Coca Cola The Entrepreneur Development Program in South Africa Summary Coca Cola’s Southern Africa division in conjunction with local bottling companies have developed the Entrepreneurs Deve by tro10748


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									Coca Cola: The Entrepreneur Development Program in South Africa


Coca Cola’s Southern Africa division, in conjunction with local bottling companies, have developed the
Entrepreneurs Development Program in South Africa to help new entrepreneurs enter the supply chain and profit
from new sustainable business ventures.

A task force comprising individuals from Coca Cola Southern Africa and each of the five Coca Cola bottling
companies in South Africa designed the program in 1999. Promising entrepreneurs are identified for the program
each year and training in basic business principles is provided. These entrepreneurs are shown how to turn their
ideas into action and develop their businesses on a sustainable trajectory.

The Coca-Cola bottlers have also developed a number of creative innovations to meet the needs of these the
developing entrepreneurs. These include for example sturdy transport bicycles, mobile mini kiosks, and mobile
coolers for street vending. Strategically placed selling depots are also being developed to service these micro
entrepreneurs, and as these micro businesses develop, Coca Cola are assisting the entrepreneurs to move up the
supply chain and expand their profitability.

The formal and informal sector employment attributable to the Coca-Cola system is 30 000 jobs, the majority of which
are in the informal sector. The entrepreneur development program is contributing considerably to this each year. In
2000 alone, over 12,900 jobs were created and 5,200 outlets were created.

The success to date of the entrepreneur development program highlights the importance of how trade, not just
production, can create jobs and boost market development. This downstream distribution and capacity building has
been vital to market development in South Africa

Introduction                            an opportunity to supply Coca           The Coca Cola system includes a
                                        Cola to South Africa. These five        broad group of businesses that
Company description                     businesses have since grown and         operate around this core. These
In 1938 the Coca-Cola Export            now include a total of 21 bottling      include suppliers, distributors,
Corporation sent Howard                 plants and 12 major                     wholesalers, and retailers, offering
Patterson to South Africa to            sales/distribution centers in SA,       employment to individuals in a
establish a bottling operation on       each servicing a specific territory     variety of forms, from plant
the African continent. In 1939          within a designated region of the       managers to street vendors.
bottling of Coca Cola commenced         country.                                Thousands of retail outlets have
at Benoni Mineral Works outside                                                 been developed in South Africa to
Johannesburg.                                                                   sell Coca-Cola soft drinks, including
                                                                                a growing informal sector that
The company has grown and is                                                    includes many home-based spaza
now essentially a system, or                                                    and tuck shops.
alliance of companies, in South
Africa. This system is made up of                                               Coca-Cola comprises about 96% of
the Southern Africa office of The                                               the total carbonated soft drinks
Coca-Cola Company (Coca Cola                                                    market in SA. The Coke system
Southern Africa) as well as local                                               currently, sells at a rate of 354
bottlers and canners who make                                                   million unit cases per annum.
products under the Coca-Cola
trademark. There are currently                                                  Country Profile: South Africa
five bottlers in South Africa.
These were originally family                                                    The Republic of South Africa, the
owned operations that identified                                                most Southern country in Africa,
has a population of 43,586,100.              Project Drivers and                  company did not impose the
South Africa is a middle-income              Objectives                           conventional ‘Coke’ channels on
developing country with an                                                        this segment, rather it needed to
abundant supply of resources,                Drivers                              allow for and build on the natural
well-developed financial, legal,             Capacity and capability building     evolution of entrepreneurship to
communications, energy, and                  were identified as key               define itself within these
transport sectors, a stock                   components for the success of        underdeveloped markets.
exchange that ranks among the 10             Coca Cola in South Africa to the     Subsequently a need arose to ensure
largest in the world, and a                  extent that the slogan "capacity     the sustainability of these
modern infrastructure supporting             and capability building ahead of     entrepreneurs over the long term.
an efficient distribution of goods           demand" became the cornerstone
to major urban centers                       of the business. To achieve this     Part of the realization came from the
throughout the region. Despite               several key actions were             fact that the Coca-Cola value chain
being a middle-income country,               identified: the recruitment and      has a very easy entry point for
however, the income disparities              assimilation of diverse, talented    entrepreneurs who want to make a
are amongst the largest in the               associates into the Coca Cola        dependable living. They start their
world, and fifty percent of the              system; the building of strong,      journey by selling Coke products.
population lives below the                   local and diverse managerial         But without a deeper understanding
poverty line. GDP as of 2000 was             talent; and the creation of new      of how to run a small business that
$369 billion, with GDP per capita            positions throughout Coca-Cola       is cash dependent these
of $8,500.                                   bottlers.                            entrepreneurs soon come to grief.

