Our business has had a slight setback which if I am honest I was expecting to happen only in 18 months time and not now. The problem is we own the licensing agreement of a particular brand and that has to be renewed in 18 months time. The better you do the higher risk as you will lose that brand to the parent company who owns that brand.
This is a fairly common business practice and is one of the risks of doing something so well the sales shoot up and you are left holding the bag. When we added the punch bag business to the warehouse business I never thought we would grow the sales so much and dominate the market space.
We were in the process of adding another brand to the business which never materialized and that was a worry at the time. The talks were happening and they being the same company were holding back as we had decimated that brands sales through the quality of items we were now producing.
What became evident very quickly is that the parent holding company could not match our costs and quality and they had two choices. One join what we are doing and supply us with the other brand or reduce our orders and force us to hand the brand back. We have now placed our orders on hold and have already pivoted moving away from their brands and grabbing two other brands from another holding company. These brands are not big name brands in South Africa right now and we will have to grow them against the brands we have now grown. This was the only real choice especially knowing how good we are at this now.
When I say we have placed everything on hold we have not processed a punch bag since February. I would rather be concentrating on the new brands than the old brands and let them continue supplying a lower quality than what we have been supplying. One of the original brands from the 3 we had has remained in our stable so we will be back producing possibly within the next two months. We have done so well picking a business up from nothing to the point that the parent company wants it back.
This sucks as the amount of work that has gone into this being the best at what you do with a huge learning curve over the last 2 years. The new branded bags we do will stand out and I have no doubt within two years we will have gained back the market share we had until recently. The quality will stand out and no one can match what we do as they have not taken the time to realize the processes involved which we have perfected.
This reminds me of what happened in the UK with a pub my family had when the brewery would not renew the lease as they wanted the pub back. The wet sales or barrelage had increased so much that the brewery wanted to have full control. This is a risk when you become a tenant leasing a pub from a brewery knowing that the business if it does well could be taken away from you. The brewery will either increase your rent, increase the cost of the beer or they will not renew your lease. Generally it is the latter and like the punchbags you have to accept this.
