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3 Vital Steps That Gave Universal Paper & Plastics 10x Growth

Here’s how brothers Jonathan and David Sher, together with their father Barry, have taken a R100 million family business and will reach R950 million by the end of 2017 — by manufacturing toilet paper.

GG van Rooyen

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Universal Paper and Plastics

Vital stats

  • Players: Brothers David and Jonathan Sher, and father Barry Sher
  • Company: Universal Paper & Plastics
  • Established: 1950
  • Revenue: R600 million, expected to reach R950 million by the end of 2017.
  • Claim to fame: This decades-old family business has managed to reinvent itself and 10x its revenue over the last decade.
  • Visit: www.upap.co.za

Key learnings

  • Find a new product you can sell to existing customers.
  • Don’t be afraid to reinvent the company. Embrace change.
  • Even old and large companies can pivot successfully.
  • Own your own supply chain (as much as you can).
  • Find a niche. Every industry offers them.

Blogger and technology evangelist Robert Scoble famously said:

“Change is inevitable, and the disruption it causes often brings both inconvenience and opportunity.”

Related: Start Manufacturing Toilet Paper Today

All businesses need to keep up with the times and evolve — even those in very traditional industries. Take for example local manufacturing firm Universal Paper & Plastics (UPP). The company has a very long history, having been founded in 1950. It started off making things like envelopes and paper drinking straws.

By 1955, however, it had found its niche when it started producing paper napkins. Over the years, UPP dabbled in other areas. As its name suggests, it also made things like plastic bags, but napkins were its core product.

The business reached its maximum growth

By the mid-2000s, though, the market had shifted. “The company wasn’t in financial trouble, but it was clear that the napkin business had reached its limit. Business was slowing down, sales were declining, and there was clearly no room for growth,” says company director David Sher.

“We wanted to grow the business and not let it stagnate, and that clearly meant reinventing it.” Together with their father Barry, brothers David and Jonathan Sher, who had joined the company in 2008, took a careful look at the business to determine where and how it could evolve.

It was clear the business, which had already been run by the Sher family for three generations, had reached an inflection point. And therein lies the secret to growth. Businesses that span only a few years will reach inflection points, and need to adapt or die.

Many business do not survive decades, because they cannot navigate these points. UPP has not only stood for 67 years, but it’s entering an unprecedented period of growth because it’s owners understand the need to adapt to changing markets, and find solutions that cater to these market while bringing costs down and simultaneously improving quality. It’s something that is much easier said than done.

Adapt or die

But lets’ step back to Scoble and his assertion that disruption brings both inconvenience and opportunity, for it’s the businesses that spot the opportunity — and react accordingly — that benefit from real growth. Scoble (and his blog scobleizer.com) first rose to prominence when he was employed at Microsoft.

He was authentic and unpretentious in his writing, and accomplished the difficult task of making a gargantuan organisation like Microsoft seem, well, human.

Related: What steps do I need to take to start manufacturing toilet paper?

Scoble made his statement about disruption in his 2006 book Age of Context: Mobile, Sensors, Data and the Future of Privacy, just as his tenure at Microsoft was ending. His words would soon prove incredibly relevant to his old employer.

The very next year, Microsoft found its world upended. Until then, Microsoft had been a software company. The world was using desktop PCs, and the corporation’s software was dominating that market. But in 2007, the world was changing. People were switching from desktop to mobile. Clunky computers were out, laptops and tablets were in.

The big reason for this change? The introduction of the first-generation iPhone. Apple, a company that had been created to build and sell personal computers, was suddenly in the cellphone business. Soon it was selling iPads and paper-thin MacBooks.

React to disruption

The late-2000s saw an incredible amount of disruption in the tech sphere. Both Microsoft and Apple only survived because they succeeded in reacting to this disruption. Where would Microsoft be if it was still just focusing on software? What would Apple look like if it was still only selling desktop Macs?

