Putting it bluntly…

As this is the last edition of the OBC newsletter for 2018, it seems appropriate for me to look into the rear-view mirror before getting out the binoculars. So here goes…

Challenges aplenty

Without wanting to focus on the negative, I have to admit that 2018 has been a challenging year. Politicians’ antics aside, steady increases in the cost of living have stretched consumers’ finances close to breaking point. For obvious reasons, the market segment we serve was hit especially hardy. It goes without saying that when customers struggle financially to make ends meet, blind brand loyalty isn’t always a guarantee as consumers look for cheaper prices and value for their hard-earned money. To remain competitive, we often had to be content with paper-thin margins.

Upturn in sales

Sales figures prove that we weathered the storm rather well. The way I see it, a combination of factors came into play here, with the following standing out.

  • The OBC brand stands for quality products consumers really need at prices they can afford.
  • Clever use of our marketing budget, built around the statement, ‘giving you more’, sent the right message to consumers and they responded positively.
  • Our team at Head Office worked hard to negotiate competitive prices from suppliers. The bulk of the resulting savings was passed on to our franchisees.
  • Taking possession of our new DC enabled us to purchase in larger quantities than ever before. This improved deal-making and logistics.
  • Our franchisees and store managers and their teams have worked hard to deliver excellent customer service at the all-important consumer interface.

Figures don’t lie. Looking back, I can say with conviction that we have done well. During the period from July 2017 to June 2018, average sales per store increased by a respectable 20%, almost four times above inflation. This was achieved during a period when some of our competitors struggled. It bears testament to the resilience of every member of the OBC family and the brand they represent.

The new DC

Those of you who attended the official opening of the new DC could see for themselves that our new DC is an amalgam of quality workmanship and cutting-edge technology rolled into one. Those of you who haven’t seen the facility yet had a chance to read all about it in the previous edition of this newsletter.

For me, taking possession of the new DC was a dream come true. It also sets the stage for the explosive expansion of the OBC Group in the near future, so I hope you will forgive me when I dwell on this topic some more.

Making the DC a reality took several years of planning and lots of hard work. It also required our shareholders’ willingness to invest close on R200 million into the venture. Surely, this is the most meaningful expression of trust in the OBC brand and the team that operates one could ask for.

Our previous facilities were never ideal. Dry goods storage and head office were housed separately from the cold store. This created logistical problems and added to operating costs. We therefore looked forward to the move. However, implementing it without disrupting service to OBC stores proved to be a mammoth task.

The situation was exacerbated by the necessity for cold storage to move twice. This came about because leases were running out. Seeing that the move was imminent, we couldn’t commit to further long-term leases. The owners of the cold storage facility couldn’t give us a month-by-month lease, so we had to move to temporary accommodation. At the dry goods warehouse, we had to give up some space sooner than we would have wanted but we could compensate for that by adding to the height of our racking.

John Fourie, speaking at the official unveiling of the DC, summed it up well when he said that this facility was built as a service to our suppliers, franchisees, managers of company-owned stores and the team at head office. Indeed,

  • Suppliers benefit because we are now in a position to purchase in larger volumes than ever before. And the hugely increased handling capacity translates into rapid turn-around times for their delivery vehicles.
  • For much the same reasons, franchisees benefit as well. Firstly, they share in the bulk savings we negotiate with our suppliers. Secondly, they can place orders based on just-in-time (JIT) principles, secure in the knowledge that we will deliver on time. The managers of our company-owned stores enjoy the same advantage.

I can say with confidence that, subject to effective stock management, stock outages at store level have practically become a thing of the past.

  • Members of the head office team benefit because they now work in a pleasant environment. They also have the space and equipment they need to carry out their tasks. This has done wonders for job satisfaction and productivity.

The new DC has created a win-win situation for all its stakeholders. It also serves as a solid launch pad for further expansion, including expansion into neighbouring states.

Expansion plans for 2019

In addition to driving further growth of sales levels and profitability of our existing stores, we will open an additional 18 stores during 2019. In most instances, leases have been signed and franchisee recruitment is in full swing. The box below lists the locations we have already secured. It follows that we are well on the way towards trading through 80+ OBC-branded stores in South Africa by the year 2020.

 

Store revamps continue

Store revamps remain a key focus for the OBC team. Indeed, over the past few months, we have done four, with pleasing results. One store more than doubled its sales within a three-months period, another has increased sales by about 30%. Revamps at the remaining two stores were completed only last month, so it’s too early to draw meaningful statistics but we are confident that their owners will not be disappointed.

In closing

On a personal level, the past year has been an extremely busy one for me. In addition to driving the OBC Group, I served as chairman of FASA for the second year running, and I established useful links with Proudly South African and the Consumer Goods Council. Some of you might define this as “extramural” activities but I am certain  that these activities have built OBC brand recognition and respectability to levels not seen before.

I further believe that over the past 12 months, we have laid the foundations for a successful 2019. I invite our franchisees to join us on the exhilarating ride that lies ahead. For franchisees, this could involve the expansion of your existing store, the acquisition of an additional store or both. If I have learnt one thing during the past ten years since joining the OBC Group it is that operating under the OBC brand and working hard means that few limitations apply.

 

 

 

 

 

Tony da Fonseca
Managing Director – OBC Group