John Newland – Leopard Brewery & Farmlands
Jim Newbigin: 8th April 2018  at the Hastings Public Library. This evening we have John Newland. John Newland used to be an accountant for Leopard Brewery just after Newbigin’s had sold, and he was there for thirteen or fourteen years and then he became Manager of Farmlands New Zealand Limited with the Head Office at Stortford Lodge so I think it will be a pretty interesting talk tonight.
[General background noise]
Joyce Barry: We’re looking forward to John on his business history in Hawke’s Bay. A Taranaki boy; grew up in Hawera; Commerce Degree from Victoria; went on to qualify as a Chartered accountant. The rest of the story is over to him … thank you, John. [Applause]
Thank you, Joyce, and thank you for the warm welcome. Yes, tonight as a little bit of history in our city – we go back to 1973 when I arrived in Hawke’s Bay. The brewery here – at that stage Leopard Brewery – was a national business, one of a range of national businesses operating in Hastings. The brewery was ninety years old at the time. It had been established by George Ellis, one of the earliest mayors of the city, and he ultimately sold it to Edward Newbigin and it was operated by the Newbigin family for sixty years. And many of you will have heard Jim Newbigin speaking of that period last time you were here, last year. When I joined in ’73 there were eighty staff based here in Hastings, and it was fifty-one percent owned by Malayan Breweries and forty-nine percent by Lion. There were two Lion directors on the Leopard Board, but other than that it operated autonomously as a national business.
There were three unique factors to the brewery here. One was the water, the quality of the water that was used in the brewing process. Ironic, isn’t it? [Chuckles] But the artesian water from the aquifer was considered some of the best water for the manufacturing of beer in its time. And we used to joke about the difference between that and the water from the Mangatainoka River that was assuming to make DB.
The second factor that was unique was the yeast, the yeast that was used in the manufacturing brewing process came from Holland, from Heineken. So every six weeks about two cubic feet would arrive in a … like a chilly bin … at Napier airport having been air-freighted out from Holland, and that would be utilised at the brewery. As many of you would recognise, yeast is a living organism and it multiplies, so that yeast would be used for a period of six weeks and it would just keep multiplying. At the end of that six week period there was sufficient left for a bulk tanker to leave the premises and take that to Kraft Foods where it was used to make marmite.
The third factor that was unique was that the process used at Leopard was batch fermentation, whereby five thousand litre … big copper ‘kettles’ as they were called … were used to make each batch, which gave greater ability for quality control which was always considered paramount. That is different from continuous fermentation which was more commonly used by most breweries. And simplistically, that’s a little bit more of a mass-produced process whereby ingredients basically go in one end and the beer comes out the other. So those products … those processes … were quite different.
From the brewery here in Hastings, bulk beer was distributed throughout the North Island. Quart bottles were produced and packaged in the ABC wooden crates that many of you would remember. Pint bottles were also produced, predominantly for sale through bars. Lagers were the speciality, and that related particularly to the use of the Heineken yeast. But there was Leopard Export produced, and Leopard Deluxe which is the top of the range. Leopard Continental was a brew that was relatively unique to Leopard in that it was a lower strength lager, but it was sold in bulk as well as in packaged forms, and that was one of the more popular products produced by the brewery. But like every brewery, we were dependent on the sale of bulk brown beer to give us the volume to make the operation economically viable.
At that time George Chamberlain was the General Manager of the brewery; Geoff Palmer was Marketing Manager; Buster Alexander was Production Manager and Jim Davidson was the Chief Engineer.
There were a number of firsts at the brewery here in Hastings – Leopard was the first brewery in New Zealand to can beer. Some of you might remember the old cans of beer. The original cans of course didn’t have rip-tops. They were packed in cartons of two dozen and in each carton there would be a little metal bottle opener one end, can piercer on the other. So you would pierce one small hole to let the gas in or out and the other hole to drink out of. So it was some time before the rip-tops were produced. Once the rip-top cans became more popular, the graphics changed over time and the production of one dozen shrink-wraps became popular, particularly for sale through bottle stores. So that’s where a dozen cans were packed on a plastic tray, shrink-wrapped in plastic. And those plastic trays were manufactured at Plix Products here – another iconic Hastings business.
