Maintaining relevance in a changing marketplace

Staying relevant as the marketplace changes around you is a concern for every business owner. So how does a 115-year-old bakery chain adapt to change without alienating its longstanding clientele?

An Aussie history lesson

“We've got a 115-year-old business and brand, and so particularly in Victoria the brand is incredibly well-known,” explains Steve Plarre, CEO of the family-owned chain Ferguson Plarre Bakehouses who co-owns the business with his brother Mike (pictured below left and right respectively).

“We have a store in Victoria Market that's been there since 1931; we have a store at Coburg that has been there since 1935; we've got a store in Puckle Street, Moonee Ponds that's been there since 1909.”

The modern-day company is the result of a 1980 merger between Plarre Cakes and another business operated by the Ferguson family, who were eventually bought out of the combined entity in 2012.Ferguson Plarre Bakehouses owners Steve and Mike Plarre

The business has served plenty of famous faces throughout its history, including the Queen and an American President.

“The Queen was coming I think for the Jubilee celebration, I'm not sure what the reason was for Lyndon Johnson to be coming down. But we weren't far from the airport ... that was servicing the main transport hub, and so we were lucky enough to be chosen [to supply them],” recalls Steve.

“My grandmother drove her old little Prefect up to the airport and delivered our famous little petit four-type cakes to the President, and for the Queen I think we had a contract into Parliament House for serving little cakes.”

A less welcome experience, however, was in the early days of the business, when deliveries were still being made by horse and cart.

“In 1917 or something, we were still using horse and cart to deliver some of our cakes, and we literally got robbed by bushrangers in Coburg in Melbourne's north!” Steve says.

“It's important for a business like us to be on the radar of the major shopping centres, that they know when they put us in, we look good, we bring new customers to the centre.”

Among the many other fascinating tales the have emerged through Ferguson Plarre's extensive history is the origin of the famed sporting chant 'Aussie, Aussie, Aussie; oi, oi, oi'.

“In the 90s I think, the Fergusons went over to England and realised the original name for a pasty is a tiddly oggy, dating right back to the 1600s when the Cornish miners – where the pasty came from – used to take their leftovers from dinner and their wives would bake it into this crust that they could take into the mines, and they would use that hand crimp to break it open and eat the insides out. They wouldn't eat the pastry because they had poison and stuff on their fingers from the mines,” he says.

“And 'tiddly' is naval slang for proper, and 'oggy' means pasty, so [tiddly oggy] means 'proper pasty'.”

The relevance for modern Australia, Steve says, is the retention of this influence from the miners.

“What would happen is the miners would be down the mines, and the head miner would ring a bell and he would yell out 'oggy, oggy, oggy' and the miners would yell up the shaft 'oi, oi, oi'. And that it is where 'Aussie, Aussie, Aussie; oi, oi, oi' comes from,” he says.

“There was an old Four'N Twenty thing that happened, it was on TV in the 60s or 70s, a bunch of rugby players on a bus for Four'N Twenty yelling out 'oggy, oggy, oggy; oi, oi, oi'.”

Knowing the story behind the product has given Ferguson Plarre Bakehouses a distinct competitive advantage in today’s marketplace.

“In Australia we have trademarked 'tiddly oggy', and we call them tiddly oggies, and we get a lot of play out of it because no one can kind of remember how to say it, so they say 'What are those iggly oggly things?’,” Steve says, chuckling.

Balancing the old and the new

J.A. Ferguson vintage delivery van in black and whiteExactly how does a business with such longevity adapt to a changing marketplace?

“Ferguson Plarre is a safe brand, we're not a cool brand, in the same way that when your grandmother makes you a cupcake, you love it, you've got fond memories of it, there's nostalgia. She's not cool, but she loves you to death, and that's kind of our brand,” Steve says.

In his own words, there is something of “a retail renaissance” currently underway, meaning it has never been more important to adapt and change your offering, even if that involves pre-emptive change to fend off the rise of potential competitors.

“I think it all really stems out of the GFC, where we were seeing … shopping centres going through massive renovation,” says Steve.

“Part of it is ensuring they are providing an experience … People at a disposable income level are happy to spend money on experience, whether that's food or entertainment and those kind of things, and you're seeing that in shopping centres. That's one part of the renaissance. So for a business like ours that has been around for a long time, we are busy reinventing our stores at a shop-fit level, and we're getting some incredible success at that point.

“It's important for a business like us to be on the radar of the major shopping centres, that they know when they put us in, we look good, we bring new customers to the centre, and when they go to open a new centre, that when they are looking for a butcher, a seafood place, a veggie place and where will they go to for their reliable bakery brand, that we are up there.”

“We tell our franchisees for every $1 that someone gives you, 50 cents is for the product ... but 50 cents is for the way you make people feel, and if you miss that bit out, it doesn't matter how good the product is, they will go somewhere else.”

Within that broader renaissance, though, is a fundamental shift in the nature of food retailing, Steve says.

