It has been quite a year for Capespan UK. The company has taken great strides in environmental and corporate social responsibility (CSR), along with launching several new brands and products into the UK marketplace and exploring an ever-increasing range of supply sources - all against the challenging backdrop of one of the most difficult market situations of recent years.
Picking up the Re:fresh award for FPJ Importer of the Year in May was the icing on the cake.
Managing director Ronan Lennon was delighted to receive the accolade. “It was fantastic to win and nice to hear that the judging panel had some of our competitors on it,” he tells FPJ. “Being judged by our peers made quite a difference.”
Over the course of the last 10 years, Capespan has grown from being a seasonal supplier of South African fruit to a year-round importer of produce sourced from a vast range of different countries.
The South African market was regulated and protected until 1997, with Unifruco (Capespan) controlling the country’s deciduous and citrus exports. Deregulation in 1997-98 meant that, almost overnight, the country went from having one major exporter to 350 shippers of varying sizes - a complete fragmentation of the market, as Lennon puts it. Fyffes, along with many other multinationals, then started looking at entering the South African market. The Irish produce firm felt that having a partner on the ground would be the best way in and hence it forged an alliance with Capespan in 1999, taking 10 per cent of the South African operation and 50 per cent of the European branch.
More or less at the same time, recalls Lennon, Capespan in Europe restructured from a central office in Buckinghamshire to a decentralised business, creating three units. “I arrived at the new Sheerness base in Kent at the end of 1999, having been based in Antwerp for two years; before that I was general manager of marketing in South Africa,” he says.
When the Capespan office at the Port of Sheerness first opened its doors, the business’s turnover was generated 100 per cent from South African produce. “We then embarked upon trying to spread our risk by getting involved with other parts of the world,” says Lennon. “This coincided with the start of the category management route in the UK, so we had to change anyway. In 2001, we acquired Fyffes Multifresh, which encompassed all of Fyffes’ retail interests in the UK multiples. In 2006, Capespan acquired Paddock Wood-based firm FPS, which gave us access to the Dutch and Belgian pear industry. These acquisitions gave us a European supply base and access to other customers, helping broaden our spread.”
Capespan today generates a turnover of £110 million, 60 per cent of which is accounted for by non-South African product. Top fruit remains the firm’s most important category, although it is also heavily involved in citrus, salads, grapes and, for the last four to five years, melons. These five categories constitute 95 per cent of the business.
Capespan UK is split into three areas: the Tesco business, the multiple business and the non-supermarket trading side, which covers foodservice, catering, wholesale, smaller retailers such as Lidl, Aldi and Spar, and also the fruit for schools business. Each unit has its own individual team for procurement and quality control, and is run as a separate entity.
“We source from more than 45-50 different countries, which has made the business more complicated,” says Lennon. “We deal with an awful lot of growers, compared to some of our competitors, covering a wide range of product.”
Trading director Martin Dunnett says that the 10 years following deregulation have been an interesting period, and everyone still wants to see a strong Capespan supply out of South Africa. The business has stabilised at a level that is encouraging. “The company has changed so much over the years; we have had to get our hands dirty and get involved on the ground,” he tells FPJ. “It’s a hands-on business and that is why we came down to Sheerness. The cycle keeps moving and now we are in the port handling the ships as they come in - we couldn’t get much closer to the product. The major challenge we face is that the growers do not have a lot more to give - a lot of them in South Africa are getting out of fruit altogether.”
In 2001, Capespan built its packhouse on the quayside at Sheerness, which Lennon says made a lot of sense. “We were bringing fruit in and sending it all over the country to be packed, with all the extra handling costs that brought with it, but this system is a lot better. We are one of the only importers to pack on quay and it is a massive advantage,” he says.
Operations director Mathew Newns is in charge of Capespan’s supply chain, involving logistics from source, distribution and third-party relationships. He is looking at improving and simplifying ways of operating, by making the most effective use of resources. “When it was built the quayside facility was not widely accepted - but with the increasing drive for leaner supply chains the quayside is recognising its potential, providing handling, packing and order picking activities. The consolidation point allows product to go directly to the RDC, cutting out additional transport legs,” he says. “We are also looking to do more third-party work here, encouraging others to benefit from the service and the produce expertise on site. We have recently installed a state-of-the-art ripening facility and the Port of Sheerness has upgraded the temperature management system throughout, reducing energy use and lessening the impact of increasing energy costs.”
Over the last 12 months, Capespan has really focused on its CSR credentials, says Lennon. “This has been a company-wide initiative driven by our commercial director, Alistair Phillipson, who has been instrumental in a number of things. He looks after brand licensing and has invested a lot of time and money into market research.
“He is also involved on the innovation side of things, coming up with the Cape fresh pineapple sticks, that we recently launched into British Airways. That was quite a coup and it was driven by Alistair.”
Phillipson has previously worked on ways of adding value to fruit from a retailer and consumer perspective and has been instrumental in launching a range of convenience products under the Cape brand through licensed partners. He has most recently been concentrating on adding value to the fresh fruit raw materials that Capespan supplies to the UK’s burgeoning fresh-cut processing industry. Subject to further trials, Capespan anticipates the disclosure of a significant development for UK processors in 2009.
