Kauai: John Berry and Carl and Brett Harwin

Kauai: John Berry and Carl and Brett Harwin

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True to surfing culture, John Berry and brothers Carl and Brett Harwin – the founders of Kauai – came up with the idea while sitting under a papaya tree watching the ocean. The three Californian college friends were living on the island of Kauai and while enjoying the fresh fruit around them, they decided that one day they would share their tastier, healthier way of life with the world.

While in Kauai they started the Kauai Juice Bar with only one juicer and later supplied major hotels, restaurants and health food stores.

Their little business was slowly gaining momentum when they travelled to Cape Town for Carl Harwin’s wedding to a Capetonian, which was followed by a surfing holiday. They fell in love with the South African city and decided to stay. But they soon realised that when they wanted to “pop down the road” to buy some food, there were no healthy options available.

So in 1996 they moved their juice business from Kauai to South Africa and evolved it into an outlet in the Mother City that sold a range of healthy sandwiches. Celebrating its15th anniversary this year, Kauai is now the number one healthy fast food brand in South Africa with major expansion on the cards.

Healthy eating

“We believe healthy eating improves quality of life,” says Hendrik Coetsee, Kauai CEO. He explains that when Kauai first started, the South African public had misconceptions about the brand, thinking that it served food suited only to health fanatics. “Fifteen years ago when Kauai first started the landscape was totally different. McDonalds was not even around yet so people had a different understanding of fast food.”

Coetsee says there was a preconceived idea that healthy food comprised only of tomatoes and lettuce. “It took time for people to get to know that Kauai was not just catering for tomato and leaves guys,” he says, adding however that the wheatgrass in the outlets did encourage the view that it was fast food for ‘greenies’.

Broadening the market

Kauai has come a long way since it started, says Coetsee. It is now recognised by more people for serving everyday healthy, tasty food. Historically the brand has served the upper LSM market, but he says the clientele is fairly neutral in terms of gender and demographics. What started as a groundbreaker in a smaller niche market is now a major player. “Since South Africa is a relatively small market, we are looking at ways to touch a broader segment of the market,” explains Coetsee. He says Kauai has introduced a number of initiatives to do so, including the addition of a kids offering to avoid cutting out families.

Back in the “heyday” as Coetsee calls it, Kauai consisted of three outlets in Cape Town. Today there are 95 stores with a modern feel and

diverse menu. Of the three founders only John Berry is still involved in the company’s operations as the chief innovation officer.

At first the menu was made up of mainly sandwiches and smoothies, and now has a significant wrap offering. Coetsee says the back of house systems have become a lot more efficient and Kauai has secured a good relationship with a supplier who is able to supply around 80% of the goods to stores, as opposed to using 50 suppliers per store in the past. This has contributed to the consistency of the Kauai brand.

Kauai ‘in Motion’

A major catalyst in the growth of the brand was establishing a relationship with Virgin Active eight years ago. Kauai’s in Motion stores offer Virgin Active gym members healthy food on the go.

Coetsee believes that although this partnership helped put Kauai on the map, it’s a symbiotic relationship. Virgin Active needed a service provider who could offer a reliable and quality product. “Because Virgin Active is a global player that displays a lot of innovation, we are constantly learning through our dealings with them. We are being pushed to evolve, to challenge ourselves – so there have been positive spin-offs in terms of pushing the business forward,” says Coetsee.

Further, he explains that Kauai has adapted its menu at the in Motion outlets to fit in with the gym environment.

Kauai also launched Kauai@School stores at Reddam House Constantia and Green Point in 2007. This was part of the campaign to expel junk food from South African schools. The menu was adapted for schools to make it more affordable to learners. Kauai plans to extend Kauai@Schools to other schools in the Western Cape and Gauteng.

Building a brand

Coetsee says the Kauai brand is perceived differently by the customers and those who are part of the company. He says just over a year ago the » company went through the process of establishing a value system. “Before it was just whoever shouts the loudest,” he jokes. “We want to touch as many people over time as we can and not be part of the problem of junk food being greasy and unhealthy.”

