Sally Williams Fine Foods: Getting toMarket

Sally Williams’ Business Approach

Sack believed that the company had to carve out a niche foritself. “You need to offer the public either what they haven’t beenoffered before or something special,” he said. 6 Sally Williams setout to produce something special.

Product

Wickham explained that nougat is a form of meringue: its basicingredients being glucose, honey, sugar, beaten egg white andvanilla essence. Roasted nuts or fruit can be added in as optionalextras at the end of the boiling process. The end result is a verysticky product which requires special handling right through thewhole manufacturing process. It is open to contamination andtemperature control is of the essence to prevent cross-infestation.“Insects like the taste of nougat. They can smell it through thepackaging, bore through all the layers, start eating it, lay eggsand the whole life cycle begins. We control the environment withinthe factory. Our problem starts when our product gets out there,”she said.

Apart from its secret recipe, Sally Williams nougatdistinguished itself by seeking to use only the best ingredients,from the locally-sourced macadamia nuts and honey (the company wasone of South Africa’s foremost users of honey, according to Sack 8) to the imported Belgian chocolate used in some of its productlines and the special wafer paper onto which the nougat was poured.Naturally, this pushed up the overall production costs and affectedthe selling price.

The original product line consisted only of almond and macadamianougat, but soon extended to include cashew and hazelnut nougat.Thereafter, a Belgian milk chocolate-coated and dark chocolatecoated almond nougat was introduced, followed shortly afterwards bya nut-free nougat bar ‘enrobed’ in chocolate. By 2007 the productrange had grown to include non-nougat products including fourvariants of Turkish delight, and medium- and dark-roasted groundcoffee (see Exhibit 1). The company had also launched a co-brandedice-cream with Nestlé that contained tiny pieces of macadamianougat and partnered with Thirsty Now Beverages to produce theMonteer Fine Liqueurs/Sally Williams Cream Liqueur.

All Sally Williams nougat was individually wrapped (most of itin bite-size pieces) and then packaged in 1kg and 500g tubs; 160gand 125g packs; 110g bars; two-piece packs of 30g each; 200g and210g gift boxes; and in three artistically designed 240g tins: theFriendship tin, the Christmas tin and the Valentine’s tin. TheTurkish delight was packaged into 280g and 300g boxes, and thedélicieux range in boxes of 50g. According to Wickham, thedélicieux range and the 160g gift box were the best sellers.

A few years previously Sally Williams had ventured into makingEaster eggs with nougat centres, on behalf of CNA, a large SouthAfrican book and stationery retailer. This venture survived someteething problems and continued for two years. Although SallyWilliams would have liked to continue the line, they had to producelarge quantities of other stock for Passover and therefore lackedthe capacity to manufacture the Easter eggs. Clicks, another largechain specialising in pharmaceuticals and homeware, in turn,approached Sally Williams to supply them with nougat to be soldunder its in-house brand name, D.licious. However, the company haddeclined an invitation from the successful food and clothing chainWoolworths in 2003 to make a Woolworths-branded nougat reasoningthat it would much rather use the time to build the Sally Williamsbrand than risk being consumed by such a powerful brand. Thisdecision was to backfire on the company with Woolworths refusing tostock Sally Williams nougat until 2008 when it started orderingSally Williams nougat stock for Passover.

One line which had not lived up to sales expectations was acoffee-flavoured nougat. The management team at the time reachedthe conclusion that “one either loved it or hated it” anddiscontinued the line.

Price

It was expected of a niche product manufactured from qualityingredients to be more expensive and Wickham said that the companywas indeed proud to be slightly more expensive that its localcompetitors. That said, the company endeavoured to reach most LSMcategories by having a range that started from the two-piece packthat retailed from around R6.00 to a gift box retailing for up toR95.00. The shops bought the nougat at a fixed price and marked itup according to their own criteria.

Promotion

In the early days, Williams marketed the product herself andtook it to international trade shows. She was fortunate in thatboth she and her nougat received a lot of exposure in the media,with the result that the big supermarket chains, such as Pick'n Pay, approached the company for listings and orders rather thanthe other way around.

The Sally Williams policy was to not venture into above-the-linemarketing. As Wickham said, the company would much rather spendtime and resources on the smooth running of its distributionnetwork and merchandising before expanding into above-the-linemarketing.

Occasionally, if products were moving too slowly, the companywould consider a promotion of some sorts. However, it had foundthat in-store tastings and sampling, where the purchase decisionwas actually made, were the most effective.

Place

Research conducted by the company in 2003 indicated that femalebuyers outnumbered male buyers by far and that its smaller pieceswere bought purely on impulse, while the packs were purchased as asmall gift. 14 Moreover, the movement of stock was influenced byfactors such as the weather, school holidays and even hormonalcycles in women. 15 Therefore, with so many variables influencing asale, it was crucial for stock to be available in the best possibleposition in the stores.

Sally Williams had one in-house sales agent who marketeddirectly to smaller outlets, such as gift shops, pharmacies andcafés in the northern and southern parts of Gauteng. For the rest,the company used a distribution company to sell and deliver itsproduct to the large retail groups and other outlets country-wide.In short, this distribution process worked as follows: theretailers placed their orders via the distributor and thedistributor then ordered the product from Sally Williams. To meetthese orders, the company manufactured stock strictly according toPretorius’s predictions of what the weekly, monthly or fortnightlyorders would be. These predictions were based on historicalprecedent.

By 2007, 65% of the company’s nougat was sold on the localmarket, in supermarket chains, pharmacies, fruit and vegetableshops, sweet shops and smaller novelty shops. Some hotels evenpurchased the product as a bedtime treat for their guests. Theremaining 35% was exported to Australia, Canada, the USA, the UK,Mauritius, Portugal, the United Arab Emirates and New Zealand.

