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Breaking the coffee barrier

Nov 22 2012 07:31

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I USED to look at great entrepreneurs like Richard Branson, Raymond Ackerman and Sol Kerzner and think: “Wow… wouldn’t it be something to make it that big?”

So I tried. First with a backyard dishwashing liquid manufacturing business, then importing things like bandanas, goats' milk cosmetics and finally an amazing foot deodorizing powder.

Sales were made, investments were recovered but there was no “Richard Branson” moment.

frontier coffee

 Frontier Coffee’s directors, Nohlene Bennett (right) and Steve Giddings (left).

Then along came Mark Bennett and things changed.

They changed more than I could ever have imagined and while I am nowhere near reaching the heights that my business heroes have achieved, I have learnt two valuable lessons along the way: what being an entrepreneur is really like and then, perhaps more importantly, what the secret of success really is.

I’m going to share both with you.

I need to start my story by saying that I had no idea what I was doing when I was asked by my friend Mark Bennett to join him and another pal, Stuart Mills, in starting a business.

I was employed at the time, drawing an average salary and enjoying what I was doing. I also had a mortgage and a young family. So I thought – let me keep all of that and spend a little spare time making some extra money.

Mark had found an advertisement by a company offering coffee machine franchises. The concept was simple: buy six coffee vending machines which would be placed by the franchisor, pay a franchise fee, and make money from the machines…. and so Frontier Coffee was born in 2002.

In practice it never happened that way. Our first surprise was to find out that our franchisor had promised a whole lot more than they could ever deliver on.

First, there was only help in placing three machines and when they needed repairs, there was no rush by the franchisor who had no real capacity, being a two-man outfit more interested in signing up new franchisees. 

Clients started to complain and we started to worry about how we would repay the loan we had struggled to obtain using our houses as security.

We had named the company “Frontier” to signify the move into the unknown, to offer what no one else offered and to signal the excitement that intrepid explorers must have felt - but the truth was that there was very little excitement left.

We were losing money, working out of a garage and all of us had to keep our day jobs while working evenings and weekends to visit the sites, clean the machines, deliver coffee beans and write sales proposals.

Lunch hours were spent presenting proposals to potential clients, who must have thought we were so successful that we could only see them between 1 and 2pm. At this time, Stuart was under immense pressure at work and so he had to pull out.

The final straw came when the franchisor called to say he had a site for us and that we should buy 10 machines. So we did but oddly, as soon as we had, the site failed to materialise.

Strength from adversity

It was time to do what we should have done long time before – walk away from the franchisor for breach of contract. So we had five machines earning money, 11 in our garage, no coffee machine and coffee bean supplier and no technical support.

It was a dark time.

But out of adversity came strength. First we reached out to a local coffee bean supplier who, on hearing our sad story, offered us such discounted coffee that I am not sure they made a cent out of us.

Second, we won our first multiple machine contract with Sony and in sourcing the coffee vending machines for this contract from another local machine supplier, Trevor Wolheim at Gateway Vending, we were to receive support we could never have imagined.

He went way past the traditional supplier relationship when he opened doors into contracts with two other large corporates. We were at last breaking even.

Mark was now able to work full-time in Frontier Coffee, but without a full salary he was taking financial strain. I had left my employment and was operating as a part-time business consultant, and we had hired Fanus Engelbrecht as a technician/delivery person.

The light at the end of the tunnel was growing brighter though - until one sad day in December 2003.

Mark was taking a break with his young family when he suffered a brain aneurism. Despite medical attention, he sadly passed away leaving his wife Nohlene with three young boys of 9, 8 and 2 years of age and a business that was treading water.

We had work to do – failure was not an option for a widow and three young children. Nohlene had been managing the accounts of the company but now as my business partner, she immediately stepped in to support the operations of the company.

The first thing we realised was that we needed to order our coffee machines direct from a manufacturer. Trevor had sold Gateway Vending and we weren’t getting competitive pricing any more. I travelled to Italy and struck up a good relationship with the suppliers of Nestlé's coffee vending machines.

We were granted distribution rights and with a bank manager that had gradually warmed to us, we had a larger loan to import machines and with competitive pricing we were growing fast.

