Trade

Super Butcher model moves with the times

Jon Condon, 12/11/2012

 

The new owners of the Super Butcher warehouse meat retailing business are confident the business can continue to move with the times during cyclical supply and demand challenges, in what is currently a tough domestic retail market environment.  

“We firmly believe the Super Butcher business model can work, regardless of these circumstances,” new majority owner Zanda McDonald told a Brisbane audience last week.

Mr McDonald spoke at a Rural Press Club function on Thursday about his company’s experiences since taking over the Super Butcher business four months ago.

Super Bucher is regarded as Australia’s largest independent meat retailer. Beef Central has written extensively this year about the business’s dramatic financial collapse and resurrection – see this earlier report, "Super Butcher saga ends in liquidation."

Original founder, Andrew McDonald (no relation) started Super Butcher during an era when the domestic market was awash with diverted export beef, due to the impact of drought on slaughter numbers and the early onset of the Global Economic Crisis on international demand. The business acted as an effective conduit for good quality beef, often pushing-up against use-by dates, by providing a high-volume, low-margin domestic distribution point.

Recognising an opportunity, Andrew McDonald pioneered the ‘warehouse retail’ model, based on cement floors and stainless steel in refrigerated cold room venues located in light-industrial locations. The venues offered a wide array of beef labels and brands, sharply priced, based on a ‘high-turnover, low margin’ business model.

Super Butcher grew to become Australia’s largest independent beef retailer, operating six large-scale refrigerated warehouse format stores between Brisbane and the Gold Coast. The new owners have plans to expand in regional areas of Queensland and potentially, interstate.

One of the business’s hallmarks has always been mass promotion, using mainstream television and more recently metropolitan newspaper advertising, as well as an email distribution network built around what is said to be the largest privately-held email database in the country, numbering 120,000 addresses.

This is used for direct marketing purposes with e-newsletters featuring specials and different information emailed out twice weekly.

On-line beef sales are also growing in size, with free delivery offered to Sydney, Melbourne, Adelaide, Toowoomba and the Brisbane/Gold Coast region.

But can the Super Butcher business model continue to function effectively when export demand and prices are again in a stronger position? 

“There are lots of bulk retailers doing discount grassfed rumps and similar budget lines, but I’ve yet to see any other outlets that stock the wide range of export quality branded beef that we do. We think it can continue to grow, regardless of changing supply/demand circumstances,” Zanda McDonald told last week’s Press Club gathering.  

While the business had perhaps lost some of its original customers, due to variable product performance like blown cryovac bags prior to the new owners’ takeover, it had perhaps also gained some new ones.

Mr McDonald said he believed Super Butcher, today, was primarily attracting customers away from the supermarkets, rather than independent butchers.

“Most customers are very loyal to their butcher. But every week our beef, mince or lamb is cheaper than Woolworths or Coles, and the product is as good, or better. When things are financially tough, as they are now, people are looking at value when buying protein.”

Mr McDonald said his family’s integrated beef producing, lotfeeding and brand development business, MDH, had originally looked at investment in the Super Butcher business as a means of getting its grainfed Wallumba Premium beef brand message through to the end consumer.

“All things happen for a reason,” he said.

“We first traded with Super Butcher in 2009. It became widely known around the beef industry that if you ever got stuck with some short-dated meat, Andrew McDonald was the first call to make. He didn’t always pay promptly, but he was a good salesman,” he said.

By 2011, a 21-day invoice blew out to 90 days to get paid, and by mid-year, the writing was on the wall that the business was in deep financial trouble.

As a substantial creditor to the original Super Butcher business, MDH was approached by the original owner earlier this year over a potential partnership agreement. But the longer it looked, the deeper the list of creditors and the amount of money owed became, meaning MDH had to walk away.

Soon afterwards, MDH met with another large Super Butcher creditor, Gary Stone and Ken Dunnett, operators of Melrina, Australia’s largest meat wholesalers.

After Super Butcher entered administration, the two parties put together a plan to buy the assets of Super Butcher back from the administrator.

“We spent a lot of money on lawyers. The combined cost to MDH alone in dealing with the administrator, the liquidator and our own legal fees reached $2 million – much more money than MDH had spent on legal matters over its entire previous history. It was ridiculous,” Mr McDonald said.

An agreement was eventually reached with the receivers and the day the new JV took over, it had to go into the market and buy $1.4 million worth of stock, while throwing out any stock out of its use-by date.

Mr McDonald said since taking over the business four months ago, the joint venture (70pc MDH, 30pc Melrina) had saved the jobs of 180 Super Butcher staff, and paid entitlements including superannuation, holiday pay and long-service leave that had not been paid by the previous owner for the past three years.

The new owners had also paid out the Australian Taxation Office, the largest creditor, Mr McDonald said.

“Everyone involved in domestic meat wholesaling and retailing agrees that the past six or eight months have been some of the toughest retail conditions seen for a long time. But the trading numbers for Super Butcher are now stacking up pretty well, and are about where we budgeted them to be by this time,” he said.

“Given the traditional good run into Christmas from now, we anticipate good trade for the next six weeks or so.”

Mr McDonald said the business today was built around ‘second-to-none’ customer service, and a standard of quality of beef that was “as good as could be found anywhere in Australia.”

“All well-known export brands are stocked, with product from Stanbroke, AA Co, JBS and others on the shelves. The business also bones out 500 lambs a week and 400 pigs. Fresh mince and sausages are made in each store every day,” he said.

In the past month, the new business has expanded into fruit and veg and frozen items, a move which has paid off in terms of lifting turnover through ‘one-stop’ convenience shopping.

“When we first started looking at the business it was with the view that we would put more of our own branded product through, and really sell our paddock-to-plate story,” he said.

That is in fact working well, and MDH is now putting through about five tonnes (5000kg) of its own Wallumba brand product through the stores a week.

“It’s not at any great price – we would probably get the same money on the export market, but we are trying to get our brand awareness out there into the domestic marketplace – partly with the view that at some future time we will start to push our animal welfare credentials as part of the brand message,” Mr McDonald said.

During question-time at Thursday’s Press Club gathering, Mr McDonald was asked whether Super Butcher was in fact ‘trashing’ the image of Meat Standards Australia grading system by offering MSA grilling beef for $9.99/kg.

“We certainly aren’t intending to do that,” he said. “We’re a big promoter of MSA, through various brand programs on offer. We believe we are the largest independent retailer of MSA beef in Queensland.”

“But there is a huge amount of surplus beef on the domestic market at the moment. That means at times we can buy-in beef quite cheaply, and for Super Butcher, it’s all about making a margin.”    

“If we can buy that wholesale MSA beef more cheaply, we retain the same margin, and pass that on to our customers, to achieve greater turnover. To us, it’s about achieving sales, and getting customers through the door.”

“But because we are linked to Australia’s largest wholesaler, we certainly get access to some very good deals, when they arise,” he said.

  • See Beef Central’s report last Thursday on MDH and partners’ focus on animal welfare through novel forms of pain relief during branding, castration and dehorning.
  • Tomorrow: MDH’s experience in commercial brand development since market entry in 2008.

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