Jane Bordenave revisits Retsol to learn about the dramatic changes that have taken place over the past year; and to find out more about chairman Wayne Duncan’s ambitious plans for the future.
A lot has changed since we last spoke to Retsol in 2009. The company, which was established in 2002, was working with Unilever to manage two of its franchises in ice cream and health food. It was also involved in the fast food and bakery markets, independent of Unilever—however, since then the firm has undergone a major overhaul.
“The decision was taken to refocus the business into two halves: one taking on the brands that were located mainly in shopping centres and the other taking brands focused around the convenience market,” explains Wayne Duncan, who is now the sole chairman since the business was divided. “So our rationale was really to restructure Retsol by divesting the shopping brands and consolidating our efforts in the convenience market.” Through this restructuring, the organisation has aligned itself strongly with the bakery market and is no longer involved with Unilever.
Retsol and its brands are fairly unique in the bakery space, as there are only a maximum of two other bakery franchise companies in South Africa. Despite it being such a small playing field, Duncan identifies three elements of his business that are important in differentiating it from the competition: “The first is the sheer scale of our business—we now manage in excess of 500 Corner Bakery or Engen Bakery brand outlets throughout South Africa. Secondly, these stores are located in forecourt convenience areas, which is a rapidly growing part of the retail market worldwide. Finally, our tie-up with Engen, the country’s largest filling station company, as landlord is an added boost.”
While the company’s customers are its franchisees, it is of course the consumer that purchases Retsol’s products and generates revenue. To ensure their satisfaction, the company engages in extensive market research, which has enabled it to customise its menu according to local tastes. “This is a strategy that has worked very well for us,” says Duncan. “We are able to keep our branding consistent across the business and build brand recognition while focusing our product’s range on a particular target market, on a store-by-store basis.”
To ensure that the quality of the products and service is consistently high across all outlets, the business uses mystery shoppers to assess the consumer experience in-store. “We contract a third-party customer research company to conduct the in-store observation,” he explains. “Before we send in anyone, we come up with a questionnaire together, which identifies the factors we want to examine. They then send in their agents to a sample of stores and feed back to us based on the parameters set out in the questionnaire.” This information is then distributed to the wider franchisee network and is used to show where customer service is now, and how it could be improved.
Mystery shoppers and market research are not the only ways in which Retsol helps its franchisees to improve their business. “There are two key thrusts when it comes to managing our relationship with our franchisees,” says Duncan. “Firstly, we retrieve data from point of sale systems in store and put that through our own data warehouse. We then conduct a monthly analysis of this data on a per-store basis. We examine things like gross profit, the sales mix, turnover, operational standards and so on.” The outcomes of these analyses are then fed back to the customer via a network of regional managers. “It is a very data-intensive process, but this is ultimately the yardstick by which we measure ourselves and help our franchisees to improve their businesses too.”
When it comes to managing its supply chain, Retsol has taken the decision to encourage its franchisees to use preferred suppliers—but it has no financial stake in them. “We have taken the decision to remain purely a franchise business and not get involved in the supply side in any way, other than approving suppliers for use by our franchisees. This is not universal practice in our sector by any means, but we feel that it is best practice—as a franchise, we are already taking a percentage of the turnover of each outlet and that it is unfair to then make more money from our franchisees from the cost of ingredients.” Instead, by using aggressive negotiating techniques with preferred suppliers, the firm is able to drive down costs for the whole chain, which benefits everyone.
The company also has a strong focus on growth, and is aiming to open / revamp another 50 to 100 stores annually within South Africa. This investment is projected to cost between R30 million and R60 million, depending upon how much work needs to be done at each location. In addition, over the past 12 months, Retsol has opened franchises in two neighbouring countries—Namibia and Botswana—with plans to move into Zambia, Zimbabwe and Mozambique within the next three months. The rest of sub-Saharan Africa will come next year, with the Democratic Republic of Congo, Kenya and Tanzania being particular targets.
In the mid-term, Retsol hopes to have at least tripled in size over the next five years as part of its 2015 Vision. “We plan to achieve this primarily through organic growth of the existing business in the baking space,” says Duncan. “We are coming from a relatively low base in that, although we are quite a sizeable business already, our brand recognition is low and on a per-outlet basis our base is small.”
In order to achieve the desired growth, Retsol will be pursuing greater product innovation and using a more aggressive and consistent marketing strategy. “We plan to use all kinds of media, including TV and radio, in order to raise brand awareness of Corner Bakery among consumers. So far, figures already show that we are trending in the right direction.” The company is also tentatively probing the potential for growth through acquisition, although it is waiting for markets to stabilise before making any moves in this direction.
Over the past year, Retsol has evolved dramatically and continues to do so. By consolidating its business in the bakery sector and focusing its attention on forecourt convenience stores, it has been able to give the Corner Bakery brand more focus, both currently and for the future. Who knows what developments may come in the next 12 months and beyond; but one thing is for certain—for a company that maintained double-digit growth throughout the recession, the only way is up.
