Roy Bagattini, the CEO of Woolworths, which aspires to be “one of the world’s most responsible retailers”, believes the escalating furore over its role in plunging chocolatier Beyers into liquidation is deeply unfair.
Bagattini tells the FM that the narrative of a swaggering corporate behemoth squishing a small family-owned business into submission is far from reality.
“I’m not looking for the sympathy vote here,” he says. “You can see the empathy that would go to a family business pitched against this big Woolies, but Beyers going into liquidation isn’t because of us.”
On the face of it, the story is simple. For 34 years, Beyers had a sweet deal, making chocolates exclusively for Woolworths, including Sweetie Pie and some variations of its beloved Chuckles brand. Of Beyers’s R650m annual revenue, Woolies made up more than half.
Then it soured — and quite why depends entirely on who you listen to.
Kees Beyers, who founded the chocolatier in 1987, claims that Woolies tried to bully his company into stopping supplying rivals like Checkers. When Beyers refused, it torpedoed its contract, which triggered the liquidation.
This might seem like a storm in a sugar cone, but look deeper and it provides uncommon insight into the power imbalance implied in the supply chain of a small, fragile economy, where small firms scrap for the attention of the few large retailers with deep pockets.
And it helps the narrative that Kees’s own history — which at times resembles that of Charlie in the classic Roald Dahl story — fits neatly in the David vs Goliath frame.
Born in Belgium, Kees said that from the age of seven he “knew that one day he would own a chocolate factory”. Having qualified as a pastry chef at the age of 17, he emigrated to South Africa soon after. Here, at the age of 20, he founded Beyers Chocolates. This is what traded merrily on supermarket shelves — until this year.
The way Kees tells it, his company’s death spiral was sparked by big egos in the lower echelons of management at Woolworths. “They started throwing their weight around in the business: not agreeing to increases, for example, and becoming incredibly demanding to the point of being unreasonable. So we needed to diversify,” he tells the FM.
But when Beyers began to supply Shoprite Checkers and Pick n Pay, Woolies claimed this breached an “exclusivity contract” it had for the chocolate products they developed together. Woolies says it had “no problem” with Beyers supplying rivals with other chocolates — just not the confectionery created using their joint “intellectual property”.
Bagattini says no reasonable retailer would allow this.
“When our intellectual property is shared with our competitors, there’s a significant risk to us,” he says. “This may come across as a David vs Goliath issue, but it really isn’t, because even a smaller business, if the trust was breached, would have probably ended up with the same decision.”
This might seem like a storm in a sugar cone, but look deeper and it provides uncommon insight into the power imbalance implied in the supply chain of a small, fragile economy
So what sort of intellectual property are we talking here? Amarula chocolates are fabulous, but this is not rocket science.
Au contraire, says Bagattini. “There has been huge innovation in the chocolate category in recent years. The intellectual property comes in how you take a chocolate formulation and turn it into a product that really is differentiated.”
Woolies is the market leader in premium chocolates, he says, precisely because of the years of experimentation. “Those are trade secrets, and when this is used without your permission, that’s harmful to your business,” he says.
Kees calls this a lie from top to bottom.
“First, there is no valid signed exclusivity contract in place, and if they say there is, let them show it to you. It does not exist,” he says.
“Second, Bagattini could not name any product that we supposedly supplied to the competition [developed as part of our partnership] as there is none — we always protected their product exclusivity 100%.”
And, while Bagattini says Woolies tried to compromise for two years, Kees says this isn’t true either. His company was simply told to cease selling to Checkers and Pick n Pay. “That is blackmail, not a negotiation.”
For Bagattini, while it seems the stakes are low, there is actually plenty on the line.
Being branded a bully, for one thing, is deeply damaging to the company’s standing with its other 500 suppliers. But to also be accused of concocting a fictional story to torpedo a contract speaks to the ethics of a company that trades on the principle of doing “good business”.
Bagattini, while conceding that Woolies waited too long to defend itself, is adamant it did nothing to jeopardise this principle.
“The risk, to me, of not being truthful is significant. So, I’m betting on my company and the people in my company and how they work with our suppliers. And I have no doubt that we are consistent with our values.”
One person who has come out to bat for Woolies is Noel Doyle, the former CEO of Tiger Brands, which supplied products to Woolworths, from Black Cat peanut butter to All Gold tomato sauce.
“I think Woolies is being tarred unfairly,” Doyle tells the FM. “I dealt with the company for years, right from before [former CEO] Zyda Rylands was there, and they were always respectful towards us. They treated it as a real partnership. So that’s why I don’t recognise Woolies in these accusations.”
Then again, Tiger Brands is hardly a small supplier, so it might have qualified for a red carpet that Beyers Chocolates might never have seen.
Either way, Kees says this tale has exposed the fiction of Woolies’s ethics. “I think Bagattini has been lied to by his staff, and they will trip up over their own lies in the next few days,” he says.
He adds, derisively, that “Bagattini is the very first CEO, in my 34 years of supplying Woolworths, that I have never met in person”.
There is evidently far more behind this chocolate fountain. It’s a story that speaks to the integrity of ethical corporate promises, just as it shines a light on the relative fragility of small businesses in South Africa.
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