The pie’s the limit
The Four’N Twenty Pie is an Australian icon. It is what you ate at the footy at half time, along with your hot jam donuts. And after the footy, if you were lucky, your mum would put a Nanna’s or Herbert Adams pie (if she wasn’t baking her own) in the oven for a weekend dessert treat. Business First looks at the current transformation of this very Australian business.
That was the perfect Saturday for most Australians: sport, pies and the family dinner at home. And Patties Foods, the manufacturer of those pies, played a major part in it.
Patties has a long history. In 1966, having worked at the local bakery, Peter and Annie Rijs bought Patties Cake Shop in Lakes Entrance. Over time, Peter and Annie’s 6 sons came to work for the business, which prospered and grew.
Today, Patties Foods is now an ASX listed company owning a high quality portfolio of iconic Australian brands that include Four’N Twenty, Patties, Herbert Adams, Nanna’s, Creative Gourmet and Chefs Pride.
These brands have strong market shares and are supported by considerable brand investment by the company. Specifically, Patties Foods has a number 1 market share in the retail frozen savoury segment (which includes pies, sausage rolls, pasties and party goods) and a number two market share in the retail frozen dessert segment (which includes fruit pies, cold desserts, danishes/crumbles, berries, snacks and cakes).
At the helm of Patties Foods is Steven Chaur, who has only been CEO since April 2014, but has already made a huge impact.
Steven’s previous positions include executive general manager of Tip Top Bakeries (Southern region), general manager of Findus Australasia and general manager of National Foods Tasmania. Prior to this Steven held senior marketing director roles on brands such as Pura Milk and Birds Eye. His most recent job was MD, Pacific, for the French publicly listed Saint-Gobain, one of the world’s top 100 industrial companies engaged in manufacturing, marketing and distributing innovative products for the construction, automotive, industrial and retail consumer markets.
“I’ve been very fortunate to have gained some good exposure to branded food business over my 20 plus years experience in FMCG, working with some big consumer brands in high volume food manufacturing and distribution environments, so I was delighted when I joined Patties Foods as it was a good fit in terms of drawing on that experience,” Steven says.
For the last four years Steven’s MD Pacific position with St Gobain brought about a different perspective.
In the Pacific region, Saint-Gobain’s products are technical in nature and are sold extensively through the B2B, end user and consumer channels via Industrial distributors. Steven’s mix of business experience in B2B and B2C has been invaluable.
“What I learnt from the industrial sector is how to deal with the complexity of the industrial market, technical application of products and driving innovation,” Steven says. “That means in a B2B environment, you focus on building deep relationships with customers and dovetail that into business and distribution strategy. I was dealing with companies like Bunnings, through to Bluescope Steel, through to Chevron to small distributors. It’s definitely not a one size fits all strategy if you want to win business and beat your competition. You have to be nimble and differentiation is the key. Sometimes in the FMCG sector, it’s easy to fall into the trap of producing a product that everyone takes. Customers in FMCG are all driving hard for differentiation beyond price, that’s probably the biggest change I’ve noticed in my four years out of the food sector… In the industrial sector you are always developing tailored solutions, it’s less about price and more about partnerships, product quality, product application and our service levels. So I have strived to bring that thought mindset and high customer engagement to Patties Foods, to make it our competitive advantage. We now look uniquely at all customers across many channels to work closely with them where we can both succeed, grow and differentiate offers.”
Steven was brought into Patties Foods to bring a new drive and responsiveness to the organisation, which to the beginning of 2014 had suffered a string of profit downgrades over a few years as price competition in the supermarket channel affected earnings. Shares in Patties had also fallen 16 per cent in the 12 months prior to his appointment.
Despite this, Steven says Patties has always been a successful Australian company and indeed figures have improved in the right direction of late.