Apple was the first to react — in many ways, it was a cause of the disruption — but Microsoft also responded before it was too late. It had some hits and some misses. It’s tablets, for instance, haven’t caught on like those of Apple and Samsung, but it has had great success with its Azure cloud service. It also purchased Skype for an astonishing $8,5 billion. Can Skype ever show Microsoft a decent ROI? Well, even if it doesn’t, it shows a willingness on Microsoft’s part to make bets on the future, instead of just depending on old strategies to keep paying off.

Death by attrition

universal-paper-and-plastics-toilet-paper-manufacturing

The point is this: When they realised that the world was changing, both Apple and Microsoft did something. They embraced change. When you’re an old and well-established company, this can be very hard to do. Many great companies have gone under simply because they were too slow to react to change.

In a sense, being disrupted can be a good thing, since it forces you to take action. Few things can focus your attention like an existential threat. But what happens when your market is slowly eroded, perhaps over a decade or two? If you’re lucky, the business will stagnate and you’ll hit a plateau.

If you’re unlucky, the business model will become so shaky that it eventually collapses.

The great disruptions and tragic failures are well documented, but for most companies, death by attrition is more likely. If you’re around long enough, you will eventually see your core product or service become obsolete. It’s inevitable. All companies are always being disrupted, but when it happens slowly, we simply call it ‘progress’. You either move with the times, or you get left behind.

Related: 3 Secrets To Business Success

Pivoting the business

Of course, the above is not only true for tech companies. UPP is an excellent case in point. “Our dad got the process started just before we joined the business,” says Jonathan.

“He wanted to shift the company’s product offering, but he didn’t want to venture into areas that the company knew nothing about. He wanted something that UPP could sell to existing customers, and that was still within the scope of the company.”

How to compete with strong international brands

An obvious answer was rolled paper products. The market for rolled paper was massive, but there was a problem: It was dominated by some very strong and entrenched competitors. As a new player in this particular field, how could Universal Paper & Plastics compete with strong international brand names?

It wasn’t easy, but the Sher family employed some smart strategies that eventually saw UPP grow exponentially over the next decade. In fact, the company’s revenue is set to grow almost tenfold by the end of 2017, going from around R100 million to closer to R1 billion. Rolled paper is now its biggest product by far.

Here’s what they’ve done to implement 10x scale in the business. 

1Sell to existing customers

It’s both more time consuming and costly to pitch to and win new customers. Selling to existing customers is far more cost efficient, and an excellent way to grow a business and increase revenues.

“We’d been around for a long time and we had established strong relationships with many of the large retail chains. Instead of trying to sell to new customers, we focused on the relationships we already had. You need to leverage your existing relationships first if you want to grow your business,” says David. In line with this strategy, UPP diversified its product range and increased its sales volumes with its existing customers.

2Own the supply chain

While existing customers might be willing to give your new product a try, one thing still remains very important: Price. When it comes to fast-moving consumer goods, margins are small, and customers — even loyal ones — are unlikely to sign a contract if you can’t offer them a great product at a competitive price.

Universal Paper & Plastics realised that it could only be competitive if it owned its entire supply chain. If it didn’t make its own raw materials, there was no way it could be competitive.

Related: How Maditsi Mphela Pushed Through Business Stagnation To Successfully Scale

“For a while, we got our paper from a supplier, but there were some issues. Firstly, buying paper from someone else ate into our margins. Secondly, when this new side of the business really took off, we suddenly couldn’t get hold of enough paper from the supplier. Finally, we weren’t terribly happy with the quality. We knew that we needed to provide a superior product, and we could only do that if we had complete control over it.”

So, the company invested in a paper plant. Taking control of the manufacture of two of its key raw materials, ink in 2002 and paper in 2008, meant that UPP could reduce its costs and improve its efficiencies.

“Making paper is difficult and expensive, so it was a risk,” says Jonathan. “Funding it wasn’t easy, but it was worth it. It gave us the competitive edge we needed.” 

3Find a niche

Don’t assume there’s no new niche to explore, even in commoditised products. Toilet paper is toilet paper, right? Well, no. Early on, Universal Paper & Plastics identified a surprising niche in the market. It decided to print on its rolled paper, something not a lot of companies could do.

