'How I achieved 80% growth in turnover'

The owner of a prominent value-added meats manufacturer shares his business strategies that delivered a staggering rise in year-on-year turnover.

Andrew Lupton, Nonna's Gourmet Sausages and Deli“You learn a lot just from listening to your customers … but some companies don’t do that.”

Coming from the owner of a business that grew its turnover by an impressive 80 per cent in 2016, such advice is worth listening to.

Speaking on the My Business Podcast, Andrew Lupton of Nonna’s Gourmet Sausages and Deli discusses exactly how he achieved this feat, his approach to developing and managing supplier and customer relationships, the opportunities that can be harnessed by acquiring distressed assets and much more!

Podcast transcript:

Phil Tarrant: G'day, everyone. Welcome to the My Business podcast. It's Phil Tarrant here. I am the editor of My Business. Thanks for tuning in. It's always good to have you. I'm joined by my regular co-host, Adam Zuchetti. How are you going, mate?

Adam Zuchetti: I'm good, Phil. Good to be back again. How are you going?

Phil Tarrant: Good. I've just come off the back of quite a long lunch, an Italian place actually, which was quite timely for a segueway I think. Not a long lunch. I've been drinking wine all day. I've had one glass and a couple of good coffees, but I do like my Italian food.

Adam Zuchetti: I don't think there's anyone who really doesn't like Italian food.

Phil Tarrant: I know. It's really good. I'm thinking that I guess today is Italian-inspired business, maybe Mediterranean-inspired business, but we've got Andrew Lupton in the studio. Now, Andrew is from Nonna's. Nonna's is a sausage deli small goods, that type of stuff. Did I get that right, Andrew?

Andrew Lupton: Yes. Value added meats, basically.

Phil Tarrant: Value added meats.

Andrew Lupton: Yes.

Phil Tarrant: Okay, so that's the sort of meat that's typically a lot better than what you might get in...

Andrew Lupton: It's normal meat that's had a bit of value added to it.

Phil Tarrant: Okay.

Andrew Lupton: You take normal chicken and instead of just selling a breast fillet, you maybe slice it and add some flavoured breadcrumbs and turn it into a schnitzel, so that's what we mean by value added meat. You take beef and turn it into a decent sausage or a decent burger or Italian meatball, and that's how we started and that's what Nonna's is known for, for its range of value added products.

Phil Tarrant: What's the Nonna's story? When was it created and how have you evolved it over the years?

Andrew Lupton: It was created by Gary Aquilina and another partner in 2007, I believe. Gary had made sausages all around town for lots of different people, and in fact he had invented the gourmet sausage really for Sydney and eventually decided to go out on his own. I don't think he worked too well as a great sausage maker and the business side didn't agree with him, so he sold out to myself and my sister. We bought him in 2008, but we kept him with a small share holding and just the general manager and he carried on making the sausages for us, which I tried to sell around Sydney and then various other acquisition came up.

Brookvale Meats came up a year later and when we needed more space and different products because I was a bit of a one horse show handing out sausages and it was difficult to get into places when you've just got some sausages, so we bought Brookvale Meats and that gave us the opportunity to rapidly and quickly expand the range into all sorts of different meat products and gave us proper production space.

Phil Tarrant: Are you guys a butcher?

Andrew Lupton: Yes, we have a retail butcher shop.

Phil Tarrant: A retail butcher.

Andrew Lupton: Yes.

Phil Tarrant: You guys have retail and wholesale?

Andrew Lupton: Yes, we do.

Phil Tarrant: In terms of percentage of your business which is wholesale versus retail, what would that be?

Andrew Lupton: Retail is 5 per cent.

Phil Tarrant: Okay, so it's really just a shopfront where you can highlight.

Andrew Lupton: Yes, or mostly community service.

Adam Zuchetti: What made you actually decide to purchase the business?

Andrew Lupton: Which one?

Adam Zuchetti: Nonna's, when you first started.

Andrew Lupton: Well, I'd been in all sorts of different businesses in the past and all over the place, and I wanted to do something in food because I'd always been interested in food. The sausage business came along. It didn't cost a fortune and it got me in.

Phil Tarrant: You're not originally from Australia, though?

Andrew Lupton: No.

Phil Tarrant: What's the backstory to you guys arriving you and going, "Hang on a second, Aussies love sausages"? I do love sausage, by the way.

Andrew Lupton: Well, everyone loves sausage whichever country you're in, I suppose. We arrived in 2008. My sister had already been living here for 20 odd years. We bought the business. We came in on a 457 working visa and eventually got permanent residency through that. I grew the business with my sister.

Phil Tarrant: You never looked back?

Andrew Lupton: Not really. It's been a rocky road, but yes, because I didn't know anything about meat or food.

Phil Tarrant: Was it a good thing, though? Sometimes it's quite refreshing for someone to come into a market segment. I talk from experience, where there's an established way of things getting done or incumbent players who have always done certain things a particular way, which has shaped the whole way the industry works. Sometimes it's quite refreshing when someone comes in that doesn't really know the rules or the status quo.

