- Player: Albé Geldenhuys
- Company: USN
- Launched: 1999
- What they do: Sports nutrition and supplementation
- Group turnover: R1 billion
- Visit: usn.co.za
The Start-up Story
Starting Small, Thinking Big
Lesson one, when you launch a business, know where you want to go. For Geldenhuys, who had consistently been the Health & Racquet Club’s top performing salesman (by a long margin), chasing and achieving targets isn’t just a vocation, it’s his life’s blood. Even the name he gave to his fledgling business marks this mindset: Ultimate Sports Nutrition (USN) was chosen because of the US in its name.
“At the time, there was a perception that US brands were the best. I wanted to capitalise on that, and the name subtly suggested an international product.”
Like any truly successful entrepreneur, Geldenhuys is a consummate salesman, and he understood from the get go that businesses need to be trading. “At first, I wasn’t even thinking about launching a product line, or even a business. I just wanted to be selling product and making a small profit.”
He bought two product ranges wholesale, Muscle Science and EAS, and sold them to health shops. “The problem was that I started getting complaints. Muscle Science wasn’t a great product, and EAS was a pricey US product.”
Geldenhuys spotted a gap in the market. “What was interesting is that this was already a busy market. It was small and saturated, so there wasn’t really room for another competitor. The available products were either too expensive, or poor quality. I was convinced that if I offered a good quality product at an affordable price, I’d have a shot.”
And USN was born. “I researched formulations in magazines and through supplement reviews. At the time Creatine was a big deal, so I bought barrels of it from Crest Chemicals, bought bottles, mixed my formulations and bottled it.”
He started selling to everyone: Friends, people he’d met at the Hatfield gym, and most importantly Blue Bulls rugby players who also worked out at the gym. “I targeted anyone. I had no strategy beyond just sell, sell, sell,” he recalls. The ‘non’ strategy worked though, because soon supplement shops started contacting Geldenhuys directly, particularly the in-house Health & Racquet shops. Word spread: If you wanted to buy good quality sports supplements at an affordable price, Albé was your guy.
As a start-up, USN was a money-in, money-out business. “I could only buy raw materials as and when I had the cash. Everything we made went back into product. We kept our overheads incredibly lean, and just focused on growing sales, and having enough product to meet demand.”
The entrepreneur was thinking about how to scale the business’s growth. He realised that just manufacturing and packaging the best product at a reasonable price, with a diverse offering wasn’t enough.
“Making sales always goes back to the same key question: What do your consumers really need from you? At first, the answer to that question was a good product at an affordable price. We experienced rapid growth based on simply meeting a need in the market. But we wanted to be bigger, and that meant expanding our market. So I needed to ask the question again.
“Now what do our consumers need from us? The answer was simple. They needed to understand how to use our products. The demand was there, but most people weren’t actually sure how to use sports supplements properly. That was our in. We started educating the market, adding meal plans to our packaging, and focusing on telling people how to use what, and what the results would be if our various products were used correctly.”
By January 2000 USN was still operating from the kitchen. It had a turnover of R20 000 a month, and enjoyed a 60% gross profit, largely because it had no overheads, and the product sold below retail prices.
“We were proud of our turnover, but I was focused on the next step,” says Geldenhuys. “I approached ChemPure to assist with the products. I had market research, they had the raw materials.”
ChemPure was housed within the CSIR, and agreed to incubate the still-small USN within its premises. It was a game changer for the start-up. They moved out of the kitchen, and within four months had grown their turnover from R20 000 to R160 000 a month. From that moment, USN started doubling its turnover every month.
Geldenhuys, his brother and girlfriend (soon to be wife) were a tiny team on fire. One of the key secrets to Geldenhuys’s success at this stage was that he always got paid. He made sure invoices were sent timeously, and he followed them up relentlessly until the cash was in the bank.
Growing in Leaps and Bounds
Since its inception, USN has enjoyed massive growth. From R20 000 a month turnover in January 2000, by the end of 2002 the product was in Springbok Pharmacies and Dis-Chems around the country, and monthly turnover was in the millions. Geldenhuys had achieved this feat without splashing out any cash on big advertising campaigns.