Exports were important to Leopard Brewery; in particular containers of Leopard Deluxe, which was a green bottle with a conical top and a gold label. They were exported to the United States predominantly, by the container, and they were exporting a carton that would hold four six-packs. And the little six-packs were the main forms of sale in the US, where they were sold both in bars but also in supermarkets, and of course, this is many years before alcohol was available through supermarkets. But the sale of imported beers was [a] very significant part of the business in bars. Many bars operating in those days did not have bulk beer; they just sold packaged beer, and it was not unusual for a bar to advertise in California that they had fifty imported beers in stock. So our objective was to have our Leopard Deluxe in as many of their bars as possible.
The Leopard Strong can was another product some of you may remember. It was strong in brand – it was the same strength as a standard beer – but that was a particularly good seller in the Pacific Islands where the product beer was purchased by the Government Stores Board for distribution under their controls. So it was a big seller in that part of the export market.
The Deluxe product in cans were [was] also exported to Australia – this is the largest 460ml can – and features of Lake Matheson on the label, and that became an iconic part of the Leopard branding in times subsequent to that.
The first canned beer sent to Antarctica was from Leopard here in Hastings; The first beer sent to Iraq in cans went from Leopard Brewery in Hastings … a consignment of fifty thousand cartons. And Leopard was the first brewery to win an export award, and that was in 1972.
And apart from the Leopard products, we also manufactured Whitbread Stout that was a significant product that was manufactured under licence from Whitbread Brewery in London, and I was fortunate enough to visit that brewery on one of my study tours. And as you will recall, we had an involvement with the Whitbread Round the World Yacht Race that ultimately came into New Zealand. So for that we actually produced a Whitbread Lager as well.
So in the seventies and eighties, beer was sold predominantly through hotels, taverns and bottle stores. It was at Leopard Brewery that the concept of the one hundred-gallon mini-tanker was developed and initially utilised.
Leopard Brewery owned hotels and taverns such as the Leopard Inn and Ahuriri Tavern in Napier; the Mayfair Hotel in Hastings – you know, the Lager Bar in the Mayfair Hotel was the scene of many significant commercial deals, and even more romances. [Laughter] There was also the Royal Oak Hotel in Wellington; Freeman’s Bay Tavern in Auckland; and the Majestic Hotel in Palmerston North. And all these places were dependent on the manufacture from the brewery in this city. Some hotels and taverns were operated as subsidiary companies and others were leased. Many, such as the Stortford Lodge in Hastings and the Victoria Hotel in Hastings, were privately owned and operated.
Initially, my role at the brewery was in accounting for the chain of hotels and this expanded into a responsibility for managing the chain. Chartered clubs were an important part of the scene and our distribution in those days, and this business was supported by sponsorship, as were sales to Sports Clubs associated with rugby, golf, bowls, squash and sailing. And the Hawke’s Bay Racing Centre was an important part of the distribution locally. While production was based here in Hastings, there was a sales team distributed around the country. It operated from here apart from a team of four that were based in an Auckland office.
I was always interested in what else was happening in the business and would put my hand up for projects and assignments to broaden my understanding and my learnings. Eventually I applied for a role as Sales Manager. This caused some consternation. I was told that an accountant couldn’t be a Sales Manager – it just didn’t make sense. I told the management at the time that I was an accountant by qualification but my aspirations were far beyond that. I was appointed to the role having not really disclosed my true motivation. The thing was that I was getting close to buying my first house, and I wanted to sell my car so I had a deposit. So I needed a company car, [chuckles] and it was very obvious to me that accountants didn’t get company cars – that was a privilege for those in the sales team. And it worked. [Chuckles]
I continued to poke my nose into other parts of the business. I worked very closely with Geoff Palmer in regard to marketing. I did a stint in California promoting our Deluxe Lager [background phone call] in Los Angeles and San Francisco.
Eventually Malayan Brewery sold their fifty-one percent, and the brewery became a wholly owned subsidiary of Lion. George Chamberlain retired and Geoff Palmer took an export marketing role at Growers’ Canneries, another iconic Hastings business. I stayed, and recognised that someone was needed to embrace the inevitable changes and help facilitate them. A new Manager was appointed by Lion. The changes were extensive and we started producing Lion products such as Steinlager. The Leopard name was replaced by Hastings Brewery, but after a relatively short time that was changed again to Hawke’s Bay Brewery.
