Bisalloy Steel Group (ASX:BIS) CEO Greg Albert: re-engaging Australia and Asian expansion

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CEO of Bisalloy Steel (ASX:BIS), Greg Albert, had his start in mechanical engineering, with extensive international experience that proved valuable to Bisalloy.

“I’ve worked with three very market-leading companies: one American, one Finnish and one Swedish.” Originally working as a heavy equipment design engineer for an American company, he moved on to various metal firms overseas, before partnering with an entrepreneur and starting an Australian-based mining equipment manufacturing company.

After the sale of this enterprise, he was offered several roles by the Finnish company that acquired it, including positions in Australia and Singapore. In total, he spent roughly 10 years working in Asia before coming back to Australia and building a consulting and executive coaching firm of his own. “I did executive coaching with quite a number of iconic companies,” he remarks. He was once again recruited by the Finnish company that he had worked with in the past and asked to run their global operations out of America, and eventually out of China and Finland.

After being offered a position by a Swedish heavy equipment manufacturing company and taking on the role of global president for several years, Albert was eventually recruited by Bisalloy Steel in January 2016 to replace their retiring CEO.

When it comes to being in a leadership position, Albert’s wide experience in global roles where he managed operations in dozens of countries led him to one conclusion: Talent is primary. To be able to run the businesses as efficiently as possible, a leader must seek people who can eventually take his role. He remarks that this is true regardless of the culture one is working in, and in his experience: “Even though the countries were different, and the businesses were different, and the market was different, and the way you service customers may be different, the way you run the business was actually very, very similar.”

According to Albert, his approach is to never “hold on to power,” and to instead nurture and train those under him until they can effectively replace him. “I learned very early on that to get to where I wanted to go—which was to eventually be a global president—I had to make myself redundant in a way.” In addition, he found that no matter which region he worked in, the staff universally needed a sense of purpose and a global perspective that could be adapted to the local mindset. The needs of a company in South Carolina, he explains, are very different from those of a company in India, and so both global and local perspectives are a necessity.

Ultimately, though, “the glue that [holds] everything together [is] always the company’s values, the company’s culture.” The values that transcended all cultures were the higher, ethical ones, and Albert believes in never compromising on these. He also stresses that running a company requires a certain degree of cultural sensitivity, and even humility. “You have to have empathy and you have to have respect,” he says. “I always tried to speak the language as much as I could. I would always try to learn as much as I could.”

Emphasizing the importance to trust, Albert says that he comes from a mindset of assuming that people are interested in genuinely helping the company. “Everybody wants to go to work and do a good job; they don’t want to go to work to do a bad job.” This goodwill and trust is key according to Albert. That, along with being sensitive to the local customs and marketplace, while still being true to the universal values of the company as a whole, was one of the most important lessons that he learned working in his global positions. These insights were partly why he went into executive coaching at one point in his career, as many people saw value in his international leadership experience.

The trust in Australian steel is now being exported internationally by Bisalloy through their joint ventures in Indonesia, Thailand, and China

In spite of all his work around the world, he was eventually attracted back to Australia because he wanted to “re-engage with the Australian industries and key people [in Australia].” He remarks that having the chance to spend time in his native country and “be Australian again” has left him feeling refreshed and reinvigorated. While he says that working in Australia is very different from working abroad, it has been an overall good experience for him, even when having to handle challenges like stalled deals with local unions. “It’s good to be able to communicate and to work with Australians again.”

Indeed, Bisalloy is a very Australian company with a rich history. It has been in business for 37 years and was founded by a South African immigrant. Originally called Bunge Industrial Steels (the BIS in Bisalloy), it was one of the first companies in Australia to work with high-strength steel. They manufacture steel plates and at one time manufactured long products such as pipes and tubes. Eventually, they changed their name to Bisalloy and listed themselves on the ASX. Three major investors own the bulk of this stock, including Anchorage Capital.

Nowadays, Bisalloy is the only Australian company that offers these specialised grades of steel. “There isn’t anybody else in Australia that does what we do now. We’re the only manufacturer.” They are a standalone high-strength steel company, and they work with a “quench and tempered” (Q and T) method of manufacturing, which essentially means that the steel is heated, then quenched with water, and then finally tempered in a furnace to make it change its properties. Unlike integrated operations—where the steel mill and the Q and T plant are coupled together—Bisalloy is not attached to any particular steel mill, so they can choose which supplier they need at a given time.

This flexibility has allowed Bisalloy to remain efficient. “Being a standalone operation, we’re small. We’re not ‘steel mill big.’” Thanks to their small size and extreme specialisation in the niche of high-strength steel, Bisalloy has the luxury of not needing the huge amounts of staff or capital investment that larger companies require. Operations only require roughly 140 full-time employees, 80 of whom reside in Australia.

“We’re totally focused on what we do, we have a small dedicated team, [and] we’re flexible, which means that we can meet with customers, they can say, ‘we’re looking for steel with these properties,’ and we can design a new recipe, and we can test it. We don’t have to go through and ask whether the steel mill can do it, whether we need to go to a big corporate structure to ask for approval, so we’re quite agile.”

Unlike every one if its competitors, Bisalloy processes all of its specialty steel products in Australia, which is attractive to those customers wanting to use Australian made products, “For the big mining companies to buy imported steel—wear-grade steel—to keep their mines running, they would have to order that 12 months minimum in advance from overseas steel mills.” By contrast, Bisalloy has the flexibility to fulfill custom orders and to fulfill them quickly. “We can partner with the customers right here in Australia.”

In spite of their lean operations, Bisalloy makes use of an extensive network of over 100 distributor locations, and their major distributors include OneSteel Metalcentre, BlueScope Distribution, and Southern Steel Group. They also have formed joint ventures overseas: one in Indonesia, one in Thailand, and another in China.

