Eyethu Beverages South Africa – Creating South African Beverages

When Mike Veysie and Ndumiso Madlala, both business veterans, decided to launch Eyethu Beverages together, they did so with a strong vision in mind.

When these two entrepreneurs launched their own beverage company, they had big plans. Then 2020 happened. Their plans have had to change but their ambition hasn’t.

“Our strategy from the company’s inception was to acquire assets at well below Net Asset Value and put management structures in place to grow the business and develop our own brands and do a lot of contract work,” Madlala recalls. “It was founded in 2019 by myself and Mike Veysie. We acquired our first asset in August 2019, a cidery, and we started off supplying a traditional (Multinational) client, but in future we intend to launch our own brands.”

Between them, Madlala and Veysie were a powerhouse of experience in the beverage sector.

“From a management perspective both Ndumiso and I have a considerable and unique experience,” Veysie points out. “I’ve been in the industry for 26 years, Ndumiso was the founder of a company called Soweto Gold, which was the first breakthrough in converting a craft beer into the mainstream in South Africa.”

As well as their wealth of experience, the pair had also purchased a unique asset that would prove a huge boon for the business even in troubled times.

“In terms of our current unique selling point, our plant was built 20 years ago by Bulmers Cider company, then the largest Cider company in the world. Bulmers was subsequently bought by Heineken, and the South African plant was bought by Diageo who then sold it to us. It’s a unique, fully automated site that, despite its size, with a capacity of 40 million litres of cider per annum, can be run by one person. South Africa’s cider market accounts for around 400 million litres, so our site can produce 10% of that total volume,” explains Veysie. “We have a cost-effective production facility and have some great brands, a lot of innovation and a lot of experience in the industry.”

“But what’s key is we also have brands lined up which we’ll be launching very soon with very good South African heritage,” Madlala adds. “One brand that we own, was taken off the market in the early 2000s but has very good memories associated with it and we think it’s going to do very well. It was one of the first cider brands in South Africa, so that will be relaunching to the market sometime this year.”

An Incubator for Talent

On top of its experienced leadership, strong brand and a unique manufacturing facility, from the outset Eyethu also inherited an extremely qualified staff.

“When we bought the business we took over the staff that had been working for Diageo. We had a fairly small staff complement of five people managing this highly automated facility, a very highly skilled and competent staff,” says Veysie. “Subsequent to that we’ve brought in another five people from around October when we began to pick up additional projects.”

Madlala tells us, “We brought a fully automated plant that requires highly-skilled cider makers. So we’re fortunate to have two highly-skilled cider makers on board.”

Eyethu is also looking to nurture new talent, within and beyond the business.

“We’re bringing in learners as we expand our business and we would like to set up an ‘incubator’ where we can bring in young entrepreneurs and train them up based on our experience, enabling them to work in the industry,” Veysie says. “We’re working with a company in South Africa to set up these training programmes, creating a training syllabus specific to the food and beverage industry.”

A South African Beverage

However, Madlala and Veysie’s vision wasn’t just about building a new business, it was about creating transformation in a uniquely South African space in a market typically controlled by international corporations.

“What’s important to note is the Liquor industry in South Africa is dominated by large multinationals such as AB InBev, Diageo, Heineken, and Halewood International. There’s been very little opportunity for transformation in this industry,” Madlala points out.

Indeed, Black Economic Empowerment plays a central role in Eyethu’s philosophy.

“The government of South Africa has made a big push to encourage BEE and part of that process is for companies to receive a scorecard on BEE performance,” explains Veysie. “Based on that scorecard if they supply to your business you would get certain points. We’re falling behind as a country on empowerment and our vision was to create the largest Black-owned Beverage company in South Africa, including bottling, cider, ready-to-drink and carbonated soft drinks. That’s the all-encompassing vision for this business.”

Pivoting the Business

However, in 2020 that vision would encounter some severe challenges in the form of the COVID-19 pandemic and associated lockdown in South Africa. The South African government saw fit to ban the sale of alcoholic products last March, a move which would have a huge impact on Eyethu.

“Our business was thriving from its inception, it was highly profitable, but from March with the ban on alcohol sales our business came to a halt and we had virtually no business up until October,” Veysie recalls.

Immediately, Veysie and Madlala worked to adapt the business to its new circumstances.

“In October we took a view to pivot our business to use our facilities to generate income to cover our overheads and began working with a major cider producer to enhance their value chain. We now have a whole variety of new projects that weren’t part of our original business plan, but we’ve been pivoting and creating new opportunities to survive through the pandemic,” Veysie says.

It meant that Madlala and Veysie’s well-laid plans would have to undergo some changes to keep the business afloat, especially as access to capital became an issue.

“The cider plant was planned as our first acquisition, we then intended to put in high-speed packaging lines to fill ciders, ready-to-drinks and carbonated soft drinks,” says Veysie. “Then we put in an offer to acquire a mid-sized distillery that can do 200,000 litres a month at the end of 2019. Because of the Covid situation, we have decided not to go ahead with that acquisition.

Fortunately, Eyethu’s early successes meant the company had resources to fall back on.

“We were profitable for our first eight months of operation and were self-funding. We had built up a war chest that we used to fund ourselves through the period where we were unable to manufacture. Now we’re reviewing opportunities to raise capital and finance the new projects,” Veysie says.

While it’s been a turbulent year, talking to Madlala and Veysie it’s clear that their enthusiasm for the company hasn’t been dampened, and neither has their ambition.

“The future? We’ve had to relook at the future,” Veysie admits. “We’ve created new opportunities using the facilities of the factory to cover our overheads and that’s been successful. We are decanting apple juice concentrate, and producing sugar syrup. We’re also looking at producing hand sanitiser because we have large blending facilities. That’s what we’re doing short term.”

Longer-term is when their real ambition begins to show.

“We’re also looking at export opportunities, supplying the cider base internationally, including a cider producer in Belgium,” Madlala says. “We can produce very competitively, and the key is the launch of our own brands. South Africa is the second largest cider market in the world, after the UK, dominated by Heineken and Distell. We want to be the third-largest player in the cider industry in this country.”