Multi Manager Insights Webinar - How a coffee company navigated the Covid-19 pandemic

By Nedgroup Investments

De Waal Basson, the co-founder of Bootleggers Coffee Company shares the Bootleggers story and how they had to adapt to survive Covid and a new ‘normal’.

To watch a recording of this conversation, go to Nedgroup Investments Insights on YouTube.

Bottleggers was established in 2012 and today has 25 restaurants (of which 50% are franchisees) with 3 more opening before the end of 2020. The idea behind Bootleggers was born out of a friendship and now partnership between two brothers and a best friend. Back in 2010, the three bachelors were living in Sea Point, leading active lifestyles. They were all early risers and avid coffee lovers who saw a need for a coffee shop that opened at 6:30am. As luck would have it, the perfect coffee site became available in Regent Road, which they jumped at. After importing the Rolls Royce of roasters from Holland and being asked what name should be engraved on it, they sat down to start exploring what their business would be all about. The name Bootleggers Coffee Company perfectly described the trio – ‘upsiders’ in the industry and mavericks. Their first site in Regent Road and the company name were instrumental in shaping the character of Bootleggers into what it is today.

Did scaling the business diminish the Bootleggers ‘identity?
Bootleggers is not a mass brand. They have sites selected in communities as opposed to regional and national malls. Their focus has always been on serving the people who work and live around their stores. Basson is not too worried about newcomers to the coffee market, such as Starbucks, as his customers really seem to identify with the Bootleggers brand. Their offering is simple and honest – one fantastic brand of coffee and a concise menu containing great food that they would want to eat. They source the best ingredients and products that are organic, free range, sustainable, etc. and offer this at a really good price. Staff training is a big part of their offering and ensures everyone is on top of their game. Basson believes that every Bootleggers has a ‘vibe’ or X factor that people identify with and want to be part of. He sees their X factor and offering as key differentiators in a busy coffee shop market.

Bootleggers has teamed up with Rainforest Alliance who make sure that crops are farmed in a sustainable manner that looks after the environment. By doing this, farmers can command a higher price for their products. All Bootleggers coffees are 100% Rainforest Alliance certified and believe their customers appreciate this approach, if not demand it.

Level 5 lockdown – the Bootleggers survival strategy
Basson could see turnover dropping in the two weeks before lockdown was implemented with a final plummet in the days leading up to lockdown. He credits his amazing team who were able to adapt extremely quickly. As trade was tapering off, they started to reduce stock on hand, staff in stores and menu items. He assumed insurance companies would have their back, which was not the case. They were forced to go back to basics and looked at every single expense in the business and cut wherever they could. As lockdown started lifting, they started with wholesale deliveries through their central bakery plus coffee to people’s homes. Anyone with a car started doing deliveries. As their restaurants started opening up, they monitored every cent spent along the way ensuring they were 100% Covid compliant to keep both their staff and customers safe while still able to pay the bills at month end. Even today, they constantly monitor every aspect of the business and reflect and work on their operating model. The team worked closely with their franchisees and did everything they could to help them to survive. Franchisees were not charged franchise or marketing fees from March to September and then only if their turnover could support it. The brand has been very resilient and people flocked back to their local Bootleggers as soon as they were able to.

Basson reflects on the situation as ‘traumatic’ with zero income almost overnight and very high overheads. The partners had to dig deep into their own savings to make sure they survived. The group’s turnover is currently down by 25% across the board year on year. Some stores in residential areas are slightly up from 2019. They now make sure that for every level of turnover, they are sustainable and able to survive. Staffing was probably the hardest aspect of lockdown for them. At the beginning of March they made a decision to put all 1 000 staff members on temporary layoff, including themselves, bringing staff back as they were able to. Basson recognises the willingness of staff to do their bit and take on other roles in the business as critical to their survival.

Lessons learned from starting a business and surviving Covid
Firstly, whatever you do, you need to have some fun! We also learned that there’s a lot of opportunity in South Africa and are excited about the future. Thirdly, your business plan never works out exactly as you’d planned, but you have to start somewhere.

If you see a crisis coming, expect the worst and act immediately. While we don’t know how long this crisis will last or what other crisis lurks around the corner, we’ve taken the approach that we need to adapt, survive and thrive in a constantly changing environment. This take guts, forward planning and rethinking everything. We need to adapt and survive and that’s what we’re going to do!