Bisalloy is the only Quench and Temper steel company in the world to have a joint venture with a Chinese steel mill. Much of the joint venture consisted of Bisalloy’s allowing Shandong Steel to manufacture under the Bisalloy brand name, and to employ other kinds of intellectual property. Bisalloy also trained the employees on the process and the chemistry involved in their techniques. Shandong Steel, for their part, provided the labor, the steel mill, and the Q and T plant.

The joint venture with Shandong allowed Bisalloy to expand their market to this region, as well as use China as a springboard for bringing their product to other nations in Asia. This was a forward-thinking strategy in light of the number of Australian OEMs who have moved their operations to Southeast Asia. Unlike the Chinese partnership, the Indonesian and Thai joint ventures are strictly sales and distribution as the market grows in these areas. “Bisalloy has a very, very good reputation all the way up through Asia and all the way through China for a number of reasons,” Albert explains. “One is [that] we’ve been around for a long time. The other is that our JVs in those regions have been quite successful at penetrating the marketplace and getting the brand out there.”

Including these joint ventures, the company turnover is around 60 million dollars per year.

There are a number of reasons why Bisalloy’s Quench and Temper steel processes are unique, but the main advantage is that they can produce some of the strongest steel in Australia. Using their methods, they can produce steel of three different kinds: wear-resistant, structural, and armour.

Bisalloy produces some of the strongest steel in Australia including wear-resistant, structural, and armour

The wear-grade type of steel that Bisalloy manufactures mainly goes into industrial use, especially in the mining industry. For instance, many dump truck bodies use this kind of steel. “All the wear and tear components of a mining or quarrying operation would use our steel,” Albert says. Customers are mainly seeking longevity with wear-grade steel.

With structural-grade steel, on the other hand, customers are looking for lighter and stronger steel. This grade of steel is commonly used in the transport sector, for example in truck chassis. This allows the vehicle to hold its payload, while still being light enough for efficient travel and use. For similar reasons, structural-grade steel tends to be used in tall buildings, windmills, and other structures that require high structural integrity. Strong, light steel promotes the use of innovative designs that may have been impractical otherwise.

Finally, there is the defense-grade or armour-grade steel. This is used largely for military applications, including bullet resistant ballistic-grades, explosion resistant blast grades, and specilised high strength steel grades used in applications such as submarines and naval crafts. Bisalloy is the only defense-grade steel manufacturer in Australia. “We obviously work with […] the defense contractors and defense industries in Australia, so […] we’re accredited with all of those companies. One of them is BAE Systems in Australia. We’re now also engaged with BAE Global Access Program, which is the USA BAE Systems, and we’re well advanced going through the process of being accredited to be able to supply to the USA market.”

The company’s steel also plays an important role in protecting Australian Defence Forces servicemen and women, where Bisalloy’s steels have been used for Australia’s protected Infantry Mobility Vehicle (IMF), the Bushmaster. Since 1993 Bisalloy has produced over 3500 tonnes of steel for the Bushmaster program adding to Bisalloy’s internationally recognised armour capability which began in 1988 with an order for hull plates for the local construction of two FFG 7 guided missile frigates.

Bisalloy went on to help develop HY80 steel plates in cooperation with (then) BHP Port Kembla and the Defence Science and Technology Organisation (DSTO) to a US specification that significantly outperformed the equivalent US-manufactured steel plate.

Australia’s four US-built FFG 7 frigates were subsequently retrofitted with the HY 80 plate. Bisalloy produced a total of approximately 1000 tonnes of steel for the FFG program. Bisalloy then went on to supply the Collins Class submarine program with more than 8000 tonnes of hardened steel of excellent low-temperature impact properties — also developed with BHP and the DSTO.

Governments in the US, India, the Middle East, and Asia have since qualified Bisalloy’s armour plate for use by their militaries and the company’s (military) exports now far exceed domestic orders. Bisalloy supplies to several sovereign militaries including Israel, Turkey, Thailand, Indonesia, and to various civilian and private groups in a range of countries including countries in the Middle East, such as the UAE. They have also been recently selected as the armour supplier for the Hawkei Protected Mobility Vehicle, which is a light armour patrol car built for the Australian military. “[There’s] quite a lot going on in the defense side of the business,” Albert says.

Keeping with their philosophy of niche simplicity, Bisalloy produces only flat steel. “Flat steel in steel terms is a plate,” Albert says. “It’s a certain width, a certain thickness, and a certain length. […] Like a table.” Bisalloy then passes these steel panels onto their distributors, and these distributors either have processing capabilities themselves, or they have partnerships with external companies that can work the steel into its final product. “So we just make the plate; that’s all we do,” he explains.

“Our product is actually very technical,” Albert says of the various grades of Bisalloy’s steel. “The different type of customer requires a different level of technical expertise. So if you look at defense grade, it’s about the highest level of technical expertise.” Bisalloy even manufactures steel that is used on submarines, which Albert says is about “the highest” grade of steel that can be made.

“We have some really strong technical people that have been with the company—some of them have been here for 30+ years. They’re all PhD’s—metallurgy and specialty PhD’s such as welding and high-strength steel.” Because of Bisalloy’s dedication to a single niche, they were able to assemble a dedicated and highly-motivated team of specialists that can engage intimately with the customer to identify their needs. Technical support is one of Bisalloy’s biggest strengths, and it gives them a significant advantage over their competition. “The people buying imported steel get no technical help, no technical support,” he says.

