In not much over a decade, Frosty Boy has increased exports from almost nothing to three-quarters of its business, selling into nearly 50 countries. Brent Balinski spoke to CEO Dirk Pretorius about how they’ve done it, and why he sees 15 – 20 per cent growth per year as sustainable.
Huge export growth
The buzz phrase “Asian Century” was one you couldn’t avoid in 2012, but rarely hear nowadays.
However, the increasing size of the middle-class in the continent still holds huge potential for Australian food and beverage exporters, such as Frosty Boy Australia.
Frosty Boy officially opened a new, purpose-built factory in Yatala at the end of last year, relocating for capacity reasons. Its rapid growth – 18 per cent compound annual growth for the last 14 years, according to the company – has been driven in no small part due to success in Asia.
CEO since 2001, Dirk Pretorius believes there are two parts to the company’s thriving trade in the continent: smartly and effectively serving its existing customer base, and being visible in its market. The latter thing includes putting in time at a lot of trade shows
“What you find in these Asian markets, if you just go and look at your QSR [Quick service restaurant] chain, and the growth rate – because of the acceptability of western foods and the demand of western foods in Asia – is [increasing] so rapidly.
“Combine that with the disposable income [growth in the middle class], you’ve got a sort of natural growth pattern happening in that market with your existing customers,” he told Manufacturers’ Monthly.
The business-to-business manufacturer of powdered soft serve, frozen yoghurt and beverage powders includes Burger King Asia and Wendy’s among its customers.
Frosty Boy exports to 48 countries currently – including the United States, Africa and the Middle East – and all of these are important, but its success and its focus is largely due to its Asian customers.
“We focus on the Asian market in terms of the time that we spend in the market,” said Pretorius, who believes that the business can sustain growth of around 15 to 20 per cent as it continues its Asian Century success story.
“Keep the cost down”
The Yatala site covers 6,000 square metres and has double the capacity of the previous plant. It is the third site the company has occupied since the current owners picked up the company in 1999.
The factory’s current output is the equivalent of two million serves of soft serve per day, running two shifts a day, five days a week.
“With the previous factory we were running seven days a week, 24 hours a day, in the end,” said Pretorius.
“So we’ve made sure we had enough capacity; we’re currently sitting at around 60 per cent capacity on a five day per week production shift. So there’s a little bit more up our sleeve, and that will see us through for the next ten years.”
The site runs two lines. These include the line from the previous site at Loganholme and a new, “super-high-capacity version” of the old line.
The facility is highly automated, from measuring to palletising. Despite the high output volumes, the plant can be run with only six people per shift manufacturing product.
“The key, and the design behind it is: if you compete in Asia, and these markets where we export, you have to keep the labour cost component low if you want to be competitive at all as an Australian manufacturer,” explained Pretorius.
“So that’s the key behind the whole design of the plant. Keep the cost down.”
R&D is key
For Pretorius’s business, research and development means three things.
Firstly continuous improvement involves keeping abreast of trends in the fast-moving food technology market. New technologies are matched to existing recipes, for example.
The second part is the recipes themselves. It’s not a one-size-fits-all approach for what FB produces.
“When a customer comes to us and says – let’s take India for instance – within the market in India we want to go and supply soft serve ice cream,” said Pretorius.
“We want it to be at the best price point and have specific flavours that will be accepted in the Indian market.”
Recipes must be developed to tastes and/or matched to an existing product.
Finally, and also involving collaboration with the customer, involves matching ideas to customers’ menus and suggesting products that match market trends.
“The investment in that is basically at our new facility we have a really good R&D [capability] in there, for food tech,” he said.
“And obviously getting the best minds in the business as a part of your team to do this work for us.”
Blends and trends
Speaking of trends, one that has influenced a recent addition to the business is around beverages.
According to research used by Frosty Boy, the beverage market is growing sharply worldwide. Just within Australia, it’s worth $542 million, and has grown 10 per cent since 2009.
In view of this, Frosty Boy launched its Art Of Blend brand of premium beverages in September last year.
Aimed at “anyone with a blender”, the investment is much less than equipping, for example, a cafe with a soft serve machine. It does not require milk to be added, and includes Aromatic Spiced Chai, Creative Yoghurt Smoothie, Finest Belgian Chocolate, Exquisite White Chocolate, Premium Mocha Latte, Velvet Dairy Frappe Base and Original Iced Coffee offerings.
“It’s early days though, but it’s definitely taken off much better than expected,” said Pretorius of the addition to the company’s range, which features its own website and brand, distinct from Frosty Boy’s.
"A no-brainer"
As part of the mission to get the new Art of Blend (and the company’s tried and true frozen yoghurt and ice cream formulas) to more and more customers, Pretorius was in India spruiking the new brand when we spoke to him.
“I’m a bit nervous about presenting chai tea to an Indian market,” he offered.
“But they really accepted it very well.”
Going to “a lot” of trade shows is an important part of driving the brand and continuing Frosty Boy’s growth, said Pretorius. Frequent visits to the customer’s valuable Asian clientele is also vital.
The company’s focus on exports, particularly to that continent, has significantly sharpened since Pretorius began in his role.
In 2001, 98 per cent of sales were Australian.
These days, 75 per cent of its business is export. Recognition of its success has included qualifying as a finalist in the Premier of Queensland’s Export Awards in both the Manufacturing and Regional Exporter categories.
Its export growth – past and future – seems very much an Asian Century story.
The country’s reputation for high-quality dairy products and shifting demographics are a winning combination for Pretorius’s firm. If it hadn’t latched on to these, things would have been very different.
“If you look at the size of the Australian market and you compare it to, for instance, the size of the market in Asia, where we have 4 billion people, and you look at the middle class in these markets – which is our consumers – and it’s currently more than 600 million people in that middle class,” he said.
“And the projection is that this will grow in the next ten years to over 3 billion people in that middle class. It’s a no-brainer basically, on where the focus should be if you want to expand your business.”