Andrew Lupton: Yes, you're absolutely right there. I don't know how differently we've done things. I do know what you're saying. We did make a mark quite quickly in terms of the product offering that we were able to quickly develop, which was unusual.

Phil Tarrant: Was it a gourmet sausage?

Andrew Lupton: Yes, it was a gourmet sausage and a gourmet meatball and a gourmet burger. They overused the gourmet word. But I think it's important to mention at this juncture that I did team up with my current partner, who is a production manager and a butcher, and so it's very much the two of us that have moved the business forward. I didn't have any meat skills, but my partner Michael Nairn, he does. He's the guy that's been the engine room of the business to allow me to run the business like you would run any other business.

Adam Zuchetti: I guess in terms of your respective skillsets, are you the sales guy?

Andrew Lupton: Yes. I'm a businessman and the sales guy and the accountant, and he's the buyer and the butcher and the production guy, so he's the guy that churns out these orders. It's a roller coaster. It's like riding a bronco every week because everyone needs their order everyday. This is food. It goes off very quickly.

Phil Tarrant: It does. We've had a bit of a theme recently, Adam, with food, and I think about Sean Garlick from Garlo's Pies. I always like to say that with a good Aussie accent, Garlo's Pies.

Andrew Lupton: Because he does.

Phil Tarrant: He's a bloke, who, ex-footy player, he was captain of the Rabbitoh's, I think he was a copper at some point, and then life after football, he and his brother set up a pie shop. Now the thing is huge.

Andrew Lupton: It is huge.

Phil Tarrant: It's quite like your business. Most of his business is wholesale.

Andrew Lupton: Yes.

Phil Tarrant: They've got their devil in retail. They've done okay in retail, but major value in terms of revenue, and I imagine also value of business is the wholesale part of it.

Andrew Lupton: It is. He's different to us inasmuch as he's targeted the large multiple chains, and that is a fundamental difference. We do not do that. We do the opposite.

Phil Tarrant: Where do you stock your stuff, then? Where do you find it?

Andrew Lupton: We source our meat from small independent local farmers.

Phil Tarrant: Okay.

Andrew Lupton: Then, we convert it and supply it to small independent retailers.

Phil Tarrant: Okay.

Andrew Lupton: You won't find the Nonna's products on the shelves in multiples.

Adam Zuchetti: Andrew, you were telling me just off air that you initially tried to do that through the major supermarket chains and things like that, but you decided to take the alternative approach. What really inspired that to go forward?

Andrew Lupton: Well, it was a breakdown to Woolworths, which I didn't really appreciate how it all was handled and I just thought, "It's too dangerous for a small guy like me." We're just small fry, and ... was huge and I'm a small guy to have too much business with those multiples because it just can kill you. They could drop you from one day to the other, which they do do.

Phil Tarrant: A lot of smaller manufacturers, the dream is to get stocked in Coles and Woolworths.

Andrew Lupton: It is a dream, yes.

Phil Tarrant: If you're running your business and if you're in the business of production and you've got to bring your margin right down in order to meet their hard buying needs, you can end up, yes, you might be in Coles and Woolworths, but you're not making any money.

Andrew Lupton: I never found them too bad from the buying point-of-view in terms of grilling me on price and delivery. It was just the way the ground rules changed as soon as there was a different boss in charge, that all these precepts and conditions that you had before just suddenly didn't exist from one day to the next, and that was impossible. I just couldn't deal like that.

Adam Zuchetti: That's the politics of a big business basically being imposed on your sale.

Andrew Lupton: Essentially, yes. I don't want to go into detail, but yes.

Phil Tarrant: That's fine. You hear mixed reviews of working with Coles and Woolworths, and we know those guys over there, and Coles and Woolworths are big business. They do things very well, and I think for the right type of producer, and I know Woolworths for example is very much geared toward supporting local industry, local farmers, local producers in terms of fresh food. That's all very good. It's cool, but choosing the path that you've chose and looking to distribute your products via smaller retailers, do you find that that's a lot of relationships to manage?

Andrew Lupton: It is, yes. It's a much tougher road to travel.

Phil Tarrant: Yes, so how do you go about doing that? How do you keep those relationships fresh with each of the individual outlets, let's call them?

Andrew Lupton: Boots on the ground.

Phil Tarrant: Boots on the ground?

Andrew Lupton: Yes.

Phil Tarrant: Getting out there and old school stuff.

Andrew Lupton: They love it. They need to be nurtured along. They need a visit.

Phil Tarrant: How do you go about it?

Andrew Lupton: They're very approachable. Every independent person, he's always wanting something new to put on his shelf because he wants to sell. I want to sell, he wants to sell, so it's not difficult. If you've got something different and it's reasonably priced and it looks good, they will try it. Most of these independents will try it because it's good for them to have something different to offer their customers. If you can just deliver on your promise, then most of the times these guys at independents, they're very receptive. They're often owner operaters and they're often there all day everyday, so you always get to see them. They're always there, so they're approachable and they're easy to deal with normally because they are the owner operator and your interests and their interests just completely align. It's not difficult, and it's a lot less risky because you've got not many eggs in one particular basket.