Bisalloy is looking to engage with the federal and local governments in order to possibly supply for future infrastructure projects

Thanks to this high employee engagement, not only are customers served and given technical support, but employees tend to be long-term and very serious about their jobs, resulting in an industry-leading safety record and over 3 years with no LTI’s. “They live and breathe Bisalloy, and I think that permeates out into results such as the LTI records.”

Looking towards the future, Bisalloy is training its focus on improving their sales and marketing strategy. “Our way to market is good and bad. Our way to market obviously is mainly through distributors, and if our distributors are not representing our product, then there’s a challenge for us,” Albert says. Bisalloy’s new strategy will involve engaging not just the distributors, but the end user as well, and focusing on their needs and their specifications first. “We need to go back out, we need to engage with the marketplace, we need to get our product re-specified—and if that means we need to grab some of these customers, bring them back down to our plant, let them see our people, let them see the product, then that’s what we’re doing.”

Bisalloy is also looking to launch a training center for fabricators, distributors, and engineers. With proper training, those in the industry should learn how to apply the product better and this will lead to more satisfied end users. In addition, Bisalloy is looking to engage with the federal and local governments in order to possibly supply for future infrastructure projects.

“This year, it’s all about looking for opportunities,” Albert says. After some time of “strengthening [their] operations,” the company is ready to engage with the market and reinvigorate it. “We need to regain the Australian marketplace. We should own this marketplace.”

Another area of focus for the company is on losing its dependence on the resource markets, which can be volatile. This will require Bisalloy to start looking beyond the mining industries for much of its customer-base.

Finally, Bisalloy has embraced international development. “There’s a big opportunity for us globally,” Albert says. “We can’t do everything. We’re a small company, so we’ve identified that we need to partner with companies.” This means solidifying their operations in Indonesia and Thailand, as well as growing their joint venture in China and forming new partnerships all over the world.

RMS Software & Aphrodite Gold: Peter Buttigieg on taking SaaS to the cloud and to the world

Early in his career, Peter Buttigieg, now the managing director of RMS Hospitality and the acting CEO of Aphrodite Gold (ASX: AQQ), helped bring trading into the information age by introducing computer systems to the Melbourne and Sydney stock exchange as an IT contractor.

“You remember the old chalkboards where they used to record stock prices? That was first computerized when the team I worked with replaced chalkboards with computer screens. That was really the first project I worked on.” From there, Buttigieg and his company RMS Hospitality began writing software for insurance brokers, then for caravan parks, “and that’s what really got us into the hospitality market for property management software.” Nowadays, Buttigieg is head of a successful software company and CEO of an emerging mining project for which he was an early investor.

His successes were not won overnight, however. In the early days of the computer revolution, the hospitality industry was only beginning to leverage software to streamline their processes. Buttigieg’s team first began computerizing the booking charts for caravan parks and hotels, then the receipting information for accounting purposes, and later all aspects of property management software as well. “Back then, computers weren’t even on the radar, so we spent the first ten years just trying to convince people that computers could do the job.” Because the hardware was still rather slow in the early 80’s, he found himself having to prove to prospective clients that using computer terminals would save them time in the long run.

Though Buttigieg experienced early success working with caravan parks, it proved to be too small of a market for sustainable business, and his company quickly moved on to include hotels and motels in their client base, as well as student accommodation for universities, shopping center space management for malls, and accommodations for defense bases. “From a software point of view, all these vertical markets, all pretty much did the same thing. […] They all had something to do with reserving something,” he says. Branching out into the different vertical markets was extremely important in the early days of RMS Hospitality because the Australian market for each of the individual niches was too small at the time.

Expanding a business in the 1980’s was not as simple as sending e-mails to prospective clients, and required a lot of legwork out in the field. Nearly everything had to be done in person. “Back in the early days, computers were the size of a washing machine, so setting up one onsite demonstration could take you a day and a half,” Buttigieg says. “It was a lot of hard work.” This was especially difficult due to RMS Hospitality’s target market, which included clients from all over the country, so the work required constant travel. “[Our sales team was] on the road all day, every day, knocking on doors, lugging these big boxes out of the boot, setting it all up, and showing people. That’s how we did it.”

RMS used to provide the software to their clients on physical floppy disk media. The applications had to be copied and sent through the mail, but since floppy disks were often unreliable, this created further logistical complications.

Because of these myriad physical limitations, international expansion at the time would have been difficult and RMS had to heavily rely on these vertical markets in Australia. “Really, until the Internet came around, it would have been impossible.” It was not until roughly 2005 that RMS began to expand into overseas markets. “Fast-forward into where we are today, we are now running out of the UK, the US, India, and the UAE, but primarily only in parks and hotels and motels. With these other verticals, we’re pretty much only working in Australia so far.”

RMS interfaces only with businesses and does not sell any kind of software to the public. Their competition, as a result, is not very extensive. “Our whole focus is dealing with the actual properties that provide the accommodation, so in our space competition-wise, there’s probably maybe ten to fifteen property management systems now worldwide that we’re competing with.”

A huge shift in technology that has taken place of late involves clients switching from using on-premise dedicated Windows servers to running cloud-based software. RMS is one of the few “traditional” companies that was able to port their Windows-based software into HTML5 cloud applications, rewriting their code for a completely different environment. Whereas before, RMS sold and supported the software, but the clients were responsible for the hardware that ran their servers, RMS now runs a full SaaS model, collecting a monthly fee to maintain both the software and the servers. This allows the clients to remotely access their information through a “dumb terminal” and outsource the IT aspect of their business.

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Some customers, however, still use the old Windows-based system and have yet to upgrade to a cloud-based solution, so RMS finds itself supporting both systems simultaneously. Part of the challenge of upgrading has been adapting to a constantly-changing technological landscape. RMS started their migration to the cloud six years ago, implementing Microsoft Silverlight, only to realize years into development that the industry standard had trended towards HTML5. This required a complete rewrite of their front-end interface. “We have a full working version in Silverlight that we’ve had to also put in the bin to go to HTML5.”

