Christmas spirit hampered

BY ROB STOCK

RICHARD BRADLEY, owner of the giant Christmas hamper company Chrisco, feels demonised.

Stoked by rival Hampsta, critics have drawn attention to his wealth and contrasted it with the low incomes of his customers; they have focused on the apparently high prices of his products and on a dispute with business partners over a consumer finance company.

Up till now the English immigrant had held himself aloof from the fray but stung by some of the claims, Bradley invited the Sunday Star-Times to his North Shore offices in an attempt to debunk what he sees as myths and misconceptions.

Chrisco is a big company. How big, the quietly spoken Bradley won't say, except to note that it ships between 300,000 and 400,000 hampers each year in New Zealand and around 1.8 million in Australia.

The hampers are actually cardboard boxes containing groceries, or meat, or bumper payloads of booze, ranging in price from around $140 to well over $2000. Chrisco's customers buy them in instalments throughout the year to make sure they get a feast come Christmas.

It's a business that has earned Bradley a considerable fortune, allowing him to indulge his love of cars – he drives a black Bentley with a personalised plate – and build New Zealand's most expensive private house, a Coatesville mansion on 30ha complete with helipads, swimming pools and a kitchen with a pink Aga and 7m-long aquarium above the bench.

The house is now for sale for a rumoured $30 million and Bradley has moved to Australia, using his daughter's house as a crash pad for visits this side of the Tasman.

"I guess the hard thing for people to understand is that Chrisco is a fairly large business," Bradley told the Star-Times. "It has scale, so we would be, in terms of gross sales, up there with a lot of the more publicly known businesses.

"So do I make an unseemly amount? It is a big number, but it is a big business."

At an average hamper size of $500, Chrisco's New Zealand turnover would be $150m-$200m, Australia's five times as big. Sources say that at its peak, turnover was even higher and press reports from 2006 talk about New Zealand sales of 500,000 hampers.

With that level of turnover, the question of margin on sales can make millions of dollars' difference to Chrisco's profits and meat retailer The Mad Butcher, a driving force behind the launch of Hampsta in August last year, alleges Chrisco's 2010 meat hampers cost between 44% and 56% more than they would at its stores.

Bradley said accusations of profiteering were insulting to Chrisco customers, and did not take into account the business's high costs.

"It is a very expensive business to maintain the level of service," he said. Unlike a retail operation, Chrisco hampers must be correctly packed and delivered within a short time frame across the whole country, he said. With those costs, "our percentage profit is probably in line with the supermarkets".

And because many customers were in rural areas, a fair comparison would be the prices in a rural supermarket rather than an Auckland Pak n' Save.

"If the price comparison was done at a Four Square in Coromandel, the comparison would be significantly different."

The argument doesn't sound convincing to Mad Butcher chief executive Michael Morton.

According to Morton, a few years ago The Mad Butcher was invited to tender to supply meat to Chrisco. He paid $15,000 to attend a Chrisco conference in Fiji, he said, but quickly concluded that Chrisco did not want his firm as a supplier. Instead, Morton believes, Chrisco wanted only to pressure current suppliers into dropping their prices.

The effect was probably not what Chrisco, at the time Australasia's third-largest grocery buyer, had in mind.

"They convinced me I should be competing against them," said Morton.

Competition between Chrisco and Hampsta has since become intense. The newcomer energetically denounces its rival at every opportunity while Bradley portrays Hampsta as a gadfly.

Hampsta, which offers a pre-paid debit card, had an opportunity for more sniping when Chrisco launched a pre-paid Visa card in response before Visa approved it.

Morton was still sniping last week. "We talk to their suppliers, so we know they are hurting."

The newest controversy is over what some see as an "inertia selling" tactic Chrisco has introduced.

Inertia selling, as its name implies, plays on customer inertia to rollover sales from one period to the next – and it's illegal. Morton alleges Chrisco's new HeadStart programme, in which customers are rolled over to another year of direct debits unless they tick a box on a form to end the payments, falls foul of that law.

Bradley said HeadStart was supported by an active programme of calling up customers and sending letters, and Chrisco's lawyers had given it their approval.

Hampsta's attacks on Chrisco have an added bite since the collapse of rival hamper company Mrs Christmas, which went bust in April leaving many customers out of pocket.

Chrisco stepped in as white knight with an offer to take on Mrs Christmas customers, an action that went some way to defusing criticism over the Christmas hamper business model, but issues remain.

Customers pre-pay for hampers to be delivered at the end of the year, but their cash is not generally kept in trust accounts by hamper companies, so if they go bust customers find themselves in the uncomfortable position of being unsecured creditors.

Chrisco does not currently use trust accounts, but Bradley told the Star-Times he is awaiting the conclusion of the Ministry of Economic Development's review of consumer laws – a move expected to include a potential overhaul of the antiquated Laybys Act under which hamper companies operate.

Although Bradley has an answer for every criticism, the public relations war is taking its toll.

The eldest of his five grandchildren is now nine, and he doesn't like the idea of her reading critical articles about him.

"It is important that I please two groups of people: those people who work for me and the people who buy from me," he said.

"They are the strongest advocates and they feel more aggrieved when they see the business getting press that isn't favourable."

His arch-enemy Hampsta, meanwhile, is unlikely to ease up.

Its target is to have more than 50,000 cardholders by next Christmas, and Chrisco remains its chosen place to find them.

- © Fairfax NZ News