“It added more complexity. We had the knowledge of flexographic printing but had to master the art of printing on such thin paper at high speeds. There was surprising demand for printed products. At first, it was purely decorative, then we moved towards design with a purpose — things that are interactive and educational. For example, we have an educational range of toilet paper for kids that provides information on topics like multiplication, biology, dinosaurs, planets and road signs,” says David.

When combined with the facts that its products are both high in quality and competitive in price, it’s clear that UPP has created an impressively defensible position for itself in a very competitive market. It’s a great example of how just about any company in any industry can rescue itself from irrelevance, as long as it’s willing to adapt and take some risks.

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Lessons Learnt

(Slideshow) Top Advice From Local Entrepreneurs That Will Change Your Business In 2019

Here’s my collection of game-changing words of wisdom from top local entrepreneurs.

CEOwise

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If I had to summarise my own learnings since starting CEOwise, it would be these ten points:

  1. I need to know the critical numbers in my business.
  2. The magic number is two co-founders. Teams build entities, individuals might start them, but teams build them.
  3. Don’t be scared of failure, that’s how we learn.
  4. It’s better to earn 10% of a bigger pie than 100% of a smaller one.
  5. Businesses in the service industry should create products out of their services, or sell value and not hours.
  6. Stick to your core competencies and outsource the rest.
  7. Make small incremental changes everyday.
  8. Your team is your biggest asset.
  9. It’s cheaper to retain clients than attain new ones.
  10. If you’re worrying about paying too much tax, you’re not earning enough.

After each interview, there is generally one main word of advice that sticks in my mind, and which I ponder on for days afterwards. The following advice from local entrepreneurs may stay with you too:

  • Benji Coetzee, Empty Trips
  • Allon Raiz, Raizcorp
  • Joel Stransky, Pivotal Group
  • Gideon Galloway, King Price Insurance
  • Adriaan Rootman, Luxury Time
  • Brian Mills, New Concept Projects
  • Byron Clatterbuck, SEACOM
  • John Sanei, Global speaker and trend specialist
  • Ryan Kahan, CallCabinet
  • Regine Le Roux, Reputation Matters
  • Miles Kubheka, Vuyo’s brand
  • Eben Uys, Mad Giant
  • Mark van Diggelen, GameZBoost
  • Erik Kruger, Mental Performance Lab
  • Musa Kalenga, Public speaker
  • Marnus Broodryk, SME Africa
  • Rich Mulholland, Missing Link
  • Mike Sharman, Retroviral
  • Cairo Howarth, EFC Worldwide
  • Dinesh Patel, OrderIn
  • Andrew McLean, Cycle Lab
  • Albé Geldenhuys, USN
  • Ran Neu-Ner, The Creative Council
  • Nic Haralambous, NicHarry
  • Mark Sham, Suits & Sneakers
  • William Wertheim Aymes, Artemis Brands
  • Matt Brown, Matt Brown Media
  • Pat Pillai, Lifeco Unltd
  • Vuyo Tofile, EntBanc
  • Ian Fuhr, Sorbet
  • Colin Timmis, Xero
  • Felix Martin-Aguilar, ReWare
  • Fritz Pienaar, Advendurance
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Lessons Learnt

How Yoco Successfully Secured Capital And The Importance Of A Pitch

Yoco entered the market in 2015. In 2018, the founders raised R248 million in Series B Funding. Here’s how they’ve built a business that funders will back.

Nadine Todd

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yoco

Vital Stats

  • Players: Bradley Wattrus (chief financial officer), Katlego Maphai (CEO), Carl Wazen (chief business officer) and Lungisa Matshoba (chief technology officer).
  • Company: Yoco
  • What they do: Yoco is an African technology company that builds tools and services to help small businesses get paid, run their businesses better and grow.
  • Visit: www.yoco.com

From scrappy start-up to professional contender

Yoco launched in 2015 as a Silicon Valley-type fintech start-up (above). Today, the brand is an established business that wants to change the way SMEs are supported in the payment, funding and financial management space.

