Listen here.BizNews editor Alec Hogg sits down with THIRSTI founder and CEO Rob Hoatson at the company’s Tulbagh bottling plant for a wide-ranging discussion on state overreach, private-sector investment, Woolworths, counterfeit bottled water, the informal market and South Africa’s looming water infrastructure challenge. Hoatson explains why his family business continues to invest heavily in SA, why standing up to abuse matters, and how THIRSTI has built a differentiated brand in a fast-growing market..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..Edited transcript of the interview.Alec Hogg (00:07)I’m here with Rob Hoatson in your Western Cape castle, as it were. We’re both from the same area originally, anyway. You still have a business in Normandien, close to Newcastle. But today you’ve taken a few of us around your plant, your water-bottling plant here in Tulbagh. So you’ve now got two huge plants. We were saying in the conversation it’s a R300m investment.Rob HoatsonYes. Look, we’ve tried to build a world-class facility. I think it has got to service for many, many years and it has got to produce the right product at the right price and at the right quality. So we’ve tried not to pull out any stops in building something that is going to last.Alec Hogg (00:57)And it’s THIRSTI, of course. I don’t know if you noticed, but we’re both wearing Pringle. Bernard Mostert is going to be so excited to see that the two of us are advertising his brand. There we go, Bernard.Anyway, let’s catch up on what you’ve been up to since the BizNews Conference. We had a fabulous nightcap chat in March — just April, May, two months ago. At the time, you were recovering from that crazy attack on your Normandien operation from parliamentarians, members of the Labour Department, police with automatic rifles — just crazy stuff — and you said you would be reacting to it. What exactly has happened?Rob HoatsonSo obviously everything that we said we would do, we have done. Charges were laid, the cases were opened. It took us quite a lot of time to get a meeting with the senior management of the Department of Labour in Pretoria, which we were able to achieve.It hasn’t, however, been a very fruitful process. To try and get a level of accountability in those departments is extremely difficult. To try and get an acknowledgement that, “Listen, that was wrong, and we really don’t want to be conducting ourselves like that,” is almost impossible.There were some very high-level meetings held with them, and they were not fruitful. There was absolutely no acknowledgement of, “Sorry, we were wrong,” or, “That was unacceptable,” or, “It shouldn’t have gone down like that.” It was more to the contrary: “We were within our rights to do that, and that’s what we will do.”But I do get a feeling that they have taken serious note of it and that they have felt the pushback. I don’t think we’ll be seeing a visit on that level and on that scale in the foreseeable future. That’s my gut feeling.Alec Hogg (03:22)That’s a relief for many other business people, because when you look at what happened there, the immediate reaction from a business person is: why bother in South Africa? Why not just invest in another country where you won’t have these goons arriving at your plant when they want to look for an excuse because one of their number maybe doesn’t like you or doesn’t like what you stand for, et cetera?But you stand for something. I think that’s really the big thing here. Rob Hoatson, THIRSTI, the Hoatson family — you guys have positioned yourselves as: ons vat nie kak.Rob HoatsonLook, we have, because unfortunately, if you don’t stand up and you don’t push back against this stuff, you simply get washed away in the tide.We are very proud South Africans. We love our country. We’re here to stay. We’re not going anywhere. Like everybody else, we stand and hope for a better country. But we can’t just hope. We’ve actually got to do something about it.So what happened was unfortunate. But what’s more important is that if you don’t agree with something, you’ve got to stand up and you’ve got to push back.It is easier for us as a private business to do that. If you’re a public business and you’ve got shareholders, it becomes infinitely more complicated. Obviously, there is also a fine line in terms of standing up for what’s good and true and right.What has been most pleasing to note is how many people have supported that stand; how many people have seen that and spoken to us, emailed us, called us to say: “Guys, well done. You give us hope. We all need to do that. That’s the way to deal with these things.”There seems to be a fundamental shift in South Africans, where instead of accepting whatever has been dished up in the past, guys have had enough. Guys are just saying: what’s fair and right and true, we go with; and what’s not, we object violently to it.Alec Hogg (05:39)That’s so interesting, because I get the same feeling as well. It’s like a wave: enough abuse, thank you very much. The cadres who’ve been deployed — now it’s changed.So well done to you. I remember Rob Hersov five years ago standing up at a BizNews Conference saying “Voetsek ANC,” saying things that were sacrilege to the business community at the time. Today, the same business community who were criticising Hersov are saying: “We actually agree with him, but we just have shareholders, so we can’t do it that