Peter Ritchie is perhaps best known for his role as the long-standing chief executive of McDonald’s Australia. But since “retiring” from this role in the mid-90s he’s become a prominent company director (he is the deputy chair of Seven Network) and an investor in several companies. One of these if Culligan Water, which specialises in water filters for commercial use. The company has revenue of $10 million, but Ritchie has plans to grow this tenfold. Today he talks about Australia’s water culture, the art of customer service and why he’ll never retire.
Can you tell us a little bit about how you got involved with Culligan? How did the investment come about?
It was when I was looking to retire as the chief executive of McDonald’s. I was looking around for basically things to invest in that might have had some ongoing interest for me. That was in the early to mid-90s and this small franchise or agency became available. Culligan Everpure it was called and it had the licence for both of those US filtration companies. I knew Culligan from the time I’d spent in the US and I knew Everpure because I knew they were the best filter product that McDonald’s was using. So that was my initial interest and I finished up buying it back then with two partners – Bob Joss who was the chief executive of Westpac and Bob Mansfield.
And I guess a lot has changed in the marketplace since then. Certainly back in 1996 we weren’t drinking nearly as much water as we are now.
Which is what we anticipated, of course. But to cut a long story short, what we didn’t anticipate was that we sort of saw the Culligan US as a role model and it turned out to be quite a way away from the reality and where we finished. The big difference is that the water in the US regionally is very different to our water here. It’s mostly a lot harder because a high proportion of it is ground water, either it comes out of the ground or has been stored in the ground. So they have a hardness problem in nearly every region of the US. So most homes are set up with a water system in the basement, which revolves around a softening and a filtration system. We in Australia in most areas of Australia just don’t need that. So from seeing ourselves as predominantly a domestic water treatment company, we’ve become a largely commercial and food service water treatment company.
Which has played to your background.
Yes it did, but what I’m saying is that it was almost accidental. So now our predominant business is staff facilities in large companies and in that case what we’re doing in a large part is replacing bottled water deliveries which is very inefficient – environmentally and dollar wise. It’s easy for us to show big companies like the four big banks which we have all of, and people like Brambles and Suncorp, just to talk about some of our major clients off the top of my head. We can show them hundreds of thousands of savings every year in some cases compared with deliveries of bottled water. That’s apart from convenience factors too.
Obviously a lot of companies have got that message now, but was it a hard education process to begin with?
Yes it was, because people are emotionally committed to these water coolers, I think, because they can see it for some reason they seem to think it’s therefore more pure or better or something. Our filters on the other hand are in cupboards and you don’t really see them. The truth is that the water is the same. But it did take us some time to move people away from bottled water and we’re still in that process, there’s still a lot of market share out there available for us.
The other part of the business that we have been very successful in is food service and particularly coffee shops. Practically you name a chain, we do it. There are rare exceptions and that’s because we’ve got the best equipment, it’s not the cheap junk, it’s the best US proven filter systems that really do produce good coffee. It’s self-evident that the better the water, the better the coffee is going to be and that’s the case. And that’s been our real success over the past five years in particular and we’ve become a coffee culture, haven’t we?
Absolutely, as much as we’ve become a water culture I guess.
What about bottled water? Is that an area you have explored?
Culligan in the US sells bottled water. I never wanted to do that. I faced 30 years of criticism in my role at McDonald’s, environmental type criticism about the various things and I wanted a break from that and thought, I don’t want to sell plastic bottles in any form. And so we’ve never followed the parent company’s role model in that regard. What we’ve been experimenting with, with some degree of success, is public filtration in places such as Manly, where councils have put in filtered bubblers or filtered refilling posts for people to refill their own bottles. We’ve actually produced a folding refillable bottle which has been very popular but with our limited exposure, there aren’t the numbers out there yet but might be in the long run. But it’s all about being much more environmentally responsible and there’s an element of cost saving in there too of course. But the amount of plastic that bottled water contributes to the environment is a disaster really.