How Woolworths ‘pulled the plug’ on Beyers Chocolates

You can also listen to this podcast on iono.fm here.

This interview was originally aired on RSG Geldsake in English, with an Afrikaans introduction that has been translated into English here.

RYK VAN NIEKERK: Beyers Chocolates is a confectionary company that has been doing business in South Africa for more than 40 years and is chiefly known for its chocolates. The company’s head office is in Kempton Park, to the east of Johannesburg in Gauteng.

The group is well known for various products. It manufactures Sweetie Pie and Chuckles, which it has been producing for Woolworths.

The business’s doors were opened in 1987 by 20-year-old Kees Beyers. He was from Belgium. He came to South Africa in 1985 and fell in love with the country. Two years later he opened a chocolate factory here.

Beyers Chocolates has unfortunately now applied for liquidation, apparently in the wake of a commercial dispute with Woolworths.

Read:
Iconic Sweetie Pie owner Beyers Chocolates in liquidation
The next battleground for Woolies and Checkers …

Kees Beyers is now on the line.

Kees, thanks so much for your time. It’s a sad story, but tell us the story – what happened?

KEES BEYERS: Yeah, it’s a very sad story. I arrived in South Africa in 1985 from Belgium, and I started the chocolate factory in 1987, and in 1990 we started a relationship with Woolworths, and we grew the brand quite big.

At that time, Woolworths would only stock Woolworths-branded chocolates, basically. Then probably about 15 years ago, they started bringing in branded chocolates, and obviously that affected our volumes to some degree.

We were very dependent on Woolworths, actually.

At one point, Woolworths was as much as 75% of our business. So we started diversifying a bit, but we were not allowed to deal with other retailers. They curtailed that.

Then about five years ago, we bought another factory, a small factory that was supplying Checkers and Pick n Pay, and we started supplying different products.

Obviously chocolate products, but different products; we always kept the product exclusivity to Woolworths. But Woolworths had a big issue with that, and they basically demanded of us that we close that factory.

I said, that’s unrealistic. It’s not right to do that, it’s just not right. They said – Chan Pillay at Woolworths said – well, basically, you close it down or there will be consequences.

In actual fact, the wording used was ‘We’ve [previously] closed down factories for what you’re doing here’.

I think it was just wrong to take that [approach].

But what had happened is, probably a year before that, we had made a very, very large investment into our business.

Just to give you a bit of a scale of the money we’re talking about, our business was doing about R650 million turnover, and Woolworths of that was about R320 million. That’s how much we were doing with Woolworths.

It had taken us 34 years to get to that level because we supplied Woolworths for 34 years.

So we had made an investment close to R200 million into our business, which Woolworths was very aware of. They pulled the plug on us and the pressure of the debt just became too much and there was no other option but to actually close down the business.

We employed 700 people full time. In season, that went up to 1 000 people. We worked out of four different factories, all based in Gauteng.

It’s a very sad story because they didn’t really find a local alternative. They found a local alternative for some of the products, but not all of them.

A lot of the box chocolates now in Woolworths are imported. If you turn the box around and look at it, the chocolates are imported from Belgium.

I was talking to someone today about it and I said, if they had found someone else that was better, that had better products, cheaper, more variety, then I would understand. I would say, look, a better company got the business.

But that’s not the case, they just wanted to prove a point, which they obviously did. They were quite successful in proving their point.

RYK VAN NIEKERK: Was it an exclusive agreement with Beyers Chocolates? Do you believe that their actions are in breach of the contract or not?

KEES BEYERS: Well, the contract actually expired in 2019.

But I even have an issue with exclusivity as a concept, to actually be honest.

I believe in product exclusivity, but I don’t believe in factory exclusivity – because if you’re being honest with yourself, exclusivity drives up prices because you’re not going to be efficient as a factory.

You don’t get the economies of scale going through the factory when you’re exclusive, especially in chocolate, because the market is relatively small.

We were doing it out of a different factory. So even if the exclusivity agreement had stood, if you’re being technical about it, we were not in breach of it because it was done from a different factory.

It was registered; it was a standalone factory, a different team, we even had different packaging suppliers, because we wanted it to be a separate thing altogether.

But the Woolworths view was they didn’t want Checkers and Pick n Pay to benefit from our knowledge, which I thought was quite a thing to say.

But yeah, that’s how they feel. Look, I’m not naïve, I realise it’s tough out there.

You’ve got Checkers, you’ve got Pick n Pay, you’ve got Spar, you’ve got Woolworths. They’re all fighting for the same customer. I do get that.

