Coupland's riding the crust of a wave
Coupland's is no small family affair. It sells millions of cookies and loaves of bread each year, and employs 400 staff. Most bread and other bakery products are sold in supermarkets in New Zealand. And supermarkets sell a lot of bread.
But Coupland's took a bold step back in 1999 when it started manufacturing bread en masse and selling it in its own shops.
Managing director Karel Adriaens says that back then, 95 per cent of all bread was sold in supermarkets.
By the end of 2000, Coupland's had scooped 20 per cent of the South Island's market share. For governing director Lance Coupland, Ray's son, this is a way to keep the product's quality and freshness under control.
"What makes our business unique is that we fundamentally are retailers. We retail 95 per cent of what we manufacture and we manufacture a lot of food. We're quite unique in that aspect - all the other large bakeries in New Zealand all supply supermarkets."
The iconic South Island business is now expanding its business model to the North Island.
This means a huge multimillion dollar investment in a new factory in Hamilton, and seven shops to date. The challenge is to bring the solid reputation and trust built in the South Island over the years up North.
It all began in Timaru in 1971 when Ray started making pies at the back of his dairy.
Lance tells the story: "He was making litterally thousands of pies and selling them just over the counter. And then he thought, let's build a bakery."
The bakery is now one of the 27 stores the company owns and operates throughout New Zealand.
The company has grown over the years and has become an institution in the South Island. Families make extra trips to Coupland's shops to get bread on special and their weekly supply of cookies and pies at a reasonable price.
Lance says the company's marketing focuses on word of mouth and communities.
"You won't see us on television much, a little bit on the radio, but predominantly we advertise through the local rags and community initiatives."
Natasha Patterson, bakery adviser for Bakels NZ, which provides training and ingredients to Coupland's, confirms the company supports the local economy.
"They try as much as possible to buy from local companies."
Coupland's supports the Salvation Army, breakfast and lunches programmmes in schools, Lance says.
"Giving our product away is a far more effective means of promoting our product. The consummer gets the benefit of advertising. It's been succesful for us."
Ray's pies were a hit, but Coupland's built its Hornby factory in 1996 and today manufactures about 400 different products.
About 100 staff are busy operating the factory day and night, seven days a week. Inside, the sound of machinery and the smell of freshly baked cookies takes over. Managing director Karel Adriaens leads the way, proudly showing the hundreds of cookies, slices, doughnuts, pies, and loaves of bread flowing on the product lines.
"We have a lot more automation than some other production facilities you'll find in New Zealand. We travel overseas to get the ideas and then come back and design and build a lot of our equipment here where we've got the local expertise."
The cookie line can produce up to 20,000 cookies of different sizes, shapes and flavours per hour. It runs with only four to five operators.
The bread plant can produce 3000 loaves of breads an hour - untouched by human hands.
"You gotta have volume in our game. It's part of how we operate," Adriaens says.
Baking sector manager for Competenz (formerly New Zealand Engineering Food and Manufacturing Industry Training Organisation) Matt Grimes says Coupland's has successfully coupled mass production with a wide range of product.
But even then, they have retained a traditional aura, he says.
Adriaens says tradition is part of the business model.
"Some of the recipes we're using like the gingernut is actually grandmother Coupland's recipe from 100 years ago."
He says recipes include natural ingredients such as eggs, milk, and butter, even though it means the products have a shorter shelf life.
"We're getting our product from our factory to our shops within days."
This focus on freshness and quality ingredients is a key part of Coupland's business model and one of the reasons the Couplands have decided to keep control of the retail chain rather than start selling in supermarkets.
"The way we interact with our own retail allows us to take out a lot of the cost, waste and inefficiency," Adriaens says.
The mix of family values and tradition that has made the business successful was nearly lost in 2008 when the company experimented with a more corporate style. Costs were cut and recipes were changed to use cheaper ingredients.
Lance and Adriaens, unhappy with this new direction, decided to leave. Lance remained as an owner but quit his director role and bought a farm. Adriaens worked for other businesses here and overseas.
"We'd lost the family values of the business," Lance says.
In 2011, Coupland started its expansion to the North Island with a factory in Hamilton and seven shops around the North Island.
But at the end of 2012, the expansion was not as successful as expected, and products did not taste as they used to. Ray Coupland decided he did not want to compromise on quality for profits and needed to go back to the business' core values. He reverted to recipes used back in 2008 and brought Lance and Adriaens back.
"We decided to go back to what made our business successful: high quality product at affordable prices. We've actually gone back to the future," Lance says.
"We're doing this out of passion, not just profit."
And the focus is now on the multimillion dollar expansion to the North Island.
Ray, Lance, Adriaens and more debt have funded the project. On occasion, private equity firms have approached Ray to take a stake in the business. His answer? "You don't have enough money."
"We are a family business and we want to keep it that way," Lance says.
Establishing a production facility with little to no retail to start with is a huge cost and a huge risk, Lance says.
"With all investments that size there are risks and cashflow issues."
But the potential is immense and taking over the North Island seemed like the logical next step for the business.
"Our business has been very well accepted in the South Island, and most of New Zealand's population is in the North Island."
Lance says there is room for a third production facility and up to 50 stores in the North Island.
"We have a strategy of developing our brand and slowly rolling out into regions."
Baking Industry Association of New Zealand president Michael Gray says the baking industry is a very competitive market with lots of niches.
"It's about being able to cater for all the different needs consumers have these days while following trends."
Gray says baking businesses that want to sell outside of supermarkets have to offer a varying range of products to give a reason for people to visit them while constantly maintaining quality levels.
"It's working very well for them [Coupland's]," he says.
"They're well established in the South Island. But, like any other growing business, it will probably take a bit of time for consumers to recognise their brand up in the North Island."
Grimes agrees with Gray - the North Island is not going to be an easy nut to crack.
He says Coupland's community-based approach works well in parochial South Island.
"Mainlanders like their community businesses."
However, the North Island might be less community-oriented, he says, and Coupland's might have to adapt to a competitive market.
Lance is realistic. He expects North Island revenues to be lower than in the South Island at this stage - developing the brand there cannot be done overnight.
"We're more dominant in the South Island because we've been there a lot longer. But we have enormous growth opportunities in the North Island. We have to build that brand and consumer's trust."
Brand promotion means going to schools to give away bread and promote healthy eating. Word of mouth marketing takes time, "but it's a solid form of growth," Lance says.
Adriaens says the Couplands have also considered expanding overseas, but decided there were enough growth opportunities in New Zealand for now.
"That's the exciting thing about our business: There is more opportunity than we can handle."
MAKING A CRUST
Coupland's turned over under $100m last year. This is a fair share of New Zealand's bakery manufacturing industry. According to Statistics New Zealand, total sales in this industry in 2012 were $1.6 billion. In 2013, the industry employed 6000 people in the North Island, and over 4000 people in the South Island.
A third of the company's revenue comes from bread product, another third from pies and other pastry type products, and a third from cakes, slices and cookies. Coupland's sells 10 million loaves of bread – 15 per cent of the bread market in the South Island.
It competes with Goodman Fielder, George Weston and myriad of smaller players.
Retail general manager for Foodstuffs Rob Chemaly says bread is one of the top five items sold in the chain nationally. "It remains a stable purchase year round and sales are not impacted by economic conditions."