When Yoco went live with its card machines in 2015, it wasn’t just a late entry to market, it was a full nine months behind many other entries. The founders weren’t worried. They had a very specific business model and weren’t going to let a noisy market distract them from their vision.

In fact, instead of rushing, they spent the next year growing the business to 500 happy merchants. They were late to market, but getting the model right was more important than being fast.

Since late 2016, the team has closed Series A and Series B rounds of funding, totalling close to R300 million. Slow and steady has worked. That doesn’t mean raising capital was easy, just ultimately successful. Here’s how Yoco did it.

Starting with Angels

“In a strange way, we were lucky that we didn’t receive venture capital funds early on,” says Katlego Maphai, founder and CEO. “We had a funder pull out at the last minute, which was scary, but also a blessing in disguise. It meant we had only angel investors and family offices invested in the business, which gave us the capacity to think long term and not take shortcuts. We’ve since realised the importance of only taking on VC investment at the last possible moment. It’s imperative to have product/market fit before you chat to VCs, and we only really achieved that at the end of 2016.”

The team learnt this lesson in hindsight though, and like so many start-ups, did approach VCs too early. “We tried to raise VC in early 2015 when we started our beta programme,” recalls Katlego.

“In our minds, we’d been running the company for two years. We thought we had two years’ worth of traction. When we started talking to investors though, the conversations didn’t go as expected. As far as they were concerned, we’d only been operating for two months, and the valuation we were asking for just didn’t make sense.”

Related: Fitbit And Adidas Know Something That Venture Capital Doesn’t

Two years later, Yoco was in a completely different position. “From the beginning, we recognised that although tech is important, our business model would differentiate us. We needed to be fast, cheap, use digital channels to onboard clients and aggregate our merchants so that our banking partner has only one point of contact — us. This was what we were quietly investing into, removing friction for merchants who were onboarding themselves onto our platform.

“This was our big focus — to make the entire process as simple, efficient and low cost as possible. Merchants need to be able to onboard themselves, with no hand-holding. The problem in this market has always been one of distribution. How do you get to market in the cheapest, most efficient way possible, when the traditional people-intensive distribution model doesn’t work because it’s just not economically viable? Once we achieved that, the ability to manage merchants at scale became a reality, and that’s when we were ready for VC funds.”

In reality, Yoco only achieved product market fit and growth at the end of 2016. “By then, we’d grown ten times our size over the space of 12 months to 5 000 merchants, we had traction, incredible unit economics, and we’d built up infrastructure that allowed us to be efficient. We could really concentrate on growth. In particular, we weren’t worried about anything breaking or the system toppling over.”

It’s an important point for any start-up to consider. Often, the unit economics of businesses experiencing growth are out of kilter, as the business’s efficiencies struggle with the increased pressures of growth. By the end of 2016, Yoco was growing while remaining efficient, which was a big advantage when they started approaching investors again.

Teams and ecosystems

In the two years preceding Yoco’s official launch, the founding team, Katlego Maphai, Carl Wazen, Bradley Wattrus and Lungisa Matshoba, didn’t just research the technology to make card payments possible for merchants in the informal, rural and SME sectors, but were working on a business model that could achieve their business vision at scale.

“We were a multi-disciplinary team that had come together wanting to make a real entrepreneurial play,” says Katlego, who brought the team together. Having grown up with Lungisa, Katlego met Carl while working for a telecoms advisory and investment firm in Dubai, and Bradley at an incubator for online businesses in Cape Town that hired ex-management consultants to assist 
start-ups.

By 2012, all four partners were living in Cape Town and had savings they could live off while they planned their entrepreneurial play. “We kept coming back to the payment space. I’d seen Square, a mobile point of sale system, in action in San Francisco in early 2011, and experienced a small restaurant business that would have been cash-based accepting cards. We knew how under-serviced SMEs were in South Africa, and that card payments presented opportunities to support them. We also knew we could build a suite of services to help our micro and SME clients run and grow their businesses once they were on our platform.”

The team didn’t focus on the tech — it existed elsewhere and could be outsourced. Instead, they focused on their business model. “We focused on why banks hadn’t traditionally serviced this sector,” explains Katlego. “Our business model needed to address those challenges and the pain points of our target market, and it needed to do so in a way that allowed the business to scale efficiently and cost-effectively.”

