Michelle HammondFollow on twitter www.startupsmart.com.au
Australian Fresh Leaf Herbs
Vydra and Pham are the founders of Australian Fresh Leaf Herbs, established in 2008 with the aim of modernising the farming industry, namely the highly fragmented fresh herb market.
With three sites across Queensland and Victoria, the business now delivers to some 400 retailers and 1,000 cafés and restaurants. Vydra, a former sales executive, talks to StartupSmart about finding his way in farming.
What prompted you to start the business?
I saw an opportunity in a highly fragmented market where I would apply my business skills, and also try new ideas and make mistakes.
When I first made the transition, I was like a duck out of water. I was used to the weekly pay cheque, everything like that.
It was a scary process and it was high pressure but I find that in a high pressure situation, you can really generate learning and growth, and create something completely different.
How did William come on board?
I was in procurement and saw a gap with a lot of retailers not getting their herbs, so I found a few growers.
William was one of them and I started delivering to him in a wholesale capacity, and started doing research into the actual production of herbs.
I sat down with William one day and I said, why don’t we just join forces? We’ll create the company together.
We were very aligned in the way we operated in the business, and we were very lucky because he picked up the operations side and I picked up the sales, corporate and marketing side.
How did you fund the business?
The start-up costs we funded ourselves. It was on a sliding scale of probably $800,000-$900,000, and probably $2.2 million in organic funding.
How did you build awareness of your business?
We’re really just starting to touch the consumers now. We were really focused on the entire supply chain, so we focused on the core national markets within Melbourne, Sydney and Brisbane.
We started going in there with a different approach to everyone else. The original market mentality was to send your stock in as a grower and you’ll get what you want for it.
I thought, what if we approach it in a consistent manner where we look at all the crops and we’ll supply it on an annual basis, very stably, and support the supply chain?
Then we took it one step further and we actually went to the retailer and reversed the model and said, the retailer orders directly off us and we’ll assign them a market agent so we’re actually owning that end supply chain customer and we’re really making sure that they’re getting the stock that they want.
That’s how we started building that retail awareness – through that change in the market – and it took us two years because everyone thought, who are these guys?
It’s an extremely traditional industry; it’s all generational so people have been doing this for 100 years but it’s time to change.
Farming in general is so fragmented. The biggest problem we face is the farmers disappearing because no one else is taking up farming. It’s a good position for us because we just keep growing – we’re selling the demand.
What’s the biggest risk you face?
The biggest risk we face in farming is the lack of succession planning and the demise of the farmer. Also, corporatisation hasn’t kicked in successfully in the industry.
It’s a generational business, so there hasn’t been that much need for innovation at this stage, but I also see that as an opportunity. We’re positioning ourselves to consolidate the herb and also the salad industry.
The biggest risk for us is understanding how the market’s moving because we have to make major capital investments.
If the market moves on us too aggressively, we can sort of be misaligned with the market development. When we’re launching new products, making sure the research is done there [is important].
The other thing is labour – the labour fluctuates so much. We have to be very innovative about our staff engagement programs.
We have a lot of students that come on board through the summertime because we’re very seasonal, depending on where we are. Staff is a major challenge and risk.
How many staff do you have?
We have three national sites – Clyde in Victoria, Bundaberg in Queensland, and Mareeba in Queensland. There are currently 60 fulltime and casual employees across these locations, but it fluctuates from 30 to over 70.
How long did it take to build up that workforce?
It’s an ongoing thing. Initially, Will and I aggressively had to recruit; we used contractors.
You don’t get to 60 staff straight away. As we watch the working hours that people are putting in, we just keep redoing the organisational structure and just keep redoing the staff pool.
About a year ago, we started taking some higher level management on board, which has freed us up a bit more to actually grow the business.
What are your revenue projections for 2011/12?
This year, I think we’re rounding off $4 million. Next year, I’d love to be rounding off $7 million or $8 million, but I’m being conservative and say we’ll probably round off $6 million.
You designed and developed an IT system, Freshweb. What was that process like?
I’ve always had a business process background so for me, I had to do all the mapping out of how all the processes would work and then work out the user impact; the user experience.
I then had to translate the user experience I’m trying to deliver, make sure it’s efficient so it actually works and then work with key programmers to actually deliver that, and make sure it works from a database perspective.
I designed Freshweb to effectively eliminate issues with the management and delivery of raw, highly perishable products that are affected by seasonal trends and the supply chain.
Freshweb supports the supply chain and key stakeholders including growers, distributors, agents, distribution centres and retailers. Retailers have the ability to place an order online or via fax, the order is then allocated to a distributor and dispatched accordingly.
That was the biggest challenge and my biggest learning curve in the whole process. I knew what I wanted to achieve but it’s a matter of putting the mechanisms in place and making sure it’s cost effective and it gets delivered on budget because these things can blow out.
Programmers are expensive and if you don’t think to do it first and map it out, you’ll triple your investment.