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21 Feb 2011 11:39
The most extraordinary thing about Wally and Debbie Fry’s vegetarian food business is not the fact that they started on a two-plate stove and now export thousands of tonnes of food to 17 countries from their 300-worker factory in Durban.
Nor is it that they, as amateur food technologists, single-handedly pioneered their products to become one of the leading producers of egg-free vegetarian meat analogues in the world.
The most amazing fact about the husband-and-wife team, who recently received Ernst & Young’s emerging entrepreneur of the year award, is that they grew their business over the past 20 years without any outside finance—neither loan nor overdraft.
Growing owner-managed businesses are notorious financial black holes, sucking up every cent of cash and credit available as their owners spend to fulfil ever-bigger orders and to bridge the gap between delivery and getting paid. In the labour- and capital-intensive food manufacturing sector where supermarkets are known for paying months after delivery, the Fry family’s feat seems near impossible.
It certainly did help that they used to run a successful small construction company in the 1980s and had built, as an investment, a small complex of mini-factories in Mahogany Ridge, Pinetown.
When the vegetarian couple’s experiments to create meat-like, protein-rich vegetarian dishes for their own consumption proved popular among their friends, they moved their production effort from their kitchen into one of the mini-factory units to test the business potential.
As the business grew, they gave notice to one tenant after the other, and so incrementally increased their occupation of the complex. It eventually turned into a single factory that today produces 22 tonnes of 15 different vegetarian product lines per shift. Even so, their early breakthroughs must have made for a horror ride on the cash flow roller coaster.
The Frys wooed the buyer from a local branch of Pick n Pay by cooking up a storm and going into the meeting with a fully prepared meal. Within 18 months of being given a chance on a shelf in the local Pick n Pay in 1991, Fry’s products were being stocked in all national supermarket chains. Many excellent business prospects get wiped out by such an expansion.
How did they survive, let alone do it without any outside finance? Apart from the advantage their modular factory gave them, a big part of the answer is frugality. They bought secondhand machines at auctions—a scary affair because Wally did not know how to work the equipment he was buying. But because the hiring of outside expertise was expensive, he soon figured it out.
“I was the only real technician [in the business] for the first 13 years. I would work all day, go to bed, the machine would break at midnight or whatever and I’d be down there. It would take me maybe 17 hours until the machine was ready and back on the floor.”
Debbie, who took charge of the financial side of the business, remembers having to go to the factory with their three daughters on Sunday evenings to prepare raw material for the start of the week’s production. “The kids all had their own pair of gumboots [for helping out in the factory],” she says. “We just had to live frugally for those years. Whatever money we made, we put back into the business.”
Perhaps their decision to never borrow money lies behind their ability to survive rapid growth. The strict discipline imposed by a no-borrowing principle contains the risk of overextension. But you have to accept that growth will be slow and incremental if you do it without finance, they say. “Had we gone to a bank, we probably could have done what we’d done in half the time,” says Wally.
Delayed gratification permeates the whole of the Fry Group. Despite the brakes that it put on expansion and the pressure it put on their lives, their uncompromising adherence to ethical principles are turning out to be a long-term commercial strategy. For example, it would have been much easier for them to develop meat analogue products containing eggs and dairy—by far the most common form of vegetarian meat alternatives worldwide—and they still would have had virtually the whole of the South African market to themselves.
Yet, because their business is based on the belief that breeding animals on factory farms is ethically abhorrent, they developed vegan products from scratch, containing no eggs, dairy or meat. This has always been the most difficult part of their business, says Wally. They had to fumble their own way towards breakthroughs such as inventing a non-animal casing for their vegan sausages, and there were no experts to help them scale it up for mass production.
“I could never pick up the phone and say: ‘I’m having this problem with my process, what can I be doing wrong?’ I had to find the problem myself, even if it meant staying awake for 100 hours,” says Wally. Similarly, they steadfastly held onto the principle of not using any genetically modified plants in their products, despite the fact that it dramatically shrank the range of suppliers available to them.
“We have to work very hard to find raw materials that are not genetically modified,” he says. Their gain, which is not yet fully realised, is that the Fry Group has dug itself strongly into a powerful niche. It has become one of the leading producers of vegan meat analogues in the world, exporting to the United States, Europe, Australia, New Zealand and India among others.
The Frys’s strategic advantages include their unique intellectual property, their strong financial independence and the acceptability of their products to old ethical systems such as halaal, kosher and shuddha, as well as to the new environmental consciousness sweeping the globe. “We’ve built an ethos around our brand where we’re considered by our consumers to be squeaky clean on the issue of the exploitation of animals,” says Wally.
None of the Fry Group’s proprietary processes and intellectual property is patented. A patent requires a detailed description of the invention, thereby helping copycats to reengineer the invention with only slight changes so as to sidestep the copyright, says Wally. The ingredients are listed on the pack, but the protection lies in the fact that it is difficult to reverse engineer the processes they have been put through.
Wally believes that because they follow “ethical pricing” principles, it is not easy for a competitor to take market share by coming in cheaper. Besides, 20 years of ethical brand-building, including the recent sponsorship of the South African chapter of the Meat-free Mondays campaign, cannot be stolen.
Another strength of the Fry Group is that two of the Fry daughters and their husbands work in the business, ensuring a deep level of commitment and trust that give family businesses their edge. And as far as nepotism goes, the Frys, as usual, err on the side of strict principle. Only one daughter has so far managed to work her way up to the position of director. And one son-in-law, who is now a systems coordinator, had to start as a cleaner.
Wally no longer spends Saturday afternoons, as he did in the early days, loading 12 tonnes of produce onto a truck on his own. Debby has built a team of financial professionals to help manage her side of the business. Yet in some ways, they are still heading towards an unknown no less daunting and exciting as their start.
The holy grail, the mainstream US market, remains untapped and a long-standing ideal to produce inside the countries to which they export so as to minimise the carbon miles on their products is a huge challenge. But there are a few certainties. They know that, this time, they won’t be able to do it on their own and are looking for a “big brother” company to help them take on the world.
They know that the “big brother” won’t be the likes of Monsanto or McDonald’s. And they have no intention of “cashing in to go lie on the beach. The family that works here has got a vision to take this thing worldwide,” says Wally.
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