Phil Tarrant: Yes. That makes a lot of sense. In terms of geographic distribution, are you ...

Andrew Lupton: Mainly Sydney.

Phil Tarrant: Mainly Sydney.

Andrew Lupton: Mainly Sydney. We've got into Melbourne. We have a good customer called About Life.

Phil Tarrant: I know About Life.

Andrew Lupton: Yes.

Phil Tarrant: They're up here, as well.

Andrew Lupton: Yes, they're all over. They're in Sydney, and we do supply a couple of independents down in Melbourne.

Phil Tarrant: The fact that you're in About Life, for our listeners that don't know about About Life, I'll probably generalise here, but it's probably a supermarket for people who actually appreciate food.

Andrew Lupton: Yes, with a lifestyle choice.

Phil Tarrant: With a lifestyle choice, About Life, so the fact that your food is stocked in there or your products are stocked in there gives some insight into the quality of produce you have, the way you probably go about creating your products. With this touch point you have with all these multiple outlets or owner occupies, how do you go about the visibility of that? In terms of your sales force, how many guys have you got on the road knocking on doors?

Andrew Lupton: Just two.

Phil Tarrant: Just the two?

Andrew Lupton: Yes.

Phil Tarrant: Typically, say you would arrive at a store and go, "G'day, Adam. How are you going? Are you looking for stock right now?" Would you have an order sheet with you and say, "What do you need?"

Andrew Lupton: No. They'll probably do that themselves. When we send people around, it's more to just make sure everything's going okay, see if they've got any issues, inform them of new products, just listen to what they've got to say. You learn a lot just from listening to your customers, as we all know.

Phil Tarrant: Oh, absolutely.

Andrew Lupton: Some companies don't do that. My sales guys, that's what they do. They're not really order takers because the customer tends to generate his own orders. He knows when his shelf is empty and he knows where to get replacements from. It's easy these days. The internet has made that very easy.

Phil Tarrant: In terms of JIT stuff, you're adjusting time. You have products with a shelf life. It's not like a can of baked beans that can sit there for a year.

Andrew Lupton: No. I wish it was. It would make my life a lot easier.

Phil Tarrant: If someone places an order with you, how quickly do you typically dispatch that and they can get it on their shelves?

Andrew Lupton: 12 hours.

Phil Tarrant: 12 hours, so it's fairly immediate.

Andrew Lupton: Yes. They can order up to 10:00 at night and the guys come in at midnight to start packing the orders.

Phil Tarrant: Okay.

Andrew Lupton: The trucks come in from 5:00 to 8:00 in the morning and they're gone by then.

Phil Tarrant: Okay. Your guys who are doing the store visits, how do they add value to the owner of the store or the manager of the store? Do they give them any merchandising tactics or tips?

Andrew Lupton: Yes, of course.

Phil Tarrant: Is that expected on behalf of the customer, or is that something that they are surprised when your guys work with them to provide them with...

Andrew Lupton: It depends on the person, but essentially they don't have a very high expectation level from that side. Their expectation is more in terms of delivery on time. That's their most...

Phil Tarrant: That's what they care about.

Andrew Lupton: Yes. There's nothing retail shelves hate more than a vacuum and that vacuum is filled immediately, so if your products are not there, it doesn't take long for that space to be filled with somebody else's product, and that's the most important thing. Making it look nice is part of it, and making sure that they've got the right mix of product is very important too, so maybe they're missing a complete category which they hadn't thought of before. So that's an important part of visits, just getting the mix right for the owner.

Sometimes it means deleting a line that's just not going for his store, like I don't know, maybe the pork's not going too well in Bondi for obvious reasons. Not many people eat pork there, so you can get rid of that line and put something in that sells. Again, our interests and their interests are the same. We want to sell, they want to sell, and so you just need to be ruthless sometimes and get rid of rubbish that doesn't sell.

Adam Zuchetti: Do you need quite strict contingency planning? You were saying if you can't stock the shelves, someone else will do it and just fill that space quite quickly.

Andrew Lupton: I meant really that you have to be able to fill the guy's shelf. That's the most important thing. His livelihood is at stake. If he's got an empty shelf, it looks terrible, it looks unprofessional, he's not making any money. That's when they get pissed off, so you have to deliver on time and make sure his shelves are filled up. It's simple as that.

Phil Tarrant: It's reasonably basic.

Andrew Lupton: Yes.

Phil Tarrant: It's hard to get right.

Andrew Lupton: Oh, it's hard. We've got, I don't know how many products we've got that have to be made everyday. It's a big range. It's Sydney's largest range I think of value added products.

Phil Tarrant: Okay.

Andrew Lupton: We are known as the value added specialists, and it's a tough call for my partner Michael to make sure that we've got all those products available all the time.

Phil Tarrant: How do you go about understanding that products that you need to be making and the quantity of those products and shaping your product lines to make sure it's relevant to changing eating habits, changing seasonal needs and wants? Is that a very well thought out deliberate strategy?