Fortunately, because RMS still had a full working version of their software on Windows, the challenges of upgrading did not affect their profits. “Customers were still paying for a service. Whether we were delivering it via Windows or Silverlight or HTML5, thankfully we still had income coming in that was able to fund the development that we needed to do.”

This is not the only way that the changing tides of technology have affected the business. “Along with the whole cloud-based change, the whole revolution with online bookings has been the biggest game-changer,” Buttigieg explains. In recent times, online booking has come to completely dominate the market, and 85 to 90% of people now book their rooms online. “Because we’re having to manage all of these online bookings, we have a whole separate stream of servers running, just collecting these online bookings 24/7.” So in addition to property management, RMS must also handle the back end where clients make their bookings, relay availability to online travel agents, and update all of this information in real time to avoid double-bookings.

“We’re one of the few property management systems that do both,” he says of RMS’s ability to handle both the traditional booking aspects and the “channel management” aspects of a property. This allows RMS to handle bookings truly in real time, and prevents their clients from having to deal with the added complication of having a third-party channel manager. “They are 100% reliant on us,” Buttigieg says. Properties use RMS’s services in order to know who is coming and going, what rooms are available, who they need to bill, and what rooms should be cleaned.

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Without these services, the 5,000 properties that use RMS would come to a standstill. Thankfully, outages at RMS are vanishingly infrequent, and are very brief even when they do happen.

Being ahead of the curve and highly stable has given RMS many opportunities over its competitors. It has allowed them to capture large clients like Quest Apartments and Discovery Parks because of the market trend towards cloud-based systems. “That opportunity wouldn’t have arisen if we weren’t fully cloud.” The early migration of RMS to new systems has allowed them to not only keep up, but to speed ahead of even well-established tech companies like Oracle when it comes to hospitality software.

Aphrodite Gold (ASX:AQQ)

Considering this vast background in tech, Buttigieg’s other major venture, Aphrodite Gold (ASX:AQQ), seems highly unusual from an outsider’s perspective. “This [Aphrodite Gold] is really an accident,” he admits. “I was a passive investor.” Just before Aphrodite Gold’s IPO, he put up roughly $100,000 of investment. “That’s all I really wanted to do with it,” he says. A few years later, however, Aphrodite Gold had spent the money that they had raised, and the company found itself having to begin fund-raising once again, so they asked Buttigieg if he would like to invest more. In addition, they approached him to be on the board of directors. Buttigieg agreed, interested in learning more about how a public company was run because of the possibility of RMS Hospitality itself going public at some point.

From Aphrodite Gold’s end, they hoped that Buttigieg could offer the board a much-needed alternative perspective. “They sort of wanted me to come on as a mediator, I suppose, to try and work out this deadlock between the CEO and the chairman. So that’s sort of how I got involved, because it was starting to get into a bit of a mess.” Eventually, the chairman was removed, and Buttigieg was abruptly voted into his position during the first board meeting.

Aphrodite Gold Limited (ASX:AQQ) originally bought the Aphrodite mine from Apex, aiming to develop the site and get it into production. While, according to Buttigieg, the mine indeed had—and still has—a lot of potential, the project was initially mired in technical problems. “There were some metallurgical issues that needed to be resolved,” he says. Because the gold was buried so deeply, the company’s strategy was to first focus on removing the top layer of overburden that covered the deposits. While this expensive process would have been profitable when gold prices were high, once the prices took a hard dive, the mine was suddenly no longer profitable.

In order to solve this problem, the company initiated massive changes in management. “We had to remove the management and put a whole new structure in place, and effectively shut the whole project down to start from scratch.” The strategy that the company then took was to cut their overhead dramatically, and sit and wait until they could decide what the best plan moving forward would be. “The operating expenses that we had for the size of the company and what we were doing were just ridiculous, and not sustainable,” he says, so the board felt compelled to cut costs above all else. Since gold is not particularly perishable, Buttigieg felt that it was a sound approach. “It’s not going to go bad,” he says, “so we could afford to shut everything down.” It wasn’t great for the share price initially—which dipped to $0.007 at one point—but it kept the company alive and out of massive debt.

After providing the cash injection, Buttigieg and his colleagues decided to look towards the expertise of a geologist to help them better understand how to extract the gold. Because the gold is refractory gold, several processes are required to extract it, including processes that create toxic byproducts that must be managed. In general, extracting refractory gold is therefore more expensive than oxide gold. The market was therefore skeptical of the mine, and stock prices remained low. However, he says, extraction “can be done at an economical price” using modern technology, and several examples of this type of extraction exist around the world.

Fortunately, the geologist helped the team to discover that there was easy-to-extract oxide gold in the top layer of soil that they had been removing. This meant that not only was the overburden removal going to pay for itself, but it was also going to be profitable enough to provide the capital for extracting the deeper refractory gold. “It’s effectively turned the whole project around,” he explains.

Now that the situation is much more profitable than previously expected, Aphrodite Gold is in the midst of interviewing for a CEO who has a mining background, to replace Buttigieg as the acting CEO and help the project move forward into production. Though Buttigieg has always been interested in gold because he sees it as a “good hedge,” he lacks in the knowledge in the technical aspects of the project. “There’s been no interest getting into the mining sector at all. Like I said, it was really an accident that I got involved, and I had to stay involved otherwise both myself and a lot of friends and family and staff would have lost their investment completely, because [the company] would have gone broke.”

