AFTER many months of speculation, Ottery-based plastics packager Bowler Metcalf has poured out some rather intriguing details on its plans for its soft-drink bottling subsidiary, Quality Beverages (QB.)
Bowler has opted to merge its QB operations with a similar soft drink operation based in KwaZulu-Natal called Shoreline in a R274m deal.
Different geographies aside, Shoreline – the owner of the Coo-ee brand - and QB – who’s Jive is a popular seller in the Western Cape - are remarkably similar in that each company is manufacturing and marketing a niche soft-drink brand in the non-cola market.
Both enjoy profitable niches in their home markets, but have both battled to press profitably for market share in the large Gauteng market.
The combined QB and Shoreline enterprise will be housed in a new entity called SoftBev. SoftBev will be a fairly considerable operation with sales of over R1bn, and an ability to extract decent operating efficiencies via improved procurement, production, marketing, distribution.
The biggest advantage for SoftBev is that Coo-ee can be manufactured at QB’s Gauteng plant instead of incurring the huge cost of transporting the brand into Gauteng.
Shoreline Beverages MD Mahmood Ismail and QB CEO Sharief Parker collectively hold more than 30 years of industry experience.
Bowler has given a massive thumbs up to the profit generating abilities of the merged entity be taking a 42% stake in the new look business. The decision to take the investment stake needs to be contextualised by the fact that Bowler’s core packaging division will make less profit from the new arrangement, and rather be looking to recoup these losses from larger soft-drink profits.
The finer details of the new production arrangement will eventually see Bowler Plastics no longer responsible for the implementation of PET bottle blowing at the Epping premises of QB.
Instead Bowler Plastics will continue to supply the same quantity of bottle preforms under certain commercial terms and conditions.
Bowler CEO Friedel Sass said this integration of bottle blowing into a filling operation was consistent with best manufacturing practices and would achieve notable efficiencies – effectively reducing the cost of production for QB in the Western Cape.
But he conceded the loss to Bowler of the PET bottle blowing profits would negatively affect the company’s operating profits.
Overall, this is a most intriguing turn of events for Bowler, which initially acquired a 30% stake in QB way back in 2002 with a view to achieving “vertical integration for symbiotic growth.”
But Sass reckoned that for Bowler the latest move provided the chance to build on the company’s specialist plastics expertise. He stressed there was a need to focus all Bowler’s resources on exciting opportunities, which were presenting themselves in the current plastic packaging market.
“The undivided attention of management to the plastics business will benefit our shareholders, customers, suppliers and employees.”
CBN, however, wonders whether the R1bn a year SoftBev won’t attract the attention of bigger food and beverage companies. In this regard one hopes it’s not the intense and aggressive scrutiny of a ultra-competitive multi-national like Coca-Cola … but rather the warm attentive looks of acquisitive companies like Pioneer Foods (which has an existing soft-drink offering through Pepsi) or dairy products group Clover (which has moved into fruit juice.)
By Jenni McCann