News | Wednesday, 04 November 2009

The new vision for Malta’s beverage giant

In a no-holds-barred interview, CHARLOT ZAHRA speaks to Norman Aquilina, the recently-appointed Farsons CEO-Designate, about the company’s performance in spite of the economic recession, his priorities for the company, and the possibility of more early retirement schemes following those already offered

You have been only a few months in the job. What is your first assessment of the Farsons Group and its employees?
My first assessment is clearly that Farsons is a Group which offers a lot of potential. We have a tremendous heritage behind us but most of all lots of opportunities ahead of us.
We have already achieved a lot but, of course, there’s still a lot more to be done, more so today because competition is so intense and we obviously need to make that extra effort to counter these competitive pressures.
In terms of employees, there is a wealth of experience, a lot of know-how has been built over the years, and it is obviously very important that we maximise on this and get the best out of each and every person within the Group.

Which are those areas within the Group whose performance you are satisfied with? Could you elaborate more in this respect?
First and foremost, I have to emphasise that, unlike the general perception, the Farsons Group goes beyond the beverage industry.
Though it is predominantly a beverage producer, over these years it has developed into a diversified business model which also includes the importation of wines, spirits and foodstuffs along with the management of fast food franchising. All this summing up to an annual turnover of around €70 million.
I can say that in terms of Farsons we obviously have our flagship brands – Cisk and Kinnie – which are clearly household names, indeed considered as Maltese icons by many. These brands have held their heads high in spite of the competitive pressures.
Here I must underline that the beverage industry was only fully liberalised as from last year. We obviously had our resilience tested to the maximum, but I believe that the interim results for this year have shown that we are responding well and we are managing to deliver what is expected out of us. Obviously we need to continue to push forward to make sure that we continue to move in the right direction.
Even the other member companies within our Group have registered satisfactory results to varying levels. Of course there’s still much more to be done, across the Group, but I believe we can look forward with some optimism despite the hurdles that we have in front of us.

Which are those areas within the Farsons Group in which you would like to see an improvement? Why?
I think, just like in many other businesses, we must always strive to improve whatever we have, whether it is being done well or maybe not as well as we would like it to.
In terms of improvement, it’s a matter of ensuring that we manage to get the best out of our resources, and build on the experience built over the years whilst also changing whatever needs to be changed. Of course…

…Are there any areas that are underperforming?
I think there are areas that are not performing as well as we would like them to…I would say there’s always room for improvement, but I wouldn’t single out any particular area. However what I would say is that while the general economic climate is taking its toll on business in general, with the beverage industry certainly being no exception, there is one issue which is hurting our beverage business. This is the supposedly environmental tax we pay in the form of an eco-contribution. This has never worked in a fair and clear manner from day one back in 2004 and has, and still is, penalising those companies like Farsons which comply. A solution is long overdue.

What are your priorities or pet projects during your first months as Farsons Group CEO-designate? Could you kindly elaborate more in this respect?
At this stage, what is important is that I continue to work closely alongside our current CEO, Louis A Farrugia, who has successfully led our Group for many years. This will certainly serve me well and help me get an even stronger grasp of all relevant matters.
That apart, one of my first objectives is to ensure that we have a well positioned management team capable of taking this Group to higher heights.....capable of achieving the objectives we set forth. I have to emphasise that at the end of the day, the success of the Group does not depend on an individual but on a team effort.....trying to get the outmost out of everyone and ensuing that total sum of the effort of the team is not simply one plus one equals two but three, if not possibly four.

Are there any specific priorities that you would like to get as CEO-Designate?
In terms of priorities, I think it’s a matter of pushing forward with the right balance – a balance which ensures continuity, whilst also securing the necessary changes. My understanding of continuity is that of ensuring that we continue to pursue the vision and foresight we have set.
Operating within a recently liberalised and highly competitve environment brings along with it a myriad of related challenges for us. Within such a changing scenario, it is clear that we need to, and are already responding by instilling a stronger challenging culture; challenging rather than accepting ways of doing business. Along with this, we are constantly seeking ways of increasing our productivity levels along with being more cost efficient; and of course also keeping our eyes on the horizon of this constantly evolving competitive environment, apart from the all important bottom line objectives.

As a director of a beverage giant, what is your assessment of the Maltese beverages market, especially in the midst of an economic recession?
Certainly the beverage sector is under some strain which is further compounded by various factors, take, for example, the pressures and difficulties in the touristic sector. The same applies to domestic demand with our retailing landscape having materially changed over these past few years, as a result of, for example, the advent of private label products, direct importation by retail operators and now the setting up of a foreign owned supermarket chain. Today, a number of consumers are reacting to the inflationary pressures by being more selective and sometimes even changing their purchasing patterns. All this obviously has an impact on the demand for our products...there is no doubt that we are living somewhat challenging moments.
However at the end of the day, we have been operating in this competitive environment for some time now. It’s a matter of regrouping your resources and pushing forward with more determination.

