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Annies Marlborough (Annies) has taken a cautious but persistent approach to developing its Australian market, which it says is paying off 10 years after first testing the market. Australia now accounts for around one third of Annies' Australasian revenue, and the company is poised for significant growth in this market.
Annies began in 1986 when Graeme Giles bought his wife Ann a small dehydrator and she began experimenting with drying fruit. The products were sold in a small store on the couple’s land just north of Blenheim.
Demand grew quickly and a thriving cottage industry was soon operating in the basement of the Giles’ rural property. By 2005, the business was ready for the next level and a purpose built, 1,500 square metre factory was opened in Blenheim.
Annies’ products are made from 100 percent fruit pulp. The company does not use concentrates or additives and the fruit is handled as little as possible to preserve freshness and nutritional values. Its products are found in health and specialty food stores and the fruit and vegetable produce section of supermarkets.
All product is manufactured in Blenheim and is sold throughout New Zealand, in supermarkets in Australia and in selected stores in the United States.
Annies decision to enter Australia was driven by the following factors:
Market opportunity
Demand for Annies’ products had grown rapidly in New Zealand, confirming that the all-fruit snack bars were filling a market niche. Annies’ was confident the same would apply in Australia, which has a similar consumer market. The company was also aware of growing global interest in natural, healthy food products.
Growth oppportunity
In 2005, former Hannah’s Chief Executive and business mentor Bill Wallace joined the company and is now Chairman of the Annies board. Bill brought knowledge of business strategies and governance, and helped to implement sound structures for growth and risk management into the company. Finding offshore markets became one of the company’s growth strategies.
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Annies began testing the market in Australia in the early 2000s, attending trade shows and joining New Zealand Trade and Enterprise trade delegations. The company was confident that fruit and vegetable stores would sell its dehydrated all-fruit snack bars – the challenge was to find distributors to get the product in front of consumers.
Cold calling and following leads from trade shows resulted in relationships with a number of distributors but they weren’t successful and the product failed to gain traction in the market. One of the issues the company faced was persuading food stores to put its fruit bars in the fresh produce section, rather than grocery, where they knew it would sell better.
A chance meeting with distributor Hugh Cowan in a Sydney food store resulted in him becoming the dedicated distributor for Annies in Australia. He worked closely with Annies through a lengthy and arduous product trial with Woolworths supermarkets in New South Wales. This included switching from a fruit roll to a fruit bar which could be machine produced more efficiently and professionally than the original, hand rolled product.
Introducing a new look product resulted in some loss of customer recognition and there were plenty of challenges, including delays, product rejections and dealing with the hierarchies of a large chain like Woolworths.
Annies has set up a fully owned subsidiary – Annies’ Australia Propriety Limited – to manage its business in Australia. It has also hired an Australian Sales Manager who looks after relationships on the ground and has input into the company’s Australian growth strategy. This arrangement reflects the need for a company to look and feel Australian if it is to be successful.
Administration and business planning, however, is handled in New Zealand. Annies warehouses its products in a purpose built facility owned by another New Zealand company. It is a logical partnership because the companies have a shared Kiwi background and both are growing their businesses in Australia.
After nearly 25 years of Annies product being available in New Zealand, the brand is well established but in Australia it is virtually unknown. Annies’ Australian distributor regularly takes part in trade shows to showcase the product. The company has a philosophy of very practical marketing. Rather than buying magazine ads, its focus is on getting people to try the product and telling them where they can buy it.
Growth in Australian brings changes to the New Zealand operation
Annies has had to increase production, up-skill staff and introduce new systems and quality control procedures to meet regulations and demands of its Australian customers. That has required a significant change of culture for a company that started in a garage, has long serving staff and a tradition of being production rather than market led.
It has also brought about a change in mindset for Ann Giles, who is now Managing Director. After years of working at the coal face, she is learning to step back, delegate responsibility, and trust staff to carry out tasks she would previously have done herself. Now, when hiring staff, Ann looks for people who are like-minded but also have skills and expertise the company needs to achieve its goals.
One of the biggest difficulties Annies faced has been finding the right people to represent the product until sales grew to a point where they could hire their own staff.
Another has been lack of resources to grow the market. The company did things sequentially, rather than simultaneously, and grew organically, rather than having a focused business strategy, until Board Chair Bill Wallace came on board. On the positive side, that meant the company thought carefully about every dollar it spent in Australia and made sure its activities there were delivering results. It also meant it has had time to put a solid business structure in place.
Annies learnt a number of lessons from investing in Australia:
Annies is poised for significant growth in the Australian market, which already accounts for around one third of its Australasian revenue. It has taken a cautious but persistent approach which is paying off, a decade down the track. Sales growth in Australia was a major factor in the company investing in its $1 million factory in Blenheim.
To be successful in Australia, a New Zealand business needs to be able to provide robust answers to the following questions. In Annies’ case:
Does the business know what success looks like?
Annies was confident from the outset that Australian consumers would buy its product. It knew how to differentiate and market its offering once it had found the right supply chain.
Does the business have the time and the money to break into a new market?
Annies had limited resources to support its entry into the Australian market. As a result, getting established there has been a long, slow process involving a lot of time and hard work by the owners. They have also had to learn to hire staff who know more than they do and delegate responsibility.
Does the business understand the Australian market?
Annies identified a market opportunity before entry. However finding the right distributor and then meeting customer demands proved more complex and difficult than expected.
Does the business understand how the product will be differentiated in the Australian market?
Annies understood the unique appeal of its product and knew customers would buy it, providing it was positioned alongside fresh fruit and vegetables rather than as a grocery item.
Does the business have a clear path to market?
In the early days, Annies did not have a clear path to market, but this has changed since the company separated management and governance and adopted a more strategic approach. It now has goals, plans ahead and sets realistic targets.
Annies will focus on further growth in the Australian market, with sales expected to increase as a result of appointing a Sydney-based Sales Manager. It is also growing its business in the United States. Annie’s goal for the Australian market is to be the predominant supplier of fruit bars.
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