Too fast it seems for one of our competitors, because about a year later I got a call from our supplier in Italy – they had come under pressure to decide if they wanted to supply this multinational or us; I guess it wasn’t a very difficult decision.

It was a major blow and I can remember my stomach sinking, sitting down and feeling sick. Without  direct access to a manufacturer we just wouldn’t be competitive.

But little did this multinational realise what a favour they had done us – it would unashamedly become one of our biggest reasons to succeed (and to this day we keep winning over their previous clients).

Off I went to Italy to find another coffee machine supplier and we were again back in business.

By now we had hundreds of clients including some well-known blue chips like Netcare, Adcorp, GlaxoSmithKline, etc. We had a national presence and a 30% growth rate each year.

During the Christmas break in 2006 I realised that we had more than enough coffee machines in the market to support the establishment of a coffee roastery.

So we decided to buy a coffee roasting machine and while it was being shipped to South Africa, one of our clients introduced me to another of her suppliers – a coffee expert called Brian Best who was himself looking for a new challenge.

By June 2007 when the coffee roaster arrived, we had a business strategy and with Brian on board, we had set up a new company - Java Lava Beverage Manufacturers. Java Lava’s first big break came when we won the tender to supply Netcare with all its hot beverage supplies.

Before long, we had hired a mini factory and bought powder mixing machines and packaging machines to add to our coffee roaster. We were importing tea, roasting coffee and manufacturing a delicious self-formulated hot chocolate powder.

Days spent covered in cocoa

Days were spent in our hopelessly undersized factory space covered in cocoa and coffee and nights were spent checking figures and fixing packaging machines. Thanks to the Netcare contract and their incredible support, we were profitable in a few months and starting to roast for other companies as well. 
 
Frontier Coffee was able to grow even further with access to quality consumables at a preferential price and by 2009, we had some 30 employees and over a thousand clients - but it wasn’t going to be all smooth sailing as our marketing manager and technical manager both resigned on the same day and proceeded to try set up a copy of our company.

It was a major shock (and disappointment) given that our approach to our staff was the same as that of our approach to our customers – treat them well. 

We had to defend our market but again, out of adversity comes strength because that was when we really found out what “customer relationships” were all about.

We spent a lot more time in understanding and supporting our customers, and it was gratifying to hear over and over again over the next few years how many customers had been approached by them with cheaper offerings and had turned them down.

Their attempt never went very far because I believe our customer service really is legendary and probably explains why in our 10-year existence, we still have many of our original blue chip clients.

The next chapter of our story continues with Famous Brands, who own the Wimpy, Steers and Mugg and Bean brands (along with a whole lot of other quality brands) buying a 60% stake in Java Lava.

It is early days in our relationship with them, but I am really pleased we are partners. One hears stories of how big companies cheat little ones in these transactions and we were nervous, but I can only praise the Famous Brands executives for the open way in which they transacted.

Their injection of professionalism has made a remarkable difference - never mind that within months we are producing nearly eight times more coffee.

As for Frontier Coffee, we now have a professional management team led by Christo van Rensburg, a national footprint, over 50 employees and a few thousand clients that include giants like Avis, Barloworld, British Telecom Global, Clicks, GlaxoSmithKline, HP, Netcare, Samsung and SAP (to name a few).

On many of these sites we run a complete beverage service with everything from the coffee vending machines, consumables and even on-site staff to fill and clean the machines and pause areas.

We also have distribution rights for three coffee machine manufacturers, which allow us to rent and sell a complete range of coffee machines, from small home units to the largest free-standing office coffee machines. We also have the highest B-BBEE rating in our sector.

Our website was also nominated for an international design award. More importantly, because we really do value our employees we have a great set of human development stories that include staff who have gone from cleaning machines to achieving technical qualifications and heading up a technical region.

frontier coffee
Tumelo Buthane (right) started in Frontier as a cleaner, obtained an N3 technical qualification and now heads up the Northern Gauteng technical region. He is pictured with Christo van Rensburg (left), Frontier Coffee’s General Manager. 

*Share your experience of setting up your own business, or simply ask a question. Our business panel can put you on the right path.



 

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