way.”I guess it was always going to take someone like you, a family business, to put that line in the sand. But are you seeing that things are going to change in the future? You’re a proud South African, you’ve said. You’ve invested R300m in this plant that we’ll talk about in a moment here in the Western Cape. What makes you happy enough to do that, make your investments here, keep your money here, rather than, as with many South Africans, take it offshore?Rob HoatsonWe are always in a situation in our business where we’re not short of opportunity. Opportunities in South Africa are enormous. Our situation is not that we’re looking for opportunity. Our situation is that we have so much opportunity, we’ve just got to pick those opportunities that work best for us.So, number one, there is opportunity. We have a big market. We have a growing market.But our question always is: what is the alternative? Do you want to go and live in the UK? Do you want to go and live in Europe? No, we don’t. We are proud South Africans. We were born here, we grew up here, and this is where we’ve chosen to make our lives.We’re going to do everything that we can to make this country better. There are many ways to do that. In our business, we feel that providing employment in the rural areas is a great way to add value, creating these agri-industrial businesses.Alec Hogg (07:55)How many people do you employ?Rob HoatsonIn total, well over 3,000 across the business. In the THIRSTI business now, we’ve got about 700 people.Alec HoggIn total, well over 3,000. For context, the disaster that has hit Newcastle, our hometown, is going to take 3,500 jobs away. It almost balances the other. You would think that the effort government has gone to, to try and save an unsavable situation at ArcelorMittal, would at least cut you some slack. Do they not know how many people you employ?Rob HoatsonThey do. They’re well aware of it.Our challenge always, when we deal with these issues and have these conversations, is to get the guys to join the dots. In South Africa, with our policies, they need to understand cause and effect: “Guys, if you make these policies, this is what the outflow is going to be.”We know how much money companies in South Africa are sitting on and not investing. Can you imagine if that capital was productively deployed? What it would do to our local economy, what growth would look like, what job creation would look like.But it’s not, because the policies are wrong. When the policy changes, then the behaviour of those people who invest the capital will change immediately as well.Alec Hogg (09:15)Healthcare matters, but what matters most? Having cover for the people who keep this business going. Bonitas is there for you when it comes to health. To help South Africa, visit bonitas.co.za and find your plan.Part of the reason that you brought some media people here in the last day or so was to explain what is happening with counterfeit water. We’ll talk about that in a moment. But THIRSTI itself — you seem to be on a bit of a mission. You’ve started producing ice now at Woolworths. How’s that been going?Rob HoatsonInteresting. Again, we have a long-term strategic partnership with Woolworths. We produce a lot of beverages for them — probably more than 100 products — as their sole national supplier. They are a great business to work with. We’ve worked with them for many years.Woolworths looks after their suppliers in that, when there are new opportunities that come, they take them to the existing suppliers first. They brought us the ice opportunity 18 or so months ago.We decided to do it on a very small scale and trial it in a few stores, and it went really, really well. We’ve created a differentiated product, so it’s not just ice from some tap. It’s spring-water ice. It’s in a very specific pack, with a resealable bag. We’re using a lot of Italian technology to make this ice.The trial went really, really well. We’re in the process of rolling it out across the Woolworths business, and we’ve built a dedicated facility to manufacture and supply this ice as part of the rest of our group.Alec Hogg (11:12)The fact that Woolies came to you in the first place would suggest that you’ve got other businesses with them.Rob HoatsonYes. We do a lot of beverages for Woolworths, as I mentioned. The Woolies water nationally comes from us, as do the flavoured water, the soft drinks and all the mixers.On our agri side, through the abattoirs and processing, we supply them beef and lamb through our Karoo farming operations as well. So it’s a very important relationship that we’ve had for many, many years, and we value it greatly.Alec Hogg (11:51)What you’ve said now is fairly unpopular, I would suggest, amongst South Africans at the moment, given the PR that has been going around the Chuckles or the chocolates that were taken.Rob HoatsonYes, I can’t speak for Beyers Chocolates and their experience, but I can only share my experience with Woolworths, and it has been nothing like that. It has been quite the opposite, to be honest.Alec HoggWhat do you think went wrong with Beyers? You supply Woolies. They supplied Woolies. Suddenly, they were no longer supplying Woolies. Could it happen to you?Rob HoatsonAgain, from my perspective, we have our own brand and then we do the Woolies private label or the house brand.Alec HoggSo Woolworths water has got no THIRSTI on it. It’s Woolworths