Yoco’s team came from the mobile space. “You walk into a mobile store, fill in forms, have a credit check, get approved, sign the agreement, receive your phone and sim card and walk out the store. You’re now a customer, and hopefully you grow in value and don’t leave the network. That’s what we wanted to do for the card payment space. We wanted to take a process that takes weeks and strip it down to minutes by applying mobile thinking and using ecommerce as 
a channel.”

Until that point, merchants would source card payment tech from providers, but sign the bank’s merchant agreement, and this was where many small and micro merchants struggled to access services: Banks were just not set up to validate small businesses. It wasn’t economically viable, mainly because it tended to be a high-touch process. It was also a lengthy process.

“We knew that for us to reach smaller businesses, we needed to be able to sign up, vet and onboard applicants digitally, limiting people in the process, as this adds time and costs. This was probably our single most important insight. Once we understood this, we knew we needed to aggregate merchants, so that the partner bank we signed with would treat us like a ‘super-merchant’ — they manage the risk with us, vet us, take us through a rigorous process, and then allow us to aggregate sub-merchants under our umbrella.”

There was just one catch — for any of this to work, Yoco needed a partner bank that would agree to them aggregating merchants. “We moved to Joburg, moved back in with our parents and spent a year lobbying our partner bank,” says Katlego.

Consider what that took — ex-management consultants who had been earning impressive salaries had to return to their childhood homes so that they could focus on building their business and securing the trust of a partner bank.

“Our backgrounds had taught us how to gather information, package it and present it in such a way that we could build credibility quickly and effectively,” says Katlego. “We also knew what we didn’t know, which in this case was the payments space.”

To fill that gap, the team built an advisory board and approached the ex-head of Visa Sub-Saharan Africa to join their board for an equity stake in the business. “LinkedIn gives anyone access to the experts in every field, and networking plays a part as well. We were asking the right questions, and ended up with a few introductions to the same person.

“From there, you just need a strong value proposition. This was a vital component for us. Not only did he coach and advise us on the payments space, but he had a strong network, and it helped convince the banks that if we could convince him that we knew what we were talking about, we were worth meeting. The same was true of funders. You need a strong team, and that includes domain expertise, which at the time we didn’t have.”

There was a challenge though: In order for Yoco to secure a licence from a partner bank, they needed to show they were capitalised, but to secure funding, they needed a licence from a partner bank, as this was core to their business model.

“It was a bit of a conundrum,” says Katlego. “We solved it by approaching investors and getting firm commitments based on the licence. With that, we could secure the agreement with our partner bank, which in turn enabled us to trigger the draw-downs with our investors.”

The entire process taught the team how to de-risk the business at every stage of the journey. “We learnt to always think in milestones, and each milestone increases the value of the business. For example, securing the licence was a stage of value. By the end of 2014 we had moved back to Cape Town and were certified by Visa and Mastercard. We launched our first early beta with 20 merchants. The next milestone was our first transaction.

Related: Is Venture Capital Right For You?

Securing funding

yoco-funding

The fact that Yoco’s founding team had four members with varied and successful backgrounds dramatically increased the business’s chances of securing funding, but they still needed to learn some lessons.

“In mid-2016 we went on our Series A road show, and it was a choppy start. First, we realised that we were thinking globally, and those were the conversations we were having, which didn’t match up with the conversations local VCs were having with us. You need to all be on the same page, and 
we weren’t.”

Once the team realised this key point, they started looking at international investors, but things still weren’t going smoothly.

“We started recognising that part of the problem was the way we were approaching the whole funding process,” says Katlego. “We’d just had an investor meeting that didn’t go well, and we weren’t feeling good. We knew we needed funding — our runway was almost out and our current funding model wasn’t sustainable.

“Instead of focusing on investors, we looked at ourselves. What were our objectives? What were we looking for? We ended up with six key objectives.”