Research done shows that customers think of three key words/phrases when they think about Kauai – healthy food, tasty food and smoothies.  The actual logo of the company has also evolved over the years. While it has always been a sun motif, the slogan has changed from ‘Juice and Smoothie Company’ to ‘Tasty Food, Healthy Life’. Coetsee says a brand bible has been created in an effort to standardise the look and feel, and the roll out plan is currently being finalised. He says one of the challenges has been to compete with the bigger fast food brands. “We want to touch more consumers than currently,” he adds, explaining that Kauai is focusing on increasing brand awareness.

It is doing so in three ways. First, it is expanding the product offering at current outlets to reach a wider audience. There are also “fairly ambitious” plans to open new stores and finally Kauai is embarking on marketing and advertising campaigns. The company is sponsoring the upcoming American Survivor series which will be broadcast in the next few months. “We want to be more out there and visible but also rely on word of mouth.”

Staying ahead

According to Coetsee, the consumer wants more healthy options, which is seeing the entrance of more and more healthy food brands. Globally the sector showing the most growth in the fast food industry is healthy food. “The consumer is shifting and there are more opportunities for players to be part of the movement.” However, Coetsee adds that offering healthy, fresh meals can be more difficult than the normal burger patty and bun. He explains that consumers expect fresh ingredients, which has significant cost implications.

As for the threat of new competitors entering the market, Coetsee says Kauai’s 15 year track record has gotten it to what it is today, and that all the costs have already been endured. “I foresee healthy food showing the biggest growth in South Africa, so we are definitely going to see more players.” He believes Kauai will continue to evolve in order to stay ahead and remain the country’s number one healthy fast food brand. “Innovation plays a big part for us as a brand, and it definitely is one thing we are pushing today.”

Time for reflection

The biggest challenge to date has been cash flow, says Coetsee. He explains that Kauai went on an expansion drive during 2007 and 2008, opening  23 stores, mainly corporate and joint venture stores. This put pressure on the cash resources, which meant that the company was not well positioned when the recession hit. Along with the recession, the fast food industry also saw food prices inflate. These two factors combined put Kauai’s margins under pressure, but Coetsee says the company managed to pull through and is now looking forward.

Four stores were closed last year, but Coetsee says these were stores that would never work and weren’t worth pouring more money into. He explains that in hindsight, they should not have been opened as they weren’t well positioned.

While this challenge was a chance to reflect on the viability of stores, Coetsee believes Kauai has come a long way since two or three years ago.

Franchising the business

Kauai outlets are a combination of being company-owned, joint venture or franchised. Coetsee says the decision to franchise the business was in line with the company’s growth model, and that franchising was one of the quickest ways of expanding. He also explains that there were already people in the system who wanted to be their own bosses, so this made it possible for them.

When Coetsee joined Kauai four years ago, there were only five franchise outlets, but he says his past experience proved to him how effective franchising is, which has strengthened his resolve to increase the number of franchised branches. Coetsee points out that 90% of the top 50 fast food brands in the US are franchises.

Because franchisees are responsible for their own success, Coetsee says they may run their outlets better than the company-owned outlets. They are closer to the customer base, and can determine how to serve their needs better. “Franchising also grows the system quicker to create a bigger brand. Initially the board was hesitant, but it has become the preferred route. For our new stores we will turn to franchising first, and only if we can’t find the right franchisees will we run them ourselves.” About a third of Kauai’s outlets are currently franchises.

On the growth path

Kauai has a target to double its business by February 2015 by growing its current and new store systems. Coetsee says there are plans to have more outlets in high streets as well as to grow the Kauai in Motion stores in line with Virgin Active’s expansion.

A new outlet opened at Somerset Mall at the beginning of April, and over the past four months four Kauai in Motion stores have opened in gyms.

Choosing the right location is important for the success of each outlet, and Coetsee says there have been some important learnings from the selection of locations. Over the past six years, Kauai has worked with Fernridge Consulting to indentify and analyse different locations spots. He says it takes more than demographics and income levels to identify a good location and that it is also important to understand the site and determine what drives people to that site. “It’s important to work with the information available and insights, rather than following your gut feel”. One example Coetsee cites is the outlet in Hout Bay.

