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Dr. Johan Van Deventer Travels From South Africa To Join Thought Leaders Panel at The New York Produce Show And Conference

Jim Prevor’s Perishable Pundit, November 5, 2010

When we began the planning for the program content of The New York Produce Show and Conference we knew from the start that rather than focusing on any one individual, we wanted the “keynote” to be a large panel representing the breadth and diversity of the region.

We certainly achieved that with a dynamic nine-person panel:

Jim Bisogno Pathmark Supermarkets

Rich Conger King Kullen Supermarkets

Steve Coomes Safeway Eastern Division

Dave Corsi Wegmans Food Markets

Dean Holmquist Foodtown Supermarkets

Derrick Jenkins Wakefern Food Corporation

Paul Kneeland Kings Super Markets

Dominick Pelosi Food Emporium

John Vasapolli D’Agostino Supermarkets

Yet if part of what the event is all about is gathering the best and brightest from within the region to illustrate the achievement of the produce community in the northeast, another part is testing the way things are done in the region against the way things are done elsewhere in the country and, indeed, around the world.

So we are pleased to announce that completing our “Thought Leaders” panel is an industry leader who is traveling from the Southern Hemisphere to provide a completely different perspective to our panel. In fact, his perspective is so intriguing and so different that he has generously agreed to pay a dual role. After joining our “Thought Leaders” panel at the Keynote Breakfast, he has agreed to conduct an educational micro-session at 2:15 p.m. in the Trianon Rendezvous Ballroom at the New York Hilton. He is traveling half-way across the world brimming with photos to show what retailing fresh produce is like in Africa today.

We asked Pundit Investigator and Special Projects Editor Mira Slott to find out more:

Dr. Johan Van Deventer
Managing Director
Freshmark, Subsidiary of the
Shoprite Group
Western Cape, South Africa

Q: We are looking forward to garnering your insight at the inaugural edition of The New York Produce Show & Conference. As a preview, could you tell us a little about your background?

A: My grandfather used to farm vegetables, and I was responsible on the farmer’s market to sell the product. I learned a few things, how to pack, and how consumers see product value for money — so I learned to effectively trade and not take product back home. In my school days, I went to university and studied for a commercial degree in economics, and then completed the doctorate degree. I started to work at our Department of Agriculture and I was nominated on the advisory committee to the Minister of Agriculture, a great experience when I wasn’t even 30-years-old. I was responsible for all 14 national fresh produce markets in South Africa, traveled a lot, and started to learn the industry well in a practical way. It gave me a national perspective as I traveled all of the market areas.

Q: How did you capitalize on that experience in the retail world?

A: I moved to the Johannesburg market as deputy director. Johannesburg still today is the largest wholesale produce market in the Southern Hemisphere. Then from there, some 18 years ago, I started at Freshmark, part of the Shoprite group of companies. Shoprite is the largest retailer in Africa today.

At Freshmark, I worked my way from a distribution center manager to the position I hold today. I am responsible to supply all the fruits and vegetables to the Shoprite brand and our other brands, Checkers, Checkers Hyper, Usave, and Ok Foods; it’s about a 1,000 stores. Added to my duties are 16 other African countries. That has been an experience of its own. It’s huge.

If you asked me what has been really exciting in the past few years, it is two things: The move into other African countries and the move to broaden our reach in South Africa itself. There have been all kinds of challenges.

Q: Will Wal-Mart’s anticipated penetration shake things up?

A: Wal-Mart is busy in South Africa. It’s in the process of closing a deal to buy a controlling stake in Massmart, and I think it will go through. The latest news is that Wal-Mart is not going to takeover 100 percent of the shares. In the end, it will probably be a joint venture of some sort. It seems to be going in that direction.

Massmart, a discount retailer in a lot of African countries, has three brands — Metro, Dion, and Game. It’s more or less the same business Wal-Mart is known for, white goods. Massmart does carry groceries but is not so strong in the perishable departments. There is Pick n Pay, and a group Fruit and Vegetable City, and Woolworths, and Spar, strong in Europe. These are my competitors. Pick n Pay is expediting expansion in anticipation of tough competition from Wal-Mart. (African Business News (ABN) article.). We think our strategy will keep us strong.

