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‘I Never Thought Anybody Would Steal My Company From Me’

Published 8 years ago
By Forbes Africa

Kerryne Krause-Neufeldt was on a roll. She founded her first beauty product business at 23 and was turning over $45,000 in the dying months of her company. But she lost it all on her worst day.

“I never thought in my wildest dream that anybody would steal my company from me. Seriously, how would they get that right?” she says.

Born in Pretoria, she was raised by a single mother who ran a hairdressing salon.

Krause-Neufeldt worked odd jobs while paying her way towards an Honours degree in marketing at the University of Pretoria. From working as a sales lady at a small outdoor store, she packed her bags and left for London on a two-year working visa, to toil for a sandwich making store, Pret A Manger. She was training to be a manager for one of the stores the company was going to launch. It was here that she learned how a well-oiled, structured company functioned. But after three months, she returned to South Africa on the promise of a job.

“The difference in having worked for Pret A Manger in London and coming back to work for this company was a culture shock of note and it was a defining moment for me. I realized there was no vision. I was never going to see this marketing position,”

she says.

She resigned after five weeks and decided to start her own business – a distribution company, supplying cheap eye masks that rejuvenated the skin and removed puffiness. She called up the principle office for the eye masks in Switzerland which did not have a market in Africa.

They offered 10,000 eye masks to sell in South Africa but Krause-Neufeldt needed funding to start this business. One of her mother’s customers was a lawyer who dabbled in business from time to time. He wanted to start his own business but Krause-Neufeldt convinced him that her business idea was more viable. But he wanted 51% of the business.

“He knew I was caught between a rock and a hard place. He said, ‘I’ll give you the money but its 50/50 for the business,’ and in that moment I was relieved I could get started on the business but somehow I knew it was the beginning of the end,” remembers Krause-Neufeldt.

The lawyer funded the first 2,000 units. She hired around 12 sales reps and did all the training and focused on the administration. She also hired Peggy, her best friend, who would distribute the units to the sales reps from a factory. The sales reps earned commission on all the stock they sold, while she earned a mere salary of $275, which she felt was too little.

Business picked up and more stock was brought into the country and South Africa became one of the biggest markets for eye masks.

After running the business for close to two years, Krause-Neufeldt told her business partners that they had to inject more money into it to meet their side of the deal. They were reluctant and felt she was becoming a problem.

Then, at peak season during November, three of her sales reps picked up units worth $91,000. Peggy counted the stock and gave it to the sales reps. They should have delivered the products and returned with the cash, but they never came back.

When Krause-Neufeldt approached her business partners about it, they said that the sales reps gave them the money and that they were investigating her for fraud.

“I asked them how much the reps were giving them and they said R30,000 ($2,740). I said they have R1 million ($91,000) worth of stock. I told them they were getting nailed, but I was the enemy,” she says.

Her boyfriend was a director in the company.

“I was fighting with my boyfriend at the time and I told him he can’t be playing golf all day and take a salary. I told him to do something and he said he’d be a sales rep.”

While in a meeting a few days later, the partners asked Krause-Neufeldt’s boyfriend whether he was earning commission. According to the contracts, it was illegal for directors to earn commission as part of their pay package unless the board of directors approved it.

“We went into a meeting and that’s the only dirt they could find on us,” says Krause Neufeldt.

The partners said they were going to open a criminal case against her and the boyfriend unless she signed over her shares and released the company to them. She tried to get lawyers in but had to fork out around $3,600 upfront. Krause Neufeldt couldn’t afford this with her small salary.

“I signed my shares for nothing and handed my company to these people. I didn’t have a choice in the matter,” she says.

Krause-Neufeldt lost everything. She also signed a restraint of trade agreement. She lost her distribution agency and a local market she had personally grown.

“It was the biggest trauma of my life. To be betrayed by everyone and you know I’d get calls from salons that would complain about my reps and I wouldn’t believe them. I lived for my staff. It was devastating.”

Krause-Neufeldt, however, refused to lie down.

“I just believed failure was the inability to get up again. So I resolved to get up the next day and start another company to show them,” she says.

She immediately started working on her next business, I-Slices Manufacturing. She had come across an Italian eye mask but it wasn’t in line with the quality she wanted. So she decided to develope her own product.

She needed the technology that would make the base of her product, Eyeslices. A friend introduced her to the Council of Scientific and Industrial Research (CSIR), a research and development organization. Here she found the department that worked on a hydrogel treatment pad for burn wounds but the idea was shelved in 1993 because it couldn’t be developed further.

One day, Krause-Neufeldt met Avie Kruger, a scientist who had worked in the CSIR polymer department, and helped her to develop her products.

She started her own laboratory in a cottage on a plot in Midrand, outside of Johannesburg, but there were no standard manufacturing methods or equipment available to produce the product she wanted.

Her mentor suggested she look into the food industry and she came across a machine which had oval cut outs, similar to those of Eyeslices. She contacted Ulma Packaging Solutions, a company that packages products such as yoghurts and meat. The next morning, they arrived at the cottage and started to help Krause-Neufeldt customize her machine.

It took about one and a half years to create the perfect Eyeslices products following the seven years of research. Today, Eyeslices is a reusable stable water-based hydrogel eye mask manufactured through a physical process of freezing and thawing.

Instead of placing cucumbers on your eyes, Eyeslices does that job better and it’s a product many beauty salons have stocked on their shelves.

The United States was I-Slices Manufacturing’s first distribution country. Today, the company boasts 19 other export markets including and hopefully followed by Morocco, Kenya and Nigeria.

Krause-Neufeldt says the challenge with exporting products on the continent is that Africans want brands to be successful in the overseas market before they buy. Regulations can also be a problem.

“Every single country in Africa, the regulations are different and they’re very onerous. They’re incredibly expensive,” says Krause-Neufeldt.

But she is not giving up just yet, she plans to grow the product and take it to many countries on the continent. She hopes it will be one in the eye for cucumbers.

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Related Topics: #Company, #December 2014, #Distribution, #Kerryne Krause-Neufeldt, #London, #market, #Pretoria.