Andrew Lupton: The match of the seasons always is, yes, definitely. You've got your winter lines and your summer lines and you try and persuade the retailer to go between the lines. The rest is like a lot of businesses, hit and miss. I'm a marketeer really, so you throw up 10 new products in the air and if a couple come down, then you're away. You might throw eight in the bin.

Phil Tarrant: Yes. What's been sort of the number one thing that you've done over the last six months that you've gone, "That thing's really killed it," that's that one product that's been one of those eight that you've thrown up in the air that's really stuck?

Andrew Lupton: Well, we've been concentrating on the organic side of the business.

Phil Tarrant: Okay.

Andrew Lupton: Organic meat is taking off. We're able because we go to these independents, they are able to access organic meat for the first time because they're already buying something. They can buy normal category meat, free range meat, and organic meat all from the same company, although they're different brands as well, which is good for them because they've got lots of different people on the shelf, but it's not, it's the same supplier, so it means that they can source more products from one company, which enables them to put different things on the shelf that they wouldn't have been able to before because they would have been subject to minimum volumes, so it means they can dabble.

If they just thought, "I wouldn't mind trying that organic meat," so we'll just give them what we call stepping stone products to help people jump from normal free range to organic. They need a stepping stone product, which is essentially like a beef mince sort of sausage or a lamb kofta or something which people will try and try and move them into the organic category, and that also helps the retailer do the same thing and it helps them increase product offering and helps the retailer just appear that he's got more on his shelf than he has. They like that. Then, hopefully the retailer can slowly build up the organic side of his business, which is the fastest growing part of the meat sector at the moment.

Adam Zuchetti: It is fast-growing, but in terms of margins, do you find that there's the same margin in organic products as non?

Andrew Lupton: Yes, essentially.

Adam Zuchetti: Yes?

Andrew Lupton: Yes. In percentage terms, it's about the same.

Adam Zuchetti: Okay. Interesting.

Andrew Lupton: In volume terms, it's more, but in percentage terms, it's about the same.

Phil Tarrant: Is organic produce more difficult to source than non-organic?

Andrew Lupton: Yes. It's really hard.

Phil Tarrant: On that supply side then, how do you go about competing for that?

Andrew Lupton: You have to nurture relationships.

Phil Tarrant: Yes, because I imagine if I'm an organic producer of chickens, for example, if I've got everyone wanting it from me, well, obviously that puts upward pressure on the buy price from the manufacturer or the supplier. How do you make sure that they're looking after you, and I do with a wink, rather than giving the business to someone else?

Andrew Lupton: Pay your bills on time.

Phil Tarrant: Yes?

Andrew Lupton: That's very important in the organic sector, and just make sure that you're buying every week from the same person. Be loyal. Just be loyal. If you change your suppliers all the time in that sector, then you will have problems.

Phil Tarrant: Would you say that the demand for organic meat outweighs manufacturing at the moment?

Andrew Lupton: They're putting a lot of farmers on. I think they've got it about right, because in real terms, organic meat is cheaper now than it was two years ago. The cost of normal beef has gone up through the roof, and the cost of organic beef has not gone up by anything like that, so the jump now from classic free range or non-free or farmed beef, for example, to organic beef has never been an easier jump to make. It's 20 per cent. That's all it is.

Phil Tarrant: Okay.

Andrew Lupton: It's not a big jump to make.

Phil Tarrant: Okay, so it makes a lot of sense then for farmers to follow the dollars, right? That is if the demand is for organic produce...

Andrew Lupton: I still feel organic's a lifestyle choice, really. It's not a guarantee of quality. It's a guarantee that the product's been made in a certain way. The farmers still have to concentrate a little bit on getting a homogeneous product the same every time.

Phil Tarrant: So just because something's organic doesn't mean it's good.

Andrew Lupton: It doesn't mean it's as tasty necessarily as a free range option where the farmer's had a bit more up his sleeve to get the animal prepared for market. The organic meat is good in general. It is good. Don't get me wrong, it's not bad, but essentially when you're buying organic meat you're buying a lifestyle choice. You're not buying a quality stamp.

Phil Tarrant: It's an interesting way to frame it. In terms of cultivating the supplier relationship, I imagine that's your business partner, is he out in the car driving to farms?

Andrew Lupton: I do that sometimes. I try and get the initial relationships going and then hand it down to Michael, my partner.

Phil Tarrant: Where are you guys buying the majority of your, or any of your produce? Is that farms within X kilometres? We're recording from Sydney today. Are they mainly Sydney?

Andrew Lupton: Organic, no. There's not a lot within shouting distance of Sydney, hardly any. A lot of the lamb we get comes actually from Victoria, and a lot of the beef comes from northern New South Wales and southern Queensland. That's where the majority of it.

Phil Tarrant: Of it's farmed?

Andrew Lupton: Yes.

Phil Tarrant: For obvious reasons.

