The perils of bad publicity – one company’s struggle against bad press

There’s an old saying that there’s no such thing as bad publicity, but as it turns out that’s not exactly true – just ask the chaps at Zambia-based agri-business Zambeef. In June this year, Zambeef’s faced a major scandal when newspapers began reporting that the beef products it was importing from America, the UK, and Ireland were contaminated. A storm of bad press followed, and the company took some serious knocks to its sales and earnings. However, according to executive director Yusuf Koya, the company is slowly bouncing back from this setback, with plans for major expansion into Africa. So, while there certainly is such a thing as bad publicity, it seems that there is also hope for business redemption. – FD

To watch this CNBC Power Lunch video click hereYusuf-Koya - Zambeef

GUGULETHU MFUPHI:  Zambeef, the fully integrated agri-business with operations in Zambia, Nigeria, and Ghana, is pleased to announce an 18 per cent increase in full-year revenue to 300 million dollars.  Yusuf Koya, Executive Director of Zambeef joins us now to unpack the results.  Looking at your numbers Yusuf, you mentioned significant partnerships that you’re looking to in the future, with regard to expansion into the African continent.  How might come about?

YUSUF KOYA:   Well, that has been coming about quite nicely.  New York has been talking about the partnership with Rainbow Chickens of South Africa and we have a joint venture with Rainbow Chickens in too many parts of our business.  Early in the year, you do recall we sold 49 percent of our broiler business to Rainbow for 14.25 million dollars.  As another joint venture, we’ve done Rainbow, which is Zamhatch Ltd.  It’s a hatchery business for the development of a hatchery, breeder farm, and stock feed production, which we hope will be operational within the next 12 to 18 months.  We’re looking forward to that partnership.  Obviously, Rainbow is a preeminent chicken producer in South Africa and their technical expertise, knowledge, and track record in value-added chicken portions is something that we’re looking forward to developing in Zambia.

ALEC HOGG:  You’re a good partner to have given your operations in Zambia being vertically integrated as well.  However, when I looked at your share price on AIM where you listed on the London Stock Market, it’s down by half since March this year.  What’s going on there, Yusuf?

YUSUF KOYA:   That’s something I’d like to know as well.  Obviously, our share price has been on the slide and I think a large reason for that earlier in the year, we did have significant negative publicity surrounding the imported beef products.  Obviously, that impacted our brand, our reputation, and our image and I would imagine that was a key contributor to the share price taking a bit of a beating. 

GUGULETHU MFUPHI:  Yusuf, you mentioned the impact of the beef import saga.  What exactly is that?

YUSUF KOYA:   Earlier in June this year, there were press articles that a number of our imported beef products, which we imported from UK, Ireland, and the USA, were contaminated. It took maybe three or four months for the formal results to come out.  However, essentially the negative publicity that surrounded that, impacted sales and food points across our retail outlets.  We realise that the vast majority of our products – perishable products – are retail directed to the end consumer through our own retail outlets.  Obviously, when you get negative press publicity along those lines, then it’s bound to affect your business.

ALEC HOGG:  Yusuf, we know that a South African business – Zeda – is involved in Zambia through Chayton Africa, and that they’re also in Mpongwe – recently having bought Mpongwe Milling – and you have the Mpongwe farm.  Do you collaborate with them in any way?

YUSUF KOYA:   No, we are aware that Chayton are here.  We don’t collaborate with them in any way.  We do keep an eye on what the other is doing, but there is no collaboration along those lines with Chayton – no.

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