The country suffers from 30%                 Historically, Coca Cola has served   Coca Cola Southern Africa, in
unemployment and daunting                    the more developed markets in        conjunction with the five South
economic problems remain from                SA, but as a volume driven           African bottlers developed the
the apartheid era, especially the            business, the company recognised     entrepreneur development program
problems of poverty and lack of              that undeveloped markets             to assist these new business achieve
economic empowerment among                   represented a major growth           sustainable growth and service new
the disadvantaged groups. Other              opportunity.                         markets. For Coca Cola the success
problems are crime, corruption,                                                   of this project would inevitably lead
and HIV/AIDS. Limited job                    Once this potential was              to an increase in sales volume and
growth remains a real concern as             identified, the company              penetration of new markets that
the South African economy sheds              recognized the need to extend        previously may not have been
jobs in the post-apartheid                   this capacity building effort to     reached through the standard
transformation. The                          new entrepreneurs in new             supply channels. For many buddy
unemployment rate, already over              markets. From this emerged the       entrepreneurs in South Africa this
30 percent, may climb higher,                entrepreneur development             program is an entry point to a
frustrating government efforts to            program.                             business network and in many cases
promote prosperity.                                                               the first step in developing
                                             Objectives                           profitable businesses and improving
Within South Africa exist both               The objective of the entrepreneur    livelihoods.
developed (first world) markets              development program was to
and highly underdeveloped                    encourage and facilitate the entry
areas. In many communities of                of new business people into the      Project Detail
South Africa it is the informal              Coca Cola system. The program
(unrecorded, untaxed) retail                 targets specifically micro           Developing the entrepreneur
operations that are providing the            entrepreneurs in undeveloped         development program
most employment opportunities.1              markets who can enter the Coca
                                             Cola value chain to generate         Representatives from each of the
                                             income and profits for               five Coca Cola bottlers and Coca
                                             themselves.                          Cola Southern Africa conceived the
1 Woodward, D.P & Tee l, S. J., 1999 Doing
                                                                                  idea for the entrepreneur
                                             In order to realize that potential   development program in 1999. A
Business in South Africa
                                             however, it was essential that the   task force was formed at the group’s
bi-monthly Leadership Forum to       to generate a pool of                     participants must be able to
lead the initiative. The program     entrepreneurs who demonstrate             prepare a business plan).
was designed to develop the          an interest in business and
capabilities of formal and           display potential capabilities and    At the end of the Business skills II
informal traders. This included      commitment. The subsequent            course participants must be able to:
providing new skills to new          selection process identifies           Write and produce an advanced
entrepreneurs as well as             individuals for the program from          business plan
enhancing the skills of existing     this pool, as well as from existing    Manage their cashflow
entrepreneurs to enable them to      outlets demonstrating the              Realize profit
grow their businesses                capability and capacity for            Avoid making a loss (sub
successfully.                        growth.                                   objective is appreciate and
                                                                               satisfy customer needs).
Coca Cola Southern Africa and        An assessment is then conducted
the five bottlers jointly fund the   in the areas in which each            Training is delivered through
entrepreneur development             entrepreneur is likely to operate     written material as well as other
program. In addition, an             to ensure they can be sustainable     forms of instruction by each of the
agreement with the South African     and profitable over time. For         bottlers. The training is based on a
government has enabled a             example, the market potential         standardized format handed down
redirection of funding to support    and the logistical issues are         from Coca Cola Southern Africa,
the program. The South African       analyzed and mechanisms for           however it is increasingly being
Government has, through an           ensuring the availability of cold     customized to meet the differing
agreement with the South African     product are reviewed; in some         needs in each region. Participants
Soft Drinks Manufacturers (Coca-     instances, where facilities and/or    attend classes followed by plant
Cola is a major player), gradually   infrastructure is not present but a   visits to familiarize them with how
reduced excise tax over a number     potential market exist, the           the system operates. This is
of years (Excise reductions: 1999    company will establish new ice        followed by coaching and
US$ 1.1mil, 2000 US$6.8 mil, 2001    plants and depots.                    mentoring in their businesses.
US$3.2 mil, 2002 US$11.8 mil). In
exchange for this reduction, Coca-   Training and equipment                The new entrepreneurs (depending
Cola allocated these savings to      provision                             on the level of entry- Robo-vending,
various programs such as job         Once selected, the entrepreneurs      Spaza shop, Depot etc) enter into a
creation through micro-enterprise    are introduced to the Coca Cola       business arrangement that makes it
development, as well as              system and how it operates. They      easier for them to access capital
equalization of the recommended      are provided with targeted            equipment like Trolleys, Coolers