At this stage, we changed from being a national business to one of seven regional breweries operated by Lion. The impact of this was huge. Part way through that process I was appointed Manager here in Hastings. Some changes were good – tinplate cans were replaced by aluminium cans, but then all can production was centralised at Auckland Brewery. Beer production was being rationalised to achieve economies of scale. I fought to have Hastings Brewery retained, as did others, because of its flexibility, its versatility, the great water, and of course there were eighty families in the city dependent on those roles in the brewery.
In the meantime, Palmerston North and Wellington Breweries were closed. While this felt like success, it was obvious to me that our brewery was unlikely to remain operational within eight to ten years. I was offered a management role in the [cough] Auckland or Christchurch brewery. By this time I was married with three children, and Carol and I had decided that this is where we wanted to live and this is where we wanted to bring up our children. So after 15 years at the brewery I set my sights on finding another senior role in Hawke’s Bay, and I was thirty-eight. This was a challenging time as companies such as Heinz Wattie’s and others were relocating their head offices away from Hawke’s Bay. After about a year, I was appointed General Manager at Farmlands and another chapter of my life began. It was nine years later the brewery ultimately closed.
Now Farmlands had been established in 1962 by a group of six farmers who met after a Federated Farmers meeting. They were motivated by the desire to establish a buying group. In those days most farmers were financed by the stock and station companies, and it was a condition of the loans provided to them that they buy their farm requisites through the merchandise stores that they were operating. That meant they had a forced market and could charge what they liked, and farmers resented this, so there was a movement, not just here but in different places around the country, for farmers to do their own thing. So these guys got together and developed membership, and that was growing quite well. They established a secretariat working out of the Federated Farmers’ office and looked at the opportunity for doing the bulk purchasing.
Well it started off with bulk tea. The first sales that they had, they had the five pound boxes of tea – some of you’ll remember, they used to have a sliding top? So the first sales they ever made to their members were the five pound boxes of tea, and the members got a free tea towel. [Chuckles] That was the deal that started off what was subsequently to become a significant business.
Before long, a store was established in an old house in Charles Street, but the East Coast Trading Society was challenged to get supply because the stock and station companies put pressure on the suppliers not to provide the Trading Society with merchandise. In fact they would threaten to remove stock from their stores if they supplied it to East Coast Trading Society. But never mind – they did well and managed to progress, and the business in the end was put into larger premises in Victoria Street – just around the corner from the brewery, ironically. And that’s the building that is now operated as the Elim Church.
A second store was opened in Dannevirke and a third one in Waipukurau. Similar groups of farmers in other areas were being formed with the same objective, as I mentioned, so the East Coast Trading Society met with those groups and assisted them, and ultimately had the stores operating in Masterton, Gisborne and Fielding. It then took over stores that were being operated by dairy companies in the Bay of Plenty, which gave them branches in Opotiki, Rotorua and Te Puke. The name was changed from East Coast Trading Society to Farmlands, to remove that geographical reference. So by the time I joined the company in 1988 it was a chain of sixteen stores and it operated an agency business with FarmaCard, and that enabled members to make purchases through other retailers or providers of service. And incidentally, one of those businesses that’s had been a FarmaCard agency from day one is Thomson’s Suits, who presented their story here last month. The business at that stage was significant. It had annual sales of $62 million; it had seven thousand members, and it had sixteen stores, and that had been achieved in twenty-five years.
Unfortunately, the business was not well managed. The year I joined it had lost half a million dollars … $500,000. The year prior to that it had lost $160,000 – it was on a slippery slope. Members that year had been asked to put in an additional $50 capital each to finance the purchase of a computer system. The General Manager of two years had jumped ship, so I took on quite a challenge.
But the business needed to be repositioned, so rather than operating like a secret society down back streets it needed to relocate into more prime positions, strengthen its branding and show some commercial confidence. While the Farmlands’ position was ‘lowest cost supplier’, we had to maintain that position and yet make the business profitable. We had to improve our purchasing terms; we had to increase sales; and we had to maintain a low cost structure. It was in this pursuit that I was assisted greatly by a tremendous group who shared my vision. The Merchandise Manager was Dennis King, a man who had worked previously for Williams and Kettle; the Operations Manager was Graham Clinton, who had been in the company for some time, and he had managed the second branch in Dannevirke and then moved into a head office role as the business had expanded into the Bay of Plenty. The experience, attitude and ability of these two men was a huge resource for the business. To complement these men we had been joined by Craig Waterhouse as Financial Controller, and Steve McCarty as Marketing Manager. Both Craig and Steve had worked for me at the brewery, and I knew their potential to help us drive this business forward. We did not over-analyse things – we tackled the obvious. Now Dennis and Graham would travel to Hamilton and Auckland to negotiate with suppliers three times a year.