These were:

  1. Completing an investment round that gives us at least 12 to 18 months runway
  2. Working with an investment partner who has experience growing a fintech business
  3. Working with an investment partner that backs the team, and understands that one of our core strengths is our ability to operate autonomously
  4. Taking on investors who have respect for our existing stakeholders, who had walked a long path with us when very few believed in what we were doing
  5. Arriving at a fair deal, with terms negotiated in the right spirit
  6. Having the Yoco founder group, organisation, and stakeholders coming out feeling energised and ready for the next phase after the round. The wrong terms and conditions can have the opposite effect, crippling our sense of self-belief and achievements to date. Something not to be trivialised for an organisation that is looking to win.

It was a powerful exercise. From that moment onwards, the team walked into meetings knowing what they wanted, which in many ways levelled the playing field. “We had more confidence and we asked more questions, which lead to richer discussions with potential investors. We could also walk away if we saw a key objective wouldn’t be met, which saved everyone time.”

Through this process, Yoco secured Series A funding from Velocity Capital in the Netherlands and US-based Quona Capital 
for $3 million in new capital and a further $1 million in secondary buyouts, allowing some early angel investors to exit.

Since launch, Yoco was run based on formal governance and structures, which also played a big role in securing investment. “When a business is run pristinely and the due diligence is based on well-organised numbers and data, investors have comfort that their money will be managed properly. Our advice is to run your business clean from day zero. Keep good books and don’t put any other expenses through the business. We learnt this lesson from a real estate developer who told us to always be ready for the exit. She didn’t mean selling the business, but rather that if someone took a look, within moments you could produce whatever they want to see. I can’t stress enough how this has helped us.”

Related: Venture Capital 101: The Ultimate Guide To The Term Sheet

Understanding your pitch

Yoco raised $16 million in its Series B fund, which closed in 2018, and although it was the same process, the focus of the pitch was very different. “Series A is often about survival. Series B is about how big this thing can become.

“During our Series A roadshow, a big part of our pitch was proving that there’s a market for people who want to accept cards, and that there was a new way to reach this market that is not people intensive.

“In the Series B round, we could show that we’d been able to grow our base to three times its size with continued good economics and a healthy, good payback. We also showed that the market is ready to be taken with the right type of capital.

“The message was simple: We’ve figured it out and we think we can win with additional capital. There’s a huge opportunity to build an entire SME operating system, bringing payments, software and capital into one home that can essentially look after a small business and build an ecosystem around them. This in turn allows third parties access to our distribution network.

“There’s an overarching need that we’re plugging into. SMEs lack access to tools, capital and payment acceptance. It’s a big gap that we want to solve, and we’re open to partnering with anyone who wants to help solve it. It’s an open commerce ecosystem.

“Our next step of growth was to democratise access to software, because software is where the magic happens. Our app allows small businesses to manage their business finances through what is essentially a mini ERP for micro enterprises and SMEs. We are making a deep investment into building this out, because we believe it’s where the stickiness and value of our product lies.

“Customers came to us for a card reader, but they’ll stay for a much wider service offering, including access to capital and a platform that they can run their businesses from. Up until this point Yoco has signed up innovators and early adopters. Now we’re taking the brand to the mass market.”

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Lessons Learnt

Danie Venter Saw A Gap In The Informal Segment And Grew Within Just A Few Months

Stoffelberg Biltong is a FMCG start-up that attracted the interest of Secha Capital. Here’s why.

Nadine Todd

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In 2014, Danie Venter lost his business. He owned a Spar supermarket, but the business wasn’t doing well, and he knew his only option was to sell it back to the franchisor. While his wife, Nikki, continued to run the store as the sale was finalised, Danie turned his attention to something else: Sourcing and selling fresh chickens to the informal segment in Mamelodi and surrounds.

“I needed to find a way to pay the bills, and I recognised how under-serviced the informal sector was,” he explains. “Only frozen chickens were available to a community that didn’t have microwaves to defrost them. I knew there would be a market for fresh chickens.”

Danie was right. Within a few months the business had grown so big he was supplying chickens to other retailers in the area, and he approached Oom Stoffel, the owner of JC’s Meat Traders, to expand his product offering.

