RICH PICKINGS: Stocking stuffers

Christmas means different things to different people, but to Chrisco Hamper founder Richard Bradley, as well as retail gurus like Brett Blundy, Naomi Milgrom and Gerry Harvey, it's a time to sit back and reap the rewards.

No matter how much you are looking forward to Christmas, I can almost guarantee you’re not as excited as Richard Bradley.

Bradley and his wife Ruth are the entrepreneurs behind New Zealand-based company Chrisco Hampers, which sells Christmas hampers that consumers pay for on a weekly, fortnightly or monthly basis over the course of the year.

While this festive company might seem like its operating in a fairly niche sector, make no mistake – this is a seriously big business.

When Bradley spoke to Business Spectator late last week, his business was in the process of shipping between 300,000 and 400,000 hampers in New Zealand each year, and 1.8 million hampers in Australia.

But while you’d think Bradley’s days were taken up with issues such as logistics and delivery times, he is actually looking firmly at Christmas 2010.

"From September onwards, our focus is already on next year. By end of December, 80-85 per cent of our sales are locked in. This is an area of the model that a lot of people don’t understand.”

Of course, next year’s sales depend heavily on getting this year’s hamper deliveries right; Bradley says repeat business accounts for around 90 per cent of hamper sales at present. Bradley says this year’s "execution" or delivery phase is going well, with a delivery rate of 99.5 per cent. To ensure customers are kept happy and keep buying, Chrisco usually throws free items into a hamper to sweeten the deal.

Bradley’s involvement in hamper game started in his native Britain in 1977; the name came from an abbreviation of Christmas Company. Five years later he and his wife sold their business and moved to New Zealand, but it was not until February 1993 that the pair got back into the hamper game, starting out from their home. By 1997 the business was also operating in Australia.

But getting an idea of the value of Chrisco – and the size of Bradley’s fortune – is not easy.

Earlier this year, the New Zealand Business Review put Bradley’s wealth at $NZ50 million, although this does seem low given the size of hamper shipments that Bradley outlined – and the fact that he previously lived in New Zealand’s richest home, a $NZ30 million mansion.

Bradley won’t be drawn on the estimate, except to say that given the company is private, NBR’s estimate is "inaccurate”.

"How much I’m worth? I’ve got no idea,” he says.

Coming up with an estimate of Chrisco’s value requires a lot of guesstimates. Even revenue is difficult to pin down. Hampers range in cost from $200 to over $2000, but the profile of the customer base (that is, how many customers stump up for the big hampers) is unknown.

Recently the Australian Financial Review recently put the company’s Australian revenue at just $200 million. But this seems low, based on Bradley’s shipment figures, as it assumes an average hamper price of just over $100. If we assume the average hamper price across Australian and New Zealand is $200, we could safely assume the company’s revenue is a conservative $420 million.

If we assume Chrisco operates on a conservative margin of just 5 per cent we’re looking at business that makes $20 million in profit each year. Applying a multiple to work out the value of the company is difficult due to the lack of similar listed companies and the fact that Chrisco runs across industries such as food, beverages, logistics and financial services.

For his part, Bradley sees the company as operating in the financial services sector. "We’ve always seen ourselves as helping people save,” he says.

A company such as Flexigroup (which provides finance to shoppers in stores such as Harvey Norman) might not be a bad comparison; it trades on a price-to-earnings ratio of 11.7. If we scale this back to a multiple of 10, we’re looking at a business that could be (crudely) valued at over $200 million.

But while the value of Bradley’s business is unknown, what is clear is that competition has increased markedly in the last few years. In Australia, former Chrisco chief executive Terry Seremetis has established a business called Hamper King; Seremetis told the AFR recently the business was turning over $22 million a year.

Over in New Zealand, a company called Hampsta has made an aggressive play for Chrisco’s Kiwi customer base, and the companies have become engaged in a bitter war of words in the New Zealand press.

Bradley admits he has not been surprised by the surge in competition.

"A lot of people stand outside the business and think it’s very easy to make money, but it really isn’t.”

"There’s probably been some extension of the hamper category as a whole and there has been churn from some brands to another. We are still by far the largest player and I am comfortable with the competition."

Bradley says he is often asked by young entrepreneurs about the secrets of success. His answer? Size matters.

"It’s easy to be outside any business model and say 'that’s easy'. I’ve done a lot of hard work to get where I am.

"Perseverance is the biggest factor. In the early years you put in a lot of effort and you don’t necessarily make a lot of money. It’s when you get scale that the business really grows. "

Of course, Bradley isn’t the only entrepreneur who will be sharing in the Christmas spirit. Here are some other examples:

Lachlan Murdoch

While the new owner of a half stake in DMG Radio Australia will probably be spending a good deal of his Christmas selecting solid gold hits to add to his radio stations' playlists, he’ll also be keeping an eye on toy sales. Murdoch’s company Illyria owns about 13 per cent of Funtastic, which imports and distributes toys.

Brett Blundy

Veteran retailer Brett Blundy, worth $594 million according to BRW, owns stakes in music retailer Sanity, accessories chain Diva, underwear retailer Bras N Things and the scented candle company Dusk. With those diverse interests, he’s sure to help fill a few stockings.

Naomi Milgrom

Clothes are always a big item at Christmas, and Milgrom is well placed to cash in, through her Sussan Group, which owns Sussan, Sportsgirl and Suzanne Grey. Her net worth is estimated at $660 million by BRW.

David Goldberger and David Wieland

These two Melbourne entrepreneurs made their fortunes in petrol stations but their main investment now is the DFO chain of discount shopping outlets. Given there is still some pressure on Christmas spending, bargain hunters are likely to swarm to their centres.

Gerry Harvey

Christmas is crucial to most retailers, and billionaire Gerry Harvey is tipping a big festive season, with Harvey Norman expected to post record sales during the period. After a tough year, the sound of ringing registers will be music to Harvey’s ears.

Peter Mattick and Philip Salter

Mattick and Salter are the names behind Salmat, one of Australia’s largest direct mail companies. While the two founders are no longer involved with the business day-to-day, they’re sure to be watching the avalanche of catalogues and flyers closely.

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