“I think it's sitting on the back of the likes of MasterChef, and this almost rock-star status of particularly pastry cheffing – from Zumbo to Heston and the home cook, the kind of ingredients people are now looking for compared to five or 10 years ago is really gourmet, and that's exciting. I think the opportunity for us is to put a harness on that and reinvent some of our classic, old stalwart products to make sure that people are comfortable, that they are feeling that they are eating something a bit fresh and new, but it's still got the same safe flavour that it has in the past,” he says.

“The retail food sector is currently the strongest retail sector in Australia by far – between 3 and 3.5 per cent growth expected over the next five years, and it's stronger than any other sector is expected to grow. It's becoming capital attractive and therefore some exciting things are coming out of that.”

Keeping things in-house

A key ingredient of the company’s success in maintaining relevance has been its unwavering commitment to owning its supply chain.Vintage Plarre's Cakes sign

Ferguson Plarre Bakehouses, according to Steve, owns “99 per cent” of its supply chain, whereby a 4,500-square-metre bakery produces all of the brand’s baked goods daily, which are then distributed to each of the 64 stores across Victoria.

Steve says this gives the business the ability to ensure brand uniformity across its franchise network, as well as the opportunity to add scale on its own terms, rather than those dictated by the availability of suppliers. But another factor is the ability to change its product mix at will.

“Speed to market for us is really key. I know a lot of suppliers will put in advance orders for six months and their muffins or their cookies and all those kind of things will be made. But when someone turns up and peri-peri chicken has gone berserk, it can be a couple of weeks before they've turned around and dropped that flavour or product into market,” explains Steve.

“With MasterChef and a couple of those shows, as soon as we've seen an ad and we know that they are going to hero a certain type of product, we're able to start doing some R&D so that once it's screened, it's in our store the next day.”

Finding franchisees

According to Steve, franchising in the 21st century is a difficult game. He says that while there are plenty of would-be franchisees in the marketplace, those who will be able to bring your brand to life are few and far between.

“Our challenge – and the challenge of lots of franchisors out there – is how do we get access to better-quality franchisees?” he explains.

“For Ferguson Plarre, it's particularly people who have got that knack for people – people-people really. We're not looking necessarily for people who have retail experience or have to be in food or [be] pastry cooks or any of that kind of stuff; to run a Ferguson Plarre [store], you need to know how to make great coffee, which we teach you how to do, and to provide great service.

“We tell our franchisees for every $1 that someone gives you, 50 cents is for the product – and we'll make a great product for you – but 50 cents is for the way you make people feel, and if you miss that bit out, it doesn't matter how good the product is, they will go somewhere else.”

Cakes and pastries by Ferguson Plarre BakehousesIt is a challenge with which the majority of franchised businesses grapple, Steve admits.

“Most franchisors with a retail ground presence will have two key issues to consider: do I have a pipeline of good-quality franchisees and a pipeline of good-quality properties? If you're lucky they both line up, but more often than not you've got some great properties but maybe not enough franchisees, or enough franchisees but not enough properties.”

It was due to this challenge that Ferguson Plarre Bakehouses launched a $500,000 franchise grant scheme, in a bid to attract more good-quality franchise applicants.

The scheme sees a total of 10 grants worth $50,000 each up for grabs for successful franchisees, which act as a credit in their account.

“It's something we've never done before, and ultimately it's us saying we're happy to offer to candidates who meet our eligibility criteria … a $50,000 credit,” says Steve.

“They start with a $50,000 grant, which gives them just a fantastic head start either to build up some extra working capital or pay down their fit-out costs.

“The whole idea is that if we can find five to 10 great-quality franchisees that we wouldn't have found otherwise ... we're happy to supply them. That kind of money would take someone through for two to three months’ worth of free stock out of our bakery; they've got only got costs for cold drinks and milk for coffee.”

“Our number one responsibility has to be to our customers. If you start convincing yourself that your number one responsibility is to your shareholders, it won't always result in the best outcome for your customers.”

Remaining customer-centric

While so much has changed during more than a century in business, Steve says the one constant has been an unwavering commitment to customers, first and foremost.

He makes a point of keeping an eye on his competitors, some of which are publicly listed. When he discusses with customers or other food retailers what distinguishes Ferguson Plarre, “it's family values versus shareholder values”, he explains.

“Our number one responsibility has to be to our customers. If you start convincing yourself that your number one responsibility is to your shareholders, it won't always result in the best outcome for your customers.”

Steve concludes: “I want my kids – whether they want to run the business or not, or whoever buys the business when my brother and I get to an age where we're dealing with succession – we want to hand it over in good nick so that it's got another 100 years to go. And it's only through us thinking that far forward.

“I would hate to think that I've got a two to three year time frame to either impress upon someone because I'm the latest CEO, or I've got shareholders banging down my door for an immediate return.”

Fast facts: Ferguson Plarre Bakehouses

Industry: Food retail
Location: Victoria, predominantly Melbourne
Established: 1901
Number of stores: 64
Began franchising: 1987

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