And then he got his first real curve ball. In early 2003, Dis-Chem bought a 50% stake in Evox, one of USN’s biggest competitors. Dis-Chem was USN’s biggest customer, so the move shook Geldenhuys to the core, as he knew Dis-Chem would promote Evox.
“I was always stingy with money. I liked a nice healthy bank balance. We’d enjoyed massive growth without spending anything on marketing, and that was the way I liked it. But I also knew it was time to spend some of our hard-earned cash to build brand awareness. It was time to advertise.”
True to form, Geldenhuys wasn’t just going to splash some cash around and hope it worked. He was going to be strategic about his marketing spend.
“Always look at yourself, and what you bring to the table. I had some great contacts in rugby thanks to my sales background at the Hatfield Health and Racquet club. This was my in.”
Geldenhuys approached Jaco van der Westhuizen, a Blue Bulls player who had been injured and was out of shape. “I made him an offer. ‘If you get into fantastic shape, using my products and sticking to a strict health routine, I’ll put your face everywhere – in Men’s Health magazine, on billboards – everywhere. You’ll get noticed. Everyone will be talking about you’.”
Within seven weeks van der Westhuizen went from flat and white to an athlete in incredible shape. “The transformation was unbelievable, and we made a huge splash of it. He was the talk of the town.” Within three months van der Westhuizen was on the Springbok team.
“It did wonders for both our brands. He was also our first USN brand ambassador.” The first of many. Geldenhuys soon realised that his business was long past start-up stage. “Spending money made us more money. We were creating more demand than ever before. People were talking about us. Turnover grew, profits grew and the business grew.”
Geldenhuys’s strategy to ensure Evox didn’t steal his market share was two pronged. He needed to send buyers into stores looking for the product, and once there ensure USN was the brand they actually bought.
“We returned to a strategy that we knew worked: People need to know how to use your product. The more consumers know, the more likely they are to buy, but the more the assistants in the stores know, the more likely they are to recommend your products, and so we trained the guys in stores. They must know more about USN than Evox. Period.”
Within six months the relationship between Evox and Dis-Chem ended. Evox had relaxed its marketing efforts, expecting Dis-Chem to sell for them, and Dis-Chem had done the same, expecting Evox to put in the work and prove the ROI of the acquisition.
The real winner was USN, which had used the challenge as a reason to up its game and focus on cementing an even bigger section of the market.
The Downside of Growth
In many respects, the business grew too fast. “I had my finger on everything: Stock, our warehouse twice a day, finance. I even stuck labels on bottles if I had to. By 2004, our sales were excellent, but our back-end was a mess. We’d grown too big for our structures. I wanted to focus on product development, advertising and sales. I didn’t want to be MD as well, but I knew we needed a detail-orientated person to focus on putting proper systems and processes in place. I appointed one of my managers, Johan Visagie, a lawyer friend who was excellent at the details, to be MD.
“I’m an autocratic leader. I tell everyone how things are going to happen, and they make them work. I’d go so far as to say that I rule by fear. My team listens to what I say, and the structure was always clear. Johan was a mild-mannered, diplomatic HR guy. Where I had been a firm task master, Johan was a gentler and friendlier boss, trying to operate within a framework that I had created. The company culture didn’t know how to adjust and we ended up losing some great people as a result.
“The second problem was that although I needed a strong MD, Johan had previously worked under me. He didn’t come into the role and immediately embrace it as a position of equal footing. He didn’t push me or challenge me. I started feeling very alone in my own business.
“We’d enjoyed phenomenal growth, but I’d gone from knowing every single little detail in every spreadsheet, to walking through our own warehouse and feeling lost. I needed a strong partner who I could bounce ideas off and who would give me honest feedback. My MD told me what he thought I wanted to hear, instead of what I needed to hear, or what was actually happening in the business.”
As Visagie got more involved in the business, Geldenhuys’s feel for the numbers started slipping as gradually a distance opened up between him and the daily operations of the business.
It would take five years, Visagie stepping down and a new CEO (whose name we’ve chosen not to mention in this article) at the helm before the implications of that separation from the numbers would really make itself felt.
“In 2010, based on our market presence and massive sales figures, PSG approached us with an offer to purchase. I had no intention of selling – in fact, I’ve always believed that if someone approaches you to sell, it means you’re doing something right – but I invited them in to do an audit anyway.”