We were on the back foot and we were being patronised by these businesses. I had my designation changed from General Manager to Chief Executive and set off to meet my counterparts in these supply companies. I told them of my vision and they needed to change their approach to our company if they wanted to be part of our success. I told them that I expected us to buy on the same terms as the stock and station companies and I wanted a one percent rebate at the year end if we managed to double the sale of their purchases through the course of the year. I gave an assurance that I would not use the improved purchasing terms to reduce prices. My objective after all was profitability. In fact, I believed that we could lift prices gently and still maintain our position as all the opposition retail businesses were also unprofitable, and they would increase their prices to match ours. We were the price settlers, and we wanted to sell leading brands. And I made it very clear that if we were not supplied with these we’d have no hesitation in importing generic products, but this was not our preference. My time in the brewery had taught me how important brands are, and I told them that Dennis and Graham were not travelling to see them any more. If they wanted to share in our growth, they needed to have their sales managers in our Hastings office every three months with deals and promotions. And I wanted these sales managers to call and see me in my office the first time they visited us in Hastings to introduce themselves, because would be watching. I never threatened anyone. [Chuckles] My conversations always concluded with a smile and a handshake, but my point was made very clearly.
My plan actually was to take the focus off price, and to put it onto an improved stock range and a standard of service provided by the personnel within our stores. We were going to have the most informed, the best trained and most customer-focused staff of any business in the sector. We maintained our low cost business model, and still did not have staff driving utes onto farms to get orders or making deliveries, and usually at different times.
The lift in business enabled us to relocate into more suitable premises. Most of you will recognise that the Farmlands head office and Hastings branch relocated to Stortford Lodge, adjacent to the sale yards. That building was opened by the Honourable John Falloon, Minister of Agriculture. We were being noticed, and our suppliers were celebrating with us. In five years, annual sales had increased to $100 million and membership had grown to 9000. The growth in Farmlands was financed by funds generated within the business, and new members adding their capital. There was no long-term debt – we just operated on an overdraft, and in fact we used to have funds invested between the 20th of the month when our members paid us, and the 30th of the month when we paid our suppliers. And in most months we could earn more interest over those seven days than what we paid for the money that we borrowed on overdraft in the first twenty days of the month. It was great fun, I can tell you. [Chuckles]
Each year we planned to open a new branch, either by buying an existing business or by leasing premises in a rural town, painting it, stocking it and putting great staff into it. We would also relocate an existing business in[to] more suitable premises. We did not own these premises – we had them built for us to a standard design and we leased them. In another five years we generated sufficient profit to pay $1million out to shareholders at the end of the year, based on their purchases. Membership had increased to 12,000.
