Cape crusader
Bruce Bishop, owner and manager of South African maize-snack maker, Elzea Snacks, talks to Gay Sutton about the challenges of supplying into South AfricaÔÇÖs informal market, and the value of organising market research road shows.
How often have we heard the truism that businesses must be nimble and constantly evolve in order to survive and thrive? ItÔÇÖs a challenging business strategy to manage day-in day-out, but Elzea Snacks, based in East London in the Eastern Cape Province of South Africa, has developed an innovative methodology for engaging with its customers to identify changing tastes and spot new gaps in the market.
Owned and managed by Bruce Bishop, Elzea Snacks was originally launched in 1973 by two German businessmen to manufacture a traditional African non-alcoholic maize-based drink called Mageu. Bishop purchased the business in 1990, quickly spotted an opportunity in the market, introduced a range of snack products and, as the saying goes, the rest is history. Today, the focus of the business is producing a wide range of baked and fried maize-based snacks in flavours as diverse as cheese, beef, cream cheese and chives and tomato and chilli. And these are sold into the huge South African informal market.
It is the nature of this informal market that dictates the way the company operates. South Africa, in common with many developing nations, has a high rate of unemployment and many of the unemployed earn a living buying goods and selling them on the streets. This army of hawkers makes up what is termed the informal market, and they sell largely into the poorest sectors of the community. 
Market research and new product development lie at the heart of ElzeaÔÇÖs success. Bishop travels widely looking for new ideas, but the company reaches out directly to its customers to find out what they are looking for and what they think of new products. ÔÇ£The most important thing we have to understand is why people want to buy our product, and weÔÇÖve also got to understand why they might not want to buy our product. So we do what we call road shows,ÔÇØ Bishop explained.┬á
Company staff are sent out to put on displays outside the shops that sell to the hawkers. ÔÇ£Our people will then talk to the hawkers, ask them questions, do product tastings, and then make reports for our R&D department. So when we finally launch a new product we know itÔÇÖs what they want and theyÔÇÖll buy it.ÔÇØ
The nature of the informal market also adds another constraint to the product development equation. ÔÇ£Margins are very tight and low in our field, so the hawkers need to know how much profit they can make from a bale of chips, for example. The more profit they can make the more they want the product. The less profit, the less theyÔÇÖll want it.ÔÇØ
Supplying at the right price is therefore vital, and to do this costs have to be controlled in every aspect of the businessÔÇöan ethos that is engrained into company culture from the top down. ÔÇ£It was my father who drilled into me that if you canÔÇÖt control a business you might as well not start it in the first place. So we donÔÇÖt waste anything.ÔÇØ Stringent controls are placed on the quality and cost of supplies, from packaging and cooking oil, through to the moisture levels in the maize.┬á┬á
Bishop has built some strong and effective relationships with his suppliers and believes wherever possible in supporting the local economy. ÔÇ£Sometimes you can buy cheaper elsewhere, but if there is a quality problem, then sorting it out with a person overseas can become problematic,ÔÇØ he said. ÔÇ£A lot of our suppliers have been with us for a long time and I donÔÇÖt like changing. ItÔÇÖs a question of loyalty, a question of trust and a question of reliability. In the FMCG (fast moving consumer goods) market you want a supplier who, if you suddenly run low on a product that is selling well, can react quickly. And thatÔÇÖs where Plastic Wrap, our packaging supplier, has been fantastic. They do go that extra mile.ÔÇØ
Health has also become an issue in recent years, particularly with concerns over obesity, and quality controls play a part in producing a healthy product. ÔÇ£So weÔÇÖre monitoring things like free fatty acid levels in the cooking oil, and weÔÇÖre consistently trying to reduce the amount of oil in the product without compromising quality.ÔÇØ┬á
Looking to the future, Elzea is moving into the cereals market, with products such as Coco Pops, Fruit Loops and Cornflakes. ÔÇ£WeÔÇÖve also started a product which we call Pillows, and that is being produced as a cereal and a snack. But cereals are quite expensive, so weÔÇÖre working on making them affordable, otherwise they wonÔÇÖt sell,ÔÇØ Bishop said.
Exporting as a means of growth is not yet an option. Snack products are expensive to transport, and therefore have a maximum viable distribution distance of around 700 km, so while products from the main plant in East London, and from a joint venture facility in Harding, Natal, can supply into most areas of the country they are not positioned to export across the border. However, Bishop is keen to explore the possibility of manufacturing in countries such as Nigeria, Tanzania and Kenya where he perceives possible markets. ÔÇ£My son will finish university at the end of this year and those are some of the things I want him to look at.ÔÇØ
The Bishop family is already heavily involved in the business. His wife and his daughter Jenna play a big part in product development, and the family ethos spreads down through the workforce. ÔÇ£I have a fantastic production managerÔÇöa guy called Samuel HiepnerÔÇöwhoÔÇÖs been in the snack industry for many years. HeÔÇÖs 72 this year and will be retiring soon, but heÔÇÖs never missed a beat. Then, Melony Botef has worked for me for 10 years now and is like one of the family. She does our truck scheduling and knows the business like the back of her hand. These sorts of people are very important.ÔÇØ
There are a number of challenges on the horizon. The rising cost of raw materials is a big issue for a company that has to keep prices as low as possible, and to add to the pain inflation is running at between 10 and 12 percent. ÔÇ£Our currency has also depreciated in the last year,ÔÇØ Bishop continues. ÔÇ£It was trading at 7.50 Rand to the dollar. It went to 10.50 and now itÔÇÖs trading at 9.54.ÔÇØ┬á
Depreciation of the currency makes decision making difficult on items like cooking oil, some of which is imported. ÔÇ£How far forward do I buy, and what will happen to the currency?ÔÇØ Bishop said. ÔÇ£The economists canÔÇÖt even tell us what is going to happen, so how a businessman is going to make those decisions is anybodyÔÇÖs guess. But thereÔÇÖs no room for pessimism. In times like this youÔÇÖve just got to put your head down, be positive and move forward.ÔÇØ