Over the next 18 months a friendship developed, which led to inevitable discussions around an industry they both knew well, and eventually settled on the idea of packaged biltong.

“It’s a fragmented market and none of us could think of a single brand of packaged biltong that we loved. Instead, we had local butcheries or suppliers that we bought from. We recognised there was a gap for a quality packaged biltong brand, and started working on it.”

From planning and designing the product and packaging to market took three months. Before the business launched though, Danie’s life changed forever. He was declared legally blind as a result of a condition called Optic Neuritis, and approached his business partner to say he could no longer participate in the venture.

“Oom Stoffel refused to accept the fact that I couldn’t participate in the business. His area of expertise was the product — the abattoir and ingredients — but mine was the trading side of the business. Together we could really make this brand work, and he didn’t believe my eyesight (or lack thereof) would get in our way.”

Oom Stoffel was right. Danie’s wife reads him his emails at night, but most of his business is done the old-fashioned way — over the phone or in person. Despite challenges, Stoffelberg Biltong launched and soon started securing a footprint.

Related: The House That Moladi Built – How Challenging Traditional Building Empowers Local Entrepreneurs

Leading a market

The business has a number of verticals and strategies to ensure cash flow and build cash reserves, but the primary vision and mission is a market-leading packaged biltong brand.

For example, Stoffelberg supplies other biltong outlets. While this may seem like Danie and Oom Stoffel are supplying their competitors, the reality is that in many respects, biltong is price sensitive and most retail stores will change suppliers from week to week. This results in a level of inconsistency when it comes to quality, the exact opposite of what Stoffelberg stands for through its branded products.

“We’re consistent, while most of our competitors are not. It’s a big, fragmented market. The current market leader only holds 6% of the market. We believe it’s important to build our brand, but we’re comfortable supplying others at the same time. It adds to our revenue stream, and more importantly, our positive cash flow.”

Going forward, the team at Stoffelberg also plans to open retail outlets and already has a kiosk. The company is also investing in continuous research and development.

“When everyone is offering the same products, you need to differentiate yourself. We want to think outside the normal verticals. When you own the entire value chain you can be innovative. If we want to try something, like chilli packets in biltong bags for example, we can do it and get immediate feedback. We’ve also launched a natural range with no preservatives or sugar for consumers with allergies, diabetes, or who just want a more natural product.”

Stoffelberg is a premium product, from its packaging to the product itself, but because of the vertical integration and the fact that the business holds the entire value chain, the brand remains competitively priced.

“Our goal is to reinvigorate a fragmented market,” says Danie. “That takes focus, brand building, a premium product and constant research and development.” It’s also taken an investment equity partner in the form of Secha Capital.

Equity deals

Within a year of launching, Danie received a call from Brendan Mullen from Secha Capital. “We weren’t too keen to discuss investments at that stage, primarily because we didn’t want to give away equity in the business,” says Danie. “We were supplying some Spar stores and we’d already begun chatting to Shoprite Checkers.

Related: Two 20 Year Olds Reshape Entrepreneur Landscape With New Social Investment Platform

Brendan continued to reach out and we realised that if we wanted to grow the business, there could be value in accessing capital to fund the growth we were experiencing.”

The initial meeting with Brendan revealed that although both Oom Stoffel and Danie are subject matter experts, there was a clear marketing gap that Secha Capital could help fill. In addition, as an FMCG and Agri-focused funder, Brendan and his partner, Rushil Vallabh, came with a network and connections that would be beneficial to the business as well.

“We had one of three game-certified abattoirs in the country, and we were Halaal, HACCP and export certified, but we needed to invest in a drying room and other facilities necessary for large-scale biltong production. Once we understood our needs and the value Brendan and his team could bring to the business from a growth perspective, the deal made sense. Giving away equity if it results in growth is worth it. But you need to make sure you’re selling to the right partners who add value beyond a capital contribution. It’s not just about the money.”

“Look for opportunities in fragmented value chains, where there are no clear brands in that specific section of the market. Find that, and you can find a slice of that value.”

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