retail price across the country      support and training in basic         (e.g. rental or loan) and they are
(primarily to benefit rural poor     business skills. This includes        provided with start up stock.
communities) as well as general      training in pricing, stocking,
price reduction.                     forecasting, legal requirements,      Monitoring entrepreneurs
                                     sales, customer relations,            Monitoring mechanisms to
Implementation                       advertising and marketing.            determine the effectiveness and
The Sales department of each                                               possible improvements have also
individual bottler administers the   There are two levels of courses,      been introduced. This includes an
program within their respective      levels 1 & II that are run for the    assessment of each individual,
regions. The program consists of     entrepreneurs.                        monitoring his or her sales and
several key activities. Sales                                              profit levels over time. When each
representatives talk with            At the end of the Business skills I   entrepreneur demonstrates
community groups, local              course trainees must be able to:      improvements they are reviewed
government and local non-             Decide whether, or not, to          for an upgrade in their business and
governmental organizations to            start a business and, if so       equipment. For example, a small-
highlight the entrepreneur            Understand the theory of            scale business may be provided
development program as an                what is required to do            with a larger cooler once it has been
opportunity, and encourage               business effectively and          demonstrated that sales and profit
applications from new                    properly (sub-objective is that   levels warrant expansion. Five (5%)
entrepreneurs. Each bottler seeks                                          to ten (10%) of the Spazas created
tended to move up the scale of        tractors with trailers for delivery   volume. In fact, Coca-Cola products
entrepreneurship ladder in the        of large quantities of product to     account for one-third of the monthly
form of volume growth.                customers who are in inaccessible     operating profits of most informal
                                      (by truck) areas. Operators of        retailers.
New innovations for                   selling depots are now also being
entrepreneurs                         trained in the basics of business     This is an important aspect of
Initially, the process was focused    management, bookkeeping, route        development in South Africa as
on conventional training,             sales, cash flow management and       many micro-enterprises serve as a
however recently it has become        inventory management.                 safety net at times when the formal
more innovative. During                                                     sector struggles -- as has been the
implementation of the program,                                              case in South Africa in recent years.
Coca-Cola bottlers came up with                                             The opportunities presented by the
creative innovations to meet the                                            entrepreneur development program
needs of the developing                                                     are therefore promoting a
entrepreneurs.                                                              sustainable means of economic
For example, in many                                                        support and poverty reduction.
communities women are running
small home businesses - known                                               In recent years in South Africa an
as ‘mamas buckets’ - to sell Coca                                           influx of people moving to urban
Cola products in their street.                                              centers in search of employment has
However, as it was not possible to                                          created an overcrowding in city
take delivery vans to these often                                           centers. The SA government
remote rural locations, a sturdy                                            therefore supports programs that
delivery bicycle was designed                                               encourage people to remain in their
that could transport around 5-6                                             communities. The entrepreneur
cases of product to these micro                                             development program is a valuable
entrepreneurs.                        Project Outcomes                      contribution in that it provides a
                                                                            mechanism to encourage and
For those operators seeking to                                              support entrepreneurs in rural and
                                      Impact on employment in SA
expand their business by offering                                           remote locations, enabling them to
                                      Currently, formal and informal
food products with Coca Cola                                                remain in their communities and
                                      sector employment attributable to
products, a mobile mini kiosk                                               improve their livelihoods.
                                      the Coca-Cola system is 30,000
was designed. This kiosk has a
                                      jobs. In 2000 Coca Cola created
facility that stores drink products                                         Operating in this informal sector is
                                      5,000 new outlets and 3,500 of
at the recommended selling                                                  also not merely a means of survival,
                                      these were by participants in the
temperature of 4 degrees C, as                                              but rather it can be a sustainable
                                      entrepreneur development
well as a built in two plate gas                                            form of growth. Most of the
                                      program; this resulted in the
stove for cooking, and storage                                              wholesale and retail operations stay
                                      creation of 12,900 jobs in the Coca
space for food. In addition,                                                in business and remain profitable
                                      Cola system. In 2001 just over
containers that have been                                                   for years. They develop into stable