The results were devastating. “They discovered R12 million in stock losses. My CEO had projected a profit of R28 million, and instead, we had lost R12 million. It was unbelievable.”
“I had completely taken my eye off the ball, putting all my trust into our CEO while I continued to focus on sales, product development and launching USN overseas.”
The CEO in question had originally joined the business to head up a new sports drink division. He’d been an executive at Coca-Cola, and he understood the market. “Up until that point, we’d been pumping money into the new product but it wasn’t really working, and we were losing a lot of money. When he joined us he was exactly what I thought I needed: A silver back with lots of business experience. He talked an excellent game, and I thought we could benefit from his expertise.”
He soon went from running the drinks division to being appointed sales director. And then he left due to a job offer to run Coca-Cola in Kenya. “I was disappointed to lose him; I had really started to rely on him,” says Geldenhuys, which is why, when he wanted to return to the business – but this time as CEO – Geldenhuys readily agreed.
“Johan had served the business well, but I believed that a new CEO would be a better fit for the growth path I wanted to take USN on, so I agreed to his terms, he joined us and Johan stepped down.”
It would prove to be the single biggest and most expensive mistake Geldenhuys would make. “There were so many issues it’s almost painful to list them,” he says.
“His first hire was a drinks director who arrived and then two months later had a big back operation and was off for six months. He hired a financial manager who was indiscreet with salaries, which also cost us a lot, because we had to suddenly increase a number of salaries to keep staff.
“He had a penchant for employing people from big corporate backgrounds who wanted to follow the corporate systems that they knew. We had always done so well because at heart we were a small, agile, flexible entrepreneurial business and not a corporate. We were losing that magic.
“The most unexpected development, was how this man whom I liked and trusted to be the CEO that my company needed, suddenly became power hungry and started abusing his role. I’ve always believed that it’s good to put pressure on people, but you can’t treat them badly. Worst of all, he was making mistakes. He over-ordered products we had discontinued. He was running the business, and yet he had no idea what was happening in the business. He was over his head, but hiding it well as he talked a good game.”
And then PSG came along and revealed just how far the rot had spread. “At the time, our turnover was R300 million, with a projected profit of R28 million, which I was already unhappy about – where had our great margins gone? Then PSG came along and said, sorry, you’ve actually lost R12 million in stock, and you’re making no profit.
“I was floored. I’d put a lot of faith in my CEO. But I also realised I’d been a bit of an ostrich with my head in the sand. There were so many things I couldn’t control that I didn’t want to see what was actually going on. It was time for change.”
The Billion Rand Question
In 2010, USN had a high turnover, but the business was in shambles. Despite its size, failure was a real possibility – but not an option for Geldenhuys. One of the PSG auditors, Jurie Bezuidenhout, wanted to join the business.
“He had a private equity background and he really understood financials. He felt he could help me effect a turnaround. I also had an excellent sales manager who was about to leave because of the CEO. Things suddenly clicked into place for me. With a strong sales director, chief financial officer and myself focusing on the products, we could turn this business around, without an MD or a CEO.
“R10 million and an unpleasant fight later, we parted ways with the CEO. Next was our head of logistics. We had massive stock losses and our efficiencies had dropped. We started out with service levels of 95%, which meant that 95% of our stock reached the shelves where it was meant to go. Under the helm of our new logistics manager, this dropped to 72%. It cost me six months’ salary to get rid of him, but it was worth every cent.”
Now the business went back to basics.
“We’re not a logistics company. We never will be. We need to focus on what we’re good at, and outsource the areas that we’re clearly not good at. We got UTI Pharma in to run the logistics side of our business. We sold the warehouse and all of our trucks. We had to retrench staff, which is never easy, but ultimately we needed to make decisions for the good of the business.
“Today, we focus on developing products and marketing. As soon as we went back to our roots we started making more money, and more profits – and the refreshed focus allowed us to focus on international growth.”
The proof is in the figures. Since 2010 USN’s turnover has grown from R300 million to R1 billion, and with the brand having launched in the UK in 2009, Australia in 2012 and the US in 2015, that growth is set to continue into the stratosphere.