Green Cross
  • After 44 years, the Green Cross shoe factory in Cape Town is closed down, and all shoes carrying the brand are now imported.
  • Now owner AVI has started renaming Green Cross stores as "GX & Co" – experimentally for now.
  • AVI has spent more than half a billion rand on Green Cross. This week it wrote down the company's value to zero.
  • For more stories go to www.BuinesssInsider.co.za.

In 2012 the JSE-listed AVI group, which owns the likes of Five Roses tea and fishing company I&J, paid R417 million to buy Green Cross, which it described as "South Africa's leading comfort footware brand".

It had taken nearly four decades for the Zeppel family to build Green Cross into that, scaling up from making comfortable German-style clogs and sandals to establishing a factory in Epping outside Cape Town that, by 2012, employed 426 people.

Those workers made nearly 60% of Green Cross shoes, making it one of the last holdouts against cheap imports that had been flooding into South Africa for years.

Now it would take that brand to the next level, AVI said, by using its financial muscle, marketing expertise, and "brand-building abilities".

But that was not to be.

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Earlier this year AVI shut down the Epping factory, moving a to "full import model" for all shoes carrying the Green Cross name.

This week the company told shareholders it had written down the value of Green Cross in its books to zero, "taking into account the extended period it will take to return the business to acceptable profitability from the current base".

And during the next year the Green Cross name will disappear from around a quarter of the existing stores that use the brand, AVI told Business Insider South Africa, in favour of "GX & Co", a new brand it started to promote in August.

This "multi-brand store concept", which will carry imported Green Cross shoes alongside other brands, had seen an initial positive response in two already converted from being pure Green Cross offerings, the parent company said.

See also: A pair of ultra-rare Nike shoes sold in South Africa for R56,000 – and the seller says it was a bargain

When AVI moved to buy Green Cross from the Zeppel family in 2012, the South African Clothing and Textile Workers' Union (Sactwu) warned competition authorities that the listed company "lacked commitment regarding local manufacturing", and could end up "curtailing" local manufacturing.

But AVI's books suggest exactly the kind of investment commitment it had promised. Over the course of six years it poured nearly R125 million into Green Cross, investing in both its factory and stores, taking its total investment to well over half a billion rand in cash. By the time the number of Green Cross stores peaked, at 45 outlets, during 2017 and 2018, the Green Cross retail footprint was nearly 70% bigger than what AVI had bought.

Yet even as AVI was spending money on Green Cross, signs of trouble were mounting. The division's operating profit started to drop as soon as AVI took control, and never stopped, declining from 24.4% in 2013 to 1.7% last year.

See also: Going barefoot gives SA kids an edge over Germans – but that may backfire later in life

By 2015 AVI was telling shareholders that progress on Green Cross "has been slower than expected" – but that growth was around the corner. In 2016 the company said Green Cross was performing "below expectations", but that it had fixed what was wrong. In 2017 AVI took a R150 million write-off on Green Cross, but said things were about to improve. 

In its 2018 annual report, AVI bluntly described Green Cross as "a missed opportunity" – and wrote down another R150 million of its value on the group's books – yet still promised to "continue to invest in retail outlets".

But by June this year four Green Cross stores had been closed, as well as the Green Cross factory, and before accounting for inflation, Green Cross had sold 10% fewer shoes by value than it had as a family-run business.

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