So our success was the result of focus on efficiency by an executive team and the way our staff responded to the challenges that we put in front of them. They always knew what was expected, and that’s the key issue – and I’ll tell you one of the stories. One year we had submitted a budget to the Board of Directors that we were going to increase sales to $92 million. But you know, I fancied running a company that had revenue of $100 million and that was what was motivating me. So after the budget had been accepted, I focused again on my goal of $100 million and tried to work out how we’d be able to do that. I thought, ‘if I just talk the big number to my executive team or people in the company, they just will not buy into it’. So I did some analysis and I worked out how many transactions there were through our stores that year, and the value of those transactions, and then I did the maths to work out how much more value would each transaction need to have for us to reach $100 million. The answer was $5. So for every sale we made we needed to sell an additional $5. So then I thought, ‘well, our membership is diverse. How do we make that happen?’ So I went and wandered around the Hastings store, and in those days we used to have the big chest freezers with a bunch of newspaper on the top, and we used to sell frozen chickens … ‘cause frozen chickens were a relative luxury item at that time. And it just so happens that even at that stage a frozen chicken was around $5. So I decided if we could sell someone a chicken every time they made a transaction [chuckles], we had an opportunity to get our $100 million. Now that may sound far-fetched, but I explained it to the executive team first; and I explained it to all our store managers at a national conference; and then I produced a video that they could show all their staff, as I explained it to every person in the country, so that we were all then charged with finding an additional $5 for every transaction. But I can tell you, in that first three months we sold thousands and thousands of chickens. [Chuckles] Our supplier rang me to ask, you know, what … you know, they thought we were doing some black market deal somewhere, because they couldn’t believe the chickens that we were selling. But it wasn’t the chicken that was important; it was the confidence that we gave the staff to actually ask our customers if they would like something else. Because many did not think that would be acceptable … they didn’t actually see it as being polite. That wasn’t my concern – I just wanted the $5. [Chuckles] But it became such an important part of the business that when documentation would come into our office, which in those days was through courier bags, not electronically – and things like time sheets and everything would come back to the head office here in Hastings – and everything would have little stamps of chickens on them, ‘cause the chicken became a symbol of the energy within the business. And it wasn’t unusual for me to receive things like this [indicates photo] in a courier pack, [laughter] because I would receive from some of the stores … I had a tie from one store with chickens on it. It was just that everybody was so motivated by their ability to grow the business and to have some fun with the chickens. But the thing was, that year we actually increased sales by $12 million, and we took our total revenue to $104 million. If I had said at the beginning that that was possible, no-one would have believed me, but by breaking it down to that $5 opportunity, they bought it. They made it work – I didn’t make it work. They made it work.
And I’ve got here – you can have a look later – the press ad that we put in the paper, just to show that we had ‘104 not out.’ That was our turnover in that particular year. And we used to buy space in the Herald Tribune to do things like this because there was no point in just issuing a media release with good news, because nobody was particularly interested. But by doing this and paying for it, we could determine whereabouts it was positioned in the paper, and we could get exactly what message that we wanted. And one of the things that people don’t realise is that seeing something like that in the paper is so important for your staff; it’s so important to your customers; it’s also so important for your suppliers, because as you may recall, I mentioned that we were going to create a success and we wanted a whole lot of people to be part of that. So that was a very important part of the exercise – the way that objectives are communicated, and then the way that the results of those objectives being achieved are communicated and celebrated.
So, while the business had been established on the East Coast where sheep and beef farming are predominant along with horticulture, I could see the value in having a stronger presence in the dairy sector because that was a more profitable farming operation by this time. And the dairy farms also operated in areas that were not so drought-prone, and therefore, by having a high proportion of our sales through the dairy sector, we would reduce our risk. As Elders Pastoral from Australia was winding down its New Zealand operation, we negotiated to blend their retail businesses in Gisborne, Hastings, Masterton and Fielding into Farmlands, and we employed their staff. We took over their stores in Hamilton, Te Awamutu and Taumarunui. Another move in that direction was opening a branch in Stratford, Taranaki, and a highlight for me came two years later when we opened in Hawera, my home town. I had done a full circuit.
So you’ll have got the drift by now. In my eighteen years as CEO at Farmlands, we took revenue from $62 million to $350 million. The chain of stores expanded from sixteen to twenty-eight. Co-operative membership grew from seven thousand to twenty-two thousand – and still there was no long-term debt … still operated that $350 million business on an overdraft. After eighteen years in this role I left Farmlands in good shape, to establish my own business. I was blessed to work with some wonderful people, and proud of what we were able to achieve together. It’s been my privilege to work with these two great Hastings businesses. Thank you for listening to the story. [Applause]
Joyce: That was marvellous, John. Questions please.
Question: The initial farmers were from Eskdale – is that right?
John: Oh, they weren’t all from Eskdale, but that’s where they met – they actually met in Eskdale Hall, you’re quite right. But they were from around the area. But that’s where they’d had a Federated Farmers’ AGM in the hall at Eskdale, so that’s where the first meeting was held. And those initial meetings – they were really secretive affairs, you know, because they were all afraid of being found out by the stock and station companies, so it was … it was an amazing culture really! But we fixed that. [Chuckle]
Ewan McGregor: Yes, John, great stories … appreciated them. You talked about in the early days of Farmlands how the stock and station agencies were putting pressure on suppliers, but they were also putting pressure on their clients, too. Many a farmer joined under stealth. Farmers didn’t want [the] stock and station manager to know about it, and I think he might’ve been sneaking into the back of the store when he was going to make a purchase. [Chuckles]
John: Oh – that’s exactly what happened, and that was actually part of the reason why the businesses were located down side streets. [Chuckles] And many of them had … ‘specially in some of the other towns, you know, had back entrances – that you had to be able to get a trailer into – but some farmers didn’t want to be seen driving across the front of a Farmlands store. You’re dead right. It was incredible really – it was quite fascinating.
