UK family businesses Shepherd Neame Ltd and Day Lewis Plc were awarded the regional Coutts Prize for Family Business last month in recognition of their success during what was a particularly difficult past 12 months. Katie Barker spoke exclusively to the CEOs of both companies to find out how they succeeded in a year of financial crisis.
When Campden FB talked to the evaluation committee for the Coutts Prize last December, Andrew Wates said that family businesses must "adapt to succeed" in the post-recession world.
Jonathan Neame (pictured right), chief executive of the fifth-generation brewer Shepherd Neame, certainly agrees it has been a tough time. He outlined the challenges currently facing the pub and brewing industry as being the smoking ban, an increase in excise duty and a sharp spike in commodity prices. "When you combine all this with the deepest recession the industry has endured since the 1930s you begin to understand some of our challenges," said Neame.
Yet the brewer has been able to increase its market share and grow its turnover by investing in the growth areas of the business (food and accommodation) and by upgrading the quality of their pubs so they are a better place to visit than their competitors. "We also brought in new beers from Japan and bought new pubs at a very competitive price. We have grown our sales to supermarkets significantly and achieved substantial cost efficiencies," he explained.
Looking to the longer term, Shepherd Neame has also invested heavily in streamlining its IT systems and business processes in order to become more efficient and cost-effective. "We looked into the micro detail of everything we have done for 100 years, from brewing beer to the way we package it. Then threw all our balls in the air and started again," explained Neame.
Kirit Patel (pictured left), CEO of second-generation pharmacy chain Day Lewis, echoed Neame's sentiments that the past year has been difficult. The pharmaceutical industry was hit when the government initiated a massive cost cutting exercise aimed at the health services in 2007. This was compounded by the credit crunch increasing the cost of borrowing and the recession cutting front-end sales.
Despite this, the Patels made a conscious decision to invest in the future of their company. "The family put its own money into the company. At the same time the managers appreciated the family putting their own capital into the business and went on a massive efficiency exercise. It was a concerted effort to get our business up and our costs down. The staff got behind the business too and produced a lot of good results," he said.
Both Patel and Neame believe being a family business gave them an advantage during the most difficult trading conditions. Patel explained: "We are fortunate that we are a family business and that the family can put their own money into it. The only alternative left was to sell shops but, being a family business, the family understands it is a long term goal that's more important than the short term dividend. Sooner or later we will end up buying more shops and growth will return," he said.
And it appears to have worked as the company was not as negatively affected by the downturn as it at first feared. "We actually came out with 20% more profit in spite of all the problems because of the initiatives we took," said Patel.
For Shepherd Neame, the family has been able to provide some much needed stability and context. "Although the last few years have felt very difficult for the industry, if you take a longer term perspective it is certainly not the first time the industry has had a crisis like this. We are increasingly confident that there will be a turning point and when that turning point comes, we will be in a fantastic position to make the most of the upturn," Neame said.
"We have a great change culture here, we never rest on our laurels. That, mixed with a great sense of pride not just from the family but right across the business, allows us to adapt the business to what the consumer wants today whilst also growing the business for tomorrow," he concluded.
It seems both Shepherd Neame and Day Lewis took on board Wates' advice and have indeed adapted to succeed.