Economy

Heat in the kitchen

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Acquisitions, an international business model and a custom-built operating system have proved successful building blocks for Australia’s only multi-state kitchen retailer. By LAURA COCHRANE.

By Laura Cochrane

It was the differences between the Australian and British kitchen retail markets that gave Englishman David Amer the idea to develop Australian Kitchen Industries (AKI).

The market in his homeland comprised 80% large specialist providers and only 20% cabinet makers. In Australia, it’s the opposite. “He saw the potential for a big player to emerge as a national kitchen provider,” says current AKI chief executive Adam Sleigh (right).

In less than a decade, AKI has grabbed a 10% share of the $1.74 billion Australian market and has an annual turnover of $80 million.

It employs 450 staff across more than 20 retail outlets in Queensland, NSW and South Australia that operate under the brand Kitchen Connection (www.kitchenconnection.com.au). It also has bolt-on appliance and wardrobe businesses.

The major shareholder, Kestrel Capital, recently became the company’s investor after Colonial First State Private Equity sold its share to concentrate on infrastructure.

With the slogan “innovation to inspiration”, Sleigh says the company is a one-stop shop for kitchens. “We install between 700 and 800 kitchens a month, and our aim is to make the process hassle-free for the customer,” he says. AKI also aims to increase annual turnover to $150 million within the next five years.

First launched in 1995 with private equity backing, AKI’s initial market growth was slow. “We were concession selling through BBC Hardware House, but they were taken over by Bunnings and kitchens were taken off the shelf,” Sleigh says.

Then in 1997 AKI turned to acquisition and snapped up Nobby Kitchens in NSW, followed by South Australia’s Wallspan in 1999. This gave the company an instant avenue into local retail and manufacturing markets because both had 10% to 15% market share in their respective states.

Sleigh, however, says the acquisitions were the toughest part of AKI’s primary development. “It was a challenge to find the right people to go into these companies with their own history and culture.” On top of this, it was difficult to find professional tradesmen who were dedicated to the “hassle-free” business principles of the company.

First, AKI aimed to minimise segregation across states by developing a manufacturing base at Geebung in Queensland, now the company headquarters. From this a start-up chain of retail stores in Queensland was launched in 2001. At the same time, Sleigh, then Queensland general manager, introduced a business model based on British kitchen retailers such as Magnet.

Sleigh says the key to the model is also AKI’s biggest future challenge – an effective operating system. “There are thousands of components needed to build a kitchen, and if we get one thing wrong then we rip the heart out of that home,” Sleigh says. “It’s the same with our business. It has to be efficient and effective from designing and manufacturing right through to distribution.”

In July this year, AKI will implement a new national operating system that has cost millions to develop and test. It’s based on having standard processes for key business areas, which has fewer steps and simpler measures.

It comes on the back of the launch of a staff intranet system called HEART (Human Excellence and Recourse Tool kit) which Sleigh says is designed to combat the company’s other major challenge: staff retention.

It includes accredited professional development courses in retail and management, and allows employees to chart a career path through the company. “The system actually drives professional development rather than always relying on management.”

Sleigh is adamant that market growth is also dependent on design innovation. Sleigh spends “half his life” in Europe following the trends and is working on plans to develop trade selling with a European business. He is also researching acquisition targets in Victoria and Western Australia. At this stage, the company is not considering a public float.

“No one in Australia has set the benchmark for design or built a platform to drive it to customers,” Sleigh says. “If we can do this, it will be good for the industry.”

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