As a homeless teenager in Mafikeng, Velaphi Ratshefola was determined to pass matric.
After his mother, a single parent, died in 1976 when he was 14 years old, he moved from unrest-torn Soweto to the North-West town of Lichtenburg, only to land in the middle of forced removals and end up on the streets.
“She was a beautiful, beautiful person,” he says of his mother. “She instilled in me that you can do better. You may be struggling but you can do better.”
Ratshefola explains that even when he was on his own, he knew he had to go to school and pass matric. Eventually he was one of only two pupils (out of 160) in his year group at the Batloung High School in Mafikeng who passed matric.
He impressed a cousin, who was working as a tea lady at an attorney’s firm in Roodepoort, when he assisted during the holidays at the shebeen she ran as a side business and managed to increase sales to unprecedented levels.
His cousin was able to secure a loan from her beer suppliers to pay for Ratshefola’s first university fees and assisted him until he obtained his B.Juris and LLB from the then Bophuthatswana University in Mafikeng.
After a year as public prosecutor he joined Nampak’s legal department and later moved to industrial relations and climbed the ranks at Nampak. He was recruited by SABMiller, owners of Amalgamated Beverage Industries (ABI), and since his return, after a short stint back at Nampak, he has been with the company for almost 20 years. ABI is SABMiller’s soft drink division.
Ratshefola has just been promoted from the position of commercial director of ABI to interim MD. He will hold the interim Managing Director position until the formation of the Coca-Cola Beverages Africa company, which is expected to begin operations in six or seven months time.
The company will be born out of a merger between the Coca-Cola Company that owns the brand, SABMiller that contributes to its soft drink interests (ABI) and Coca-Cola Sabco to become the largest Coca-Cola bottler in Africa, operating in nine countries.
Ratshefola is the first African to head ABI and only the second appointment to the position from within. He confesses to having “Coke in my veins”.
He explains that a Coca-Cola bottler operates under a franchise from the Coca-Cola Company and has to adhere to its standards. The bottler buys concentrate from Coca-Cola, adds ingredients like sugar and water according to a prescribed recipe, puts it in a bottle, packages, sells and distributes it in a designated geographical area.
The franchisor prescribes a recommended sales price that the bottler is not allowed to exceed. It may however give discounts, but at its own cost.
Such discounts are important levers to the bottler in depressed markets and are currently being used to defend market share, says Ratshefola.
He says soft drinks are more affordable than many other products. “There is no greater equaliser than a Coke. Everybody has access to it.”
He says consumers have, in the current low-growth economy, become wiser about what they spend money on. At the same time a lot of regional B-brands have entered the market. These are lesser known brands that sell at a lower price than established brands like Coke and Pepsi.
“An empty stomach knows no brand value. If you’ve got a full stomach, you can afford to choose a brand, but if you’ve got an empty stomach, even if it doesn’t taste exactly like Coke, you’re going to compromise,” he says. Therefore B-brands grow faster in a struggling economy.
The price gap between a 2-litre Coke and a 2-litre bottler of B-brand Kingsley is 66% and the question is whether the market can bear that.
ABI uses its “fighter brand” Sparletta, a local brand with strong flavours that SAB earlier sold to the Coca-Cola Company, to bridge the gap. The 2-litre Sparletta sells at R12-R13, halfway between the B-brand that costs just more than R10 and Coke that retails at anything from R15, depending on where you buy.
ABI has discounted its Sparletta brands to maintain a price gap of about R1.50, which Ratshefola says is more manageable.
Through this strategy ABI has been able to realise 7% growth since April last year in volume and revenue, but that is “cheap growth”. Sparletta is growing much faster that Coke and Fanta, because of economy, he explains. The market is moving from high value to low value brands.
“I often tell my team I’m not a Sparletta bottler, I’m a Coke bottler,” he says. “What is important to us is to win with Coke first.”
The other strategy that serves ABI very well is to invest in the township market that Ratshefola says has been neglected before and competitors don’t have the scale and investment appetite for.
The bottler has fast-tracked opening new outlets and has almost doubled the number to 100 000 in its distribution area since 2010, most of them in townships. Ratshefola believes there is potential for 180 000.
The township outlets have in fact grown by 24% in the recent past, as opposed to on-premises channels like restaurants and sales at garage forecourt outlets where sales have declined.
The company assists spazashop owners by giving them training in business skills and loaning them equipment and coolers. These get damaged during xenophobic attacks, “but that’s the price you pay for being the market leader”.
The number of ABI sales people have also doubled to 720 over the same period and he believes it may double again in the next five years as outlets increase. “This is the time to be investing, but choicefully”.
At the same time ABI reduced costs at the back end, for example in manufacturing, warehousing, and had to revert to retrenchments last year.
Ratshefola says South Africans love their Coke. South Africa is in fact the country with the second-highest brand love of Coke globally.
The Coke consumption in South Africa is about 285 servings per person annually, way ahead of other African countries at 10 to 15, but not near the biggest Coke drinkers, namely Mexico at almost 800.
He says Coke was some years ago included in a basket of staple food qualifying for tax exemptions and developed a culture of drinking Coke as a result.
South Africa has a total of 250 000 outlets (across all bottlers) as opposed to Mexico’s 1.2 million with roughly double the number of people.
“That is where we benchmark ourselves and we see huge opportunities.”
Ratshefola says SABMiller, that will own 57% of Coca-Cola Beverages Africa after the merger, sees huge growth opportunities locally and in Africa. It is globally the last frontier for Coke, he says.
“If you pass on that street as a consumer and you don’t get thirsty, I’ve not done my job.”