The pre-feasability study concerning the site has just been finished and is due shortly. The mine is particularly promising because of the infrastructure that surrounds it. Just North of Kalgoorlie, it is close to transport and has adequate access to water and electricity. Unlike other mines near the area, which have small pockets of gold peppered throughout their sites, the Aphrodite Gold site has all of its gold concentrated in one area. In fact, he says, “we’ve got 1.4 million ounces in the ground of refractory gold. We know for sure that that gold is down there.”

“We’ve proven that the project is now viable,” Buttigieg says, so the next step before the transition from exploring to production will be finding a suitable CEO. This will factor into the company’s execution plan, which is now critically important. According to Buttigieg, since the company doesn’t have the “luxury” of shutting down operations once production begins, this step must be planned carefully. Moving forward, the company will soon begin extraction of the gold at the top layer, which will fund the extraction of the refractory gold beneath.

Considering Buttigieg’s success and the profitability of his two major ventures, one would think that he would be tempted to relax into some sort of retirement. This is not the case, however. “I definitely like to see things through to where they’re finished,” he says. “Rain, hail, or shine, I do like to see things through.”

Written by Raul Betancourt.

Norco Co-operative CEO Brett Kelly: how increased revenues are benefitting farmers and consumers

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Norco is a 121-year-old farmer-owned co-operative, with strong ties to the most popular supermarket chains in Australia.

“It’s basically the last of its kind in terms of being a dairy farmer-owned co-operative,” CEO Brett Kelly remarks. Norco and its subsidiary Norco Foods is made up of 230 members, most of whom are based in Northern New South Wales, though the company trades and sells their dairy products throughout Australia and internationally. While specialising mostly in milk and ice cream, Norco Foods also runs store locations geared towards the agricultural sector, where they sell animal feed and similar products to rural customers.

During Brett Kelly’s tenure for the last 8 years, the company has seen huge changes. “When I started, we were around a 300 million dollar business; we’re now about a 600 million dollar business.” Kelly has guided the company through several successful projects, including buying back the Norco licensed marketing rights for 5 million dollars after the company had previously sold them for 63 million dollars.

“That particular license was for the Norco brand, and under the previous owners, it was actually losing about 7-and-a-half million dollars a year. We were able to turn that around into a profitable situation within about 18 months,” Kelly says. “It enabled us to have control of our own license and brands, and what that means in a nutshell is that we can go direct to retailers and sell our own brand.” While in theory selling the licensing rights to a multi-national company was meant to grow and enhance the brand, over time the strategy stagnated and introduced many complications in Norco’s dealings with retailers. Kelly even found himself having to ask permission from the license owner to negotiate contracts with other companies. Having control over their brand again has allowed Norco to run more efficiently and approach potential partnerships directly.

From there, Norco was able to create a strong marketing strategy, one that highlighted their presence as a co-op that directs profits back to the farmers. Unlike other companies that are influenced by shareholders and the need to create profits for them, Norco has no reason to drive the price of milk down to increase their margins. Most of Norco’s profitability instead goes back to the farmers, who receive roughly 58 cents per litre of milk. On average, Norco pays the highest farmgate in Australia to its members. Though the farmgate is most important, Norco also pays dividends to the farmers every year, roughly 6% of their net profits.

Kelly sees this as an important point of difference for the company. “We’re farmer-owned. Whatever we achieve goes back to our farmers, and the consumer really resonates with that.”

Another major success that Norco has experienced under Kelly’s leadership is its relationship with the largest food retailers in Australia. “We negotiated with Coles for two years, and we were able to successfully gain the Queensland Coles generic contract. What that means is that we can’t control the retail price, but we can control what we sell for.” Because of this relationship, Norco has been able to put 3 cents per litre back into their farmgate milk price.

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Under CEO Brett Kelly, Norco has transformed from a 300 million dollar business to a 600 million dollar business (Photo: Lindsay Moller)

However, Coles is not the only company that Norco works with. “We do Aldi, Woolworths, and Coles, and a few other organizations as well, but [Coles] is the majority,” Kelly says. Norco also exports ice cream into the United States and into Japan, though much of their international effort lately has been concentrated in China.

Two years ago, Norco became the first Australian company to begin exporting fresh milk to China. “The challenge was that to export fresh milk there was a testing requirement from China. In that it requires about 8 days testing in Australia, and probably another 7 days when it got to China. So if you added that together, plus the air freight, you sort of would nearly run out of time for the life of the milk.” To solve this problem, Norco developed a system called “parallel testing,” where they send the milk to China, then simultaneously test samples in Australia and China. This cut down the time it took to export the milk to 6 or 7 days, from the farm to the retail shelf. “Our objective and strategy is to slowly, carefully build a footprint in China and in Asia for the future,” Kelly explains. This is part of a greater diversification strategy.

Thanks to all of this recent success, Kelly believes that the company is in a very strong position financially. “We’re very strong in terms of our profitability, [and] our farmgate. We have low debt. We have a very strong market position,” he says. According to Kelly, the key asset for Norco in the marketplace is that they do not have to compete on price, and that their unique selling points center around the quality of their product and the fact that they are a farmer-owned co-op. “It’s really put us into a position where no one else is.”

Currently, the major project that Norco has been pushing for is entry into the café market in Australia. Kelly considers this a huge market for dairy. “When you buy your coffee, 25% of the cup is coffee, 75% is milk,” he says. “You’ll find that the coffee is marketed in terms of its history, credibility, quality, [and] background, but there’s nothing about the milk, so what we’re doing is joining forces with the major coffee houses and uniting to put a story out there about the Norco farmer-owned co-op.” Kelly predicts that Norco’s unique structure as a co-op and its focus on high quality dairy will resonate well with coffee enthusiasts. Norco has already made good progress in this market, even in just the past several months.