                                      3000 new outlets were created,
converted to kiosks are                                                     enterprises and are a prominent
                                      and in 2002 the focus will be on
strategically positioned for the                                            feature of many communities.
                                      ensuring that these continue to
convenience of potential                                                    Some expand from small, home-
                                      stay in business and remain
customers and mobile coolers for                                            based operations into larger
                                      viable. In total, over 7000 people
street vending were designed.                                               distribution centers and even into
                                      were trained is sessions that took
                                                                            soft-drink production.
                                      place in a number of locations in
To support the entrepreneurs,
                                      the country.
selling depots are strategically                                            These informal traders are revealing
positioned to make supply easy                                              a propensity to spend much of their
                                      Importance of informal sector
and, where possible, ice making                                             income on capital improvements.
                                      for economic development
machines are also provided.                                                 Further, they help to build and
                                      The majority of new jobs are
To support the entrepreneurs at                                             improve communities and create
                                      created in the informal sector,
the next stage – owners of sales                                            demand for electricity, water,
                                      which accounts for 60% of sales
depots – Coca Cola provided                                                 construction and transport.
Project Challenges                    would enhance the basic business      of the agreement with CCSEA.
                                      skills training.                      However, local governments were
                                                                            not aligned with the thinking of the
Identifying participants
                                      Motivating current outlet owners      National government and thus
The first hurdle encountered was
                                      Another challenge was the fact        became barriers to the efforts of the
identifying the appropriate
                                      that some participants were           program. Implementing the
candidates for the program. As
                                      owners of outlets so taking two       program regionally has required re-
the economy was shedding jobs
                                      days off to attend training           negotiations with many local
and unemployment levels were
                                      programs meant sales would be         governments - often a lengthy
growing sharply there was a large
                                      lost over these days. Some outlet     process that has delayed the
pool of potential participants.
                                      owners resisted attending             program.
However the challenge was to
                                      training sessions because they
identify those individuals who
                                      had seen or experienced               A changing market
possessed the necessary long-
                                      businesses being run in the           The changing economic situation in
term interest in an
                                      unconventional ways and               South Africa is presenting a number
entrepreneurial venture.
                                      sometimes this had seemed             of future challenges to Coca Cola
                                      successful.                           and South African entrepreneurs.
Communicating training
                                                                            Firstly, there is a limit to the market,
                                      Framework conditions                  and there are a lot more aspirant
Once the suitable candidates were
                                      The regulatory framework in SA        retail outlets owners than market
selected, the next challenge was
                                      has been in part unsupportive of      demand can sustain. In addition, the
in the communication of training
                                      Coca Cola and while there has         patterns of other industries and
material. This relates to both
                                      been considerable support for the     individual businesses affect many
language differences and the
                                      entrepreneur development              entrepreneurs. Some of the outlets
varying education levels of the
                                      program, there have been some         rely solely on one large business,
individuals taking part in training
                                      hurdles encountered with local        such as a mining site fro example,
activities. While English is
                                      governments.                          and with the closure of such
predominantly used as the
                                                                            operations the business can lose its
business language in South
                                      There was in the past a lack of       entire customer base.
Africa, many of the program
                                      effective policing of regulations,
participants did not speak and/or
                                      to such an extent that whilst the
read English. In South Africa                                               Further, as the economy has been
                                      Coca-Cola system adhered to
there are eleven ‘official’                                                 shedding jobs, this is lessening the
                                      requirements, competitors did
languages, but in fact there are 20                                         number of people with
                                      not, leading to a dilution of
languages spoken across the                                                 discretionary income hence
                                      competitive advantage. The bulk