Phillipson has also been working with the Carbon Trust, to improve energy and resource efficiency within Capespan. The now widely chronicled barge plan, which uses river transport as a more carbon-efficient freight solution, is a noteworthy example of Capespan’s innovative approach to improving its environmental performance and reducing costs. When fruit arrives by container at the Port of Tilbury, as opposed to Sheerness, Capespan uses the services of a river barge to bring it to the Kent port, and this has reduced road movements of its fruit containers from Tilbury to Sheerness by half. Every barge trip can remove at least 40 vehicle movements from the roads.
The company has this year embarked on a project to comprehensively measure resource utilisation within its UK operations. The data will then be used as a baseline for further improvement targets.
In addition to striving for an ultra-efficient distribution model, Capespan is also reducing packaging and improving waste management within its business. For example, it now sells its cucumbers to The Co-op without individual sleeves, using a moisture-retaining carton liner instead. This represents a saving of eight tonnes of packaging a year.
“All our waste is separated and recycled where possible, and fruit waste is composted or used for animal feed on local farms, reducing the impact on landfill and haulage,” says Newns. “We are also investigating ways of reducing transit packaging material on imported product with proven methods used in other industries - it may come to nothing, but we have to keep exploring new options as our supply chain comes under increasing pressure.”
Capespan’s work in the salad sector has seen it get involved in local sourcing initiatives, and the firm is working with growers in Hampshire and the Lea Valley, as well as other UK regions, to that end. “The local aspects of the business are very powerful,” says Dunnett. “For example, with The Co-op we are doing a 20 per cent off British produce promotion at the moment.
“We now have a very customer-oriented offer - in the past, we tended to err in favour of the growers. We used to compromise but now we don’t and are driving to introduce new products, thanks to the work of people such as Alistair. He has been great for innovation and is full of ideas.”
The firm’s clear focus on CSR and innovation helped it become a Re:fresh winner, believes Lennon. “Not only is it green, but at the same time it also saves us money. We are doing whatever we can to reduce our energy costs,” he says.
But the next few years will clearly throw up numerous challenges, and Lennon claims the risk profile of the business has risen substantially. “Two things are happening,” he says. “First, the costs for growers are going up significantly. But second, they have a lot more options. From South Africa there are lots of opportunities in the Far East, for example, and Russia is another market performing well.”
Climate change will also have a big impact on the produce business as a whole, says Lennon. “Fruit and veg are not cash crops and weather patterns are changing. There will be more failures going forward and some production areas will become marginal over time. There will be more disruption of supply in the future and growers will be more demanding and bullish in terms of prices.
“At the other end of the chain in the UK, the costs of the five big retailers are going up - they are also under huge pressure and are doing whatever they can to mitigate that. The two forces of growers and retailers are pulling in different directions and the importer is caught in the middle and will come under enormous pressure. The more and more produce you buy, the more the risk goes up. We need the competitive edge, and to take as much out of the cost chain as possible without compromising on our quality and service levels. Category managers will find it tough in this challenging environment.”
Dunnett, who has worked at Capespan for 32 years, says there is “fairly tight supply” of fruit in the market at the moment. “Logistics is the only way to cost efficiencies in the supply chain, and as we are in the middle we have to see how clever we can be,” he says.
Newns adds: “Robust, low-cost supply chains will be the key to supporting growth in the future - Capespan is well placed to add value in this area. There is no one-size-fits-all approach; we work with customers and growers to drive efficiencies, increase understanding and information flow through the supply chain and provide the best solution for all sides.”
Lennon explains that the most profitable side of the business at the moment is the non-supermarket side. “Huge inflation in prices has brought an enormous amount of trading opportunities, particularly on the wholesale markets,” he says.
The last six months have been very strong for the wholesale sector, agrees Dunnett, and the Cape brand still holds a lot of value among traders. “In the 1980s and 1990s there were probably only one or two panellists in each market selling Cape produce, but now that is not the case,” he says. “The Capespan Gold brand that we launched into wholesale in January, initially on grapes, has been fantastically successful to date. Long term, I think wholesale may start to move towards fixed-price programmes. There are a lot of good new guys coming through into the sector.”
Brands still form an integral part of Capespan’s strategy, insists Dunnett, despite the multiples’ preference for own-brand products. “You have got to tailor your brand to your target,” he explains. “Some retailers have been turned off by the idea of brands, but there is a lot of equity for consumers in the Cape brand, which Tesco still uses. Morrisons takes our Outspan citrus brand. We want to build on this, as the fresh produce world can feel mundane and new seasons are not promoted as much as they used to be. Brands can therefore be a point of difference or a point of reference for a consumer. We use them as and when we need to.”
Certain sources are shaping up as new kids on the block, according to Dunnett. “Egypt is looking strong for citrus and grapes and fruit quality is improving. The country has good water supplies, unlike other parts of the Middle East, and it is a growth area. There are also greater options available from Brazil for grapes and melons and this year we are exploring a new alliance with suppliers in Morocco.
“But we will also be consolidating our South African volumes, as it is still the natural source of southern hemisphere fruit. It is still our target market as we know all the growers and their strengths and weaknesses.
“South Africa is a fabulous source of quality fruit, with the climate, the soils and the expertise to grow the very best product,” Dunnett adds. “As category managers, you do have influence - but nine out of 10 times, the South African stuff is the best available anyway. They are very dedicated growers. When a source is that good, you don’t walk away from it easily, and we are keen to develop it further in the future.”
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