Bickford's Australia

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“None of us are as good as all of us”

 

Bickford's has a long history in South Australia. Initially established as an apothecary in 1839, the company's legacy of producing premium cordials and aerated drinks began in 1874. Today, Bickford's employs around 120 employees in its state of the art facility in Salisbury in Northern Adelaide. Bickford's produces a wide range of premium cordials, syrups, sodas, fruit juices, purified and flavoured waters.

What makes Bickford's a Smart Workplace is that rather than competing on low cost in the mass produced 'economy drinks' market, it competes on a wide variety of high quality, premium brands. Moreover, to support this strategy the company invests heavily in product development, high tech production line automation and people management practices associated with High Performance Work Systems (HPWS). Mr Angelo Kotses, Managing Director, Bickford's, illustrated this point:

“Yes we have slightly higher operating costs, but high quality products, automated production technologies and a multi-skilled and flexible workforce allow us to target the premium segments, and where there are premium segments there are premium margins... we don't need to compete in economy markets”.

Mr Angelo Kotses – Managing Director, Bickford's

Mr Angelo Kotses, Managing Director, Bickford’s, accepted that operating in Australia, an advanced economy with a high standard of living, inevitably results in higher manufacturing costs. Furthermore, he emphasised that the company's major global competitors possess additional cost advantages as a result of their huge purchasing power and lower cost of ingredients and technologies. He stated that:

We know we can’t compete on cost, and we accept that, it’s just a fact of life and so we need to deal with it”.

At the time of writing (2014) Bickford’s produced 15 brands as a result of this process of diversification. In just one of these brands, traditional cordial, the company had 15 different flavours including Peach Tea Flavour and Ginger Beer Flavour. Again the focus is on variety and quality. Bickford’s has also extended its production of juices, sodas, flavoured waters and syrups. At the time of writing, the company had around 23 per cent market share of the premium juices market with flavours including prune, pomegranate and coconut.

Mr Angelo Kotses, Managing Director, Bickford’s, fervently believed that innovation is essential to the success of Bickford’s in terms of both new product development and marketing and market research. Angelo claimed that, in general, “first to market always generates 50 to 60% of the market share” which is why Bickford’s emphasises product development as opposed to replicating existing products on the market. He provided the example of the company's introduction of pomegranate juice - Bickford’s was the first to market and as a result had around 90% of the market share.

Angelo emphasised that knowing what consumers will and will not demand requires a different kind of innovation; first innovative market research and second innovative marketing of the product to the public. Chris, the Group Marketing Manager, gave the example of Bickford’s ‘red-skin’ fruit juices, which are well known for containing high levels of anti-oxidants. Market research highlighted a growing consumer desire for healthier food and drinks, and so Bickford’s embarked upon a marketing campaign emphasising the health benefits of their red-skin fruit juices (including pomegranate), not only as a breakfast drink but also as a ‘cool, late night mixer’ for spirits. At the time of writing Bickford’s was experiencing a 40% per year increase in these products.

Research and development are ingrained in our business, we believe that the only constant in our businesses is change!

Mr Angelo Kotses – Managing Director, Bickford’s

Bickford’s strongly advocates vertical integration, something that Angelo described as “innovation in process and supply chain”. Vertical integration involves relying less upon external suppliers by internalising as much of the production process as possible. Mr George Kotses, Operations Manager, Bickford's, described the benefits this generates for Bickford’s:

Vertical integration for us is extremely important. It enables us to control the supply chain, it enables us to be very efficient and very responsive, reducing downtime and ultimately allowing greater control over the process of producing the products when they are needed”.

Mr Angelo Kotses highlighted two clear examples of vertical integration and the benefits they created for Bickford’s. First, the company no longer buy its bottles externally; instead it blows (mould), fills, caps and labels its own on the production line. This allows Bickford’s to operate a just-in-time approach, minimising warehouse storage requirements, avoiding bottlenecks in production and operating more efficiently.

Second, Angelo claimed that as yields from fruit farming can be unpredictable Bickford’s cannot over rely on suppliers, particularly when they are international and Bickford’s has little control over them. As such, Bickford’s made the strategic decision to ‘move backwards up the supply chain’ and bought the largest pomegranate farm in Australia. Whereas before Bickford’s was the largest importer of pomegranates into Australia, it is now less reliant on that supply chain, it has greater certainty and control over supply, it employs locally within South Australia, it can ensure the quality of the product and market the final product as Australian, clean and green. Furthermore, as only 20 per cent of a pomegranate is used in the production of a juice, Bickford’s now also owns the remaining 80 per cent which can be used to make syrups giving Bickford’s an additional income stream with little extra cost.

Bickford’s has invested greatly in automating its production process. Mr George Kotses, Operations Manager, Bickford's, claimed that the company has done this without reducing the workforce, rather automation has allowed Bickford’s to expand and grow whilst maintaining the same number of employees. In fact, on any one shift there may only be 35 production workers on site.

Mr Angelo Kotses, the Managing Director of Bickford’s, outlined three main benefits attached to automation; first it increases output lowering the cost of producing each additional unit (marginal cost), for example their main production line fills 400 bottles a minute. Second, production technologies that can be reprogrammed quickly and efficiently to, for example, produce different flavours, different bottle shapes, different packaging or to attach different labels on the same line improves flexibility and is compatible with a business strategy that focuses on producing smaller batches of premium products. Bickford’s also operates a number of different lines and so production is continuous even when a line is being re-programmed.

