Big baby steps: Tasmanian Formula Group Bellamy’s Organic Rides China Wave towards $50m in Sales

Source: BRW

Laura McBain, chief executive of baby and toddler food company Bellamy’s Organic, is a running a few minutes late for our interview thanks to a delayed flight. It is one of the downsides of running a business from Launceston in Tasmania – she estimates travel between the company’s offices in Sydney, Melbourne and Shanghai takes three months a year.

“It does put you at the mercy of the airlines flying out of Launceston,” she says. “The choice is not vast.”

But Tasmania’s advantages far outweigh any delayed flights. The state is building a reputation for high-quality food products and this reputation has helped Bellamy’s break into the Chinese market. Revenue at the company as soared from $3 million in 2007, to $29.5 million in 2013.

On current sales, the 2014 turnover is forecast to exceed $50 million and McBain’s next target is turnover of $100 million.

“The opportunity for continued expansion is huge because we’ve been constrained by the lack of ingredients,” she says.

Like many organic food companies, Bellamy’s has struggled to source enough certified organic supplies in an industry that is still in its infancy. McBain says there have been times when product arrived at Bellamy’s distribution facility one hour and headed back out to market the next.

It’s a good – if very frustrating – problem to have, and one that underlines how far the company has come.

McBain first came into contact with the company when she was working as a chartered accountant. One of her clients was Tasmanian farmer David Bellamy, who had started the food company with backing from some mum and dad investors in Tasmania.

McBain came on board as financial controller, but the company was struggling, particularly with cashflow.

“Frankly, things were pretty tough, they’d probably reached out a bit further than they should have,” she says.

In 2007, a group of wealthy investors formed Tasmania Pure Foods to buy the business. The board now includes local business people such as Rob Woolley and Bob Wilson.

“That injection of capital meant we could start to build a real brand – and just have enough money in the bank to buy stock,” McBain says.

She would move to general manager shortly after the deal, although the glamour was somewhat lessened by the fact she had a team of just three. Her role would involve everything from helping new mothers pick the right formula, to taking orders, and negotiating with Coles and Woolworths.

Breaking into China

McBain soon realised she had to broaden the company’s horizons.

“We had two problems. We were a small company and there is only a limited number of babies born here each year. The other critical part is that we were highly dependent on the two major supermarkets.

“We only needed one line to be deleted from the supermarkets’ ranges and the whole house of cards could fall down.”

China, with its emerging middle class, was the obvious target. This was underlined by a food safety scandal in that country, where melamine was found in some baby milk products.

Very quickly, Bellamy’s had as much demand as it could handle from China, and more – stories of Australian retailers “rationing” sales of Bellamy’s baby formula (and other brands) as Chinese buyers hunted stock, have become common in recent years.

Not that it has all been smooth sailing for Bellamy’s in China. Finding good people and understanding local business practices can be difficult – McBain had one particularly frustrating episode when a shipment was turned back because “not all the boxes were ticked”.

But the company now has a Shanghai office run by a Chinese-born executive who studied in Australia. It’s a model more Australian companies should look to emulate, she says.

“There is another great story about being able to tap into those Chinese alumni that have studied here. They are able to breach that cultural divide between how the Chinese do business and how we do business.”

The right branding

The intermittent episodes of formula rationing are not the only times Bellamy’s has hit the media. In 2012, Seven Network’s Sunday Night program took aim at the sugar content in the company’s Organic Apple Snacks, and McBain was forced to defend the product on the grounds it has no added sugar.

With its focus on food for babies and toddlers, McBain acknowledges there will always be extra sensitivities around its products. But she argues Bellamy’s organic credentials are important.

“The requirements of being organic mean that everyone in your supply chain has a higher set of standards to adhere to. We feel it adds an extra layer of security for a mum.”

If the organic branding is important, so to is its connection to Tasmania. While the company has a production facility in Melbourne, it remains fiercely local.

“Our preference would be to have more manufacturing here in Tasmania. Tassie is unique in its opportunities and being based in Tassie is absolutely critical to the business going forward. It gives us our sense of identity.”

As for McBain, who was named Telstra Business Woman of the Year in the private and corporate business category, she’s still waiting for the right to call herself a Tasmanian – she’s been there for 15 years, and jokes she’s still got a few more to go.

Some businesses the size of Bellamy’s would be thinking about a float or a private equity investment in the current environment, but she stays focused.

“I think we’ve got a lot of growth still in the company. I really think that we can hit that $100 million mark in turnover and be profitable. That’s where we’re clearly focused at the moment.”