By Rowan De Klerk, CEO of The CFO Centre

In recent weeks, Woolworths has found itself at the centre of two very different supplier stories. On the one hand, Beyers Chocolates has attributed its collapse, at least in part, to its relationship with the retailer, which has sparked the usual “David versus Goliath” narrative. Not long after, Rob Hoatson of Thirsti Water spoke positively about a long-standing and successful partnership with the same group.

I don’t have a direct view into either of those relationships. What it does highlight, though, is how quickly the conversation around exclusive supply or manufacturing agreements becomes emotional, when in reality it’s a far more commercial and strategic decision.

Before even getting into exclusivity, it’s worth touching on the broader competition landscape in South Africa, particularly in the mid-market. If we are serious about building an entrepreneurial ecosystem and attracting capital, we need to make it easier for transactions to happen.

There is a place for scrutiny in large, complex deals. No one is arguing against that. But in the mid-sized market, it increasingly feels like transactions are being slowed down by processes that try to engineer outcomes rather than enable them. The result is simple: more time, more cost, and in some cases, deals that don’t get done at all. That is not helpful for entrepreneurs trying to build and scale businesses.

Against that backdrop, exclusive manufacturing agreements can make a lot of sense.

Manufacturing is capital-intensive. Winning a contract with a large corporation can be the difference between getting a business off the ground and not. You get a stable base client, which in itself is incredibly valuable in the early stages. In many cases, you also get access to intellectual property, technical expertise and support across the value chain, from product development through to merchandising and distribution.

There’s also a commercial reality that people often overlook. When you are the appointed supplier, the client is not running around asking for three quotes every time they need a product. That stability typically translates into better margins. Depending on the industry, those margins can be meaningfully higher than what you would earn doing ad hoc manufacturing work.

From a funding perspective, having a credible, blue-chip client behind your revenue line also helps. If you are looking for working capital, that contracted income gives banks and lenders a level of comfort that is otherwise difficult to achieve.

That’s the upside.

The downside is concentration risk, and it’s a real one.

When a single client makes up a large portion of your revenue, your business becomes highly exposed to decisions you don’t control. A change in strategy, a shift in procurement, or even internal pressures within that corporate can have a direct impact on your business.

You start to see this play out when businesses look to raise more meaningful capital. For short-term funding, the blue-chip client is an advantage. For larger capital raises or expansion funding, it can become a concern. Investors and lenders start asking a different question: what does this business look like without that client?

That question becomes even more relevant when you start thinking about an exit.

On paper, these businesses can look very strong. Good margins, stable revenue, efficient operations. But in substance, many of them are effectively an extension of a corporate manufacturing arm. That limits the pool of potential buyers and can have a direct impact on valuation.

If exiting is part of the plan, timing matters. There is often a window early in the lifecycle of the contract where the business still has perceived optionality. As the relationship matures and dependency increases, that optionality narrows.

For entrepreneurs looking to expand into new manufacturing lines or take on additional clients, structure becomes critical. You need to be very deliberate about how you manage intellectual property and client relationships. Clear separation between operations is not just good practice, it’s essential. If a key client feels their IP is at risk, you will have a problem.

The reality is that exclusive manufacturing agreements are neither good nor bad. They are tools. In the right context, they can accelerate growth and create a solid commercial foundation. In the wrong context, or if poorly structured, they can create constraints that are difficult to unwind.

The key is to be clear about what role that agreement plays in your broader strategy. If you treat it as a stepping stone, structure it that way. If you are building around it, understand the risks you are taking on.

As the recent headlines show, two businesses can enter into similar arrangements and walk away with very different outcomes. That usually comes down to how the deal was structured in the first place and how well the entrepreneur understood what they were signing up for.

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