Andrew Lupton: Yes. You go where it's farmed, whereas the free range stuff that Nonna's sells, that comes from there. We've developed relationships with farmers, we know who they are, the local abattoir, we know those people. It's a small family business. The whole supply chain is very much in keeping with our philosophy of source from small independents, gets processed at a small independent abattoir, of which there are very few left, it gets shipped up to a small family business, we process it for independent grocers. We know the paddock to plate chain on the Nonna's side. It's much easier to control.

Phil Tarrant: In terms of that part of the supply chain, so the buy side, you guys getting your raw ingredients, would you say that you need to be more proactive in terms of cultivating the supplier relationships rather than the suppliers banging down your door saying, "Can you please stock our stuff?" What's that dynamic like?

Andrew Lupton: It depends what it is you're purchasing. Certainly when it comes to beef and lamb, our relationships with our suppliers are paramount, because we just need to align our interests with those suppliers. We get our lamb from Cowra. We get it mostly from Breakout River, who do quite a lot of advertising on the radio saying that you won't find our lamb in the big supermarkets, which is great. It just aligns completely with what we do, and we have good relations with those guys for the lamb and we make sure that we have similar good relations with the beef guys down in Moruya. That relationship is a very close knit one and it goes on everyday, so the longer we stay in business the closer the relationship will get. When people come knocking on my door, yes, sure, if I've got time I'll find out what's happening, what's new in the zoo, but to make us change would be very, very difficult. It would have to be a hell of an offering to make us change.

Phil Tarrant: It's interesting you say that because there's two ways I would look at that. Birds of a feather flock together, so you have a particular ethos that you choose around your business plan, and that is stocking smaller suppliers, smaller grocers, and then you have your suppliers, the manufacturers of the product want to work with people like you who have the same sort of visibility, the same sort of thrust of how you want to grow your business.

But, the challenge is that if someone is trying to break into your business, and whether it's you buying raw ingredients or raw meat to create a product out of, or someone supplying a timber mill or a stationary business, to actually break down the cycle of established relationships is very difficult. You said that for you to shift your supplier relationships, someone would need to make an offer which is so good that you can't refuse it.

Andrew Lupton: Yes. It would have to be ridiculously good.

Phil Tarrant: How do people, then, do you think can actually break down established supplier relationships to get in front of someone? A lot of the time, it's just hard work, perpetual hard work, sort of grinding, but many times it's just a shut door and you can't do it.

Andrew Lupton: I guess so. I don't know the answer to that question.

Phil Tarrant: I think everyone challenges with it everyday, right, any sort of business person? How do you get in there?

Andrew Lupton: How do you get in there? It's the same for how do you get into some of the larger independents. We've been supplying Harris Farm for years now, and how do you get in there? Well, it was a long, slow process of slowly building up trust as a supplier, and if you do that, then they trust in you more and they give you further opportunities, and if you execute well on that, then if you're lucky and you do well, then they'll give you further opportunities and you slowly, slowly build up a relationship, which is essentially based on trust I think.

Phil Tarrant: It's just good business, isn't it?

Andrew Lupton: Yes.

Phil Tarrant: Start with something small and grow up from there.

Andrew Lupton: Yes.

Phil Tarrant: When you think about your business and the challenges that you have in your business or what keeps you awake at night, is it the buy side as in sourcing produce so you can manufacture it or is it the sales side, as in, "I've got to grow my distribution footprint and sell more stock"?

Andrew Lupton: Yes. The thing that keeps me up at night really is just we've grown so quickly that we've never got any money.

Phil Tarrant: Spoken like all SMEs.

Andrew Lupton: We really have. This year has been crazy in the last 12 months. We bought the organic meat business, we've just bought the small business in Perth, we've moved factory twice. It's been a hell of a year, plus we've launched more new products than I care to think about, and we've grown our turnover by 80 per cent.

Phil Tarrant: Big growth.

Andrew Lupton: It's been a big year, so it's not surprising that we're skin.

Adam Zuchetti: Does that mean that the year ahead is more betting all this down?

Andrew Lupton: Yes, definitely. Bet it all down.

Phil Tarrant: Yes, and how have you financed the acquisitions? is that from balance sheet, or...

Andrew Lupton: From free cash flow only.

Phil Tarrant: Okay, good. Nice way to finance growth.

Andrew Lupton: Yes. I was doing the figures the other day and 80 per cent of it was from free cash flow.

Phil Tarrant: Okay, good.

Andrew Lupton: 20 per cent is from borrowing.

Phil Tarrant: You use the profits...

Andrew Lupton: Reinvest it.

Phil Tarrant: Reinvesting in acquisitions.

Andrew Lupton: Many people in my business earn more money than me. You find a lot of your pennies getting reinvested.

Phil Tarrant: Yes. That's good. What's the vision with that?

Andrew Lupton: I was just telling Adam earlier on. I'm 53 now and I kind of had the finishing line ahead, and then all of a sudden my son got involved, Luke, and my partner Michael, his daughter got involved, so we suddenly had new kids on the block.