Q: Tell us more about Freshmark’s operation…What is it like to do business in South Africa? Do you confront some of the same issues as in the U.S.?

A: While we are a subsidiary of the Shoprite group, we are an independent business unit (sales of $2.5 million US per day). Our responsibility is channeled through six distribution centers in South Africa, the main one in the Johannesburg area accounts for 40 percent of our business. I’m sitting in Cape Town’s Freshmark office, and the Shoprite office also is in Capetown.

We procure product from 550 farmer/suppliers in various climate zones, and differ on where we draw product based on the time of the year, which is the normal thing. We work on good relations with these suppliers long term. It is not our policy to chop and change. The majority of our farmers are with us all the years. We put a premium on this philosophy: Don’t fool around with suppliers.

Of course, they have to conform to standards, but we’re not arrogant. We would rather help someone obtain higher food safety standards rather than say this is your last day.

Q: Could you elaborate on food safety aspects? In the U.S., new proposed government food safety regulations would require local farmers to abide by the same food safety standards as large companies.

A: In South Africa, the government is going to implement a new consumer protection act. For many years, we have our own food safety standards, which are higher than what government or legislation requires. That is something we agree upon when we sign up a new grower, and all the growers have signed the agreement. We also have GlobalGAP.

Q: In the U.S., not all retailers are willing or able to provide such supplier security or loyalty. Is this an issue in Africa as well?

A: That is one of the differences for us, compared to our opposition. Our procurement program and the way we work with suppliers is different from how they do it. We also prefer to have meetings on the farm and not at the head office of Freshmark. We go to the farms, and the procurement officer’s job is to plan there, understand the farm better and understand what farmers need.

Come to our distribution centers; if you’ve seen one you’ve seen them all. They look like the ones in America. State-of-the-art refrigeration, we ripen bananas and avocados using the same technology as you find in America and Europe. Of course, we have our inspections on food safety from independent authorities. We also have testing done by independent laboratories. And we have our own trucks distributing every day.

Q: How does your relationship with Shoprite work exactly?

A: We have a “push” process. We at Freshmark are not just a service provider to the retailer; we are an independent business to the group. We must sell as hard as an independent does, go to the retailer and promote. We have new summer fruit and innovative packaging.

They have to believe in us and we work hard for our orders. It’s the same with quality… if the Shoprite is not happy, they can put a claim against us; if it’s not on time, we incur certain penalties. It is one company, but I do get penalized if products are not up to standards. We’re also independent when it comes to results. I have a financial director, a human resources director.

Freshmark has been owned by Shoprite, but except for that, it’s independent. If you go to meat procurement, the meat market is doing the same thing as me. We have our own bottom line, and compensation, shares, bonus, etc., are coupled to performance.

The Shoprite group makes use of the AC Nielsen report, which will tell you your market share. We’re measured — are you growing against rivals or competition — and there is pressure on us for new product, to be fresh in season, normal competition to keep you ahead of the other players.

Q: How is Shoprite positioned in the marketplace? Could you describe your customer base?

A: Price is very important. Shoprite is known for price where Woolworths is known more for quality.

Q: Would you say ShopRite parallels Wal-Mart in that regard?

A: Bruce Peterson was here some years ago and met with me and the previous managing director of Freshmark. He saw Wal-Mart comparable price-wise to Shoprite, middle income, but we also go to bottom lower income.

Q: How has the transition from Apartheid affected your goals of reaching poorer people?

A: Before 1994, when President Mandela was elected in the first democratic election for everybody in South Africa, Apartheid was the rule of law. There were Black neighborhoods and then White neighborhoods due to the apartheid regime.

After 1994, we started opening stores in previously disadvantaged areas, predominantly Black areas. We now have over 200 stores in that bracket with our Usave brand. Usave’s are limited range stores like you find in Europe. We try to keep not more than 800 lines in those stores; they are small. People there don’t have transport with their own cars. To get to a store is an expensive thing to do. We try to make stores more accessible.

Q: How widespread a problem is this phenomenon? What percentage of food gets sold through supermarkets?