Recently, the Farsons Group concluded a €24 million investment programme in a new pacakging plant and logistics centre, thus doing away with regional distributors. How much has this investment contributed to improving both your productivity and your bottom line?
This investment was a decision we had taken after a lot of work and calculation, well in time prior to the liberalisation of the market.
We firstly needed to ensure that we had the productive capability to switch to PET bottle packaging. We also needed to look at a distribution set-up which gave us better control, greater efficiency, and of course an improved level of service to ensure that our products arrived at the consumer in optimal condition.
Today, with both the packaging plant and logistics centre now in operation for almost two years, one can safely say that the investment made is delivering the results and living up to our expectations. It is certainly delivering the efficiency levels and is certainly contributing towards improving both our productivity and bottom line results. This, one must not forget, is also thanks to our highly dedicated management team.

What other kind of investment does the Farsons Group have in store?
Farsons over these years has made investments which range across various aspects of our operations. The latest investments will not be the last ones – there will certainly be other investments lined-up. We will continue to invest whenever and wherever necessary.
Within the broader Group perspective, we also will conitinue to build on this diversified business model and invest in those businesses which are showing positive signs of growth potential.

…What kind of specific investments do you have lined up?
There are some discussions going on internally, but at this stage it is premature for me to make any announcements. But in due course this will be made known once a final decision is taken.

How has the economic recession affected the Group’s operations and financial resilience?
I think that in spite of the economic difficulties along with the market liberalisation, as I indicated earlier, we have successfully tested our resilience. Our financial strength, timely investments and vast experience, coupled with the necessary strategic decisions has kept our Group well on course, steering forward, even if not at the pace we would like it to be given the somewhat turbulent market conditions of the moment.
That said, this is also a time when we must be in a position to swiftly take advantage of any arising opportunities that will come about in the future once the economic situation improves. We simply cannot afford to sit down and wait. We need to be prepared and that is precisely what we are doing.

What effective measures have you taken to ensure financial sustainability for the group?
Rather than talking about sustainability, it’s more a matter of ensuring that we are as productive and as efficient as is necessary.
And this irrespective if we are talking about our human resources, our financial resources, any of our assets or brand portfolio.
Of course, for a Group like Farsons, one cannot fail to also mention our ambitions for sustainable growth. We need to press for growth, particularly in view of our Group investments and strategic outlook-growth which should not necessarily only be of an organic nature, but also be innovation-led, whether in the form of product or business innovation. Furthermore, just as much as we have extended our business interests over the years, growth can certainly also come about as we revisit and review our Group business model.

Does the company plan to shed more jobs after the Early Retirement Scheme implemented a few years ago or not in the near future to maintain the bottom line?
I must clarify that the early retirement scheme was a voluntary one and this was occassionally complemented with the non-replacement of people reaching retirement age. There is no reason why we should not keep these options open given the voluntary nature of the former and natural progression of the latter. That said, our focus must be on ensuring that we optimize on our productive capacity in the most efficient manner possible and this implies that we ensure that every employee across the Group is as productive as possible and delivers the necessary contribution.

How many employees does Farsons have at the moment?
Just over 400 at the Mriehel brewery. This encompasses all aspects of the operations of Farsons but excludes the subsidiaries.

And with the subsidiaries, how much would the head count be?
The total labour force of the Group would be closer to 800 today when one takes on board the employment levels of all subsidiaries.

How have Farsons Group’s export operations fared this year when compared to last year?
In terms of exports, I think we have fared quite well, and certainly an improvement over last year, even if one must acknowledge that this is not an easy task. As an island, our geographical location, particularly our insularity heavily penalises us, especially when you consider that most raw and packaging materials need to be imported. In spite of these odds, it is certainly one of the areas we are determined to make progress in. In fact we have entered a number of markets with both Kinnie and Cisk.
It’s still too early days to talk about success, but there are encouraging signs and growing numbers in terms of our exports.

Which are those markets in which you have started exporting this year?
Our main export market is the European Union, but we have made some initial inroads in markets beyond the EU, a case in point being the US.

What about Australia, with a Maltese community there?
We actually already have Kinnie produced under licence in Australia.

Which are those markets in which Farsons is planning to penetrate next year?
We need to focus our resources on those markets which are relatively close to home, predominantly the EU; however we obviously need to keep an eye open on any markets that show opportunity for our brands.

When do you think that the Maltese economy will start to recover out of the economic recession?
I do not have a crystal ball – but more seriously, I still think it is too early to talk about recovery. Hopefully, it will be sooner rather than later.
That said, it would be a good step in the right direction if the Finance Minister ensures that the forthcoming budget does not contain any measures which are counterproductive to the competitiveness of business - indeed he must seek ways how to re-invigorate and encourage further economic activity.
Every budget has of course different circumstances to cater for. Yet, from a general perspective, we sometimes need to be reminded that it is not public expenditure which leads the way to greater prosperity – it is private enterprise. After all, it is no use having good intentions about distributing wealth unless you also pursue policies which create wealth.....and this means a thriving private sector.

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04 November 2009


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