Not cowed by the competition
Sonnendal Dairies is an exclusive supplier of dairy products to South Africa’s largest food retail chain, Pick n Pay. Ben Sansom finds out how the company has been achieving world class standards while fighting off the effects of falling consumer demand.
Sonnendal Dairies was launched by Andre Reitsma in 1994 as a small shop in Goodwood, Cape Town, selling just 200 litres of milk a day. However, Reitsma had an ambitious vision for the company and set about turning that vision into a reality, deftly steering it through periods of rapid growth and attracting investment that has enabled him to turn a modest business into one of South Africa’s success stories.
Not long after its launch, demand had already begun to outstrip the company’s ability to supply through its shop in Goodwood, so Sonnendal moved to larger premises just a few miles away in Kensington, Cape Town, and increased its throughput to 12,000 litres of milk a day. A second move became necessary in 1996 and the business relocated to Athlone, from where it was able to supply 17,000 litres of milk a day as well as juice and maas—a fermented milk product also known as amasi in Zulu and Xhosa.
The site also provided capacity for expansion in the future; however, to capitalise on the opportunities that Reitsma could see in the marketplace, serious investment was required, and this quickly came from two sources. In 1996 Martin Swanepoel, now Sonnendal Dairies’ managing director, made a major investment in the company and this was followed in 1997 by a further cash injection from Malcolm Jeffrey.
The biggest breakthrough, however, came in 2000 when the company was awarded the contract to supply milk to Pick n Pay, an expanding supermarket chain that has grown to become South Africa’s largest food retailer. Since that time, Sonnendal has developed a close partnering relationship with Pick n Pay, and the company’s growth has paralleled that of its retail client.
Today, Sonnendal is an exclusive supplier of dairy products to the supermarket chain, supplying up to 122,000 litres of dairy goods a day, around 20 per cent of which is in the form of yoghurt and 80 per cent of which is milk.
Sonnendal has built its reputation upon its ability to supply on time and to the quality demanded of such a highly competitive market sector. But reaching this eminent position has required some significant changes. Having expanded rapidly since its launch in 1994, the company reached the stage in 2006 where it became imperative to build a mature and stable management structure as a foundation for future development.
The first step was to join the South African DTI’s Workplace Challenge (WPC), a scheme designed to improve the competitiveness of South African industry through the implementation of world class practices and continuous improvement principles.
The rollout of the WPC programme began with the tough task of bringing together the management and workforce, and aligning their activities to the company’s business strategy and goals.
In December 2006, the company was reorganised into mini businesses. The management team formulated a strategic vision for the company and then set about communicating this to every member of staff. Meetings and discussions were set up to ensure that everyone understood what was expected of them and how their section would help to achieve those goals. Since that time, regular monthly meetings have been established: firstly between managers and team leaders and more recently between team leaders and the shop floor, ensuring communication channels are open and that everyone is motivated and pulling together.
Next, to transform Sonnendal into a results-driven company, the executive committee identified the measures and goals needed to run the business effectively. Meanwhile all staff were put through a three-day best operating practice training course and this was followed up with goal alignment training to introduce and embed the new culture of measures and goals.
Attention was then focused on improving the efficiency of the workplace, and 5S was introduced across all the mini businesses, the aim being to de-clutter and organise every part of the business. This has resulted in significant changes, many of them suggested by the shop floor work force.
Factory equipment was reorganised to increase operational efficiency and optimise the use of the floor space, while tools and materials both on the factory floor and in the offices were labelled and a place made for them, resulting in significantly improved efficiency.
The WPC scheme has resulted in significant changes and improvements, transforming the company into a cohesive and innovative organisation, with each member of staff pulling in the same direction. The principles of continuous improvement are now well established and staff are continuing to identify and eliminate bottlenecks in the operations. Skills play a key role, not only in improving efficiency but also staff morale, with the company committed to upskilling its staff.
Like most companies, Sonnendal was hit by the recession of 2008 when sales dropped by some 30 per cent. “As early as April 2008, we saw trouble coming regarding the local over-production of milk, while at the same time Namibia was starting to experience shortages,” said managing director Swanepoel.
Rather than cancel long-term contracts with milk producers or force down the prices to the extent that most milk producers have done, Sonnendal opted to set up an export route to Namibia to absorb the excess capacity. Already enjoying a strong relationship with outlets in Namibia through its work supplying Pick n Pay, the company was able to gain the necessary certification and began exporting pasteurised milk to Namibia Dairies in June 2008.
During the 800-plus-mile journey from Cape Town to Windhoek, the milk has to be kept at as low a temperature as possible. It is pasteurised and cooled to less than 3oC before it leaves the Sonnendal plant and only travels at night to avoid the scorching heat of the Namibian day. The company has appointed a special agent to handle the documentation and permits at the border crossing to prevent delays to its progress, and it arrives at its destination at a temperature no higher than 6oC. Once in Namibia, it is UHT treated and then packaged as long-life milk.
The export drive has completely plugged the gap in the neighbouring country’s supply deficit, and has helped Sonnendal to retain its valuable pool of 21 milk producers, protecting production for an upswing in demand as the recession eases.