water.Rob HoatsonBut we produce it for them, to their standard, on behalf of them, and supply it to them.My understanding is that Woolworths doesn’t have a problem if companies have their own brands. So we do. We have our THIRSTI brand, and then we do all of the Woolies work nationally.What Woolworths is not a fan of is when their private-label suppliers produce private label for other retailers, because there is a lot of IP in what Woolworths do. That is an issue, and understandably so.Before you even engage with them, they will say: “Guys, this is the basis on which we’re going to work. Are you happy with it?” Yes — and away you go.Our relationship with Woolworths is 11 or 12 years deep, and that has been our understanding from day one. We’ve honoured that, and they’ve honoured it back. So the relationship has worked.Alec Hogg (13:45)It seems to make sense, Rob. I don’t know too much about Mr Beyers or his business, but if you’re doing a private label for one retailer, surely you can’t expect to do a private label for another retailer. It just doesn’t make sense. Was that really the nub of it?Rob HoatsonMy understanding is that was the nub of it. Rather than do multiple private labels, do a single private label and then drive your own brands.Alec HoggPick your horse, be the jockey there. Anyway, Woolies, as far as you’re concerned, are good. How strict are they on checking that the water you’re producing isn’t going to make anybody sick?Rob HoatsonThe standards that we always expect are incredibly high. They have developed massive technical skill internally in their business. We’ve been working with them for many years. They make sure, in conjunction with you, that you meet the standards. They’re great people to work with.Alec HoggHow many scientists, for instance, do they have who would check this?Rob HoatsonI stand corrected, but I think Woolworths has got about 120 to 140 food technologists in their business, which is probably 110 more than anyone else in South Africa in an equivalent business.Alec HoggThey put a lot of effort into that.Rob HoatsonAnd that’s why they want to protect it. You can understand that, if they’re making that investment in product, in recipes, in IP, there’s a level of protection that they want.Alec Hogg (15:23)The ice story — did that require investment? Clearly what you’re doing is taking the water from the Drakensberg, in this sense, and icing it somehow. How do you get the water there to your plant?Rob HoatsonCold-chain distribution is always much more expensive than ambient distribution. So we truck the water from its mountain source to an ice plant that we—Alec HoggYou put it into trucks and drive them on entry?Rob HoatsonYes. We tanker it about 300km.Alec HoggWhy don’t you rail it? Sorry, I had to ask.Rob HoatsonLook, we would love to use rail, but there is no real reliable rail service in this country. We used to use rail quite a lot, especially in our timber business. It’s just not a viable option.Alec HoggSo now you truck the water from the Drakensberg, from Normandien, up to Gauteng.Rob HoatsonWe truck it to Gauteng, where it’s received into a facility. We manage the stock so that we’re not carrying product for more than two or three days. It is then iced and frozen at minus 20, and then it’s a short-hop cold chain from that facility into the Woolworths distribution centre in Midrand.Alec Hogg (16:44)The other thing I’ve noticed coming down to your plant here in Tulbagh is that you’re now taking on energy drinks and sports drinks. What exactly do sports drinks do, and why have you gone into that market?Rob HoatsonOur brand is about health and wellness, and we want to promote a healthy lifestyle. Part of that is getting out and exercising. In that space, you want to be hydrated — hydration as in water. Once you’ve had a good, solid workout, you want to rehydrate. So it’s about hydration and then rehydration.We’ve recently relaunched that as THIRSTI Sport. It’s in a gorgeous black bottle and it’s going really, really well in the marketplace. We’re very excited about it. It has a lot of electrolytes in it. We’ve had amazing feedback from all the retailers.Alec Hogg (17:47)Where do you buy it? Because at the moment I use these little sachets, and it’s quite a hassle to put them together. Having tasted yours, I really like it big time.But let’s get onto that counterfeit stuff. Here I have a family connection, where we started off by buying our water from a local outlet in Hermanus because it was being filtered. Then we said: no, well, it would be easier to filter it in the home.But listening to your guys here and the bottled water association, we’re making a mistake on both scores because there’s no certification of that water. How serious a problem is this?Rob HoatsonIt’s fundamentally important that people actually know what they’re buying. When you buy bottled water with a SANBWA logo on it — the South African National Bottled Water Association — when you buy a product with that seal of approval on it, you can be assured that it has been produced in a professionally managed facility, where every aspect of health, hygiene, environmental requirements and all those issues have been considered and well managed.It’s a certification that should give the consumer peace of mind.What has happened, because of the water challenges that exist in South Africa, is that it has become a bit of a free-for-all, where