A spring in its step

It has its own recycling facility and gets all its water from the same spring that supposedly quenched the thirst of Julius Caesar's troops when they invaded Britain in 55 BC. The spring in question is within a mile of its facilities and the water makes most of its way to the plant with the aid of gravity. Not only that, but the business is expanding its use of recycled plastic for its bottles, which it makes on-site. Then there's its product development, activity for which is really hotting up.

Operations director David Hanlon freely admits the company has hidden its light under a bushel for some time. However, now it's going on the offensive, with plans to boost sales by 25% by 2011. "We're at £40M. We have plans to reach £50M within the next three years, with our ideal [production] ratio being one third our own brands, one third contract work and one third [retailers'] own label."

Since he joined in December 2004, the firm has undergone rapid transformation, with Hanlon boasting that his initiatives have saved millions. His achievements include a £1M annual saving from restructuring, cutting staff from 320 to 270, and £600,000 of cost savings by reworking contract supply and stockholding.

He also makes the most of unique features to save or generate extra cash. They include an on-site workshop manned by six engineers and a shop that sells roughly £200,000 of surplus stock to staff and the public annually.

In addition, he's improved efficiency by supervising investment in a £1M warehouse management software system, courtesy of global firm RedPrairie. "Everything was done by hand over two years ago," says Hanlon. "It was a nightmare."

Silver Spring uses four major warehouses for stockholding and several third party local hauliers for distribution. It has its own fleet of nine vehicles, which it plans to replace with six leased vehicles, with revamped livery. And while it may be based on the south coast, Hanlon is quick to point out that 60% of the UK population are within 100 miles of its HQ.

That said, he always has his eye on ways to make deliveries greener and more cost-efficient. "We're working with retailers on distribution and talking with distribution firms to contract out deliveries, using their fleets to piggy-back on [distribution for other clients]."

Distribution is only one part of its eco-friendly strategy. Another major pillar is recycled polyethylene terephthalate (rPET). "We first started exploring this about six years ago with a company called Wellman," says Hanlon. "It was offering a product called EcoClear, which was 75% virgin [newly made] PET and 25% rPET. We offered this to our customers, but the market wasn't ready. There were worries over contaminates. Since then the market has evolved and recycling has become more prominent."

Green credentials

The company processes 6,000-7,000t of PET bottles a year, of which a fifth is rPET. "We're heading towards a quarter within a year," says Hanlon. "Within 20 months we could offer rPET to everybody." Its major rPET customers are Boots and the Co-operative Group, with the latter's acquisition of Somerfield in July potentially set to boost this. Silver Spring now supplies 1,000t of 100% rPET to these two customers alone.

Whether 100% rPET can be sustainable for everyone is questionable, he says. Although the technology is possible, if everybody went to rPET there would not be enough raw material available. "There's currently a feeling it should be restricted to 50%," he adds.

Hanlon has enough experience of rPET now to address the concerns many processors raise about the material. The bottles are at least as strong as virgin PET and while some customers are concerned about the tinted nature of rPET, optical brighteners can be added to reduce cloudiness, he says.

Silver Spring has an advantage over larger rivals when it comes to separate rPET production, because it makes its own pre-forms, the material from which bottles are extruded. Indeed, it claims it was the first company to take pre-form production in-house, in the early 1970s. "We have full control of the process and because of that have the ability to act quickly," says Hanlon. "Others are tied to large manufacturers of pre-forms. For them to source and separate a small stream of rPET would be difficult and costly."

The rPET granules for Silver Spring's pre-forms comes from Continental sources. "There is a slight on-cost because supply of the base material is tight, but we have it secured," says Hanlon. "More UK [recycling] plants are coming on-stream, so supply will become more readily available and hopefully the price will reflect that." Silver Spring also wants to move to recycled plastic sleeves and caps for bottles.

Elsewhere, the company has established its own recycling facilities that save it £100,000 in recycling costs and earn an additional £50,000 from sales of the recycled material. Who says being green doesn't pay?

All this would mean little, of course, without a strong product offering to undergird everything and here, too, Silver Spring has big plans. The most notable of which is a move into squash production. It has just launched six variants of retailer label products in 2l format for mid-priced and value ranges and one litre formats for premium high juices, containing 50% fruit juice. Flavours include standard squash varieties, such as blackcurrant; orange; tropical; and apple and blackcurrant juice.

At the same time, the firm is working on relaunching its flagship Perfectly Clear flavoured brand, redesigning its packaging.

Hanlon is proud of the firm's new product development (NPD) department, which has two main areas of focus: completely novel products, possibly with functional benefits, and children's drinks. "We have a small, tightly knit department so more can get done," he says. "Out of every 10 products we work on weekly, roughly one goes live." Products go from testing to market in one or two months.

The future of soft drinks

For the NPD department, the opportunities for the soft drinks market as a whole lie in smaller formats for children and simple functional products, as well as "bread and butter" two litre lines. Many consumers are rebelling against having too many functional ingredients in drinks, says the NPD team.

In the current economic climate, the NPD unit must not only keep churning out new ideas, but must face the challenges of rocketing raw material costs and the growing appetite for cleaner labels.

As with many soft drinks firms, Silver Spring is striving towards the long-term holy grail of reducing dependency on sodium benzoate as a preservative. The ingredient has had a lot of bad press in the past year, with some researchers claiming it can cause hyperactivity, damage DNA and react with vitamin C to create benzene, a carcinogen. Use of pasteurisers on lines can act as an alternative aid to prolonging shelf-life, says Hanlon. Silver Spring has already installed two, with plans for at least one other in 2009.

Meanwhile, Hanlon has been working hard at renegotiating contracts with ingredients suppliers to drive costs down. "We have been rationalising and standardising flavours and have re-tendered all our business with our suppliers. Retailers are of course mandating more and more margin, but we have made a seven figure saving here."

All in all, the company seems well-equipped to face the future trends, while keeping sight of its rich history. FM

Company facts

Company Name: Silver Spring Mineral Water Company

Base: Park Farm, Folkestone, Kent

Founded: 1870

Size: 14 acres

Staff: 270

Opening hours: 24/7, seven days per week

Products: 350 stock keeping units: branded and own-label still and sparkling water and flavoured water and now juices; brands include Perfectly Clear, Virgin Cola (under licence) and Pulsar energy drink

Split: 70/30 in favour of own-label

Output: 110,000l/h; which represents 250M bottles a year

Capacity: 1Ml/day

Customers: major supermarkets, discounters, independent retailers and hotels

Personal profile

Name: David Hanlon

Post: director of operations

Joined: December 2004

Age: 50

Previous roles include: general manager, Barber Springdale, at Hillsdown Holdings (1994-1997); operations director, Princes Soft Drinks (2000-2002); operations director, Dairy Farmers of Britain (2003-2004)

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