Keeping your powder dry
Sunspray Food Ingredients (Pty) Ltd is South Africa’s largest independent manufacturer of spray dried ingredients, a key component of many of the foods and beverages we take for granted. Doing well despite the downturn, it is set to grow fast, as CEO David Watson explained to John O’Hanlon.
In the present climate, where a flat graph is something of an achievement, it is a bold manager who will predict higher profits in 2009 than 2008, but that is just what David Watson, CEO and principal shareholder of Sunspray Food Ingredients, is saying. He doesn’t deny that the domestic food market in South Africa has changed, with some sectors hit badly, but food is the last to go down in a recession, and a company that can ride the changes in consumption patterns can still do well.
Sunspray is a very long established company in South Africa, having its origins in Nutritional Foods, a manufacturer of dried food products that was established at the present location in Industria, Johannesburg. Today it specialises in spray dried food ingredients under its own brand, Sunspray, and these are sold to the food industry and flavour houses. Customers include manufacturers of soups, dried baby foods, snacks, biscuits plus many more. The company also produces a limited range of branded retail products and carries out a large amount of contract work for food manufacturers and flavour houses. Another business focusing on catering products was sold in 2006 along with the Nutritional Foods brand, and Sunspray now operates from the Industria site and another smaller factory some 100 kilometres away at Bronkhorstspruit that was acquired in 2005.
This was Ovipro, a specialist in egg products, which was struggling to make any profit so its capacity has been realigned to include other products. The egg products expanded the range of food ingredients while the spray driers at Ovipro gave Sunspray greater flexibility, says Watson.
The food ingredients business has held up well, while the retail business has suffered, he says. “People are steering away from milk and toward non dairy creamers. But on the other hand, some areas are doing very well like the caramel powder we sell, which is used in soups and stock cubes.” These are selling in the market because they are cheap and nutritional, and that is what consumers look for in times like these. It is this diversity that helped achieve the R200 million turnover the company reported in 2008 and will drive the modest improvement in profitability Watson expects this year.
At present, only about five per cent of this turnover is accounted for by exports—mainly to neighbouring African countries. In the longer term Watson wants to expand this business and extend it to other markets such as the EU, where subsidies have made it difficult to break into dairy products in particular. However, he stresses that Sunspray is one of a small number of indigenous producers, and that its recent growth owes much to a strategy of import replacement.
Cheese powders are a case in point. Sunspray’s range is used in snacks and biscuits as well as sauces, bakery ingredients, canned foods such as spaghetti bolognese and pre-cooked meals. “Traditionally these have been imported but we have now convinced South African customers that we can make as good a cheese powder as any they can get from abroad, and at a much lower price. There are still one or two products being imported in quantity that we feel we can replace,” he says, “including fat powder products being imported from Holland.” A slight weakening of the rand against the euro encourages his hopes in this direction.
The same is true of fruit powders—and here Sunspray has the advantage of a reliable local supply of raw materials including guava, mango, banana, apple and of course, citrus fruits. The dried product is half fruit and half maltodextrin, an easily digested ‘carrier’ for spray drying that is absorbed as glucose.
For the time being, growth at Sunspray is likely to be organic rather than by further acquisition, with investment in plant and machinery at the existing sites. The fifth tower at the Johannesburg site was added as recently as 2007, and was a second-hand plant that cost around R8 million, less than half the cost of a new one. These are large units, up to 15 metres high, and making efficient use of them is very important, says Watson, who hopes to add a further tower at the site next year.
That is why he is focusing on process excellence to get the maximum productivity and as much up-time as possible. “We are trying to optimise some of the products by changing towers, and also by optimising our production runs. The changeover between runs is quite lengthy so if we can do a ten ton instead of a five ton run, it saves us time and money.” When the plant changes from one product to another, the cleaning process can take 10 or 12 hours, and this downtime causes real economic pain at a plant that is running 24/7. It is a trade-off between inventory and responsiveness, he agrees: nobody wants to have too much finished product on the premises that has to be stored, so ultimately it is an accounting exercise.
Going forward, Watson’s plan is to reduce the company’s reliance on low value, high volume contract work and to concentrate more on Sunspray’s own brands and high value, high margin contract work. Some exciting new products are currently under negotiation—details will, he hopes, be announced soon of new business that will further enhance the bottom line.
Sunspray has one of only two pilot plants for new product development in South Africa—the other, at the Council for Scientific and Industrial Research (CSIR), is very expensive for commercial companies to hire. “We have a pilot spray drier plant at the Industria facility that can simulate on a small scale the spray drying of products in the production towers: it is a wonderful asset,” he explains. “Every day we are either trying out an improvement in raw materials, or a brand new product; or one of our customers is using it. By having a proper test facility you don’t have to interfere with your main production schedule, but at the same time you can get a good idea of what the result would be if you were to scale it up to full production.”
The pilot plant is a key resource for Sunspray’s R&D department, which is staffed by three qualified food scientists and technologists. Most of the marketing staff are also qualified, so customers benefit from a great deal of technical support. In addition, the production staff benefit from training programmes in conjunction with the government’s Food & Beverage SETA (sector education and training authority). Production standards are among the best in the international food industry. Sunspray has been ISO 9001:2000 accredited since 2003, and recently received its HACCP accreditation from the South African Bureau of Standards. HACCP is an internationally recognised system of food safety management that ensures the integrity of the process, not just the product.