Phil Tarrant: A succession plan.

Andrew Lupton: I suddenly thought, "My god, we're going to have to do something here," because I can't do what I was going to do, hence the acquisitions and the factory move. We're just growing it now because there's hopefully some kids there to leave it to or to take over the reigns and look after us when we've pegged out.

Phil Tarrant: Good. You can just rock up every now and then and poke your head around.

Andrew Lupton: Yes, annoy them to hell and let them get on with it.

Phil Tarrant: Yes.

Andrew Lupton: Maybe.

Phil Tarrant: Maybe.

Andrew Lupton: Maybe, or alternatively, we're building up brands. If the kids wanted one of the brands, they could take one of the brands.

Phil Tarrant: What's the brands? You have brands within Nonna's now. Are they brands of particular lines?

Andrew Lupton: Yes, occasionally. We've been supplying a particularly good bacon up here from Tasmania, the box bacon, to all around Sydney for years.

Phil Tarrant: Okay. That's you, is it?

Andrew Lupton: It's pretty unusual bacon.

Phil Tarrant: That's all right, then.

Andrew Lupton: It's good bacon.

Phil Tarrant: It's good for your Sunday morning bacon sandwich.

Andrew Lupton: He does say it's the best bacon, and I think it is because it's old-fashioned clean bacon, so that's one brand, and then there's Nonna's and we've got the Belmore Organics and we'll soon have the small goods and then there's just the retail brand of Brookvale Meats for the website and the internet orders, which is on the retail side. If we can build up four or five different brands, then that does give us flexibility as to how we move forward, whether we add more brands or absorb other brands into the brands that we've got. We'll see how it goes. If there were a food scare, then it just cuts down your risk. If Nonna's had a food scare, that's not going to affect Belmore, it's not going to affect Brookvale. You have to think about things like that.

Phil Tarrant: You never know what happens.

Andrew Lupton: You never know what's around the corner.

Adam Zuchetti: Yes, and each brand is very much a separate silo.

Phil Tarrant: A separate business as well in terms of structure.

Andrew Lupton: Yes, in terms of cost centre, too. We break it down that way.

Phil Tarrant: The way that you structured the business in terms of these different brands, which can be their own verticals or independent, did you set it up that way because you felt it was the right way to do it or did you get any advice around the best way to structure the business so that you've got the options or choice to be able to accelerate one, pull one back, close one down?

Andrew Lupton: Look, I've been running businesses for years. I'm a marketeer really. It comes second nature to me. I didn't plan it that way, but when opportunities come along, then you assess the merits of what they are and you adjust your business plan to suit that. That's how it all happened, really.

Phil Tarrant: It was very organic.

Andrew Lupton: All my life, I've had the twin path of organic growth and acquisition. We tend to buy largely underperforming businesses, businesses that perhaps are on their knees, or require...

Phil Tarrant: Distressed assets.

Andrew Lupton: Completely, so we don't spend much money on them, and then we try and grow them. That's what we do.

Phil Tarrant: When you identify these distressed assets, and by the way, this is very much how I've built our parent company; we identify distressed assets and do what we do to them. Where's the value that you see within these distressed assets when you lift up the hood and say, "Okay, what's this thing worth and what value is it going to give me or how is it going to help me keep going?" What do you look for?

Andrew Lupton: Well, I look for positioning in the marketplace first and its distribution base and is it going to add different customers, are they exactly the same customers, can I just add a box to the same... If I'm going there anyway, can I just add another box, the organic meat business for example, or I look to see a product range which was currently not being fulfilled by us, the small goods sector is that. That's why we bought ... Smallgoods in Perth to allow us access to small goods, which would give us another few products to sell over here. Each case is judged on its merit, so I don't go around desperately looking for businesses. It's amazing in our industry, as soon as you've bought one or two, people come along all the time, "Oh, do you want to buy mine, too?" Nine times out of 10, I'm not at all interested, but they come along and you measure them on their own merits.

Adam Zuchetti: Is there anything that's a real no go zone for you? As you say, you lift that hood and you see that and you go, "Oh, no, walking away." Is there anything that you won't touch like that?

Andrew Lupton: I'm not sure yet.

Phil Tarrant: Yes. Wait until you uncover it.

Andrew Lupton: Yes, exactly. Things just come along. Particularly in Sydney, Sydney is a very vibrant place to do business. There's opportunity all over the place if you look for it, and it comes knocking on your door as well. It's just a question of what you do with that opportunity, whether you let go. It has to be the right thing at the right time with the right price with the right prospects, and if it is, then you think, "Okay, well, how do we fund this? How do we go about this?" For the future now, we've bought two businesses in the last 12 months. That's it. We're going to develop them.

Organic meat has got a long way to go. Smallgoods is a massive market that we haven't even looked at over here in Sydney yet, plus we're buying equipment which will allow us to put a lot longer shelf life on the organic meats. We'll be shipping that over to Perth after Christmas. The guy that ran my organic meat business has gone to run the smallgoods business in Perth, so he's a trusted guy who's gone to run that business, and he's bought some of that business with me, so that's good.

