A growing success
Tuesday, December 16, 2008/
Fresh from winning Telstra’s Business Woman of the Year award, Leanne Wesche tells AMANDA GOME how she built a booming business from packing and washing fruit and vegetables.
By Amanda Gome
Packing fruit and vegetables, or washing them, may not seem the stuff of entrepreneurial dreams, but Leanne Wesche is making millions doing just that.
Leanne Wesche is 41 and has been self-employed since the age of 19. In 2004, she started her fifth business, the WA-based fruit and vegetable packaging company, Pacco Group.
Revenue is now $6 million, the company is profitable and Wesche has just taken out the Telstra Business Woman of the Year Award for 2008.
Wesche talks to Amanda Gome about lessons from selling her last business The Sprout Factory in 2003, her strategy for Pacco Group and plans for her latest venture – an all natural decontamination product for fruit and vegetables that she is selling globally. Plus she shares her tips to avoid burn-out at the end of the year Christmas party season.
To listen to the interview with Leanne Wesche, click here (interview length 23 minutes.)
To download this mp3 file and listen to it later, right-click this link and “Save target as…” to your computer (Macs; option-click).
Amanda Gome: Your last company was The Sprout Factory which you built up over seven years and then sold in 2003. How much did you sell it for?
Leanne Wesche: I was very fortunate to sell it on an EBITDA of a multiple of five of the net profit, which was a great result for us. It was a business that had massive growth and over seven years we moved the factory three times and so we were continually pumping money back into assets and growing the business and more equipment. So it was a really hard seven years.
At the end, what was your revenue?
It almost got up to $3 million when we sold, which is a lot of punnets of sprouts at 80 cents each. Sprouts grow in three days so we had massive hydroponic setups; growing, washing, packing. We had a big team of staff.
What did you learn through the sales process? Was an offer made to you or did you approach people after deciding it was time to get out?
At the very, very early days of the sprout business we won a really small export award, “best potential exporter” or something like that.
I couldn’t believe what media that attracted. So I jumped on the awards trail and we won the Fremantle Business of the Year and then the WA Business of the Year. And this was my way (we were always cash poor) to get some free advertising and it branded our business incredibly. Every time I had a new punnet of sprouts… the broccoli sprouts were great cancer fighting aids and all these different things. And so from that I got great attention.
So when I won a national award, supermarkets on the east coast went ‘wow, what is this crazy woman over there doing?’ Do we take her on or buy her out?’ So I was very lucky; it started as a merger and then a buyout.
So you merged with the company that bought you out. What did you learn through that process? If you were selling something again, what would be the tips you’d share with our entrepreneurs?
Often when you do sell a business it’s not a complete buyout. You’re asked to keep shares and then you become part of a big company. That was particularly hard as I’ve been self employed since 19. Then all of a sudden I wasn’t my own boss and I was part of a bigger team. That was a huge growth phase for me as we were part of other people’s decision making and our shares were diluted as other businesses were purchased, some which we agreed with and some which we didn’t.
So we were very lucky to go into it with really great legal advice and we had a put and call option put on our shares, so at any time we could call our shares back at the full price that we sold them for. So when it looked like it was time to get out because we didn’t like the direction that the new business was going, we still ended up getting all our money back. Huge learning curve; and my biggest message there is make sure you get great advice when you’re selling your business. Actually get that first, when you’re starting up a business.
The structure that you set the business up is so important. I didn’t even know what capital gains tax was, and I thought how dare I have to pay this ghastly toll after seven years. We sold our house – we were renting houses, we were really, really struggling. Then sure, we sold it for the big dollar but had to give the 25% capital gains. Sure there are some concessions, but you just have to make sure how you set it up, whether it’s a family trust. All those beginning days are really important. You have to consider ‘I’m setting this business up to eventually sell. Am I going to do this right?’ So get great advice all along the way.
How did you finance The Spout Factory in the early days?
