More banger for their buck is key to growing smallgoods into big ones
Aged just 30, Stephan Knoll has turned around his family smallgoods business by taking on the supermarkets, cutting out the middlemen and modernising the factory.
When Mr Knoll and his brothers took control of Barossa Fine Foods, the Adelaide ham and salami business founded by his parents 22 years ago, it wasn't turning a profit and the family had to make a choice: become an "uber-specialist" producer that needs 20 per cent margins to survive, or increase its production.
They chose the second path.
"We needed to look at producing product on a wider scale and using efficiencies to make sure that our pricing - while still delivering us a good margin - doesn't become an inhibitor to people consuming our food," Mr Knoll said. "And by finding that right balance we've managed to grow."
Barossa Fine Foods now supplies supermarkets and delis all around Australia, has a chain of stores in Adelaide and employs 165 people.
Mr Knoll said there weren't the usual tensions associated with generational change in the family business because, while his father Franz isn't the sort who would have relinquished control of the family business to outsiders, he was prepared to hand over to his four sons.
"Mum and Dad went on a trip in March 2004 to Germany and left us boys to look after the place. When they came back, we said: 'That's it, you're not having it back'," Mr Knoll recalled. "He's quite proud of the fact that we decided to stay and work on the business."
He became managing director of the business aged 22. Of the other brothers, Dieter is the production manager, Andreas is the finance manager and the youngest, Alex, is the brand ambassador. Their involvement allows their father to focus on product development and process improvement.
Being a family-owned business also helped Barossa Fine Foods survive through the difficult years because, rather than seeking a dividend or selling out, the family took the time to turn it around.
One of the first decisions the family made was to move to a larger factory in Adelaide. The business started buying modern machinery - piece by piece as it could afford it - that would make the factory more efficient while not compromising the product.
"We knew it would work and we just had to get to a certain scale. Once you hit that tipping point everything falls into place, and that's exactly what it's done," Mr Knoll said.
For instance, the company produces exactly the same sausage as it did a decade ago, but for 20 per cent less cost, and is now looking at buying a rival producer that isn't reaping the benefits of modernising and efficiencies.
The business supplies all the big supermarkets around the country, although not every supermarket chain in every state. The company has a risk-mitigation strategy that ensures no one customer can make up more than 10 per cent of its business.
While supermarkets have been driving down prices paid to suppliers and the quality of their goods, Barossa Fine Foods has been able to resist the trend.
"We don't entertain those discussions on price. We want to maintain the integrity of our brand, the quality of our product, therefore we charge what we charge and it's in the supermarket's best interest to let us do that because it means that they have a complete range to offer their customers," Mr Knoll said.
"That 10 per cent rule is there because we always have in the back of our mind that we have to be able to walk away and we will always keep ourselves in a position where we are able to walk away."
Another way the business was put on a more sustainable footing was to cut out wholesalers and set up the company's own distribution network to about 600 outlets throughout Australia.
The costs are a third of the amount it was paying to distributors, but it took about a decade to get right. "It only works where you're able to get enough volume," Mr Knoll said.
'He also cut out meat wholesalers, going direct to farmers. "It is about cost, because you can cut out that margin," he said. "But it's also about having direct contact with your farmers."
It's another way the family is trying to keep the business profitable and producing. "We don't want to make money for the next five years and get out. We want to be here for a long time."
Stephan Knoll's entrepreneur secrets
Produce a quality product
Have a strong and positive culture to motivate staff
Don't just copy your competitors
Love what you're doing