Phil Tarrant: Going back to look at the assets within a business that you'll be acquiring, often it's also the people within it as well.

Andrew Lupton: Do you know what? They're the most valuable assets often.

Phil Tarrant: Yes.

Andrew Lupton: When we bought Brookvale Meats, the business itself was worthless really. The best thing in it were the two butchers that we acquired and they're gold.

Phil Tarrant: Yes, which is very good technically.

Andrew Lupton: Yes.

Phil Tarrant: Good guys?

Andrew Lupton: Yes, great guys. They looked after all their customers. They knew their trade. We've got a Croatian butcher at Brookvale called Boris. He's been there 40 years.

Phil Tarrant: Okay. He knows a little bit about butchering.

Andrew Lupton: He does, and the customers love him.

Phil Tarrant: Those guys are all fired up for Christmas, then. They've got their hams ready.

Andrew Lupton: Yes. Everything's coming in. It's all riding along.

Phil Tarrant: It's a big time of the year for butchers.

Andrew Lupton: Very big time of the year for butchers.

Phil Tarrant: We're running out of time, Andrew. I just want to finish up just with another couple questions. You spoke about how you've funded the large share of your acquisitions from cash flow, which is good. Sign of a healthy business that you're able to do that, but in terms of payment terms with meat distribution, smallgoods distribution or whatever you want to call it, you said that one of the key things about maintaining supplier relationships is that you pay them on time. What's the payment cycle in terms of you guys getting paid from retailers? You deliver meat. What sort of payment terms do they typically get to pay you?

Andrew Lupton: It depends a lot, to be honest.

Phil Tarrant: Okay, so it's negotiable.

Andrew Lupton: It's negotiable.

Phil Tarrant: Okay.

Andrew Lupton: The larger chains, they'd want a month.

Phil Tarrant: Okay, but smaller guys will typically pay a little bit of cost, then?

Andrew Lupton: An owner operator, he likes to know where he's at, so often he'll pay you either cash or at the end of the week. Otherwise, he gets himself in a mess because he doesn't quite know how much he hasn't paid. The smaller guys, they tend to try and just keep things under wraps so that they know where they're at, and the larger chains, they try and squeeze you for what they can get, but on the supply side, it's the meat industry you have to pay seven to 14 days full stop.

Phil Tarrant: Okay, so typically the flow of funds for you from when you get paid to when you need to pay, you're not sitting on cash for a long time, so it's quite immediate.

Andrew Lupton: It's a very immediate business.

Phil Tarrant: Yes.

Andrew Lupton: It's a very immediate business. There's high cash flow. Small margins turned regularly, that's the way it works.

Phil Tarrant: That's the way it works. In terms of people who supply smaller retailers, you said that a lot of them like to pay pretty quickly so they know where they're at. If you see as a supplier into smaller retailers, people not buying their bill for a week or two weeks, when do you start going, "Hang on a second, this is a problem. We need to get on this and let's cut them off"? I'm sure there's no steadfast rule, but when do you know? You've been doing this. How do you know?

Andrew Lupton: It's all about patterns, isn't it? It's all about payment. It doesn't matter who it is. It's all about payment patterns, and as soon as the pattern's broken, they need to have a good reason why it's broken, and if it's not a particularly believable or credible excuse then you have to toughen up, but I must say this country, people don't like being put on credit hold, or they all take it so personally.

Phil Tarrant: Yes.

Andrew Lupton: I've noticed that more. I've done business all over the world and no one minded that much, but Australians don't like being put on credit hold.

Phil Tarrant: It annoys them.

Andrew Lupton: Yes. That is often a relationship breaker.

Phil Tarrant: Okay.

Andrew Lupton: What do you think, I'm not worth it, mate?

Phil Tarrant: Yes.

Andrew Lupton: It's not that. It's that you owe it to me.

Phil Tarrant: My contact's my handshake.

Andrew Lupton: It's not that. It's not the fact that I don't think you're worth it. It's the fact that you haven't paid the bill. It's a simple fact.

Phil Tarrant: Fair enough.

Andrew Lupton: We have to pay ours. This is the meat industry, seven to 14 days. They're very strict, the meat people. They put you on credit hold. They don't care who you are. That's the way it is.

Phil Tarrant: That's the industry. What's the sort of meat ... I don't know if it's called a meat industry board, or the association that represents meat producers?

Andrew Lupton: Seven days.

Phil Tarrant: Seven days?

Andrew Lupton: Yes. The sales yards and the abattoirs and the sales yards, where the stocks sell is seven days, and if you don't pay in seven days ...

Phil Tarrant: They come get their cows.

Andrew Lupton: Yes. It's really, really strict. That flows on down, so when people go above a month in our industry, it hurts because you can't afford to fund people for weeks on end.

Phil Tarrant: I imagine it's a domino effect as well because if one person doesn't do what they should be doing, then it affects the whole supply chain.

Andrew Lupton: Yes, it sure does. Getting paid, like any industry, is difficult, but it's not as bad as... at least people do pay here. It's an economy where people do pay.