Putting our house on the line and then that wasn’t enough. Selling the house and putting that into the business to prop it up. Just being really passionate, sitting in front of the bankers telling this story. Do it face-to-face. Take your suppliers, your customers, everywhere on a journey with you. Believe in yourself and you’ll have people believe in you and support you along the way.
When you sold in 2003, did you immediately want to start Pacco Group? What was the vision?
I’m not sure, I just wanted a rest for a while. I was completely burnt out. So I went to Europe and I couldn’t wait to walk up and down the aisles of the supermarkets and check out what the food industry was doing over there. So I did have six weeks off but came back with suitcases full of packaging and ideas. I went immediately to the supermarkets.
It’s really important to forge strong relationships, which I had. And of course the supermarkets said ‘wow Leanne we can’t wait for your next business venture’. They gave me an opportunity to set up a pack house. They said there’s a big gap in the West Australian market. So I went into massive debt again, built a huge big Rolls Royce pack house and just believed that I could do it and went forth.
Why is there a gap in the fruit and vegetable packing industry in Perth?
It’s probably all over Australia. The farmers out there are great at what they do – but do they really want to go into the technology and the difficulties of then taking on a completely different business model for packing their fruit and vegies?
In Western Australia we haven’t got the volumes, so if a packer was to set up at the back of the farm, their machines would be only used for an hour a day to pack their fruit and vegies to meet the market trends. So rather than that, I’ve got 25 to 30 growers that bring their fruit and vegies into me. I’m following the trends, I’m getting the latest technology and latest plastics and punnets and recyclable and compostable, and it’s constantly changing. Your supermarkets want higher quality assurance and you’re always having to step up to meet these changes. And I think it’s great; let the farmers out there do what they do best, grow better vegies and put their money into land.
Part of your strategy was to add services since you’ve launched your basic packing house. Where did those ideas come from and what are they?
Needing to diversify and not being reliant on one customer or one large supermarket. When I was overseas again, I had the largest world conference on fruit and vegies in San Diego a couple of years ago, there was a large food outbreak of E.coli on baby spinach. I thought wow, people were getting sick and there were a couple of people dying and there was the FBI involved, it was bigger than Ben Hur. I thought imagine if something like that happened back in Australia. So I then when on to develop a fruit and vegie wash that removes all the contaminants from fresh produce. By that stage the pack house was comfortable, we’d consolidated, had their systems in place, so I went on and built another business.
You are referring to the Safeguard Fruit and Vegie Wash. And you’re saying it’s 100 times more effective than just washing with water. How have you marketed that?
It’s been a real challenge. Again jumping on the media trail. I employed a national media company. They would send out media releases then you’d be standing there hoping on your launch day that the media would turn up. Then you would be open for any articles that came up. They constantly worked behind the scenes to send out anything that happened with the product. Whenever we launched, they were there and we’ve got over 200 articles written about us, we’ve been on national TV, on local TV, radio constantly just promoting the product. It’s a really interesting story. We had to be really careful that the media didn’t pick up the hype that there are contaminants on fresh produce. I wanted people to eat more fruit and vegies, not to be scared off, so we had to do it gently, gently.
So you really had to massage that message that you put out there so it didn’t backfire.
That’s right, so that’s where we came up with the catchphrase “Up to 20 pairs of hands can touch your fruit and vegies from farm gate to feeding your family”. So taking the focus away from farmers using pesticides and chemicals, which is necessary because we all want no bugs. We need that to grow, to farm.
So it’s actually the chance of contamination with the transport company and the shop person and the consumer in front of you that picks up that apple and doesn’t want it and puts it back down. Have they got marks on their hands, have they washed their hands after they have gone to the toilet? All those ghastly thoughts. So we’ve had to go down that way than do the other angle.
The Pacco Group has revenue of around $6 million. You started in 2004 and quickly got to $5 million in 2005 and it’s pretty much stayed around $5 million to $6 million since then. But your costs would have been very high to start with as you built a warehouse in Perth, which is a 4000 square metre processing plant that handles over 150 tonnes of produce every week. How did you get the funds to do that?
