­pany sup­port) pro­duce closer to 12t/ha. “Those are the farm­ers of the fu­ture,” says Ovens. “We need to sup­port them.”

The group has ex­tended the brand “about as far as it can go”. Lays Chips has a pep­padew flavour, and Clover and other food man­u­fac­tur­ers have prod­ucts laced with the fruit.

Pep­padew In­ter­na­tional re­cently ac­quired Ban­dito’s Chile Com­pany – a 1994 start-up that Ovens be­lieves will bal­ance out the sea­son­al­ity of the Pep­padew busi­ness. It means the fac­tory will be used more and it will pro­vide an out­let for some of the by-prod­ucts of the core busi­ness that would oth­er­wise sim­ply be wasted. With Ban­dito’s comes the reg­is­tered Mamma Africa brand. A glint comes into Ovens’s eye as he men­tions it. “There’s great op­por­tu­nity there.”

What about a list­ing? Ovens is con­sid­er­ing his op­tions but doesn’t fancy the rig­ma­role of com­pli­ance and list­ings re­quire­ments. A pre­ferred exit strat­egy when the time comes would be a sale to an in­ter­na­tional food group. How­ever, he in­sists that’s a long way off.

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