AH Beard wants to get China into bed

All is not lost in Australian manufacturing. Next month one of the nation’s big three bedding producers, AH Beard, will take on the Chinese market, from a facility in Shanghai, which is to be officially opened on July 6th by former Prime Minister John Howard.
 
This is a business that makes 5000 mattresses a week in Australia and earns more than $100 million a year in sales of seven different brands, so it would be a brave pessimist who said this Aussie manufacturer can’t succeed in China.
 
Through relentless innovation the company has got the time from order to delivery down to 3-5 days and the beds are pretty fine items. I know this because I just reluctantly dragged myself out of one of their products this morning.
 
AH Beard is also a family business, in fact at 113 years old, it is the very model of a modern family business and last year it was inducted into the Family Business Australia Hall of Fame.
 
The fourth generation Beards who run the company, Garry and Allyn, have a constitution, family charter, board charter, shareholders’ agreement and business policies paper. You name it, it’s written down. That’s because there was a time when they wished it had been.
 
In 1979, their father Austin Beard owned 25 per cent of the business and was CEO. His three sisters, Joyce, Roby and Bev, owned the other 75 per cent of the company between them. Garry was 24 at the time and working in the upholstery department. Allyn was 19 and still studying.
 
One day Austin asked Garry to sit with him on the front step of the factory in Kogarah, NSW. “Mate,” he said. “My sisters have told me to either shut the business down or buy them out. I can’t afford to do that, so it’s all over. I’m sorry.”
 
Garry remembers it as a very emotional time in their family. His aunts simply didn’t believe the business had a future and wanted out, and at the end of the 70s after the second oil shock and the Whitlam tariff cut, who can blame them?
 
Word got around the factory that the three sisters had given Austin an ultimatum, and one of the company’s suppliers, Harry Warat, a flock producer, got wind of it and offered to help, keen to keep his supply deal going.
 
Harry was a Jewish immigrant who had survived Auschwitz and landed in Australia with nothing. He also built a great family business collecting and selling the wool from sheep’s backsides as mattress flocking (where there’s muck there’s money).
 
Garry remembers going, awestruck, with his father to Harry Warat’s mansion at Point Piper, next door to Lady Mary Fairfax’s place, and once again they sat on the doorstep – this time to do a deal with Harry to save the company. The Warats lent Austin Beard $942,735 to buy the 75 per cent of AH Beard that he didn’t own, including the “dirt” at Kogarah. In return, Harry got to be the Beards’ preferred supplier of flocking for as long as there was any debt outstanding, on top of a fixed and floating charge over the assets.
 
(Ten years later Austin wrote out his final cheque to Lionel Warat, Harry’s son, and immediately switched to another, cheaper, supplier of flocking.)
 
The business was started by Enoch Beard in 1899 as Australian Bedding Mills, producing handmade straw and horsehair mattresses. In 1926, the factory burnt to the ground and Enoch wasn’t insured: he lost the lot, although he had some money put aside, and out of that he gave each of his three sons half a gold sovereign. One of them, Albert Henry, decided to use that money to rebuild the business.
 
So according to family legend, Albert and his wife Ada began making mattresses by hand from black-and-white stripped ticking, flock, kapok and horsehair.
 
The business grew, they survived the Depression and after the war their son Austin joined the business and started to introduced mechanization. As we know, Austin had three sisters who didn’t join the business but, unusually for those times, ended up each owning an equal share of it with Austin. Anyway, it all worked out well in the end, thanks to Harry Warat… and Gerry Harvey.
 
The founder of Harvey Norman has been supporting AH Beard and selling its mattresses for more than 50 years. The Beards followed Gerry to Queensland and then New Zealand, spreading their manufacturing operations across the country with Gerry’s support.
 
But there was one more disaster left for AH Beard. It happened in 1999 – ironically the year in which the firm also won the inaugural Australian Family Business of the Year award. It was because Austin decided to buy another 90 year-old mattress maker, Domino, which lost its way because it didn’t have a succession.
 
The acquisition looked good for two years, but then wheels fell off. The GST squeezed margins and the letdown from the Sydney Olympics coincided with an economic slowdown. Worst of all, the Beards didn’t know how to combine two old family cultures successfully, so the merger didn’t work.
 
That’s when they brought in their first outside CEO, a man who specialized in merging two different cultures. Since then the CEO has never been family (Garry is chairman and Allyn is a director), and the constitution now states that either the chairman or the CEO must be a family member, but not necessarily both.
 
Ownership of the company is now in a testamentary trust, but nominally 50 per cent is owned by Garry and Allyn’s mum Pat, now 84 (her husband Austin passed away 6 years ago), while Garry and Allyn own 20 per cent each and their sisters Christine and Alexis own 5 per cent each.
 
Pat’s 50 per cent will eventually pass equally to the four children, which means Garry and Allyn will own 32.5 per cent each and Christine and Alexis 17.5 per cent each.
 
As for the next generation, Garry’s eldest, Sally, 30, runs the company’s training department, and Matthew, 27, is operations manager for NSW. His two other children, Anthony and Rachel, aren’t in the business (yet).
 
In 2008 the Beard family finished building their Australian and New Zealand manufacturing and distribution network with the acquisition of SleepHaven Bedding in South Australia.
 
Now for China.

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