people are just opening up refilling shops. There’s no standard. There’s no enforcement. They are literally bottling product in these shops. There’s no level of hygiene control, there’s no certification, and then they sell it like everybody else and call it bottled water.Again, our fundamental point of difference is that we’re spring water, so we are mineral water. The product that comes through those types of refilling operations is municipal water, which has just been through a very basic filtration process in the back of the shop.Alec Hogg (20:10)And, of course, much cheaper.People think: we all know not to drink what’s coming out of your tap, because there’s all kinds of chaos happening in the background and you might get yourself sick, as you do if you go to Gqeberha, for instance. You don’t drink tap water; everyone there knows you don’t do that.So you move to the next level, which is: I have to have filtered water. But the problem, from what I’ve now learned, is that filtered water hasn’t had any certification, no stamp of approval. How do you know if something has been checked, given the stuff that’s flooding the market?Rob HoatsonThe easiest way is to look for that SANBWA logo on it. That’s the stamp of approval, the seal of quality that has become the standard. It’s a voluntary organisation in South Africa. It’s funded by the bottlers, and it was established because there is no real standard and no real enforcement.So it’s ourselves holding ourselves to account to a certain standard. We’re affiliated to the European Water Bottlers Association, so the standards are really world-class standards that we hold ourselves to.Alec Hogg (21:20)I’ve been around your plant for the second time, and I can support or endorse what you say about the different standards. You can see nobody has been spitting in this water, and certainly this water has been checked all the way through with your scientists and so on.How much does that add to the cost of getting this product to the consumer?Rob HoatsonIt certainly does add to the cost, because from the outside, one would think it’s very easy just to take some water, put it in a bottle and sell it. But, as you’ve seen when you go through that process, there’s a massive amount of science and a massive amount of tech involved in doing it right at what is a relatively low cost in the marketplace in South Africa.For us, we did it because we weren’t prepared to risk our reputation in producing a product for human consumption that is possibly not up to standard. We’ve had that certification from the get-go, from the beginning, but there is certainly a cost to doing that.Alec Hogg (22:35)In our conversations over the past day or so, what has been perhaps the most interesting was the way that you are growing in the informal market.For many people in the BizNews tribe, people in the informal market don’t really care. They’ll just drink any damn thing. But actually, that’s where you’re having very sharp growth. Correct me, but it’s almost as big now through the informal market as through the formal market. GG Alcock would say: of course, I always knew that. But most members of our tribe wouldn’t.Rob HoatsonThe informal trade in this country is massive and growing, and it is now bigger than the formal trade. That’s primarily through the wholesalers, who then wholesale to the spaza shops, to the tuck shops, into the townships, to the street vendors. That’s where the numbers are. That’s where the numbers exist.Because of the overhead structures that exist in those channels, the prices are really, really competitive. Someone who is financially under pressure can buy product from the wholesalers at a lot less than you can through these major formal retailers, who have massive overheads and rents, et cetera, in the big shopping centres.So it’s about cost and accessibility.Alec HoggAnd brand?Rob HoatsonAbsolutely. The people in the informal sector are more brand conscious than the people in the formal sector, in my view.Alec HoggAnd so those consumers are also buying THIRSTI because they know it’s not going to make them sick, for instance, rather than the story that happened in Hammanskraal, where I suppose we do have this scourge of politicians and water tankers, and we all know the story there.Rob HoatsonAgain, remember we produce the water, the flavoured waters and the sports drinks. So it’s about taste, it’s about price, it’s about brand recognition, and it’s about how you have positioned your brand in that market and how it’s perceived.We’ve worked very hard in that space, and we will continue to build the brand with our people.Alec Hogg (24:57)Rob, people are going to be watching this video a long time into the future, but as we sit here right now, we’ve just been through a really hectic weather period in the Western Cape, where we are sitting now. My research suggests it’s not going to be the end of it. In fact, climate change is real and it’s just getting worse.Have you done much work into that, and how might that be affecting your business and others?Rob HoatsonAlec, we believe it has already started building in the Pacific, and this can be researched online and read up online. We’ve had 10 exceptionally wet seasons in the eastern half of South Africa, where 80% of the people live. Whether we like it or not, we are headed for some much drier weather, and that’s what the El Niño phenomenon