In the middle of Vereeniging, south of Johannesburg, a qualified chemical engineer bakes thousands of biscuits a day.
Bheki Zondo, the new owner of Biscotti Biscuits, bakes from morning till late at night. Zondo aims to take on some of the JSE blue-chip companies that control the growing sector.
The 45-year-old executive loves baking so much that he is considering having the company run 24 hours to keep up with demand.
Zondo took over the biscuit factory from the Italian Valle family late last year with the assistance of Massmart, Africa’s third-largest retailer that is owned by Walmart.
The R6.5-million deal allows Zondo to take on the biscuit sector’s giants such as AVI’s Bakers Biscuits, with its Eet-Sum-Mor and Tennis Biscuit treats; Pioneer Foods’ Moir’s brand, which makes Lemon Creams and Marie biscuits; and Mondelez South Africa (previously known as Kraft Foods SA), which distributes Oreo biscuits in South Africa.
The deal concluded last year includes a R5-million loan from the Massmart supplier development programme’s financial partner, Absa Enterprise Development. Massmart is a guarantor for 50% of the loan and Absa is guaranteeing the balance. A R1.45-million grant was provided to upgrade the factory and ensure compliance with food safety standards.
The market, estimated to be worth about R3.5-billion annually, is highly concentrated, with Bakers Biscuits controlling two-thirds.
Pioneer Foods has an estimated 10% market share and Mondelez South Africa at least 5%. Zondo said taking on the “big boys is an awesome challenge…talk to me in about five years”.
He has doubled the factory’s staff and added an extra shift to keep up with demand from his corporate clients, including Pick n Pay, Spar, Peermont Hotels, the Netcare Group, Emerald Resort & Casino and SAA.
He recently added Massmart to his list of clients. Biscotti Biscuits supplies Makro and is in discussions to distribute to Game and Cambridge stores.
This proves that opportunities are abundant for the former Tongaat Hulett employee from KwaZulu-Natal.
He beams when asked whether his company will soon supply the UK-based Asda – Massmart’s sister company under the Walmart umbrella. “I’d love to. We [Massmart and Biscotti Biscuits] should talk about that,” Zondo said.
His tie-up with Massmart gives Biscotti Biscuits an opportunity to distribute his products and brands throughout Africa as the retail company expands its footprint.
Zondo is one of several entrepreneurs to benefit from Massmart’s supplier development programme. The programme is a partnership between Massmart and the Gordon Institute of Business Science. It is aimed at equipping selected small, medium andmicro enterprises with business foundation skills.
About 33 entrepreneurs graduated from the training course earlier this month.
Tammy Brown, a research analyst with BMi Research , said the biscuit category lost ground in 2010, but is recovering with estimated growth from 2011- 12 of 0.7%. In 2012- 13, the category grew by 0.8%.
“While this seems low, it is positive growth considering the change in trends for consumers, who are focusing more on healthy options and less on wheat- and flour-based products,” Brown said.
Biscotti Biscuits has been growing its revenue by 20% annually. Zondo expects this to increase as he restructures the business. Because it is an unlisted entity, Zondo is hesitant to talk about the profit margins. “They are good,” he said coyly.