The recently published results of the Farsons’ Group for the financial year ending January 2012 showed a profit before tax of €5 million, an increase of 25 per cent over the same period the previous year. Furthermore, the group increased its turnover to exceed €70 million. This positive result has been particularly attributed to the company’s record export sales, group chief executive Norman Aquilina tells The Times Business in an interview.
The group’s growth strategy remains entrenched on two pillars – namely innovation and export-led growth
“Today we export to various markets ranging from Europe to North Africa, and from North America to Australia – with Cisk and Kinnie being our main flag bearers. That said, it is still too early to talk about export success, but it is significant and very encouraging to note that we are seeing a consistent growth in our exports,” he says.
He says that Kinnie is available in UK, Libya and Australia with the latest addition being the Czech Republic, while Cisk is mainly exported to Italy and now even as far as China.
Mr Aquilina says the group’s growth strategy remains entrenched on two pillars – namely innovation and export-led growth – without, of course, losing out on any local growth and additional brand representation opportunities thereby further strengthening the group brand portfolio.
“On the international side, exports firmly remain a strategic priority – here we are not only talking about exporting what we produce locally but also exploring avenues of strategic alliances with overseas partners which would render our export operations more competitive and ultimately offer more potential for profitable growth. So far, we have one arrangement whereby Kinnie is produced under licence in Australia.”
He stresses that within the local scene and considering the limited organic growth within some of the major segments the company operates in, the company is focusing on business and product innovation.
“For example, we are currently well advanced in a business process re-engineering exercise which will render our sales and distribution even more efficient and effective. In terms of product innovation, without hesitation, our highlight last year was the successful launch of Cisk Chill. Such developments give us that needed incremental volume and value growth, while also further strengthening our position in the market,” he says.
He says operating in a highly competitive environment which often does not allow one to adopt the needed pricing policy and having to face considerable inflationary pressures in key commodity prices, raw materials and fuel oil have all contributed towards exerting pressure on the group’s margins.
“Nonetheless, it is significant to note that we managed to marginally reduce our selling, distribution and administrative cost ratio to turnover and more importantly marginally improved our operating profit which now reads €6.4 million. One should also note the continued improvement in our EBITDA which has now reached €11.45 million.”
Mr Aquilina says the group’s financial results can be attributed to various factors – however one can split them into what he calls the controllables and non-controllables. The latter consists of the economy, tourism and the weather. “All three have been generally good during 2011,” he points out.
“With respect to the controllables one finds our drive for more productive efficiencies, ongoing efforts to always continue to raise our quality standards and further improve our sales and marketing initiatives. All this has been spearheaded by stronger performance management across the group along with improvements in our cost management and procurement. Additionally, we have maintained our investment in our human capital along with all the necessary working assets – whether plant, technology or whatever is needed to render our business model more and more competitive.”
He highlights the silver medal recently awarded to Cisk Export in the 2012 World Beer Cup as being the international endorsement of the group’s philosophy of adapting the highest quality levels across the group.
Mr Aquilina says the construction of Farsons’ new state of the art €12.5 million brew house is nearing completion and will be commissioned over the next few months. “This is yet another major milestone in rendering our operations more competitive after a €24 million investment in a new logistics centre and PET packaging line back in 2008,” he says.
He describes the fact that the group enjoyed two consecutive record sets of financial results in the last two years as involving “no rocket science or secret formula” but “simply the result of more collective effort and sheer determination to achieve whatever we all set out to achieve at all levels within our group”.
He adds: “We go through great length to ensure we adopt the right strategy and implement the most effective tactical measures in response to the challenging and highly competitive environment we operate in – and all this is done following an extensive market and business review, and ultimately reflected in the formulation of our business plans.
“Of course, it’s not just about business planning, or better, meticulously working your business plans. It’s also about believing in your plans. This, for me, is a key consideration.
“Add on the needed involvement and broad sense of ownership along with the necessary disciplined and consistent focus on the set priorities and planned objectives amongst all your management team – complemented by a strong dose of performance management – and you have already got one hand on your targeted results.”
Moving on to subsidiaries, he says the wines and spirits business (Farsons Beverage Imports Co. Ltd.) continues to play an important role within the group thanks to improvements in brand portfolio management.
“This business is certainly not short of its challenges – notably parallel trading and illegal importation – but nonetheless is still translating into improved results. This has come about as a result of our dedicated structures and resultant added focus which in return has allowed better brand governance and ultimately better performance.
“We have also made some significant brand acquisitions – in terms of representation – which have contributed to the momentum in our growth,” he says.
Turning to Quintano Foods Ltd, the group’s food importation arm, he says the alliance of major supermarkets with international chains has and will continue to somewhat change the retail landscape within the local market. “Not only, it also poses some challenges on the strategic response, corporate structures and ways of working within traditional importing businesses.”
Mr Aquilina says the group responded to these changing market realities and adopted an approach which ensures it maintains a good market presence with good brand performance and continued profitable growth. “Indeed, Quintano Foods remains the fastest growing company within the group since its acquisition back in 2004. This has also come about as a result of the strong leverage and synergies of positioning such a business within a group like Farsons.”
Regarding Food Chain, the restaurant wing of Farsons, he points out that through the management of the franchise agreements of Burger King, Pizza Hut and KFC, this company forms an integral part of the group and while both turnover and profitability increased during the year, “we are always on the lookout for further opportunities for growth”.
“The potential is there, and I am pleased to note that with the added management focus, which we have put in place over the year, we are growingly delivering improved results,” he says.
Summing up the general direction of the group, Mr Aquilina firmly believes that from a strategic point of view, it is imperative that the group does not restrict its outlook to only its bottom line results, no matter how important this certainly is, but also keep a vigilant eye on the horizon.
“We’re thirsty and adamant on brewing a better future. We need to, and will, maintain our strategic focus to ensure we constantly strengthen our competitive edge within all segments of our group business model, improve our overall performance, take on any arising business opportunities, whether local or overseas, and strive to continue to deliver the desired results,” he says.