does.It raises the sea temperature, and depending on how much the sea temperature goes up, that determines how dry your usually wet season is — which is the summer in the eastern half of South Africa.So it’s going to be interesting to see what happens. The hotter it is, the drier it is, and the more water issues that exist, the more product that we produce gets sold in the market.But it is concerning because our water infrastructure is not where it should be. When you have very wet seasons like that, it kind of keeps the pressure off the infrastructure.The last really dry patch that we had was at the end of 2015 and the beginning of 2016 — so 10 years ago. That’s why I say it’s time, and it’s due. We believe it’s just around the corner. If not this year, if not this coming summer, then definitely next summer we’re going to see some very dry weather — very hot, very dry weather — in South Africa.For a country that’s not prepared, and for a country with water infrastructure that is not where it should be, I don’t want to be a prophet of doom, but I think there are some challenges on the way.Alec Hogg (26:58)It continues to add to the importance of the November 4 vote. You’ve got to get the right people into your local government, into your local area. I’m very fortunate to live in Hermanus. We’ve got the right people running Hermanus. The whole country, when it comes there, says: wow, this is South Africa.But everywhere in the country, depending on who gets elected on November 4, those people are going to have to deal with this issue that you’ve mentioned now.Rob HoatsonAbsolutely. Unfortunately, it’s not something that can be fixed overnight, Alec. This is 30 years of decay that is now catching up. I spent a fair amount of time in Joburg, and whoever has that job is going to have their hands full, make no mistake.Alec Hogg (27:44)To end off with a little bit on your entrepreneurial journey: THIRSTI is a phenomenon. I don’t think even your enemies would take away from you the achievement that you’ve managed with this brand over the last 11 years.But what drove you there, from what I understand, is that you’re always looking for a point of difference. How would you say you’ve taken that point of difference into your business culture?Rob HoatsonWe don’t want to be “me too” and do everything the same as everyone else. We want to find a point of difference, and then we want to focus on that point of difference, because I think that’s what the market likes to see and that’s what the market rewards.Certainly, the opportunities that we find in our business are generally driven through solving a problem, actually. Where we find a problem somewhere, we will engage in a solution that is business-driven to fix that problem. It inevitably ends up creating another business for us.There are so many examples over time of how we’ve got involved in certain businesses because of trying to solve a problem.Alec Hogg (29:14)Give me an example of a problem that you’re solving at the moment.Rob HoatsonI’ll give you a perfect example of how our beef business started. We weren’t in the beef business at all. We were in the forestry business.Between all your forests, you have a lot of open areas. These grasslands, in summer when it’s raining, grow like mad. You have to burn those grasslands as firebreaks in the winter. When it comes to burning them in winter, the grass is so long that you actually can’t safely manage it.About 12 or 15 years ago, we bought 100 cattle to try and manage the grass so that, when it came to burning it in winter, we could do it safely, rather than try to burn this long grass and lose control of it.Then we thought: well, let’s see if we can start breeding with these cattle. One cow became two, and two became four, and so the herd grows. But we started off using those cattle as lawnmowers, just to manage the grass levels on our farm.Literally three or four years after that, the CEO of Woolworths was with me on the farm, driving around, and said: “What’s going on there? What’s happening there?”I explained the story I’ve just explained to you, and he said: “What you call lawnmowers, we call free-range, grass-fed beef. Can we have all of your beef, please?”Absolutely. So, in trying to solve a problem with grass fires on the farm by starting a beef herd, we inadvertently got to supply Woolworths with free-range, grass-fed beef.Alec Hogg (31:07)And how much has that grown?Rob HoatsonIt’s grown dramatically over the last couple of years, to the point where we’re fully stocked on a few of the agri-properties. So our beef business is wonderful.Alec HoggAnd it’s still grass-fed. It’s also a good place to end, because it shows that as much stick as Woolies has been taking, they really do live what they say. When they talk about organic — well, there’s the Hoatson property with organic beef. We want it.Rob HoatsonCorrect. Again, as I said earlier, I can’t speak for the other guy who unfortunately went out of business, but our experience with them has been completely the opposite.Alec Hogg (31:54)Rob Hoatson, lovely to be here with you at your Cape castle. I’m sure we’ll be in your KZN castle, the much bigger one, in the not-too-distant future.Rob HoatsonThank you for coming to visit. It’s been amazing to have you.Alec HoggIt’s such a pleasure to be here. Rob Hoatson is the chief executive and founder of THIRSTI. I’m Alec Hogg from BizNews.com.