Q&A with Nando’s CEO Mike Cathie

Nando’s, the fast-food chain behind some of SA’s cheekiest ad campaigns, regards 2017 as the most telling year in its three-decade history, according to SA CEO Mike Cathie.

The Financial Mail interviewed Cathie about the year that was, SA’s reinvigoration, and how the chain is responding to changes in the retail landscape.

Consumers have been under huge spending pressure and naturally December would have been a crucial time for the industry. How did the group perform in terms of festive trade?

Our trade was good. The year was tough without a doubt — the first six months were incredibly tough, but it turned out to be a wonderful year for us. It’s not really about the result, it’s about how the business responds to tough times, and it’s good to be tested. Even though times were tough, we didn’t cut back on any development initiatives, human initiatives or community initiatives.

Some positive leading indicators have emerged since the ANC’s elective conference in December. Are you seeing this improved sentiment filter through into stores in terms of better sales?

It’s a little too soon, but there are some encouraging signs. I don’t want to speak on behalf of all South Africans, but my sense is that the vibe is hopeful. We have a new president (Cyril Ramaphosa) who is making some bold moves, though of course the opposition is not going to stop criticising. I think as a country we are a lot more hopeful than we were six months ago. It does bode well for trading — consumers have been under real economic pressure, which means they tend to hold onto their cash a lot more because they’re not sure what’s coming.

They lived with the randomness of the previous budget, where all of a sudden a whole bunch of people had to pay more tax and there were tariffs and rates going up. So consumers had to hang on and be a lot more thoughtful about how they spent their money.

After a bruising 2017 (for most players), what’s your call on SA’s fast-food market in the short to medium term?

Businesses that have stayed sensible and connected to their customers are probably well positioned to realise some decent growth in the period ahead. There’s been significant churn in the industry as a whole. I think the folk who have maybe not been thoughtful about taking care of customers, or about the trading zones in which they set up, will see some contraction. And if you are hugely dependent on deep discounting, I’m not sure how healthy your income statement looks right now. Also, if you have chased the tyranny of new store openings at the expense of everything else, you probably also have a balance sheet that’s looking a little shaky.

The company’s footprint in SA has remained flat at just under 300 outlets for some time. Do you have designs on adding more stores?

We’re not hysterical about growing the base, because you can get yourself into an awful amount of trouble chasing numbers. We’re a lot more about where we trade. Increasingly importantly, can we trade in areas where it’s easy for our Nandocas [employees] to get to? Some of them have their own cars but a lot rely on public transport like taxis. If you can, wherever possible, be in a zone where your Nandocas have to take only one taxi to get to work, it makes such a big difference to their financial wellbeing. All these things have to be taken into account. So we don’t sit down and say "we’re going to open 40 restaurants this year come hell or high water"; it’s a lot more about thoughtfully figuring out where the economic opportunities are, and where you can make it as easy as possible for your employees to get to work with the least hassle, aggravation and financial downside. With the demographic changes in the country, some areas have become less attractive from a trading point of view and new areas have sprung up, so it’s really been about relocating to take advantage of better trade zones and areas where customers and staff are safer.

So the net growth has been pretty much zero, but it’s a lot more about realigning where we are with our customers. Waterfall is a brilliant example; it’s turned into a very attractive trade zone. We moved one of our restaurants from a little further north into Waterfall. I think [the recalibration] will always continue. I don’t think the population movement has settled down — new suburbs are popping up all the time and new centres of trade are opening up, and as people shift we have to move with that. But we definitely have growth aspirations.

Nando’s has a partnership with Mr D Food and other delivery services. What’s your approach to the growing food-delivery segment?

It’s a category that’s increasingly important, but I think everyone needs to be very thoughtful about how they move forward with it because there are incremental costs if you go that route. You have to pay drivers, vehicles, maintenance and all of that. If you use an aggregator or third party, they charge a delivery fee to your customer and they also charge you a commission. So customers are paying more and we’re paying more. But is a customer’s experience as good as it should be? Is the food they take delivery of hot, has it been looked after, and is the driver treating them with respect? So we are moving forward cautiously because the last thing we want to do is create an environment where loyal Nando’s customers have a bad experience.

If you as a loyal Nando’s customer place an order and your food is cold, or is wrong, or the driver is rude to you, you’re probably not going to feel terribly bad about the delivery company but you’re probably going to be quite grumpy with Nando’s. Uber Eats is one of the companies that we’re in discussions with... and we’re working with various people to figure out how we can best [deal with food delivery].

Tell us a little bit about your advertising strategy — is it likely that you will remain centred on light-hearted political statements?

The last advert, "fix our s#*t", was inspired by increasing feedback from customers that it felt like we weren’t clear enough as a country about how much power we have as individuals. It was fundamentally driven by a desire to express a more hopeful sentiment, but also to remind everyone how powerful they are as citizens and voters — you don’t have to put up with this kind of nonsense forever, you can stand up and make your voice heard and drive this country forward to the state of magnificence that we all hope it will realise. So that was quite different in that it’s encouraging and hopeful and about taking your power back and being heard. But our strategy will not change, it will remain about giving people a voice who sometimes don’t feel like they have one, and we will take their lead.