“Patties have always been a successful company. I have just tried to add value through a different set of perspectives and experiences to lead the business forward, with the support of our Board. We have focused on getting the operational basics right, with a mandate on improving operational excellence, removing decision barriers, speed to market, driving employee empowerment and; focussing on our brand support and product development strategy. In the past we had tried to do a lot too quickly and sometimes we didn’t do a lot of it well. It was clear we had to create a new baseline. So we went back to what it is we did well for over 40 years: focus on making the best quality pies and sausage rolls in Australia, invest in our icon brands and make sure our products were sold everywhere they could be in every channel – that is, profitably win all the business we could. This helped drive profitability and made us focus on growing our sales channels and launching new products that met consumer needs within these channels. We’ve stripped back layers with a clear focus as to who we are as a business, created simpler decision processes, instilled a deeper category focus and adopted a ‘fewer-bigger-better’ approach to new innovation.”
Backing what Steven says and despite profit downgrades, Patties Foods has maintained market share leadership in all its categories with its icon Four’N Twenty brand remaining as the market-leading brand in savoury pastry products nationally.
Nanna’s frozen fruit saw branded growth of +92 percent due to new product launches with high customer penetration whilst the frozen fruit category grew by +36 percent.
Oatties Foods also launched the Four’N Twenty Real Chunky Pies, Herbert Adams 8-hour Slow Cooked premium pies and Patties Pie Bites.
Innovation is the key to maintaining and building market share.
“There are a number of companies struggling with lack of innovation in the fresh food categories, especially in frozen foods. There is high pressure on those businesses to catch up to some of the growth segments like chilled meals and fresh dairy products… It is exciting what is going on in the food sector and at Patties we’re recalibrating to adapt to and drive it.”
Steven says Patties Foods is privileged to preside over a stable of iconic Australian brands. However, as new competition in fast food choices increases that wasn’t around 20 years ago, Patties has needed to look at different strategies to grow market share, especially in the out of home consumption channels. People have so many more choices today for on the go food offers and our challenge is to make our pies appealing against those choices. Speak to most people and they will tell you they love a good pie or pasty, but it’s often not first to mind when that hunger needs to be satisfied.
“We have a great product tradition of eating pies in Australia, it’s our national dish, and the awareness among consumers of our Four’N Twenty brand is virtually 100% nationally. So we have every opportunity to get pies back top of mind against the larger budget marketing of the fast food giants by driving new marketing initiatives, product distribution, promotional flavours and new products to capitalise on that and entice people to have a pie.” Over the last 6 months, we’ve really put a high focus on driving ‘step change’ innovation to rebuild our company growth and market share position.
Steven says the icon Four’N Twenty brand has such massive growth potential, so Patties has implemented a strong marketing plan to reengage consumer with the brand. We have a strong brand that people know and love and we are reconnecting them with the brand. Over the past 6 months we’ve been strongly activating the brand through convenience stores, major sporting venues and the general trade through promotions, new TV campaigns, locating more pie warmers, eye catching point of sale material and new products, like Four’N Twenty Real Chunky slow cooked beef pies and new Four’N Twenty ‘Slams’ party pie bites – tiny snack sized pies aimed at the competing with the snack food market. We’ve already seen a strong positive growth recovery in the brand sales over the past 6 months. Having an association with Aussie Rules Football has also been critical for the brand and forms an important part of the brand strategy. We’ve been selling Four’N Twenty pies to the MCG in Melbourne since 1958, and our bright yellow attired pie boys are a tradition at the ‘G’. We’re now looking at how we drive the brand harder over summer months as savoury pastry sales don’t tend to be seasonal and while footy’s taking a break, there are many opportunities that consumers have to engage with our brand over summer.
Our 105 year old Herbert Adams Bakery brand also led the innovation charge with 3 new to market varieties of 8-hour slow cooked chunky beef pies into supermarkets, cafes and convenience stores. These pies are a first in the market and I’m not aware of any other major pie maker to have tender, slow cooked beef in a pie. It is literally the ‘best pie’ you will ever eat and sales have been successful. It really has been a game changer for us as a business and our innovation focus capitalising on the consumer trend for flavoursome and premium quality products.
With our Patties brand, which is the market leader in Party Pies and savoury entertaining products, we also stepped up our innovation with major capital investment to produce miniature party pies – or Patties Pie Bites – as we call them. The innovative tiny 15g pies are designed to be a one bite occasion and have been really well received in the finger foods segment in foodservice and catering, as well as the grocery channel. Until this innovation, we found it difficult to compete on serving platters with our normal 40g party pie against cocktail spring rolls, chicken wings and meat balls due to the higher cost per serve. Pie Bites have been a great hit with caterers – same pie, just cuter, cheaper per serve and more fun to eat.”