Again, put the beautiful home that we’d bought after selling the sprout business on the line. So that’s the bricks and mortar, and that’s all the banks want to know about. That’s the security and then we have all the equipment leases. It cost me $6000 per day just to be here with all the electricity and all the leases and rent – so really, really high cost.
So it’s all about high volumes, low margins and that’s really pushed us to run a really efficient pack house. So at the beginning, we are fighting lots of fires and learning the new business and then slowly consolidating and getting it right.
And you broke even you said after the first year. You were able to cover your costs?
We lost a couple of hundred thousand dollars of cost the first year. And after 12 to 15 months we hit the breakeven, then we started filling that big hole of the loss over the first year and then slowly came good after that.
So that takes a lot of guts. Where do your guts come from? You’ve obviously learnt a lot through building these other businesses that has given you the courage to do this. But what else is it?
I think you’re born with a true entrepreneurial spirit and that real resilience that I have. I’ve made lots of mistakes and learnt along the way. And I’ve also been very aware of what I’m good at and what I’m not good at.
What is your weakness and what do you do about it?
I’m a complete technophobe, I am absolutely hopeless. I’ve been spoilt with great support around me. I really had to learn the financial side of the business. I was just so obsessed with turnover. I was like wow as we watched we’ve made the $1 million, $2 million, $3 million and just wasn’t watching what was happening in the middle.
That is so important, turnover is just an ego thing. Who cares how much money is coming in, it’s what’s going in and what’s going out and you’ve got to make sure that there’s some that stays in the middle.
I’ve really had to work with great teams and good accounting teams. I’ve got real attention to details, watching that money going in and out. I’m great with staff. I’ve always been a really great role model and inspiration to people, and that’s tiring at times; it’s exhausting actually to having to play that role day-in day-out. I’ll walk into the factory and said a couple of things to a couple of people and haven’t realised that your impact can be really damaging and leave a trail of blaze behind me.
It’s the week before Christmas and poor entrepreneurs, after an exhausting year, have to go to their Christmas parties and be nice to everybody when they just feel like pulling a doona over their heads. How do you do it?
Christmas parties are a huge challenge for me. I’m a huge entertainer, a huge party queen. So this year we’re going rock climbing, abseiling and flying foxing, and of course they’re going to look to me to do it too so I’m terrified. I always do all the catering. And then I have these awards where every single person gets chosen for the funny award or the clumsy award.
I always put together a huge Christmas party as a celebration and run the entire thing. We have a really social side. Obviously packing fruit and veg is a very boring. The girls and guys are standing there hour after hour chopping those terrible pumpkins and lettuces all day.
So we have star of the month, birthday cake day. Every Thursday I cook the staff lunch, (sometimes we buy it in) and we get together and have a lunch. That team spirit that you build in a business makes them turn up everyday. We have very little time off in our business, very little staff leaving. We have a great core of staff. Even in something like unskilled labour like we do. So I’m really proud of that.
What do you do though when you are exhausted and feel like you’ve got nothing to give on that day, and then there’s something big asked of you?
I have a personal training session everyday for an hour. And it’s only because that I make that appointment that I turn up. The factory could be burning down and I walk into that session like the world is sometimes completely on top of me. And then your adrenalin kicks in with exercise and I walk out of there everyday and think wow I can take on anything now.
What time do you do that?
I do it around the 10 or 11 o’clock. So I come in and do a few hours, get the team going and then I disappear and go and do my session and then come back and then because I always work late as well. After everyone leaves that’s when I get my real work and my big picture work done.
Do all the staff know to not ask Leanne something until after the session?
Yes they do. My accountant says I’ll always find that money for the personal trainer sessions because then you’re bearable to be around. They do give me a hard time but they love me really.
So basically you’ve got two businesses. You’ve got your Pacco Group which is your packing company and then you’ve got the fruit and vegie wash. Can that be sold globally?
