Ensuring succession doesn’t get you in a pickle

Spring Gully Foods, maker of the Green Tomato Pickle, is doing an exemplary job of preparing its company's management transition from the third to fourth generation.

Succession is the number one challenge for any family business and unlike the Catholic Church family, most of them haven’t been going for two thousand years so they haven’t worked out a neat system of white smoke to hand over to the next generation.
 
It can be very tricky indeed, especially when more than one family is involved, as there usually are by the time they get to the third and fourth generations, which often results in the business being broken up or sold. The only way to do it so it preserves the family heritage is via careful preparation and talking – lots of talking.
 
Adelaide-based Spring Gully Foods is now preparing to transition the business from the third to fourth generation. It won’t happen for another five years, and in the meantime the “fours” have to “fill their tool bags with tools”, as managing director Kevin Webb puts it. That means leaving the business, where they’re currently working, and working somewhere else for a while, probably overseas, plus doing some more study.
 
And the two generations are working it out through a series of meetings in a local café. The kids – Russell, 26, and Tegan, 23 – are passionate about the business and excited about their futures, but they have to wait: they’re not ready to take over and Kevin and his brother Ross, director and purchasing manager, aren’t ready to move on.
 
First, a declaration of interest: I’m passionate about this company as well. Spring Gully Green Tomato Pickle is my favourite substance in the world. Our pantry is never without it, and the Kohler family has done its bit over the years to help build the Webb family wealth.
 
The business was started by a young returned soldier named Edward (Ted) McKee in 1946. He bought an orange orchard on Spring Gully Road in the Adelaide suburb of Rostrevor and planned to supply oranges to the local grocers. He added 3000 chooks to fertilise the trees so he ended up delivering eggs as well as oranges.
 
Before the war Ted had been chief briner at a large Adelaide food company and knew a thing or two about making pickles, which he often did for his family. One Christmas he made enough for his customers and took some jars around with the oranges and eggs. The pickles were delicious, the storeowners clamoured for more and… well, the rest is history.
 
To move into the pickle business Ted needed help, so he brought in his son-in-law Allan McMillan, his stepson, Eric Webb, and his friend Malcolm Clyma.
 
Eventually that second generation – Allan and Eric – took control and then later brought their own children into the business: Allan’s two sons, Brian and Garry, and Eric’s sons, Kevin and Ross.
 
In the 1980s Allan and Eric invested in a new plant and equipment and, in 1993, moved to a new purpose built factory, about 15km to the northwest of Rostrevor. Their big break was getting into the national supermarkets – Coles and Woolworths – which remain their biggest customers today.
 
The business grew solidly and now has sales of more than $25 million a year, including Leabrook Farms Honey, which was acquired a decade or so ago.
 
Next problem: the fourth generation. At 82, Eric remains a very engaged chairman of the business; his son Kevin is managing director while his other son, Ross, handles purchasing; Allan McMillan’s son Brian runs Leabrook Farms and Garry McMillan manages the warehouse.
 
Russell is Kevin’s son and Tegan is Ross’s daughter. Both work in business – Russell in marketing and Tegan managing exports – as does Brian McMillan’s son Justin.
 
Kevin wouldn’t tell me exactly how the ownership of the business breaks down now, except to say that there are still three families with shareholdings – the Webbs, McMillans and Clymas – but they are not equal. I guess the Webbs are in control.
 
That means Russell and Tegan will eventually inherit that control. I spoke to Tegan, and she is champing at the bit.
 
She was brought up hearing stories about it and has now been there for five years, completing a business degree part-time while she worked.
 
She says one of the biggest challenges for someone in her position is getting the respect of co-workers. “Some of them have been with the company since before I was born and watched me grow up,” she says. “It can be tricky sometimes.”
 
Tegan is not only passionate about her own family’s business but also about helping other families to manage their succession, and sits on Family Business Australia’s Next Generation council.
 
“It’s important engage the next generation, especially if you see the kids have an interest in the business. As a family member you’ve been brought up hearing about it, so you probably understand it more deeply than just about anybody.”
 
Kevin and Ross are delighted their children feel so strongly about the business, but they don’t want to move too quickly. They’re both in their mid-50s and might be ready to move aside in five years, and in any case Tegan and Russell aren’t ready to take over yet.
 
The time to work this out is now, thus the café meetings.
 
So it looks like Spring Gully Foods is going to successfully manage one of the most difficult transitions for any family business – from the third to the fourth generation, which is a great relief to your correspondent.
 
The most important thing in all of this is that they just keep producing those green tomato pickles.

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