Re-engineering a traditional business

Source: Technology Digital

Date :20/06/2007 14:03:38

In March 2006 turnaround specialist Cameron Gunn and his partners Craig Morgan and Mark Supperstone set up Gunn Partners LLP

By Alison Withers

This was to assist investors, creditors and debtors in dealing with businesses and assets in distressed situations.

Their years of experience have already ensured a successful track record in restructuring several companies in the food industry and a variety of other companies across many sectors in the UK and abroad

Less than a year later, after looking at more than 30 other companies, the three put their own money into buying South Wales bakery Ferrari’s out of administration. They saved 580 jobs and are now dedicated to making sure the 95 year-old, £12 million turnover company, started by an Italian immigrant, will continue and grow into the future.

In the two years before they bought the company sales were plummeting by ten percent each year. That’s now been reduced to zero. They took on the entire work force (no redundancies were made) and, discovering that one person had previously been expected to oversee what to them were clearly two separate businesses, separated the bakery business from the retail outlets to create two divisions. Each division had its own manager promoted from within the company.

The factory, at Hirwaun in the Cynon Valley, has been renamed Best Bakeries. The shops will continue to trade as Ferrari’s (apart from the 20 Sweetmans shops acquired last year before the company went into administration). Each division will have to run as a profit centre so the bakery will have to become more competitive and the shops will have to improve their ordering processes or wastage will “hit their bottom line”, says CEO Cameron Gunn, 36.

Consolidation

Mr Gunn expects the consolidation period to last between three and six months, but on current form that could be a cautious estimate. On the plus side, Australian-born Mr Gunn says: “We have a brand name which is extremely strong around South Wales with loyal customers and an extremely loyal employee base. We have very good quality products and our brand name is our USP (Unique Selling Point). I’ve been pleasantly surprised at just how popular our stores are.”

The products are price competitive, not premium prices but not at the bottom end either, he adds. Says Mr Gunn: “It’s a steep learning curve for me. I’m not a baker; my experience is working with companies in various degrees of distress. Administration is about as distressed as you can get and we’re assisting the business to emerge out of that. I love challenges like this. It’s hugely exciting.” No redundancies were made and none are planned and as there were no other buyers in the frame, that’s cemented the new owners’ relationship with the staff, many of whom had worked for the business for more than 30 years and would have suddenly found themselves unemployed.

In addition to the newly-promoted managers of the two new divisions, a completely new management post has been created with responsibility for developing new products and for special event planning (for products targeted at things like Mothers’ Day, Rugby Internationals and the like). Again the new post holder is an internal promotion.

It sounds obvious, but for the first time staff have been consulted about the products. He says: “I expected our first product meeting to last 20 minutes. It lasted four and a half hours! There’s amazing creativity here, second to none. Previously the company never held regular meetings and there seemed to be no interest at the top level in the product feedback from the bakery staff and shop managers and employees. The bakery previously dictated how the retail arms were run, and no-one looked at the high street and thought “actually our customers want something different.”

A work in progress

New systems are already in place to manage the two profit centres and other systems are under review.

Many of the work methods are undergoing a revamp with new systems for cash handling, ordering, picking and packing, prices and purchasing processes already introduced or nearing completion. They’re not using new technology yet, but it may well be possible in the future.

Mr Gunn is pleased with the way things are going, not least that the company’s existing suppliers are continuing to supply them under normal terms and offering full support.

He says: “We want to continue with a local focus on buying raw materials and on hiring staff, using Welsh advertising companies and other local services.”

And the future?

How far they will go with updating and re-tooling the bakery will depend on discussions currently under way with the Welsh Assembly. Once there is a clearer picture of what funding might be available the new owners will be in a better position to review the situation.

However, it’s absolutely certain that the product line will be revamped, keeping popular lines, particularly the range of breads and savouries, but possibly changing or discontinuing others that are not selling. A new, healthier focus will also be introduced.

Mr Gunn believes the potential for the wholesale side of the business has hardly been explored and there are massive opportunities for growth. Currently, wholesale accounts for less than ten percent of total sales. The shops, too, will get a new image, although they will keep the Ferrari’s name, and possibly also the Sweetmans name which is also well known and popular locally.

But, he says: “The shops need to be revamped. We have a very clinical blue as a logo which no-one likes. We need warm colours, a different logo, new uniforms. It won’t happen overnight, and probably not for at least 12 months.” In time the company will take on more experts, particularly on the retail side as well as someone to manage the operation day-to-day on the owners’ behalf, but the plan is for the company to grow organically.

They’re also in discussion with the unions on possibilities for new initiatives in training and recruitment but that too will develop over the longer term. Marketing will emphasise the Welsh heritage and traditional food, with the shops expanding to cover all of Wales and eventually across the UK. As Mr Gunn says, the aim is to “bring a breath of fresh air” into the company.