country. As the training manuals                                            lowering the demand for soft
                                      of the legislative framework has
from Coca Cola Southern Africa                                              drinks. To address this the company
                                      been developed in the last 10
are presented in English, it has                                            will be reinvesting the next phase of
                                      years. Prior to this period, the
been necessary to rely on                                                   excise tax savings into subsidizing
                                      legislative framework was geared
translators and/or non-written                                              the prices of the pack sizes that are
                                      at protecting local industry
training tools in many cases. This                                          major sales volume drivers in these
                                      primarily because of sanctions
slowed down the training in some                                            newly created outlets.
                                      and the policies of the regime of
instances, however the sales
                                      the time. Currently, the
personnel from each bottler are                                             In addition, there was an
                                      legislation is geared more toward
able to speak the local languages                                           expectation that there would be
                                      opening the markets to enable fair
and dialects and have                                                       across the board price reductions
                                      competition, attract foreign direct
increasingly been customizing                                               for all size packs. While this was
                                      investment and allow local
their training programs.                                                    part of the company’s goal, this
                                      companies to compete globally.
                                                                            needed to be balanced with
A further issue was the disparity                                           maintaining price levels that would
                                      National government support for
of education levels between                                                 enable micro entrepreneurs to make
                                      the entrepreneur development
participants. Unfortunately many                                            a profit on their sales. Failure to
                                      program has been high, so much
of the participants had only a low                                          achieve this balance would have
                                      so that there has been a complete
level of skills and education and                                           defeated the sustainable job creation
                                      abolishment of excise tax as part
therefore lacked a foundation that
commitment the company had to             fact that there are shorter
the government.                           daylight hours and longer
                                          nights as most purchasing
                                          and consumption takes place
Success Factors & Lessons                 during the day. Further, some
Learned                                   outlets are in areas where
                                          electricity is unavailable,
                                          hence it is not possible to
Adapting to changing market
                                          provide refrigerated drinks.
It has been vital for Coca Coal to
                                         The identification, selection
adapt to this changing market in
                                          and training of new retail
many ways.
                                          outlet owners is time-
Following the re-entry of The
                                          Virtually thousands of
Coca-Cola Company, after the
                                          unemployed people would
political transformation of South
                                          like to have the opportunity
Africa, the challenge was to
                                          to generate income through
implement business programs
                                          the Coke value chain,
which were aligned to the
                                          particularly as it is very easy
transforming environment e.g.
                                          to enter. However, to ensure
the market is not a developed
                                          sustainability of operations
market but a combination of a
                                          and maximum benefits from
small, fairly profitable base and a
                                          the program, the right
massive underdeveloped
                                          participants need to be
segment. The business had to
                                          identified. Given the number
change its mindset and it's go "-
                                          of applicants, this is a time
to-market" strategy.
                                          consuming activity.

It is this adaptation of business
                                      Fifty to sixty percent of the Spaza
strategy that ultimately led to the
                                      shops, 100% of Mama's buckets
entrepreneur development
                                      are run by women. Most women
program and this continues to be
                                      in Previously Disadvantaged
a driving success factor. The
                                      communities in rural and urban
success of the program itself has
                                      settings have over the years
relied on the ability of the
                                      sharpened their survival
company and its bottlers to adapt
                                      (entrepreneurial) skills to meet
to local needs and challenges and
                                      the challenges of a repressive
continually come up with new
                                      economic and political climate.
ideas to help this segment of the
market grow.

Specific to the entrepreneur
development program, several
key lessons (and future
challenges) have emerged:

   New retail outlets that
    survive the winter months
    have a higher chance of
    survival. During the winter
    months cold drink sales tend
    to drop dramatically. This is
    further exacerbated by the

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