Social media has played a huge part in Norco’s ability to spread the message of how the co-op works, and how it is different from other dairy producers. Kelly finds that recently consumers have been more conscious of brand names, and that they are eager to support companies that distribute profits back to the farmers. “When you go onto the Norco Facebook or you look into Norco, you can see that there’s no external shareholders; you know that whatever dollars you spend, you know exactly where it’s going,” Kelly says. “I think it’s all about the educational process of understanding who Norco is, whether it be up front with our branded milk, or as a contract packer in ice cream.”

Though its primary focus is on dairy, Norco has two different business divisions, one of which is in the agricultural sector. “We have two feed mills, one is in Lismore, one is in mid-Queensland,” Kelly says. In addition, Norco runs about thirty retail stores, which sell farming products of all kinds, and deal with both the public and Norco’s own members. “Right from the hobby farmer through to the serious, full-time, full-on farmer.”

“We’re farmer-owned. Whatever we achieve goes back to our farmers, and the consumer really resonates with that.” - Norco Co-operative CEO Brett Kelly (Photo: Lindsay Moller)
“We’re farmer-owned. Whatever we achieve goes back to our farmers, and the consumer really resonates with that.” – Norco Co-operative CEO Brett Kelly (Photo: Lindsay Moller)

At the moment, Norco’s footprint is largely from Cairns to Melbourne, with a strong presence in Brisbane, but they plan to expand and eventually have a national footprint. According to Kelly, the biggest obstacle to expansion is not so much a matter of logistics or competition, but a matter of profitability. “It’s really important to have a strategy that will enable you to achieve the profitability [that] you need. A lot of the time, when business is tough, people go down the price channel and as you know, anybody can sell two-dollar coins for a dollar, but at the end of the day you go broke,” Kelly explains, “so you’ve really got to come up with a strategy—a point of difference, a competitive edge—that can take you upstream, and that’s what we’re doing.”

This kind of strategy is something that makes Norco very different from other companies, Kelly says. As a co-op, they must be very conservative with their risks and take things “one step at a time,” otherwise they could be compromising the returns for their farmers. They focus instead on building solid long-term contracts with partners. “We’re quite transparent because we are a farmer-owned co-op, and most of our customers really appreciate that because they know exactly what they’re dealing with, and they know that we obviously need to make a certain amount of profit, but our main objective is our farmer-shareholders.”

Their strong presence in the market has won Norco a lot of attention among farmers, and according to Kelly there is a “long list” of farms waiting to join. Norco is careful about adding to their roster, though, as their first priority is always financial sustainability. “We lead from the front,” he says, “and what that means is that we always secure a contract or growth first before we take on new members.” The reason for this is that one of Norco’s rules is that they provide pickup and payment for milk to their farmers no matter what. This means that to be able to pay a fair price to every single one of its farmers, they must first secure lucrative contracts and ensure that a larger volume of milk will be in demand before they take on new members.

“What tends to happen traditionally with co-operatives is that they’re pretty famous for going broke,” Kelly says. Though Norco has faced challenges throughout the years, its commitment to a solid business strategy and good profitability has facilitated its continued existence since 1895. Kelly also credits Norco’s commitment to high standards as an important factor to its long-term success. “The one thing that’s been quite outstanding is the quality, reputation, and credibility of the Norco brand,” he says.

In addition, he believes that four key points have played a large part in the growth of Norco: 1. having the right people in the business, 2. keeping costs low, 3. staying focused on the customer’s needs and the company’s specific niche, 4. and having a winning strategy that will support the company’s niche position in the market place. Following these guidelines, Norco has been able to avoid the trap of competing on price in the retail market.

Kelly is no stranger to the realities of these pitfalls. He has a background in retail, having been CEO of several groups in sectors as diverse as international brand apparel, pharmaceuticals, and discount goods. He has worked with Symbion Health, Canterbury International, and Mountain Designs.

It was 8 years ago when he was approached to take on the CEO position at Norco. At the time, Norco was going through some financial difficulties. “It was what I consider a bit of a challenge—which I really enjoy—and a matter of refocusing the business,” he says. “I always saw Norco as a potentially sleeping giant, when you look at the brand, when you look [at the fact] that it’s farmer-owned, when you look at its heritage and history.”

He sees his background in retail as the asset he brought to the company, since it taught him to focus primarily on what the customer wants. “At the end of the day, the key outcome is what the consumer wants and you have to understand the consumer’s needs, and analyze that and make sure that you’re producing a product that is within that requirement.”

“I think the co-operative model can work. In our case, we’ve proven it to work, but I think that, again, requires discipline from a business point of view, and a focus on profitability.” Kelly stresses that a huge asset of the co-op is support from the Australian public, and their desire to see farmers have financially sustainable businesses.
Another factor that has been key to Norco’s success is the quality of its staff. “I’ve got an exceptional team, [an] exceptional Chief Financial Officer, and general managers for each of the divisions,” Kelly says. “They’re all very focused high achievers.”

Through this focus and teamwork, Norco continues to be an award-winning company. They recently won The Grand Dairy Award in the flavoured dairy category for their Ultimate Chocolate Milk; for the second year in a row. Industry recognition is a regular occurrence for Norco. “We win a lot of awards for the ice cream we produce for retailers,” Kelly remarks. “We’re pretty consistent with the quality, and that forms a very strong part of what the Norco brand is all about.”

Norco Milk Norco Dairy Norco Foods web banner

Norco’s commitment to both quality products for the end user and fair prices for farmers puts them in a unique position where they are already in compliance with many currently developing reforms and new regulations. Kelly says that the government has been focusing on making sure that farmers receive fair treatment from the corporations that buy from them, but that education is still by far the most important factor.