A: In South Africa, if you talk fruit and vegetables, I would say a good 50 percent of fresh produce gets to the end consumer not through the chain store. What you typically find in South Africa are a growing number of fresh markets, now reaching 18 or so. The majority of chain stores don’t buy from fresh markets due to food safety issues, including traceability that does not exist. So they are not comfortable to buy from fresh produce markets. A group of buyers started to enter into the fresh market in the past 50 years. It’s informal. They don’t have a shop and are trading on the pavement. This is allowed in South Africa. Anyone can sit in front of a chain store and trade his product.

Q: What other options are available to poor South Africans in more remote areas?

A: It becomes a moral dilemma. The unemployment rate is 20 percent and these guys want to earn an honest living. Is it right to stop them, to take them out of an honest job instead of them becoming a gangster, robber or murderer? That’s the story behind it. These guys are in the previous disadvantaged areas.

Some of them are trading on the street corners or small store or straight from the truck. But it’s a huge, huge outlet and they can end up in opposition to you, with no overhead costs, electricity or proper food safety measures. The consumer doesn’t have the same food safety protections.

The lower you go with income groups, the less this is a deterring factor for them because they just want to eat, they’re hungry. They’ve heard of food hazards, but they don’t have the money to pay for that safety assurance.

Many a time a Spaza shop — an informal business — abuses the situation of disenfranchised people who have no where else to buy necessities. It could be a motor garage trading and making huge profits. Then things like food safety are really not maintained. We’ve made a difference to many poor people in these areas.

Q: What kinds of challenges do you face in distributing food to these areas?

A: We’re in 16 countries, and not just cities, but also in rural areas far away from city. Sometimes it is not profitable. There are bad roads and lack of infrastructure. We believe that if you want to build a brand, you have to be seen. As we go to these rural areas, people use our brand and they start to know ShopRite. Maybe their children will go to study in a bigger town and stay with the brand from a rural brand to a city brand. We are not just picking the profitable areas. But we still have to make a profit.

When you open stores in rural areas, you try to procure from that area; it might be 400 or 500 meters from a distribution center. You don’t have the density of population to justify a truck even once a week. We ask rural people and encourage them to plant. We want to empower them.

Q: Do you have labor issues? Are your stores unionized? What is the political climate on this front?

A: Unions are basically an issue. We have minimum wages and a lot of legislation — - what pay and housing should be, etc., not only on farms, but right through the labor sector. There are strong unions. It’s political, normally connected to the government as well. You have that relationship. What we have as the governing body here, the African National Congress, and some of the affiliates like COSATU, the strongest union, work together in elections.

Q: In the U.S., labor issues can be a challenge, retaining good employees after investing in training, etc.

A: Labor is difficult… your opposition can steal your labor, but it is not a problem to the extent we can’t do business. Employee retention is manageable, but it is a challenge. You need a whole package of remuneration and training and looking to the future.

Q: In addition to your procurement responsibilities, do you also do merchandising?

A: I’m not directly involved in merchandising/marketing. We have what we call fruit and vegetable retailers each responsible for 13 to 15 stores. They will go out and see if product is properly merchandised, how it’s signed, it’s on the shelf, on the order guide, arranged well, quality meeting standards, etc. They’re in an advisory capacity rather then to exercise control. They work for Freshmark. And some work for Shoprite. In house, they work for the fruit and vegetable departments.

Q: In the U.S., people are following trends, such as local versus organic, convenience items, marketing to children, etc. Are these types of issues relevant in South Africa?

A: One of the differences in South Africa is that we’re still dealing with an unsaturated market. There are still millions of people bettering their position financially, busy moving up. The portion that is rich is the minority by far. People are interested in good food and value for money, not so much about fruit for children in smaller sizes. That is something Woolworths is doing, catering for the more finicky market and specialty markets.

We say we’re feeding the nation.

Q: Do you do any importing?

A: In South Africa, we have a typical season. We do import a little, but it ends up being very expensive; volume is limited, not even one percent. It’s too costly. If we do import, it’s normally from Europe, Italy or Spain.

Most product comes from South Africa. On vegetables, we sell proficiently 12 months of the year. When it comes to fruit, we have times of the year with windows of opportunity, for your summer fruit varieties as well as citrus. Competition is from Europe. And then the volumes sold to consumers in South Africa decrease dramatically when talking to importers because of price and distance. It’s a different situation in the U.S., where you don’t have seasons at retail. It’s a privilege we don’t have in South Africa that U.S. consumers take for granted.

Q: Do you ever import any product from the U.S.?

