ecoman: From a Garage in Northland to a Pioneering Global Brand

BOOK EXTRACT

ecoman: From a Garage in Northland to a Pioneering Global Brand, by Malcolm Rands. Published by Random House New Zealand.

From around 2004 we entered a period of incredible growth that would see our turnover increase from around $1.5 million, including mail-order and shop income, when we first went into the supermarkets, to around $24 million by 2010. But nothing has ever been certain in our business, and risk is always present.

As soon as we got into the supermarkets we found ourselves in a three-way fight, almost neck-and-neck: Ecostore, next GENERATION and B_E_E. But I think because we had a strong health message and we put all the information about our ingredients on our packaging — something no one else does even to this day — we started to take off. Over the next year or two we pulled ahead until we had 50 per cent of the market in New Zealand, at which point we decided to start looking at Australia.

That was partly because at last we were feeling more secure, but also because in the FMCG game the way you make money is not by putting your price up but by cutting your costs, and the only way we could do that was by increasing the scale of our operation. Our competitors were mostly giant multinationals who operated on completely different economies of scale, which meant we were at a huge disadvantage. We had the same overheads, but a comparatively tiny turnover. We knew that if we could increase our scale it would start driving down our costs. If you can buy a container of something, rather than a barrel, suddenly your costs can drop to a quarter as much per unit.

Then around this time, an opportunity came along. Gordon still had the itch to keep doing things, and he and a friend had bought a factory in Pakuranga called Ecotech. Using that factory he had become one of our contract manufacturers, but in 2005 he was ready to move on to a new project. So Ecostore bought Ecotech from Gordon. It was a huge deal for us, to get into manufacturing ourselves. What made it possible was that their factory manager, Tony Morpeth, an incredibly skilled and ethically driven guy, was happy to become a 10 per cent shareholder in the factory, and I welcomed that proposition. Manufacturing wasn’t my skill-set at all, and I thought it was going to be such a vital part of the business that I wanted someone who had passion as well as a real stake in the operation. Someone who was going to run the factory as though they owned it. We financed him into his shareholding out of his wages, so he didn’t have to find the money.

We had our own factory at last, and the way to make the factory more efficient was to pump more products through it, to keep driving the prices down. So Daniel went to Australia and we found a distributor for each of the states in Australia. We weren’t interested in supermarkets at this stage — just the wholefood, green, organic stores. Within a couple of years we were in 1000 stores throughout Australia. It gave us a feel for the market there. And the great thing about having distributors was that they bought the product off us and then we could just kiss it goodbye. We didn’t have to be in there selling or marketing. We made it cheaply enough that they had enough margin to afford the selling and marketing. Straight away, it was quite profitable. As a result of that, and increasing sales in New Zealand, the Ecotech factory staff grew from 3 to 15 between 2005 and 2007, and sales tripled.

I had worried that Australians would not want a NZ product — ‘buy Australia’ is very strong over there — but it turns out that they are happy to buy quality, green goods from their little cousin New Zealand. The clean, green, 100% Pure campaign has really worked.

Occasionally someone will complain about food miles and buy local — things I believe in, too — but when you look at the reality, it doesn’t stack up. As I point out to them: if you are manufacturing something in Australia you are using dirty brown coal to generate the electricity to make it, and then you are trucking it gigantic distances around Australia. Whereas New Zealand has got the greenest energy on the planet — anything made in New Zealand has been made with almost zero carbon energy — and then we ship it, which is the greenest way you can transport something. So Australians are actually getting a product that is more of a green option than a local product. And then I finish up by saying: ‘If you come to New Zealand you’ll find that nearly all our big business is owned by Australians, and now you are denying us the right to send things back to you. Is that fair?’ And they go, ‘Oh, I suppose you’re right.’

Towards the end of 2006 we found a broker who specialised in Australian supermarkets — it was the same broker Whittaker’s had used over there. He set up a meeting at Woolworths in Sydney, and Daniel, I and our new agent Brian all went along. Brian was confident that Woolworths would take us, because he knew the chain’s buyer for household cleaners and he felt that we’d be a good fit for the eco category they were looking to expand, but just a week before our interview his friend was transferred and a brand-new guy that none of us knew took up the position. Suddenly Brian’s old-boy network had fallen flat.

I went ahead and did my presentation, and at the end of it the buyer said, ‘Well, Malcolm, I want the whole range. Everything you’ve got. I want it all.’ I would love to say that it’s because I am such a brilliant salesman, but we found out later that his wife had already been buying Ecostore products at her local green store and she loved them. So, again, serendipity.

Extracted from ecoman: From a Garage in Northland to a Pioneering Global Brand, by Malcolm Rands. Published by Random House New Zealand Ltd.