“The more education, understanding, communication, [and] knowledge that we can give back to the farmers, so that they can make better decisions, and understand the end strategy [and] result with the consumer, the better they’re going to be.” He stresses that no business can be sustainable just focusing on production and ignoring what the consumer ultimately wants. In this sense, Norco is helping to bridge the gap between farmers and customers.

Kelly is very optimistic about where Norco is headed in spite of the challenges of their sector. “The market is quite volatile. For Norco, though, […] we’re ahead on our year-to-date net profits. We’ve been able to pay an extra—what we call a ‘step up” payment—for our farmgate this year, which is exceptional. It means that in our first quarter we performed a lot better over our budgeted profits, so we then pay part of that back to our farmers.” This, combined with low debt, a high market share, and promising development in the café market, has allowed Norco to continue thriving.

Written by Raul Betancourt.

City of Albany: delivering economic development through tourism and infrastructure

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While most of Western Australia has been riding the boom-and-bust roller coaster of the mining industry, Albany continues to show remarkable stability with consistent growth in infrastructure.

“It’s a very comfortable place to live,” Mayor Dennis Wellington remarks. Having lived in Albany since childhood, the Mayor has seen the city go through an extreme transformation. “It has been an interesting ride. We’ve gone from being a somewhat sedate place, to now somewhere that we think [has] enormous potential. I just love the change.”

With a population of more than 37,000, Albany has a small town charm and an abundance of historical landmarks. At the same time, it has managed to evolve into an increasingly cosmopolitan area that supports both a growing tourism sector as well as a local bar, café, and entertainment scene. It is a city that is ripe for investment and is ready to build new infrastructure as well as take on new residents.

Thanks to its pleasantly cool weather and its access to picturesque countryside and coastline, Albany has seen an influx of retirees in particular. With a new $160 million hospital, one of the quickly expanding sectors of its economy has been medical care for these older residents. “We’ve had an increase in the health areas of our business down here—30% in the last five years,” Mayor Wellington says. “Two new aged-care homes have also been approved recently, about $60 million in development which will be completed within the next year and a half.”

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Albany’s Middleton Beach is just one of the many attractions driving growth to the region

Health is not the only growing sector, however, and retirees are not the only people eager to take advantage of Albany’s beautiful beaches and expanding resources. The city has experienced a 6% increase in tourism per year, with 900,000 tourists visiting Albany in 2016. A new hotel development to accommodate this growth is in the works. The 12-story hotel will be the largest in the area, as well as the closest to the water in all of Western Australia, as it sits only 50 meters from the shore of Middleton Beach, which is set to be transformed with a number of residential and commercial developments also in the immediate surroundings. “It is a place which is absolutely pristine in terms of its environment and its location. It’s well-protected, and we’d like to see a major infrastructure there where we can cater for larger groups of tourists and have a major focus of the town.”

It is one of the city’s two hotel development sites, the other sitting just south of the main street on the marina waterfront alongside a $70 million entertainment centre built in 2010. Once developed, both hotels will provide for significant growth in the tourism and business sectors. Mayor Wellington hopes that by attracting larger and larger numbers of visitors, new capital will find its way to Albany as investors seek to develop the areas around the hotels.

Albany is in the midst of building up its walkway and bike path infrastructure, in an effort to make the city more walkable—and in turn, healthier and more convenient—for both tourists and residents. “We’ve started a program where we’re using a lot of e-bikes around the place; we’re getting people back into cycling,” says Mayor Wellington.

Even the older business sectors of Albany have been seeing growth. Albany has a rich agricultural business that has always served as a major portion of the local economy. “100% of the free-range pork for Coles supermarket comes out of this region,” Mayor Wellington explains, “because it’s the best place in Australia to grow free range pork.” Wheat, sheep, canola and woodchips are also major exports of the area.

After the wild success of the Anzac Centenary Commemoration in 2014, which brought 40,000 visitors, Albany saw a dramatic increase in interest from surrounding areas and the creation of new business precincts in the city. According to the Mayor, this was the “catalyst” that pushed Albany into its current state of growth. “The [business] areas that were created were the old areas of town that had sort of been let go a little bit, and the streets and the buildings were redone; it created an environment down there where people could go to and relax and enjoy the surrounds.” The city has encouraged local restaurants and cafés to set their tables outside, and to create a more attractive outdoors atmosphere for customers so that they could admire Albany’s natural beauty.

The Anzac Centenary also provided Albany with a lot of national exposure, and led to the building of the National Anzac Centre, a monument to our Anzacs that has seen over 200,000 visitors since its opening. “It’s a display which is second to none,” Mayor Wellington remarks. “Thousands of visitors flock to the center every month, many of whom had ancestors who were part of Anzac and departed Australia through Albany’s harbour. During World War I, Albany saw 41,000 soldiers leave its shores, a third of which did not come back.”

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Albany’s recently launched National Anzac Centre has seen over 200,000 visitors since its opening

With the rapid increase in tourism due to these developments, the Albany City Council sought to form an alliance with the nearby shires of Denmark and Plantagenet. “The fact is, as things change—I mean, things are changing all over the world—nobody, in terms of tourism, recognises [geographic] boundaries,” Said Mayor Wellington. Many tourist destinations exist across these three neighboring areas, from the vineyards of Mount Barker to the Valley of the Giants tree-top walk of Denmark to the adventure trails and whale-watching in Albany. The three towns have begun to market themselves as The Amazing South Coast after realising that their core customer base had little recognition of the area under its former name, the “Great Southern” region.