Comment: I recall the Charles Street property, and seeing a gentleman come out of that who I won’t name, but he could’ve bought the business. But he had an armful of toilet paper – he must’ve got a good … [Laughter]
John: Yes, well you know what they say – shit happens. [Laughter] And you know, a lot of it was bulk purchasing in those early days, and that’s what it was about. That’s really how the psyche was fixed, too, because when members could realise that there was opportunities to be had by buying things in bulk, it worked. And that’s part of what developed – the understanding, you know. And they always sold toilet paper. In fact, toilet paper, tissues and paper towels, you know, it was all the trees, that we used to talk about. That was some of the biggest moving items through a store, was all those things made of paper.
Question: Did you get lots of export incentives and things … tax savings when you were in the Leopard Brewery, who were exporting?
John: Oh yes, there were in those days – there were some incentives, and yes, some of the expenses you know, were subsidised through those. I mentioned a trip I did to California – that was funded by export incentives.
Question: Yes, John – you only in the last two minutes mentioned the fact that it was a co-operative. Having been involved with other co-operatives, how much importance did you put upon that structure?
John: Oh, that was phenomenally important. Sorry, I should have clarified that area earlier on. Yes, but the fact that the business was owned by the customers was huge. And that was the driver for initiating it – it was people getting their purchasing power together. Fundamentally, I have total confidence in the co-operative concept. And you organise your business and operate it according to the funds that you have available. And then you have to develop a loyalty from those co-operative members. So I think that being a co-operative was critical and that really motivated me. I mean, I ran it as though I owned the business, but what I loved was that it was actually owned by the customers. And it was wonderful.
Question: And the directors were never tempted to get outside directors in?
John: Yes – yes. When I was appointed there was a man called John Parker, who was the Deputy Chief Executive of the Dairy Board. He was an exterior director and in fact I give him the credit for … probably for engaging me, because some of the questions that the farming directors asked me at the last interview – you know, sort of … well, you know, “You’ve been in a brewery for fifteen years – what do you know about things that are needed on farms? And I said, “Well no, you’re going to employ a general manager here. I would hope that some of the people that worked for me know about those things. But I’ve actually got to know about how to run a business.” John was great. But no, we always had an external director, and that was good. And sometimes I found that very helpful.
Question: Yes, there’s just two items … one about the cans of lo-cal beer – didn’t go anywhere etcetera, and we had to [??] them back on the coastal railway from Nelson to give them a refund.
John: Oh. A lot of it was sold, John and actually lo-cal was in bottles, it was never canned. And it was just in pint bottles, but there was a lot of it, but it wasn’t a great-tasting product. You know, I was a big man and every so often I’d decide ‘well, you know, I have to drink the lo-cal beer’, but to be honest you had to be pretty thirsty, [chuckles] because most of the flavour had been brewed out of it. But there was a demand for it.
Question: The other story I can remember is Frankie Steiner’s truck leaving the brewery, [chuckles] going up St Aubyn Street when it was only two lanes wide, turning into King Street, coming up to top the load off with the remains of our vegetables etcetera, and of course not securing the back gate. And of course the [chuckles] local boys in blue, they were black and white once in those days – came racing up and said “Who’s dropped this unsecure load?”
John: That was a spent grain that was a by-product of the brewing process. Thank you for your questions. I’ve enjoyed sharing some of these stories with you this evening. I appreciate you coming along to hear about these great businesses. [Applause]
Cynthia Bowers: John, thank you for a fantastic presentation that was absolutely inspirational. You’ve proved to me that indeed, accountants can do anything. [Chuckles] But look, thank you for the time you’ve taken, and thanks for sharing your story with us. [Applause]
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BusinessLeopard Brewery; Farmlands
Landmarks Talk 18/4/2019
- John Newland