Moving up the chain
Dr. Theunis Prinsloo, managing director of Kanhym Estates, talked to Jayne Flannery about the transformation of a traditional agricultural business in the new South Africa.
Kanhym Estates extends across an area of just over 10,000 hectares of prime agricultural land, mainly to the south of Middelburg, South Africa. The estate has undergone many dramatic changes since it was founded by two Jewish families in the 1930s. In 2001, it was the subject of a management buyout. Then, in 2007, the Zambli consortium acquired a substantial stake in Kanhym’s equity, a milestone in supporting the goal of Broad Based Black Economic Empowerment (BBBEE).
Today, Kanhym is one of the most forward-looking and financially viable estates of its kind. In recognition of the precarious nature of agri-business, the company is underpinned by a diverse multi-faceted business model which stresses vertical integration, added value and maximising the use of new food technology. Pig genetics, animal feeds, agronomy and meat are core activities and within each category, the onus is on progressing up the value chain as far as possible.
Prinsloo is keenly aware of the inherent risks of agriculture, and the recent economic downturn has highlighted the price vulnerability of commodities. A strategic goal is to move closer to the customer, adding value through outstanding service and eliminating margin-devouring middlemen. The company has also shown a strong flair for leveraging new technology—the agronomy division, for example, relies on state-of-the-art precision farming supported by satellite feedback to produce optimum yields.
At present, the animal feed division is the most well-developed area of the business—250,000 tonnes a year are produced at Kanhym, giving it a big footprint in the market. However, as Prinsloo explains, even in what appears to be a commodity market, there is still plenty of scope for differentiation. “We work closely with a select number of large, very progressive clients to develop feed programmes that meet their unique and specific needs. It is not feed that we offer to our customers, but the superior performance that their animals will derive from it.”
Kanhym is already South Africa’s largest producer of pork and it also leads in the breeding stock market, supplying world class genotypes to commercial pig producers. In the drive to progress up the value chain, the company has already developed a branded retail presence for its meat products—Tenderlicious for its beef and Slenderlicious for pork. Leanerlicious will soon become a registered trademark for lamb products.
The most exciting area of the business for Prinsloo is the recent move the company has made to extend its retail meat brands a stage further, through the Kanhym Fresh Meat Deli concept. Another step forward in positioning Kanhym’s output away from commodity markets, the Kanhym Deli will market fresh meat and complementary products through a network of franchised, owner-operated deli outlets. The first delicatessen has already been successfully trialled in Middleburg and a second franchised business is now situated in Pretoria.
“Our meat products are of outstanding quality and we have a brand that conveys integrity, honesty and goodness. We can put these values across in a premium shopping experience, bringing them directly to consumers in a fully supported delicatessen which we then plan to roll out on a franchise basis,” Prinsloo explains.
Not only will operating an owner-managed franchise model avoid the need for a large injection of cash to support the expansion, it is also the best way of guaranteeing attention to detail and the customer service that will be one of the hallmarks of the Kanhym Deli concept.
Prinsloo believes that shoppers in the 21st century are weary of anonymous shopping malls and that they crave intimacy and personal contact. “Each of our delicatessen stores will be fronted by a chef who is a product advisor in a position to build up a personal relationship with customers. We believe we will have great appeal to young, affluent women wanting to entertain well, but lacking the confidence and skill to do it alone.”
However, Prinsloo is keen to stress that economic success is not the company’s only concern. “We want to be in touch with the social and economic realities of the new South Africa. Social responsibility is a guiding principle at Kanhym,” he states. The company has led many improvements in local living and educational standards and is a big supporter of the ABET literacy programme. Prinsloo is proud of the fact that a quarter of the equity of the business is owned by a black consortium, which also acts as a conduit for ordinary workers to hold shares—they currently own five per cent of Kanhym’s equity.
The company has recently established Kanhym Life to pay tribute to the local black heritage that Kanhym wants to see endure into the 21st century. Cattle play a fundamental role in African culture, particularly in death rites. Working in association with insurers, the company has recently launched a highly innovative scheme to support traditional funeral ceremonies following the death of a family member. The ritual slaughter and provision of cattle can now be financed by way of an insurance contract. “Zulu and other groups’ culture and ritual is very rich and we are delighted that we can support it in a way which also makes economic sense for the company,” Prinsloo says.
The evolution of Kanhym is ongoing. Looking to the future, Prinsloo believes there is still much to be done as the estate continues to re-position and re-invent itself. Adapting new and emerging technologies will continue to be of key importance—at present, activity is embryonic, but in the future he anticipates that Kanhym will also play a role in green energy production through methane harvesting and its subsequent transformation into an energy source. “We hope that methane harvesting will become operational in the next six months. Then we will need to run for a year to determine methane yields before we can move into power generation. Energy production is still something very much in the future but we believe we are uniquely well placed to add it to our portfolio if all goes well in trials,” he concludes.