Because the product was kosher, it received great support fromJewish people both locally and abroad. Countries such as Canada andthe USA had large Jewish communities 17 and each year the companyhad to produce large quantities of special stock for Passover tocater for the export and local markets.

Distribution Challenges

Despite the company’s steady growth under its currentdistributor, which specialised in the distribution of exclusivegrocery brands, Pretorius was getting increasingly concerned abouta number of things. The incorrect placement of product in stores,for example, which he had picked up during his regular spot checks,was a major concern.

Grocery retail chains allocated all food items to specificcategories. Confectionery was one of 15 subdivisions under theumbrella term of groceries. In turn, confectionery was subdividedinto categories such as chocolate slabs, imports, novelty,nougat, boils, softs and glucose. Deciding where to place SallyWilliams nougat was not that clear-cut, however, because althoughit was a nougat, it was also a novelty. The company wanted itsproduct to be perceived as a gift, which meant it also had to becategorised with the imports so that it could be placed in thegifting section.

Shelf space was negotiated according to ‘right of sale’. Thismeant that the product selling the most units per week was giventhe best space. This created a challenge for Sally Williams. As aniche product, turnover of its product was lower than that of otherproduct ranges. Moreover, some merchandisers would deliberatelyrearrange products by, for example, hiding their opposition’sproducts beneath unrelated products. This meant that space that wasrightfully negotiated could disappear if the sales representativesdid not check the shelves on a daily basis.

Another concern was that the current distributor incentivisedits sales representatives when they exceeded an overall monthlysales target irrespective of which products were sold.Consequently, the sales people concentrated on easy-to-sell itemssuch as washing powder, for example, to the detriment of SallyWilliams.

Overall, it seemed to Pretorius as if proper supervision wasseverely lacking. Further research revealed that the distributorused a roving merchandising system which meant that its salesrepresentatives did not call on every store every day. Moreover,the distributor concentrated on exclusive brands only, thereforedelivery was limited to specific regions and stores. This meantSally Williams nougat that was suitable for the lower LSM marketdid not reach its target.

Even more challenging was the communication between the twocompanies. It had become increasingly difficult to obtainelectronic sales figures from the distributor. Of particularimportance were the ‘hit rate’ reports that indicated sales perstore, because these statistics could show up potential problemsvery early in the process. “If I have a problem today I want aresolution by the end of today. We require at the very least asales representative call cycle (where they called and on whichdays), as well as a delivery call cycle and a hit-rate report,”Pretorius explained.

The final, but gravest, concern was the distributor’s poor coldchain management. In order to maintain the cold chain b from thefactory to the distributor’s warehouse, orders were loaded into ahired cooling truck which maintained a temperature of around 16degrees Celsius. This temperature had to be maintained at thedistributor’s warehouse and during delivery. There had beensporadic incidents before, but now, in May 2007, the almostcomplete recall of its products because of a broken thermostat inthe distributor’s warehouse sealed the fate of the currentdistributor. Pretorius knew that the company had to look for analternative distribution option.

Food Distribution in South Africa.

The food distribution industry in South Africa was highlycompetitive and faced a multitude of challenges of its own.Distributors continuously had to optimize their operations so as toreduce costs, by automating processes, specialising in particulartypes of product or outsourcing certain aspects of the distributionprocess.

Distributors had to adhere to very strict health and safetyregulations pertaining to the distribution and warehousing offoods. They also had to follow the guidelines of the manufacturers,each of which had their own requirements for handling andstoring their products. Some of the larger groups distributed avariety of goods, but specialised within the group to adhere to therespective rules and regulations.

The industry could roughly be subdivided into companies thatspecialised in the distribution of groceries (with sub-categoriesof its own such as high-end groceries), delicatessen foods, coldstorage goods (sub-divided further into dairy and frozen goods),dry foods (such as pet foods) and confectionery. Apart frommaintaining the cold chain, the companies specialising in coldstorage products had the additional challenge of turnaround time,which meant that these products had to be delivered within acertain time.

Distributors might deliver to some or all of four categories ofstore: forecourt or convenience stores; delicatessens;greengrocers; and retailers (comprising retail and wholesalechains).

A distributor generally operated on a delivery lead time ofthree days, but kept at least four to six weeks’ worth of inventoryin its warehouse. This was to accommodate the large retailers thatoperated on a just-in-time principle by only keeping two weeks’worth of inventory at any given time in their stores. Once thestock was delivered to the retailers’ warehouse, the merchandisingagents were responsible for packing the stock in the warehouse andonto the shelves in the shop.

The distributor’s own sales representatives, or alternatively,the merchandisers at store level, were also responsible for‘returns’ (the removal of old stock that had reached its shelf lifeexpiry date or faulty stock). In some instances the distributorwould also be responsible for the incineration of expiredstock.

Conclusion.

Pretorius weighed up his options: to bring the distributionin-house or to outsource it. If the choice was to outsource, whatcriteria should the company look for in a distributor and whatcould he put in place to manage the relationship effectively? TheSally Williams management team was meeting the next day and hewanted to have some concrete recommendations ready.

Question 1

Do or Perform a Company Analysis for Sally Williams. (10Marks)

Question 2

Apply the Ansoff Matrix on Sally Williams. (10Marks)

Question 3

Assume that you are the Marketing Manager at Sally Williams,recommend the target market (final consumers), positioning,product, price, distribution and promotional strategies(promotional mix) to management for 2020. (30marks)