With Nanna’s we have recently relaunched our frozen fruit pie range to contemporise the brand and attract new consumers to the category. We spoke with younger consumers and examined the market shift and category growth in that section. Over recent years we have been able to also lead the frozen fruit category development in supermarkets, which is showing very strong growth, through our Nanna’s and premium Creative Gourmet brands… Fresh fruit is often expensive due to seasonality and frozen fruit is both convenient and cost competitive. There frozen fruit category is now growing at +30% pa and Nanna’s frozen fruit products have grown +90% with new innovations, such as frozen mango and more recently, frozen Hass avocado chunks. We need to ensure that innovation is on trend and that we can respond quickly to launch products that consumers want.”
To further drive innovation as a competitive advantage, Patties has invested heavily in production automation at their Bairnsdale bakery, located in east Gippsland Victoria to improve efficiencies, drive quality and increase line capability.
“We invested heavily into a robotic pick and place system to pack our pies. It initially had a few teething problems, as most major projects do, but its settled now and can pick and pack pies into trays, through a vision system, at a fantastic pace of around 18-20,000pies and hours. It’s incredible to watch it in action… It so exciting to think that the more than ¼ billion high quality pies we make each year get consumed and consumer are still demanding more each year,” Stevens says.
Steven has conducted a lot of groundwork in his first seven months undertaking a comprehensive strategic review. The review is looking at engaging customers, looking at opportunities in line-by-line manufacturing, ingredients and product formulation. He spent a lot of time with customers, suppliers and on the bakery floor with employees to understand his business deeply. The idea was simply to identify bottlenecks, immediate risk areas and to take complexity out of the production and remove the decision making bureaucracy to help production move faster. His focus was also very heavy on driving a strong safety and product quality culture, especially through continuous improvement philosophies and a simple ‘make right first time’ production culture, which has dramatically changed the operational results and driven up employee engagement.
“Patties has been through a process of ‘restoring its basic operating conditions’, as a part of a defined 3 stage company growth program. We are well on track to delivering our first phase of getting the business right which will enable us to deliver on growth and acquisitions in the future stages. Much of the hard work and restructuring will come to bear in the next 12-18 months,” Steven says.
With only an 18% share of an estimated $1.4 billion sales value market for savoury pastry products in Australia (Patties data 2014), the Patties Foods strategy is to continue to develop beyond its traditional purchase points and further into the out of home segment, which includes bakeries, cafes, aged care facilities, food service, major venues and schools.
“We have a huge opportunity to grow in what is a very competitive market. There is no shortage of bakeries and pies shops in Australia. At one end of the spectrum, we enjoy a very strong relationship with all our supermarket customers in both branded and private label products, but supermarkets only represent 20% of the total potential market sales. So there is also good growth potential for Patties by creating new distribution points, developing new markets and launching new premium, innovative savoury products in the out-of-home space where consumers spend more time eating. That is exciting and it’s certainly one of the competitive strengths of our company, in that our products touch many customers and channels, so we are not limited to sales in only one market.”
As for suppliers and partners, an important element of Patties’ strength comes in its commitment to Australian business and this has been the case since the company’s foundation. For instance. Peerless Foods is Australia’s largest privately owned manufacturer of premium edible oils, fats and margarines and the 100% Australian, family owned Global Foods.
“We have a strong community profile in Bairnsdale and we proudly source a lot of raw materials from this region. We source 100% Australian beef from all over country and we are one of the largest users of beef in the country, which many people would not know. Many of our suppliers of raw materials have been with us since the business started. They have grown with the business. We are also proud of the fact that we source beef, RSPCA approved chicken and mutton from many family owned processors around the country. It is an Aussie brand supporting Aussie companies.”
While change is never easy, Steven engaged staff from the get-go, enticing them to give feedback, which he has listened to and implemented. There is a new energy at Patties. It is the market leader in its category with an annual sales turnover of $300 million. They have market leading and iconic brands and an innovation pipeline that is strong, with a presence in many distribution channels. Should they continue to innovate and market in their current manner, this iconic Australian company will remain at the top of its game.
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