First Person: Taking a bite out of the big boys’ profits

While the supermarkets have been at each other’s throats, smaller businesses in the food and beverage industry have been steadily growing in the shadow of the giants. Aussie Farmer’s Direct is one of them.

The company, which is now more than seven years old, delivers fresh fruit, produce, milk and other products directly from farmers to customers’ doorsteps. But over the past few years, the company has been expanding into food production.

The business now operates milk and butter plants, operating on the adage that everything customers buy should be Australian-made.

The business is successful on its own merits, turning over more than $170 million. But as chief executive Braedon Lord explains, the supermarket in-fighting hasn’t hurt.

The first couple of years were spent figuring out the concept. The next four years were on growing the business, and the last 18 have all been about more vertical expansion.

A couple of years ago, we were in about 170 delivery zones. Now, we’re in about 230. The growth in those territories is what makes the business work.

Our range expansion is really driven by customers. We become more in tune with what they want, and they’re quite comfortable telling us about it. They’d love to see us do everything.

The aim at the beginning was to do logistics. But once we had the confidence that we could add value, we started showing the capability to do this ourselves. We invested in that.

We ask ourselves questions when going into a new area. Do we have the capability internally to do so? Are we able to work with farmers? What has been the main impact on their lives, and how can we work closer with them?

That approach has enabled us to integrate a lot of production vertically and has given us much greater knowledge.

We’re turning over about $170 million. Our revenue growth has actually slowed down a bit as we’ve moved into new territories, because of the investment.

Our next big opportunity is to increase our product ranges, but also to increase our capacity to supply. Our next real opportunity is to expand what we can do physically; so expand delivery areas, or add multiple vans in the same area.

Certainly the last couple of years have been less about geographical footprint than about really tightening up the vertical integration.

The supermarket debates have had a really galvanising effect. We’ve experienced some strong advocacy coming through our social base. It’s drawn customers to our business.

The stronger and more blatant the supermarkets become, the more opportunities there are for us to prosper around the fringe.

Nowhere in our business plan do we say this should be a massive business. We enjoy the grass-roots nature of the company. We don’t drive the business around revenue growth.

If that gets us to $1 billion, then great. But it’s not a specific objective.

The diversity within our organisation is pretty significant. We’ve moved from a business built on quality logistics systems to becoming producers. It means we’ve had to invest in culture and management quite significantly.

The cocktail mix of being customer-facing and also talking to producers is a major challenge. But at the same time, it becomes an employment exercise as well. Two years ago we had 100 employees, now we have over 500.

The next step for our business is making sure our IT interface remains savvy. If you look at how we’re growing, nothing is growing as fast as the exchange customers have with an IT base. It’s become more important than ever to be on top of that.

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