Ceo Musters Party Pies From Shop Floor To Supermarket
Saturday May 31, 2008
Patties may be small, but Michele Allan relishes the challenges it presents, writes Christopher Webb.ONE Sunday last August Michele Allan was in Los Angeles on Amcor business when the phone rang. On the line was Peter Kempen, the chairman of Patties Foods. He was ringing his fellow director to let her know that the board had found a replacement for Richard Rijs, who had resigned unexpectedly after building Patties into one of the world's biggest pie makers.Allan - who had been on the Patties board as a non-executive director since June, 2006, five months before it went public - was surprised at how fast her board colleagues had filled the position."Wow, that was quick, well done, congratulations," she told him. He then informed her that she was the board's choice.That came as some surprise to someone whose hat was not even in the ring. She was happy working for Amcor, looking after risk and sustainability. She was shocked and unable to sleep that night but deep down she knew she would be accepting the job."It was the hardest decision I'd ever had to make to resign; it was traumatic," she says.It meant moving from a big company with perks such as world travel to running the Bairnsdale-based Patties, a relatively small company, albeit with such brands as Four'n Twenty, Herbert Adams, Nanna's and Chefs Pride."The opportunity was the sort of thing I'd been working towards all my life: to run a company," she says.Allan has now been in the managing director's chair for six months and at first glance her style is a world away from that of Richard Rijs, the seat-of-the-pants operator who left school when he was 16, got a job filleting fish in Lakes Entrance and who ran Patties for more than two decades. His office was virtually a hole in the wall at Patties' factory in Bairnsdale with a yellowed takings sheet from the Rijs family's original Lakes Entrance cake shop on the wall. Hers is in an office park in Mentone, with sleek black furniture and books such as Competitive Strategy and Intelligent Enterprise on the shelves.The 50-year-old Allan - with jobs behind her at Amcor, Nestle, Kraft and Bonlac - has four degrees; which, she is keen to point out, she got after studying part-time. Why? "Because people just assume you've done them all full-time and so you haven't worked; but I've worked since I was 16," she says.Since joining Patties, she has shaken it up, reorganised it and given it structure. "It is a different structure. My predecessor had four people reporting to him and I have 10 because I believe in flat structures. I like people to have authority and accountability," she says.Three people were promoted from within the company, a new chief financial officer was hired in the form of Beth Schofield from Ernst & Young, as well as a human resources manager and someone who looks after "strategic innovation"."We're a publicly listed company, we're accountable to our shareholders and we aim to be as transparent as we possibly can be, and to do that you need a little bit of infrastructure behind you," she says.While Allan might be big on management theory, she is closer to Rijs' style than it might seem. "I started off on the shop floor in my Dad's sheet metal conversion factory, on the guillotines and the presses, and I've run manufacturing plants," she says. "Dad was of the belief that you would value your education if you knew what it was like working 24/7 on the factory floor. It gave you respect for everybody, and you start off by doing what you expect everyone else to do."Allan says that experience was a huge influence on her. "I get the feeling of a place. I walk up to anybody in a factory and talk to them; if they look down or look away then I can tell exactly the culture of the place. People who look away and won't make eye contact don't feel as though they're of value."At our Bairnsdale plant no one looks away, they all look you straight in the eye. When you walk up to the line everyone will say, 'hi, boss, how's it going?' And I'll say, 'good, thanks. How's the line running?"'She regularly visits the company's plants at Bairnsdale, Thomastown and Sydney, and the other places you'll find her are at supermarkets and service stations. She visits a supermarket nearly every day; she doesn't buy anything, she just looks.With its pies, sausage rolls, party pastries and sweet frozen foods, Patties' brands take up a decent chunk of the frozen food section of all supermarkets, and has a 55% share on the retail pie market. Allan likes to keep a close eye on things."I look at what's happening in the freezer, what's happening in the dairy case, shelf positioning, what's on promotion, what your competitors are doing. That's our lifeblood. It's all about reflecting on what you do and learning from what everyone else is doing," she says.Service stations are also her stamping ground. "I go into BP and Shell petrol stations to look at our products and our pie warmers and things like that. I'll stand and watch what people are doing. Do they buy a drink, do they buy a pie, is the pie warmer easy to get to, has it got stock in it? If we don't get that right, we won't sell the product."Allan is big on this grass-roots approach. "You've got to see what Mr and Mrs Consumer see. If you walk into a supermarket and the freezer looks like a disaster, and it's really hard to find our product, we've got to do something about it."As well as the merchandising side of the business, the other area Allan has to get right is profit. Patties went public in 2006 when it sold $103 million worth of shares at $1.75 apiece.The shares have been a disaster for anyone who took them up and for those investors who bought in after the company went public. The company failed to meet its prospectus profit forecast last year and the shares recently sank to 97?. Last year Patties paid $25 million for the Chefs Pride and Creative Gourmet businesses, which provide frozen fruit to the food-service and retail markets. But even with those acquisitions under its belt, the company is unlikely to make this year what it forecast it would make for 2006-07.The prospectus tipped a $16.8 million tax-paid profit; and the company ended up making $12.7 million last year.Patties' scrip recently jumped from $1.09 to as much as $1.27 - they last fetched $1.19 - on the news that profit for 2007-08 would comfortably be within a range of $14.5 million to $15.5 million.Funnily enough, Patties' poor performance is one reason Allan took on the job. "It has its challenges, but that's part of what I like doing. I've always moved into a situation that needed attention," she says."If we'd met our prospectus forecasts and everything was going along and there was nothing that needed to be attended to I wouldn't have taken the job."I'm not very good at maintaining the status quo," she adds. The company's shareholders, including those investors who have recently been buying the stock, will be cheered to hear that the underlying business is sound. "You've got four brands that are fantastic, including two iconic brands. It had a very good financial base to work from. It wasn't actually broken but from the outside it looked like it was. But I knew as a director it wasn't broken, but there were a whole lot of things that we could do to improve the outcome; and that's what we've done."And some of the directors, including the Rijs family, who retain effective control, have been buying the shares; which is encouraging. But it might take a bit longer for the market to be reassured that the show is on the improve. Allan says that some of the things that needed to be done would not show up as financial improvements until the 2009 financial year.Asked whether she'll be there in five years, Allan responds: "You'll have to ask the board that. My intention is to be here then because that's when we will have grown. We want to grow organically and by acquisition, and acquisitions are always interesting. So, unless the board has another view, I have no intention of moving."