In 2019, Adrian was tasked with a mission to rescue 13 Starbucks Southern Africa stores.
When Adrian Maizey was playing tennis and cricket at Pretoria Boys High, he dreamed about spending the rest of his life pursuing a career in sports.
At the age of 17, Adrian went to the United States embassy in Pretoria where the lady at the front desk, who also happened to be a childhood neighbour of his dad’s, gave him a list of American universities. “This was before the time of the internet when such lists were obtained in person,” he laughs.
Three of the universities phoned him back and Adrian ended up choosing a scholarship to play tennis at the University of Nebraska. In 1993, at the age of 18, he took his first ever international flight with only R3,000 and one suitcase. “I came to the US and didn’t know anybody,” he says. “The first thing I did was go to the local store and buy a radio, because I didn’t have one growing up.”
Adrian won the Tukkies (University of Pretoria) tennis championships in 1992, shortly after accepting the scholarship.
When he started his education at the university of Nebraska, it was mandatory that Adrian take accounting. “I got an A plus while most of the others in the class found it challenging,” he says. Because he was good at it and found it interesting, Adrian decided to pursue an accounting degree, because, at that point, he had realised that a legitimate professional tennis career was not on the cards.
Adrian got his first job at Coopers & Lybrand (now PwC) and shortly after joined Deloitte and Touche in Houston, Texas, where he qualified as a US chartered accountant. In 2001, he was accepted to Harvard Business School where he earned his MBA. This, Adrian explains, was a life changing moment.
He entered the corporate world again with new ambition and worked his way up the ladder. After spending a total of ten years at Deloitte & Touche, his Harvard credentials helped open doors for him in the investment world. He worked for four different investment firms over the next 19 years, which led to a personal investment in Taste Holdings.
When Taste Holdings ran into financial difficulties in 2019, in an effort to save that investment with less than a month to spare, Adrian scrambled. “Through my network in the US I raised money that ultimately led to Rand Capital acquiring the rights to Starbucks in Southern Africa,” he explains.
The capital from the acquisition provided Taste Holdings with a necessary funding lifeline.
Getting to work
Having inherited a mere 13 stores after five years under its previous owners, Adrian, who is now the CEO, CFO and his own executive assistant at Starbucks South Africa, set out plans to restructure the business model using economies of scale to deliver the international Starbucks experience to more South Africans.
Adrian says that, for the scale of the Starbucks business internationally, South Africa is still in its infancy. “We’re not a large corporate entity that’s mature and established. In order to get this business to actually work, we’ve had to instil an owner-operator start-up mentality.”
He explains that it was an eleventh hour rescue effort. "We inherited these very big, expensive stores split throughout the country. This had massive implications from a back-office perspective because I needed a management team based in Durban and Gauteng where the stores were located and was faced with the challenge of opening stores in Cape Town, during the height of the pandemic, on account of leases signed by the prior owners for which we were on the hook.”
Adrian adds that, when you only have 13 stores, it doesn’t make much sense to open stores across provinces because it’s cost-prohibitive to oversee and supply. The company also needed scale to improve purchasing power, which has allowed for localisation of non-proprietary products and equipment. “Scale helps cover the extensive fixed costs that come with managing the brand and offering of the quality of Starbucks. So I ended up having to get scale rapidly.”
He further explains that the prior owners had a lot of costs built into the structure that were inappropriate for the stage of the fledgling business. His first course of action was to reduce the corporate overhead and move to smaller store formats in lower rental areas outside of malls. “We wanted to move into the neighbourhoods to facilitate building a habitual type of offering, with less dependence on novelty, which is inherent in well-known brands when they first arrive in new markets”.
Adrian then partnered with Shoprite Checkers to increase Starbucks SA’s reach. “The new Starbucks kiosks in the FreshX supermarkets is a good partnership for us. It helps extend the Starbucks offering into regions and neighbourhoods and gives us access to Shoprite’s incredible leadership and innovation. In turn, Shoprite achieves access to Starbucks’ market leading brand, offering, coffee expertise, and a key market demographic of Starbucks, namely the influential and discerning young consumer,” he says.
Market penetration and reach, he adds, is a key step in building an omnichannel business. “We’re available on Uber Eats and are coming to Mr Delivery soon.”