A: You might be interested to know we import Washington apples a container at a time every two weeks, which gives a perspective. We buy the big size, and it’s a point of difference for us, selling for 50 cents each. We imported California grapes once or twice

Q: How do you view the U.S. produce industry?

A: I think many a time we look at the U.S. as leaders. We send our people there to learn.

Q: What is your vision five years from now? Where do you see the greatest growth opportunities?

A: We’d like to grow stronger in the bottom end of the market and the middle too. There is a lot of growth we can still achieve. There are so many countries we haven’t entered into yet. It is not so easy politically, and there are so many barriers.

Bad infrastructure is difficult to get through, and some areas coming out of war situations are very unstable. A country where we want to grow far bigger is Nigeria, and Ghana, and Angola is also full of potential. Africa is one big dream.

One of the most interesting jobs the Pundit has had was supplying American produce to Africa. Liberia used to use US dollars as its currency, and we shipped mixed loads via sea very frequently. We thought it kind of fun to trade with such a remote place and enjoyed when the Liberians came to New York and we had dinner together. Unfortunately trading with Africa also taught us about instability and, to this day, we are not sure what happened to the friends we knew there after the country collapsed.

South Africa is a case of African exceptionalism. In country after country, as colonialism collapsed, the white population fled or was driven out, and countless millions were plunged into dysfunction… or worse.

Not South Africa. Perhaps it was the visionary leadership of Nelson Mandela or perhaps it was the basic fact that a white population in South Africa, larger than the total population of New Zealand, really had nowhere to go. In places like Zimbabwe, the white population generally had British passports. In Angola or Mozambique, they went back to Portugal. Yet in South Africa, the Afrikaans, sometimes referred to as Africa’s white tribe, had been there so long and Dutch connections were so distant, that they just had nowhere to go.

So South Africa’s black population, which had observed the poverty and chaos that ensued when the white population fled the rest of sub-Saharan Africa, and South Africa’s white population, which was substantial and had no way of instantly disappearing, created a system of cooperation and co-existence.

The Pundit was honored to be invited down to South Africa to give the Keynote Address for the AllFresh Conference, the national produce conclave in South Africa. We also did a series of workshops for different organizations, including two for Freshmark/Shoprite/Checkers.

We found the country inspiring and, as it struggled toward Democracy, we felt that the struggle in South Africa to find a route to peace and prosperity in the midst of great diversity was very much a struggle in which America had a stake — that success in South Africa could show the world the strength of democratic governance. It seemed to us that American self-interest stood very much with seeing the South African enterprise succeed.

The announcement that Wal-Mart is poised to move into the region reminds us of a visit some years ago to the headquarters of Capespan in South Africa, where the CEO pointed to a large map. He predicted that foreign investment in South Africa would be strong. His logic? All over the world, CEOs had similar maps and on each there were flags or pins pointing out where the giant had operations.

And all these companies would have operations in North America, South America, Europe, Asia and Oceania and their map would be covered in flags. Then all of Africa would be empty and this astute executive, who understood that economics and psychology share important elements, explained that these CEOs would be bothered by this gap in their maps and would want to invest in Africa, and if one is going to invest in Africa, South Africa was the place to start.

South Africa is diverse in a way no other country quite is. There are places and moments when you think you are in the most modern city in Europe; there are places one thinks one is in Tuscany… then one is riding an elephant or watching a leopard give birth or seeing a native tribe.

We can’t wait to hear what Dr. Johan Van Deventer has to tell us about retailing in Africa and his take on our retailing in the Northeast and,more broadly,in America.p>

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We have to confess that we have a secret reason for enjoying the time we have spent with Dr. Van Deventer. Yes, he is knowledgeable and a gentleman, but wherever Johan is, the wine is always exceptional, because his wife, Gesie, who is joining him on his journey to America, is one of South Africa’s highly esteemed wine makers.

You can read some accolades her wines have won here. You can read the series we wrote on our trip to South Africa here and as we approach The New York Produce Show and Conference, keep in mind Gesie’s favorite motto, adapted from Zig Ziglar: “Life is like a ladder and no-one has ever climbed a ladder with his hands in his pockets.”

If you want to get your hands out of your pockets and come meet Johan and Gesie, register for The New York Produce Show and Conference right here.

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