Theo Bakkum, managing director of Awesome Snacks, didn’t win the medium business category in the Sanlam Business Partners Entrepreneur of the Year Competition in 2010 for nothing. His business has grown out of adversity to become a top snacks supplier in SA.
The saying adversity breeds opportunity is relevant to almost all entrepreneurs in South Africa, but none more so than Theo Bakkum, managing director of Awesome Snacks. But it is the way in which he overcame the challenges saw him worthy of being a winner in the medium business category in the Sanlam Business Partners Entrepreneur of the Year competition in 2010.
Bakkum held a number of directorships at Simba before becoming managing director of National Brand, Willards. Due to a restructuring process, he was retrenched. He pursued a various business opportunities that lead to the establishment of Awesome Snacks in 2003.
‘It just so happened that all four partners were all executives within the snack industry and available at the same time. Today, two of the founders manage the business with an iron fist and our success in the market has been remarkable,’ says Bakkum.
The Germiston-based business produces soft, extruded maize products (puffed maize), a harder maize extrude (better known as a nak) in various flavours and powdered drinks. Bakkum recalls how the company initially decided to pursue the retail sector. But Awesome Snacks was unsuccessful due to the dominance of Simba and Willards.
‘Awesome Snacks brought back the Ghostbusters brand in October 2003 and we struggled to keep up with demand for this old favourite. Unfortunately for us, we only had the rights to use the brand for one year. The rights were later revoked by Simba. ‘
Bakkum says that they went into retail and nearly went under. We had to realise that we were now small business owners. I remember we were a little arrogant. We had the Ghostbusters brand and we didn’t expect Simba to retaliate. We also underestimated the strength of Simba and Willards and the market’s acceptance of a new brand.’
This led the business to severe trouble and that they had no choice but to change direction.
‘We were basically too small for the formal sector – we did not have the critical mass,’ says Bakkum.
Awesome Snacks started producing its own branded products, Awesome Snacks, hoping the masses of school children they begun targeting would accept their naks and curls. But soon discovered how different the market is to the formal sector so Awesome Snacks adapted.
‘We secured the rights to use the WWE wrestling characters as well as some of the heroes from the Marvel Hero Comic franchise. Today, the company moves about 350 tons of product each month.
‘Price is very important, as well as consistency of the product. It is very difficult to move these consumers across to your product because they are generally very loyal to a brand. They have limited disposable income and do not want to be disappointed with a purchase. But, once you have done it, you have a customer for life.’
Awesome Snacks uses freelance sales consultants to move its goods through about 200 independent wholesalers throughout the country. From there, informal traders sell its products to consumers.
Wholesalers pay cash and are generally very loyal. This makes them important business partners and also helped the business significantly as cash flow was boosted through his repositioning strategy. Similarly, the business has invested in top quality machinery to ensure that production lines run smoothly and product quality remains consistent.
Although Awesome Snacks successfully penetrated the informal market, diversification was required. Bakkum explains that the World Cup last year, and the teachers strike, negatively impacted on volumes to drop because school attendance dropped.
The company secured a supply agreement with Woolworths for its house-branded naks and curls. Bakkum expects eight new production lines to be on offer in 2011. This will boost the business’s current R80 million turnover and will require adding to the 162 staff members.
‘Big corporates do not understand this market and their overhead structure is too big to effectively compete in the market,’ says Bakkum.
He explains gaining market share is a slow process and you need to chip away at it daily, to increase the business’s footprint.
At the same time, Awesome Snacks rules it financial aspects with an iron fist.
In addition, we look at our cost structure and micro manage the business. We also manage our production numbers on a daily basis, as well as our stock on hand and debtors books. And, as partners, we do not pay ourselves exorbitant salaries. We don’t have an overdraft facility and we don’t spend what we don’t have.’
He advises that there are opportunities for SMEs but you need to know what you are doing.
‘You need to put a business plan together very carefully and then, you need to live it. When it comes to using your own money, you had better have thought about it long and hard.’
Future growth:
About 10% of Awesome Snacks’ monthly production is now for Woolworths. Future product roll-outs are in the pipeline. Awesome Snacks produces three variants for Woolworths and has plans in place to expand the product lines. When sales conventionally dip at Awesome Snacks (during school holidays), Woolworths sales escalate. Striking a deal with the big retail giant, ensures production balance.
About the Sanlam Business Partners Entrepreneur of the Year
The Sanlam Business Partners Entrepreneur of the Year competition rewards entrepreneurial excellence in South Africa’s small and medium-size businesses. Initiated in 1989 by Business Partners (BP) and previously only open to BP members, the competition underwent some significant changes in 2010. Sanlam came on board as sponsor and the competition was opened to all entrepreneurs in South Africa. Recognition of the vision, innovation, perseverance, drive and commitment of the individuals who run successful small and medium enterprises is given through the awards.
For more information visit www.eoy.co.za.