Exponential growth trajectory
Just over two years down the line, having ploughed through macro interruptions including the Covid-19 pandemic, looting, metal worker strikes, as well as rolling electricity and water blackouts, Rand Capital has opened a total of 42 new Starbucks stores in South Africa, bringing its total of stores to 55.
Adrian explains that the Covid-19 pandemic presented Rand Capital with the opportunity to expand Starbucks South Africa, as Covid-19 made much needed market share available. “I don’t think we would have expanded at this rate were it not for Covid-19, as the landscape would not have been as opportunistic as it was,” he says. “The markets imploded, and we went out there looking for new retail space while the rest of the market was retreating and anchoring down in preparation of the storm that was coming. While our growth has been out of necessity, our rate of growth has been out of opportunity. We moved early and fast.”
Rand Capital leased various retail spaces that had become available as previous tenants had to close down from the impact of the lockdown.
Adrian explains that this fast growth was crucial and has resulted in a significant infusion of equity capital into the country during the height of these economically challenging times for South Africa. “We had to build enough profitable stores to cover the corporate losses being incurred on the original 13 stores, hence the need for economies of scale, and we had to do so quickly as the pandemic further exposed the flaws in oversized stores attracting large, fixed rentals. When sales retreat, as they have during the pandemic, the inelasticity of those rentals becomes acutely apparent.”
A new market
While Covid-19 brought an opportunity for growth for Starbucks South Africa, it also had a significant impact on its sales. “A lot of that has to do with office workers now staying at home. We’ve lost customers who used to come in to get coffee in between meetings,” Adrian says.
However, Starbucks South Africa stores are seeing bigger groups and consequently higher spend per transaction at the same time. “While that might not mean more money is coming, it certainly has changed the experience in our stores,” he explains. “Instead of one person coming in, grabbing coffee and leaving, the groups will sit down and socialise because they probably want to get out of the house.”
He adds that weekdays have been the most impacted, as there is less movement in society – people are staying at home and therefore spending less. Weekends, on the other hand, have not been affected as much. “Now you have to figure out how to serve the new customer behaviour, and you have to consider the longevity of this. Do you change your strategy and offering, or hold steady? All of which have material cost implications in terms of training, product offering, marketing, and how you design your stores.”
Adrian believes that one of the biggest impediments currently to economic growth in South Africa, outside of the country’s labour laws, is the pandemic induced “working from home” trend. “We need big corporations to bring their workforce back,” he says. “For an economy to grow, there needs to be spend. When people move around, they buy petrol, lunch, work clothes, coffee, and more. This creates monetary velocity – the grease the economy needs.”
He predicts that, in the long term, the younger generation who are still apprentices, are going to be particularly disadvantaged by the years they have lost by working from home. “They are missing out on the opportunity to be mentored, nurtured and developed.”
Covid-19 has also impacted Rand Capital’s supply chain. Because it is part of the bigger international brand, its proprietary drinks are appropriately imported. However, the silver-lining of the global supply chain disruption has been an acceleration of the localisation of non-proprietary ingredients, materials, and equipment. “This has reduced Rand Capital’s reliance on the unreliable shipping channels and local ports and its susceptibility to the volatile Rand,” Adrian notes. “More importantly, it has led to further investment in local suppliers, leading to more job creation in South Africa, much needed during the pandemic.”
Taking on 2022
The next step in Starbucks South Africa’s journey is to take on the new year. “We are starting to build our pipeline of new stores for later in the year. If we can find the right partners or landlords to do it with, we will open more stores,” Adrian says.
In the meantime, he explains that they are focusing on strengthening the local company’s offering, foundation, training, and services – everything that comes with such fast growth. “The business today is five times what it was 24 months ago. It’s completely different,” he adds. “So I have to retrain the employees, even at executive level, and move the whole team to think on a much bigger scale.”
Sport as an outlet
Adrian is still passionate about sports and uses it as an outlet when work and travel gets to be too much. With 22 Ironman triathlons and three Comrades Marathons under his belt, he aims to do the Cape Epic in March with his colleague Craig Palm. “Retail is a 24/7 job, it doesn’t stop. So, I exercise a lot, and that’s what keeps me sane,” he says.
He explains that the one thing he has learned through competing in Ironman is how to suffer. “I’ve always worked hard and that’s how I got to where I was – I learned that from my parents, so credit goes to them.”
