Norman Aquilina, CEO of Farsons Group, speaks to Anthony Manduca about the challenges ahead.
Even though Farsons Group results are consistently good, this does not mean that the company does not have, and continues to have, its fair share of challenges, according to CEO Norman Aquilina.
“With record year-on-year results, we sometimes run the risk of taking them for granted, so staying vigilant is critically important,” he says.
Farsons Group is engaged in the brewing, production and sale and distribution of branded beers and beverages, the importation, wholesale and retail of food and beverages including wines and spirits, the operation of franchised food retailing establishments and property development.
With a wide portfolio of food and beverage brands, the group represents some of the best names in the industry, which include its own award-winning range of beers and beverage brands such as Cisk Lager and the Kinnie range of soft drinks.
Its financial results for the year ended January 31, 2019, shows a 5.1 per cent increase (or +€4.82 million) in revenues to just under €100 million and a near five per cent growth in pre-tax profits to €14.1 million.
Mr Aquilina says that Farsons has embarked on an ambitious growth strategy with both innovation and exports being its two key drivers.
“The challenges on both these fronts are endless, and even though we continue to register steady progress, building an innovative and export-led business is a challenging and long-haul process.
“We also need to keep in mind the ongoing challenges we face, given we operate in a highly competitive market, not to mention the unfair challenges of also having to compete with some operators that trade outside the fiscal and regulatory radars,” he says.
Maintaining a competitive business model and keeping one’s costs under check is another ongoing struggle that has been further accentuated by the prevailing tight labour market conditions, he points out.
“This has brought about added pressure to render our business more efficient to ensure we do not let our rise in payroll costs outweigh our increase in productivity.
“So even if the underlying significance of our results lies in our ability to consistently improve, we need to always keep in mind that the competitive environment and challenges around us continue to intensify.”
Mr Aquilina says the company’s positive results boil down to the right mix between shareholders and professional senior management at the top end to ensure the right strategic vision and timely decisions, “driven by an objective-led management team and implemented by a performance-motivated workforce”.
He adds: “The synergies of this collective effort forms the backbone of that needed resilient drive to safeguard and strengthen our competitive advantage. That apart, I would also underline good corporate governance as the cherry on the cake.”
Malta is experiencing a boom in population. Does this make it easier for companies such as Farsons to make better returns?
“It is true that the influx of foreign workers has given us a larger local base which translates into potentially more consumption of our products. But the underlying economic growth experienced in recent years has also increased competition as this has attracted new business entrants,” he says.
Mr Aquilina recently said that had Farsons not invested in innovation it would not have survived. Asked to elaborate, he said: “Market liberalisation in the beverage sector came about in 2008. This brought a total change to the local market landscape with a resultant surge in imports. We anticipated this by investing well over €100 million during the last 10 years, and today can boast of having the latest state-of-the-art brewing and beverage production facilities.
20% of our workforce are foreigners
“The strategic importance of such investments cannot be underestimated, but equally we cannot underestimate the challenges this has brought about in terms of training our workforce. Here, the changes in our workforce skills profile has been immense, but nonetheless critically important for us to have managed to take on the full onslaught of the competitive pressures of market liberalisation.”
As a result of the ongoing innovation efforts, he stresses, Farsons has significantly strengthened its competitive position. All this would not have been possible without a sustained commitment towards the necessary investments and ongoing drive to innovate.
Exports is a key plank in Farsons’ internationalisation strategy. Do they make a tangible difference to the business?
“Developing an export strategy has been a natural extension of our growth ambitions, and even if exports represent under 10 per cent of our volumes, they nonetheless are incremental volumes which would otherwise have been difficult to achieve from the local market. Beyond the volumes, such exports are helping us raise the bar, both in terms of quality and overall competitiveness, which, of course, also has a spill over benefit on the local market.
“Today we export to a number of countries, spanning from Europe to the Middle East up to Australasia, and even if such business is fraught with numerous challenges, and our efforts are more often not immediately successful, we persevere in line with our overriding international growth ambitions.”
He explains that while the Farsons Group continues to pursue a growth strategy, this is not only restricted to Farsons.
“Around half of the group’s turnover is generated by four subsidiaries involved in the importation of food and beverages, franchise food restaurants and water dispensing. Growth opportunities, whether organic or by means of extending our business model, remain significant.
The spin-off of Trident Estates does not seem to have had much impact on Farsons Group results. How does he explain this?
“The need to increase shareholder value by making better use of our property portfolio, particularly those properties not utilised by our operations, has driven this spin-off. Given this non-utilisation, the spin-off did not have a very material impact, even if the subsequent non-consolidation of Trident’s financials within the group results did translate into some additional rental costs,” he says.
Mr Aquilina also believes that business should not be concerned “solely with making profits’’.
He adds: “Today, more than ever before, there are both moral and business imperatives to do more than just increase profits. We are increasingly obliged to take a long-term view which considers the interest of a wide spectrum of stakeholders, ranging from our consumers, our workforce, our suppliers, our shareholders along with the broader community together with the environment.
“Profitability is, and will remain, a basic and critically important necessity for any sustainable business. But it is important that we also actively engage ourselves in motivating and empowering our workforce along with our much broader corporate social responsibility, whilst also mitigating our impact on the environment.”
It’s all about having had the visionary foresight together with a strong, but ongoing dose of perseverance
A sustainable and profitable business, he says, requires a three-dimensional approach, which apart from primarily measuring up financial performance, also needs to consider the social and environmental dimensions.
“I believe that the benefits of this three- dimensional approach are somewhat interlinked and can only add to our reputational value and contribute towards a more successful enterprise.”
Regarding the group’s employees, Mr Aquilina says that it has a workforce of around 800 full-time equivalents, of which almost 40 per cent are female.
“Around 20 per cent of our workforce are foreigners. The trend line here is clearly showing that our share of both foreigners and women is expected to continue to grow.”
Farsons is supporting the introduction of a compulsory deposit on beverage containers, known as the Beverage Container Refund Scheme (BCRS). Presumably this adds both complexity and costs to operators and consumers. So why is the company in favour?
“The BCRS is intended to encourage the return and recycling of beverage containers, whether plastic, glass or cans. The scheme will certainly be very challenging to introduce, and more so to effectively enforce, but it is necessary, if collectively we want to address the sizeable problems of waste management.
“That said, beverage containers should certainly not be singled out, and one hopes that the authorities will step up their efforts and truly push towards a more representative and effective circular economy.”
Last year, Farsons celebrated its 90th anniversary, and this year Cisk lager turns 90. To what would does Mr Aquilina attribute this long and successful history?
“It’s all about having had the visionary foresight together with a strong, but ongoing dose of perseverance. Persevering by ensuring consistency in good quality standards, and in successfully matching consumer expectations with their brand and product experience.
“Cisk, now 90 years young, remains our prized jewel with a proud history and heritage within Farsons. We now look forward to many more years of brewing success,” he says.