Finally, automation has reduced costs by enabling better monitoring and controlling inventory and organising ‘backend’ logistics at Bickford’s. This has been achieved by investing in fully automated, unmanned, laser guided vehicles. These laser guided vehicles talk (electronically) to a centralised Warehouse Management System which tells them where to stack finished goods pallets and can even pick up full pallet stock for customers' orders. The introduction of these vehicles has resulted in huge improvements in warehouse efficiency and complete accuracy in stocktaking, something that had not been achieved in the past. Furthermore, the system clearly relays stock information to management on an ongoing basis allowing them to better plan production and respond to fluctuations in product demand. According to the Operations Manager, Mr George Kotses:

Automation gives us flexibility in production and lower production costs. This allows us to compete with much larger companies and acts as a barrier to entry to new companies … it is also good for our personnel as they are up-skilled and feel secure in the long term”.

Overall, production workers stay with Bickford’s for an extremely long time (low labour turnover), 9.25 years on average. This reduces costs associated with recruitment and selection and allows Bickford’s to spread the cost of training over a much longer period. One way that Bickford’s tries to do this is to make employees feel that there is a long term future for them within the company. They do this by creating a sense of job security and by providing the opportunity to develop within the company over time.

The feeling of job security is created by avoiding putting employees off when jobs become redundant by re-training and transferring employees into other areas of the workplace. For example, at the time of writing (2014) Bickford’s was investing in further automating one of their packaging lines to reduce the number of employees required to operate it from five to one. Rather than make four employees redundant, Bickford’s re-trained and transferred them internally. This not only helps to replace natural labour turnover, but also symbolises to the workforce that the company is committed to their job security.

Bickford’s also, both formally and informally, communicates to employees that a career path and opportunities to develop are open to them. Mr Angelo Kotses, Managing Director, Bickford’s, emphasised that employee development is not only beneficial to employees but also to the company as a whole:

A lot of team leaders and managers have come from the shopfloor, we’ll provide you with a career path if you’ve got talent, enthusiasm and the desire to progress within the company … these are the people that will create the greatest benefits for the company”.

Mr Dean Crichton, Chief Financial Officer, Bickford's, claimed that the ‘mindset of employee involvement permeates the whole organisation’ and that ‘125 people having an input’ into how things are done leads to new and creative solutions. Similarly Mr Angelo Kotses, Managing Director, stated that:

We tell our staff that we don’t mind conflict, it’s not a bad thing. Come to us when you disagree with something or you have an idea … once you take the emotion out of conflict, it is just an exchange of ideas, and that can lead to better solutions!

Mr George Kotses, Operations Manager, identified what he believes to be the three main ways in which a culture of involvement has been created at Bickford’s. First, the company operates a flat hierarchical structure making senior management visible and accessible to shopfloor workers. This structure also means that senior management are involved in day-to-day operational decisions as well as higher level strategic decisions. Elevated levels of authority close to the shopfloor means that operational decisions are given a greater priority and dealt with quickly and efficiently. Second, team leaders and managers at all levels make themselves as approachable as possible. They are on first name terms with employees, managers’ offices do not have doors and employees are encouraged to ‘walk right in and make suggestions’.

As well as informal means of communication (as outlined above), Bickford’s has also established clear formal communication structures which allow for the greater involvement of employees. These are used to encourage employees to make suggestions on how to improve their work processes and share ideas and practices between different areas. Communication structures range from daily shopfloor team meetings and team leader toolbox meetings to weekly ‘leadership group’ meetings and wide-scale quarterly operations meetings with the whole workforce.

Bickford’s tries to be as open and transparent as it can and has established a variety of channels for management to communicate with the workforce. Strategic decisions that affect the workforce, product range information, production output by area, quality and waste statistics, and continuous improvement suggestions are all shared with employees. Formal communication structures include shopfloor team meetings and a range of cross-functional forums around efficiency and waste, quality, and health and safety. Moreover, there is an extensive use of a staff notice board to transfer information. Mr George Kotses, Operations Manager, Bickford's, claimed that:

Transparency in decisions and constant communication is key to providing clarity and direction to employees and re-enforcing a culture of inclusion … it’s important that the executive team cascades information down to personnel to provide support and direction ... You must break through any blockages”.

Mr Angelo Kotses, Managing Director, Bickford’s, believed that, along with their brands and technologically advanced automation, the company’s workforce is a source of competitive advantage and to that effect, great effort is spent on recruiting the right people in the first place and subsequently developing their skills. Angelo claimed that they use a range of different recruitment methods depending upon the position they are trying to fill at the time, however he emphasised that there is an equally strong focus on technical skills and how well an individual ‘fits’ with the company culture. As such they try to identify enthusiastic candidates who want to develop within Bickford’s and contribute to the company’s continued success.

Mr Angelo Kotses, Managing Director, highlighted the importance of multi-skilling at Bickford’s:

Multi-skilling is engrained in our culture, it is not negotiable … everyone is trained to operate any machine out there. Demarcation is not even part of our vocabulary. All production workers can operate different machines on different lines at different times which gives us the flexibility to deal efficiently with down-time and fluctuations in demand”.

Flinders University, Australian Industrial Transformation Institute (AITI)