It is yes. We’re very lucky; we launched in Australia and we immediately launched into 11 countries. We did a food exhibition in Singapore and one in Hong Kong and we got great interest from all over the world. So we’re exporting into Singapore and Malaysia. And we’re launching into India next month and what an amazing market that will be. We’ve got pallets into Canada, France and a container load went into Taiwan.
Have you got someone out there selling that, what is the structure behind that?
No, there’s just a small team of us. Safeguard is a new business, so we’re piggy backing on Pacco and using the same resources and running the business from the Pacco offices. So I stand there at the exhibitions and get the contacts. Because there are fruit and vegie washes around the world, people are used to using vegie washes in other countries. But this is natural and organic and a better value, so it’s been a really easy market overseas. The Australians are a bit tougher. We’ve only ever washed in water here.
Are you selling this straight to consumers?
Yes it’s retail. It’s a 750ml bottle that sits next to your sink and you fill your water up, dilute the solution and wash the vegies and that’s where all the contaminants come out. So it is purely for retail.
Overseas are consumers or packers buying it?
No, that’s also for retail sale in the supermarkets. It’s sitting in the fresh produce departments and selling through there. We’re developing a new range as we’re going into industrial use, we’re going into wipes, sachets and sprays. At the beginning I didn’t want to complicate the market by putting a whole range out. I started with the concentrate and now we’re about eight or nine months down the track and we’re starting to develop our next range.
That’s a very important point. Not complicating the market. I can’t tell you how many times I come across entrepreneurs telling me about their new business and you just think the consumer won’t get it, it’s too complex. How do you know what the consumer understands?
Previously I’ve done a lot of my business decisions on gut feel but this one I’ve actually done extensive market research to make sure that I targeted it right and I bottled it right. We did omnibuses, which is where you buy a couple of questions on those ghastly surveys you get phoned through at dinner time at home. You get qualitative and quantitative. You know how many people will buy it.
Then you sit in your focus groups. That was really great fun. You were in behind one of those double screen mirrors and you pay for people to sit there and look at your packaging and give you opinions on all those sorts of things. And it’s been really valuable, it’s really given me an insight on what to expect and how to market properly.
How big do you expect your vegie wash business to grow? Would that be around $1 million revenue now?
Yes. We’ve sold over 100,000 bottles here in Australia and 150,000 bottles overseas. So that’s certainly growing. We really want to target the UK. The world is our oyster. Obviously with the global crisis and the China scares everyone wants our vegies exported.
So we’re just starting to send some container loads into Singapore, Malaysia and Indonesia. They want our clean, green vegies. We’ve tried before but have had trouble competing with the high air freight costs. But now we’re going really well with the dollar the way it is. We’re doing more trading in fruit and vegies and looking at the different opportunities, diversifying and always keeping ahead and lots of energy and passion along the way.
Just lastly, what’s your biggest personal challenge going forward?
Of course it’s the work life balance but I don’t concentrate too much on that. I’m passionate in whatever I do. Whether it’s at home, I make sure it’s quality time.
Have you got children?
I do but I have the Mr Mum so I’m really lucky.
I’ve been wanting to ask you about your partner. Because I think your partner should be bottled.
It’s hard. He works in a business during school hours. You need that strong support network of family and friends around you. My friends always know I’m going to turn up late to their dinner parties but they love me for it anyway. It’s hard to get that balance, but just be passionate in what you do and believe in yourself and believe that it’s for a reason and go forward.
And the downturn? It’s good for export; are you seeing it hit you any other ways?
I’m a bit lucky being in food. I don’t think it’s really going to hit food or retail or supermarket-level food. They’re saying that supermarket sales shouldn’t be affected. I think people are talking about it a lot and there’s a bit of doom and gloom out there. But still in Western Australia you go to book a restaurant and the first three you ring are fully booked. So I think there is still plenty of money around.