But as a manufacturer, you don’t want to depend on one customer because it just gets very, very dangerous as this obviously has proven.

It is a very dangerous game to play. So it’s not advisable. What’s the old saying, you can’t have all your eggs in one basket.

RYK VAN NIEKERK: You can’t have all your chocolates in one shop, probably in this case.

KEES BEYERS: Absolutely.

RYK VAN NIEKERK: Did you take it up with Roy Bagattini? I would assume he was the [Woolworths] CEO at the time.

KEES BEYERS: We wrote a letter to Roy Bagattini. No reply. We wrote a letter to the chair at the time. No reply. We wrote a letter to Sam Ngumeni, who was then Woolworths Food director at the time, and he’s now CEO.

Absolutely no reply, which I thought was quite surprising after 34 years of supply, and we were a good supplier.

One thing I will say, there are lot of good people in Woolworths as well. It’s not that the whole business is tainted.

I still have friends working at Woolworths, and I can tell you that not everyone who works there at Woolworths is on board with what has happened here.

A lot of the people within Woolworths are actually embarrassed about what’s happened here, how they’ve conducted themselves.

What I actually want to say is that we obviously got liquidated because Woolworths withdrew their business.

But you know what? We’re big people. Onwards and upwards. We’ve got a strong partner at the moment that’s looking at maybe buying the business, resuscitating it, and we would welcome talking to Woolworths and let the past be the past, and we can we can supply again.

I haven’t been doing much for the last two months, so I’ve learned lessons. I’m sure they have as well.

We’re open for business. Our door is open. I’m happy to talk.

RYK VAN NIEKERK: Have you had a phone call from the Competition Commission?

KEES BEYERS: We did have a phone call from them, probably about a year and a half ago.

They interviewed me for two hours and they said, well, because Woolworths is not a dominant player there’s not a lot that we can do.

But I think they’re missing the point in that Woolworths – technically they’re right in saying [that], because Woolworths has a 9% or 10% market share in the wider retail market.

But the one thing they’re missing is that Woolworths is very dominant in our business.

I know suppliers where they are 70%, 80%, 100% of their business and there is a place for exclusivity.

Don’t get me wrong, there are suppliers out there where Woolworths is exclusive to that supplier, and the supplier is exclusive to Woolworths. But that’s not the case in the chocolate space, they have many different suppliers.

So I don’t see why I should be exclusive to them when they’re not exclusive to us and that’s the point.

RYK VAN NIEKERK: As I understand it, you produced the Chuckles brand for Woolies exclusively. Was that the only brand and were there others?

KEES BEYERS: On a weekly basis, we were producing about 78 different products for them. Out of those 78, about 28, I think, have been replaced, maybe 30.

There are a lot of products we used to do for them, like I used to do Cutie Pie for them. That’s gone.

Cherry liqueur, gone. Chocolate coated ginger, gone. Chocolate coated orange peel, gone.

We had a whole range of fantastical eggs they’ve brought back.

So I was doing speckled eggs for Woolworths, for example, as well. They’ve given that to another supplier. But we had built that whole range.

The one thing I want to explain about, because a lot of people don’t understand this, when you’re doing a house brand for someone like Woolworths, they actually take possession of the recipe.

So they take the recipe and they see it as their proprietary [recipe]. So when there’s a dispute or there’s a disagreement, they can easily take that recipe, just go to a different supplier and say, right, now you go and produce this.

But it all didn’t go as well as planned because about a year and a half ago when they withdrew from us fully, there were empty shelves for like three or four months, where people were saying – there were a lot of comments at the time on social media – and obviously because they withdrew relatively quickly and they didn’t replace it as quickly as they would have wanted to.

Their brand, when we were still producing for Woolworths, the Woolworths brand was a very prominent brand on the shelf.

You look today at the Woolworths brand, the chocolates on the shelf, it’s very small.

Yes, you’ve got the Chuckles brand. There is a little bit of speckled eggs, and the box chocolates are being imported, and the rest is all branded from a lot of multinationals. A lot of it is imported chocolate.

So they haven’t quite replaced the jobs that we’ve lost in our factory.

Look, I can’t sit here and say, I have no accountability whatsoever. I do to a degree, but I feel that Woolworths didn’t play their part in this particular one, and I don’t think they conducted themselves very well.

Also, the comments they’ve come back with, saying we can’t comment because of confidentiality. What confidentiality? What are they actually talking about? I actually don’t know what they’re talking about.