Case study Refresco
Netherlands-headquartered private label drinks manufacturer Refresco has been able to identify both costs savings and areas of innovation by focusing on supply chain management and working closely with customers.
Refresco occupies a unique position in the supply chain. “At first we were unsure of the added value of the business because of the effect of retailer pressure on its margins,” says Menno Antal, investment director at 3i. “But once we truly understood the industry dynamics of large, global suppliers and large, multinational – but not yet really global
– retailers, we saw how it was really creating value.”
As consolidation of both its suppliers and customers progresses, Refresco’s buy-and-build strategy puts it in an ideal position to grow with its customers. “On top of that, you benefit from traditional avenues like economies of scale, market entry, customer sharing and cost sharing,” says Refresco CEO Frans Barèl.
Barèl says margins are under pressure, but adds: “There are two things we can do to present sustainable margins to our shareholders. One is continued improvement of our cost level. By further growth, we see a decrease of our cost level and our cost per unit every year. Secondly, our ambition is to combine cost leadership with the highest level of innovation. With innovation you present uniqueness, which means nobody will be looking for the last penny.”
The strategy has proved hugely successful. Refresco was born of the combination of five separate businesses between 1999 and 2002: Refrescos in Spain, Menken in The Netherlands, Krings and Hardthof in Germany and Delifruit in France. It grew sales from €219m in 2000 to €417m in 2003 in the process, becoming one of Europe’s largest suppliers of fruit juice to food retailers, primarily as private label. Sales in 2005 are expected to top €650m. 3i invested in 2004. “We’d been following Refresco for some years,” says Menno Antal, investment director, 3i. “We were hugely impressed with how it had performed and grown over the space of just three years and we knew that was down to a top-class management team.”
Frans Barel, CEo, Refresco
“3i has helped us create an organisation with a higher degree of professionalism and focus on executing our strategy,” says Barèl. As well as working more closely with retailers through the supply of private label goods, Refresco shares its cost-leadership credentials with producers of branded goods such as Coca-Cola, with which it has a bottling contract.
Barèl says delivering cost leadership in this way means the brand owner can “focus more on building the consumer franchise, through marketing and so on. We are co-operating with each other to give the consumer more choice and the right pricing.”