Phil Tarrant: Do pay.

Andrew Lupton: Yes. I worked in Spain for eight years before I came to Australia and payment was optional there.

Phil Tarrant: Where in Spain were you?

Andrew Lupton: In the southeast.

Phil Tarrant: Okay.

Andrew Lupton: We dealt with lots of the larger plastic processing companies and they would pay you from 120 to 180 days, and only then if you really started begging.

Phil Tarrant: So begging rather than demanding and threatening.

Andrew Lupton: Oh, begging, yes.

Phil Tarrant: Please pay me.

Andrew Lupton: Yes, yes. That was before the GFC hit. There's stories coming out of Spain for these last six years that even councils haven't been paying their employees for up to six months.

Phil Tarrant: How do they get away with that?

Andrew Lupton: All that payment thing in Spain was dreadful, but here in Australia, it's good.

Phil Tarrant: Okay, so we shouldn't complain too much.

Andrew Lupton: No, we don't complain, but just don't put an Aussie on credit hold.

Phil Tarrant: Couple of gems of information there, Andrew. Thanks, mate. I really like your insights into identifying when you need to start worrying about whether or not you're going to get paid and take action pretty quickly. I think it's a mistake that a lot of Australian businesses fall into where they go, "Ah, she'll be right. He'll pay eventually," and then they don't get paid.

Andrew Lupton: It's all sorts of trouble.

Phil Tarrant: Yes. It's something that every business can work on. If you're a part of that chain, you've got to pay your bills on time, and coming up to Christmas right now, everyone's going to be trying to sit on their cash.

Andrew Lupton: They are.

Phil Tarrant: Yes, and this is a challenge. Adam, anything you want to finish off with, mate?

Adam Zuchetti: No. I think you covered quite a lot, Andrew, so thanks for coming in.

Andrew Lupton: Thank you. Thank you for having me. It's been very interesting.

Phil Tarrant: You've whet my appetite. I want to go eat some sausages and some small goods.

Andrew Lupton: BrookvaleMeats.com.au.

Phil Tarrant: What is it?

Andrew Lupton: BrookvaleMeats.com.au.

Phil Tarrant: BrookvaleMeats.com.au.

Andrew Lupton: Yes. That's the retail site. You order anything you want. That's probably the largest selection of meat products in Sydney.

Phil Tarrant: If I do that, then they'll just ship it to me to my door?

Andrew Lupton: Yes.

Phil Tarrant: Yes? Like the next day? A couple days?

Andrew Lupton: 24 to 48 hours.

Phil Tarrant: Okay, so good for Christmas shopping, then to save the madness.

Andrew Lupton: Absolutely. It's all on the web site. BrookvaleMeats.com.au.

Phil Tarrant: There you go. Mention My Business and you'l ...

Andrew Lupton: Yes.

Phil Tarrant: Andrew, I really appreciate your time, mate.

Andrew Lupton: Thank you. Thank you for having me.

Phil Tarrant: I've really enjoyed the chat, and it sounds like you're doing some good stuff there in terms of the blend of organic versus acquisition, and keep driving forward. Thankfully, we're a nation of sausage and meat lovers.

Andrew Lupton: Yes, we are.

Phil Tarrant: We'll keep the barbecues going for summer ahead, Adam. Thanks again, mate. Thanks for joining us.

Adam Zuchetti: No worries, Phil.

Phil Tarrant: Check us out at MyBusiness.com.au. We'll write up stories also around Andrew and get some more info up there. Remember to check us out on all the social stuff. You can follow me at Philip Tarrant. Anything else I've missed at all?

Adam Zuchetti: Or This email address is being protected from spambots. You need JavaScript enabled to view it..

Phil Tarrant: This email address is being protected from spambots. You need JavaScript enabled to view it. if you've got any questions or if you'd like to come on the podcast. We're open. All businesses come in all shapes and sizes. We've got butchers now, bakers.

Adam Zuchetti: We profiled a baker but not on the podcast.

Phil Tarrant: Profiled a baker, okay. No candlestick makers. I don't know if they exist anymore.

Adam Zuchetti: I'm chasing it.

Phil Tarrant: Okay. Let's do it.

Adam Zuchetti: I haven't found it yet. If you're out there, contact us.

Phil Tarrant: Good. Nice one. Thanks for tuning in. We'll see you next week. Bye-bye.

Listen to other instalments of the My Business Podcast:
Episode 34: Anytime Fitness Australia CEO talks expansion and competitive markets
Episode 33: Are you a leader, a manager or both?
Episode 32: Customer satisfaction: the only growth that counts
Episode 31: Taking a new idea from concept to consumer
Episode 30: Exclusive: Why not all growth is good growth
Episode 29: Taking the frustration out of people management
Episode 27: Giving your business the perfect fit-out
Episode 26: Cash flow tips and tricks for SMEs
Episode 25: SMBs have their say on economic prospects
Episode 24: Offshore workers: the next bastion of business growth?
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