As South African business rides out the economic downturn, its consumer industries need to be responsive to customer preferences. Craig Leathwhite, CEO of General Mills South Africa, tells Andrew Pelis about the improvements being made.
A successful global operation is one that adapts to local customs and trends; and in the food sector, that translates to understanding regional foods and tastes. At General Mills South Africa, this particular issue has become a priority and measures are now in place to develop a range of products that best suit the local market.
The company is a subsidiary of North America-based General Mills, one of the five largest food companies in the world. The company first entered South Africa in 1993 as part of a joint venture with Food Corporation, which saw the business introduce a range of frozen vegetables. Two years later it launched its Bakeries and Food service business, including the famous Pillsbury brand. Many of the labels are instantly recognisable and in addition to Pillsbury the South African company manufactures and markets Old El Paso, Big T burger products and Häagen-Dazs ice cream.
Economic events over the past 18 months have seen the company adapt its strategy, however, as CEO Craig Leathwhite explains. “Trading conditions are still tough and I have a feeling that it will take longer yet for the country to extract itself from this crisis. We have implemented some changes over the last 14 months that are based on our philosophy of Holistic Margin Management (HMM), which revolves around improving efficiency and eliminating wasteful practices.”
After a review of sales figures on its existing range of products, Leathwhite says that the business has identified trends that have prompted some changes. “We have not introduced any new products in the past year,” he says. “Instead we have refined our product range and cut a few items out. We are currently in the process of increasing the volume of products we have retained by doubling (and in some cases trebling) the volume of our top selling SKUs. We have also seen a change in consumer habits and there has been a marked downsize in the pack sizes that people purchase, with fewer bulk packs being bought.”
The company operates a facility on the Linbro Business Park in the Wendywood region of South Africa. The site has seen a number of operational changes during the last year, aimed at improving shop floor efficiency. “We have examined how we can make our manufacturing more efficient by altering our shift structures and eliminating production bottlenecks,” Leathwhite explains.
“There was some resistance initially,” he admits, “but we have seen an 80 per cent increase in productivity as a result of our efforts. We introduced staggered shifts and mapped out our processes to find out exactly where the bottlenecks existed, as it wasn’t always obvious.”
The increase in productivity has sheltered employees from dramatic cuts although Leathwhite says the workforce has reduced by about five per cent. South Africa remains General Mills’ flagship operation on the continent and while staff training has inevitably slowed a little, Leathwhite says training has undoubtedly contributed to the productivity improvements.
The business has also embraced South Africa’s Black Economic Empowerment programme and recently attained Level Five accreditation, although Leathwhite says it has always incorporated many of BEE’s core requirements, including its training philosophy. “Our focus has always been about ‘nourishing life’ and treating our employees and communities with respect. We were looking to work with communities long before the scorecards were in place and have always looked to develop young talent. For us, the ownership aspect of BEE is a challenge but we are getting there and have also helped our suppliers to improve their ratings.”
Leathwhite says that the company is now in the process of sitting down with its key local suppliers, to discuss changes to its procurement strategy that will benefit both parties. “We have around 70 suppliers and roughly 10 of those we regard as key suppliers. We are looking to partner with our vendors in a way that will enable us to buy more efficiently so that we can develop more effective processes.
“At the moment we buy some materials on an almost daily basis while other supplies are purchased in bulk maybe once every six months. Part of our new strategy is to buy up front and to purchase at a time when our partners are slowing down, so that their own work flows are more evenly spread across the year. This will help us to build better relationships and should allow us to negotiate better rates on materials, while at the same time assisting our product development side.”
In our previous article on General Mills just over a year ago, Leathwhite told me that the South African operation would be looking to improve its forecasting; a promise he says has now been met. “This comes from our sales and drives the business—and everything emanates from that. We have made improvements to our IT systems to improve our third party warehousing to ensure that when a customer orders a product they can get it when they want it at a reasonable price.
“The next phase is to partner with our warehouse and distribution providers and we should make good progress over the next three months. This will help us to improve customer service levels by ensuring we have the right products located in the right place at the right time.”
The company also sees opportunities to introduce products with, literally, a more local flavour. “One of the areas we are starting to look at is to develop products that are more applicable to our local market,” says Leathwhite. “We have a small demographic here currently and want to increase that by attracting more middle class customers with a range of local foods and tastes.” The company is working closely with its Miami, USA-based parent to create a range of new products, the extent of which Leathwhite is not yet ready to reveal.
That sounds like a good subject for the next article in our General Mills South Africa series.