While this area is an affluent neighbourhood and people living there fit the right profiles, most travel to Cape Town CBD during the day, which is when Kauai operates. Coetsee says this outlet was closed as the company realised it would never succeed, but the exercise was a vital lesson learnt.

Coetsee says the experience has also provided insight into looking for more realistic offers from landlords. There has been a flood of prospects and the plan is to open four to five more outlets in the next three months.

According to Coetsee, Kauai started looking at the possibility of expanding internationally in 2007, seeking alliances to do so. But these plans were paused when the financial crisis hit.

“It takes time, money, money and money to expand into other countries but we started conversations again last year and are currently talking to an international player,” he says. Coetsee says Kauai’s existing alliance with Virgin Active could also be a possibility for global growth, specifically in the UK and Europe.

“Many South African companies don’t have deep enough pockets to take on fast food globally so we have to be careful about how we go about it. We believe Kauai can play on the global stage, but we have to work out how we can do it properly,” adds Coetsee.

Words to live by

Kauai’s witty brand and unique healthy fast food concept can be seen in its ‘Words to live by’

1. It’s all fresh

Our servings are made right before your eyes, using only the freshest ingredients.

2. As nature intended

We keep our ingredients as close to their whole and natural state as possible so that we don’t lose any of their flavour or goodness.

3. Not a fat lot of good

Trans fats are neither good nor natural, that’s why you won’t find any in our products.

4. No fry zone

None of our products are fried and that means that the oiliest thing in our kitchen is an avocado.

5. If you haven’t got the MSG yet, you won’t get it here

You won’t find any MSG or tartrazine in any of our meals, just another way we’re looking out for your health.

6. 100% wheat-free or 100% gluten-free

Our rye bread is, well rye bread, which means it’s 100% wheat-free. Alternatively you can ask for 100% gluten-free wraps.

7. No dairy, no problem

All dairy smoothies can be made with GM free soya milk for the lactose intolerant. (excludes iced lattes and protein drinks)

8. Vegetarian friendly

Kauai mayo is reduced in fat and egg-free, perfect for vegetarians.

9. Protein power

Our protein smoothies are made with Muscle Works superior whey protein. This is a complete protein containing all the essential amino acids, which also has the highest amount of branch chain amino acids of all proteins, to help prevent your muscles from breaking down.

10. It’s not only the flavour of freshly squeezed that’s so great

It’s also the fact that it’s packed with nutrients. It takes 1kg of carrots to make 500ml of freshly squeezed carrot juice. For all those vitamins, it’s worth it.

The Kauai Franchisee

According to Hendrik Coetsee, Kauai CEO, the ideal franchisee for the brand is entrepreneurial. He says it is someone who wants to be their own boss, but not necessarily worry about the complexity of running a business. “They don’t need to reinvent the wheel,” he adds. “They should be able to work within boundaries, share knowledge and use the system provided. They should want to be hands on and love the industry as every game has its injuries.” Furthermore, Coetsee says a franchisee should know how to keep the customer happy and love working with people as there is a service element to the job.

While franchisees usually haven’t owned their own businesses before, the Kauai training programme gives them the skills to do so. “They are set up for success rather than failure, but should they make mistakes, they will have a support system to turn to. You can be your own boss with a safety net in place,” he says.

One more important requirement is that an individual should want to be part of a healthy food and lifestyle system, which Coetsee says makes for a ‘magical fit’.

Doing good

Community players

Kauai regularly invests and contributes to good causes. It supports the Children’s Hospital Trust, the fundraising arm of the Red Cross War Memorial Children’s Hospital, by catering for fundraising events as well as treating the children and dedicated hospital staff to Kauai treats.

Kauai also supported the Chaeli Campaign, which focuses on mobilising the minds and bodies of children with disabilities, through the sponsorship of one of the Chaeli Riders in the 2011 Cape Argus Pick n Pay Cycle Tour.