With this re-branding and more aggressive marketing, Albany hopes to raise its influx of tourists from 900,000 per year—or roughly 2.5 million visitor nights—to 3 million visitor nights by 2021. With roughly 85% of the tourist market made up of residents from other towns and cities in Western Australia, Albany also hopes to expand to overseas markets once its hotel project is up and running.

The state, for its part, has guaranteed $135 million in funding to Albany for various infrastructure projects, which the Mayor says will help catalyse the flow of even more private investment into the city. In particular, the most important infrastructure changes that will occur in Albany and its neighboring towns are road improvements. “Roads are what we live and die on around here,” he says. Perth is one of the most isolated capital cities in the world. It and the other smaller towns in Western Australia are connected by a vital network of roads and little else, and so roads are of particular economic importance. “95% of the people that come [to Albany] come here by road.”

The funding is also expected to go into sporting fields, tourism, and, importantly, industry development and investment attraction. For instance, with fairly minor improvements to their airport, Albany could begin exporting some of its crops to Asia. This is a major area of growth that the city is looking to exploit in the near future because of the relative vicinity of Asian countries and the convenience of shared time zones. Ironically, this plan to expand overseas export is within closer reach than exporting these same goods nationally because of Western Australia’s isolation. “If you had to put it on a truck and take it to the rest of Australia, we’re a long, long way from anything, but in terms of Asia, we’re not,” Mayor Wellington says. “The location of Albany makes it an ideal exit point to Asia, even more so than Queensland.”

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Albany’s new hotel development will be the closest to the water in all of Western Australia neighboring their $70 million entertainment centre

With this growing economy also comes a need for an education workforce. As jobs become more available in Albany, the city has been establishing better education facilities. They have a regional university—University of Western Australia—with 500 students, and they hope to raise the number to 2,000 by 2025. Wanting to attract overseas students as well, Albany has been erecting student housing close to the university and shopping centers. According to Mayor Wellington, growth in the education sector will impact the city economically in several ways: For one, it will attract visiting family members of students, which will continue to fuel the tourism sector; secondly, it will help create new jobs.

“These are all things we can build on over a period of time,” he says. His intention is for Albany to become “one of the best cities to live in,” while still maintaining its character. One factor that is helping to build Albany’s future is the development of “clusters,” which are local business entities that would normally be in direct competition working together on given projects to solve problems. For instance, clusters of farmers are investing in scientific research which has helped them to grow better barley for new and innovative types of beer. Business clusters like these allow an area to gain a good reputation in certain industries, which attracts further business.

Agriculture is not the only sector in which this clustering strategy works. Albany hopes to expand its aquaculture industry thanks to the appeal of its pristine waters, and also hopes to expand its wineries. In fact, 26% of the state’s wine is already grown in the region with many well-established vineyards in Denmark and Mount Barker already producing large volumes of quality wine Mayor Wellington emphasises that a spirit of cooperation among individual businesses in these sectors is what will ultimately move the region’s economic prospects to the next level. “We’d like to see it formed together as a conglomerate, to take the whole market to a certain area, and then everyone sells out of that. Still in competition, but then in cooperation at the same time, so it’s a different way of doing business and it’s a different way of looking at things.”

According to the Mayor, these clusters are part of the long-term growth plan of Albany, but they can also offer immediate impact in the industries that are already well established in the region. “That’s why we want to start immediately in looking at the places and looking at the things that we already do well,” he says.

There have been some subtle changes to Albany’s existing infrastructure as well, in order to accommodate tourists and create more vibrancy and activity within the community. One of these efforts has been the revitalisation of the city centre, which has transformed the area from a major four-lane roadway with little room for wandering pedestrians, to a two-lane road with a low speed limit. “The center of town is not supposed to be a place for cars, it’s a place where you’re parking, where people walk around, where they go to the shops,” the Mayor says. “The traffic has slowed down to about 40 km per hour, there’s plenty of parking there, and we want to get people out of their cars, walking around the shops, and walking into the shops and spending their money.”

With a host of restaurants, shops, and cafés, the city centre has proven to be a location that is growing in popularity. It has also been an increasing source of revenue thanks to the redesigned streets that encourage people to step out of their cars. “You don’t spend too many dollars when you’re sitting in a car, but walking around you tend to do that,” explains Mayor Wellington. Albany is also moving its visitor centre from the South of the city to the centre of town and has plans to re-purpose its old town hall, built in 1888, into an art gallery.

Albany is also building up its walkway and bike path infrastructure in an effort to make the city more walkable—and in turn, healthier and more convenient—for both tourists and residents.

Albany is looking to attract 3 million visitor nights by 2021 by making the city more walkable for tourists and residents alike
Albany is looking to attract 3 million visitor nights by 2021 by making the city more walkable for tourists and residents alike

“We’ve started a program where we’re using a lot of e-bikes around the place; we’re getting people back into cycling,” says Mayor Wellington. In addition, Albany is in the midst of a $27 million dollar upgrade of its sports complex, which can house football, soccer, and cricket games. They also have 7 indoor basketball courts, and 7 fully-lit outdoor sports fields. On Saturdays, there can be as many as 1,400 children playing soccer and 1,200 children playing football. The city also boasts 195 basketball teams. “We need to get kids basically out of their houses and off the computer games, getting about, running around in the field and exercising more and playing sport.” Its all part of the City of Albany’s aim to provide better facilities so youth and the wider community can exercise and in turn live healthier and happier lives.

Looking towards the future, Albany hopes to grow its population to 50,000 by the year 2025. The city already has the infrastructure to handle such a population, thanks to their prior experience with tens of thousands of tourists. In other words, the groundwork has already been laid, and Albany is ready for its next major economic expansion. “We’re ready to go,” Mayor Wellington says.