Why St.George funds food and beverage enterprises

With interest rates at an all-time low – and some industry pundits stating they might go lower – the opportunities for growth, especially for an industry like food and beverage, are enormous.

Mark Burgess is the experienced and affable relationship director – consumer goods leader at St.George Bank. His portfolio of customers are in the food and beverage arena and he sees solid opportunities within the industry over the next 12-18 months. It is one of the bank’s growth sectors, mainly propelled by the domestic and global demand for quality Australian produce. He’s also a good gauge of what other factors are propelling the market at the moment, and Burgess cites new technologies and food trends as being market drivers.

At a recent St.George Signature Food Event, Burgess talked of not only how the food and beverage sectors are looking healthy, but how the role of banks has changed over the past decade.

“I think within the last few years – the banks have shifted away from being what I would call ‘order takers’ – like at McDonald’s – to that of being more trusted business advisors. That is one of the reasons St.George moved to an industry model four years ago because we wanted to have industry experts to not just be there to take orders from customers, but also have insightful discussions with them about their industry as well as their growth plans and where they see themselves going. Then talking to them about how we can support them to grow and prosper. It’s really about that. It is one of the reasons I joined the bank.”

READ MORE: How a 1960s cartoon predicted the future of food

Having been a director at Ernst and Young and a senior corporate advisor, Burgess likes helping businesses grow. It’s another reason he likes the food and beverage industry.
“While we are seeing growth with our customers who are the larger players in the market, as a bank we also focus on family businesses and the middle marketplace, too,” he said.

Why? Burgess sees them as lean, hungry and leading the charge when it comes to some of the newer market sectors within food and beverage.

“Those companies are really nimble, and quite dynamic and they are looking at new areas that they can diversity in,” he said. “For example, a lot of my customers look to supply Coles and Woolworths, and it is those customers who are leading the charge in the healthy alternatives market. Then there is a push for the vegan movement, as well as alternative substitutes for meats and other core products.

“Some of those businesses are ahead of the curve and have a huge focus on innovation within their organisations. I’ve got one customer who is a traditional meat supplier and they are now getting into non-meat products.”

Although Burgess is excited about the market and where it is headed, this doesn’t mean the bank has a laissez-faire attitude towards doing business. There are still systems that have to be followed. A large portion of food and beverage businesses involve the manufacture of perishable items, not exactly great assets to put in the ledger when talking to your bank.

So what does a company have to do with regard to getting a loan if they need to recapitalise, or more often than not, expand their business?

“If we’re doing cash flow lending as opposed to bricks and mortar property lending in the food space, we look at your working capital cycle. We are relying on your debtor book to fund your business,” he said. “We look at the strength of your relationships and what your terms are like with those debtors. We then look at how efficient your supply chain is. It’s also about the experience of the management of the company, too.”

And how does the bank find the attitude of the big players like Woolworths and Coles when it comes to helping out not just those who are regular brands on their shelves, but those new to the market? Burgess works closely with them and said they are very supportive of entrepreneurs because they want to see new products on their shelves.

“They want to get onboard because an entrepreneur could produce a new product that might fly off the shelves, and that product might also be a reason why consumers go to a Woolworths store instead of Coles or vice versa,” he said.

New technologies are also a driver for the industry, and Burgess and his team are seeing those innovations first-hand from their customers.

“I was talking with a customer today who specialises in ready-made meals, and he has
been flat out,” said Burgess. “His product had a shelf life of three to four days, but because a packaging specialist brought out a new technology, his product now has a shelf life of 7-10 days. Something as simple as that has made a huge impact on his business in terms of wastage and time savings from deliveries.”

Burgess loves the industry, not just because he’s a foodie, but because it is dynamic, ever changing. He is very excited about the future of banking in the sector, and the industry itself.

“The thing I love about this role is that it is all about seeing the customers grow and prosper and supporting them in their growth plans,” he said. “Given my corporate advisory background, I can provide meaningful insights around business strategy and direction. The food and beverage space is a rapidly changing environment and it’s exciting.”

How a 1960s cartoon predicted the future of food

Sharon Natoli loves food. Which is just as well when she makes her living as an author and speaker specialising in the food and beverage industry.

At a recent event held by St.George Bank at urban farm, Cultivate, which is based in the Sydney CBD, Natoli spoke about the future of food and some of the challenges processors, retailers and manufacturers face.

Her first point was that the future – in general – is coming faster and faster. The Human Knowledge Curve has shown that in 1900 humanity’s knowledge was doubling every 100 years. In 1945, the rate was doubling every 25 years. By 1982 it was down to approximately one year. Today, it is estimated that what humans know is doubling every day, while deep learning platform IBM Watson predicts that our knowledge will double every 12 hours by 2020. What is driving this alarming rate of change?

“It is around data collection,” said Natoli. “The fact is that every day that we use our laptop, our phone, we buy things, and we click purchase things online. We use our credit cards, that’s data that is being collected all the time. Wearables, sensors – so much technology around us, and so much data to collect. The key is keeping up with the rate of knowledge that is happening in terms at which it is doubling.”

READ MORE: Federal funding announced for aquaculture development in Northern Australia

And with all these changes starting to occur, it is important that food and beverage businesses don’t get caught ‘sheep walking’ – a term that Natoli said is similar to sleep walking, except people are wandering around with their eyes open.

“We have our eyes open and we are conscious, but it is hard to see the future coming at us because we are surrounded by the status quo,” she said. “If we get caught sheep walking, then it is harder for us to innovate and keep up.”

She gives the example of French yoghurt manufacturer Yoplait, who up until 2015 was the number one brand in the United States. Over a few years it lost 33 per cent of its market share, with 23 per cent of that coming within one year. The equated to about $500 million in revenue. What happened? A rival read the future.

“Chobani came along with a better tasting yoghurt, a lower sugar yoghurt – the kind of things consumers were looking for at that time, and so they took a large chunk of that market share away.”

However, one topic that Natoli covered could have consequences for food processors – 3D printing. Back in the 1960s the cartoon television series The Jetsons had the Foodarackacycle, a device that, with the press of a button, would produce food for the family. Fifty years later, similar technology is coming to fruition with the Foodini.

“Foodini is a 3D printer that enables us to serve food, freshly printed,” said Natoli. “It is a smart kitchen appliance using 3D printing technology that enables us to personalise our food. Not only the amount, but a personalised nutritional profile of the food, and we can personalise the way that it looks.

“It is also attractive to health-conscious people because it puts food production in the hands of the consumer. You can print things like crackers, wraps and pizza bases – some of the things you would usually buy prepared from the supermarket.”

With the future fast approaching, it would be easy to put your head in the sand and say “it’s all too much”, especially as Natoli has already stated, our knowledge is almost doubling every day. However, she also said there are three “plates that need spinning” if the food and beverage manufacturers are going to keep ahead of the knowledge curve. They are: what do you need to keep? What are things that these companies need to keep up with? What do they want to create?

When she talks about what companies need to keep, it is more about their legacy, their history – it is about a company’s culture, both past, present and looking to the future.
Probably the most important of the three “spinning plates”, is keeping up with trends, something that could be argued Yoplait failed to do when it lost its market share in the US. There are lots of trends and different businesses need to keep up with them, said Natoli. She said there are three areas of macro trends that will be relevant to the food and beverage industry.

“The first is this rising rebellion,” she said. “What we are finding is that we have the means and the motivation more than ever to stand up for the things we believe in. We are seeing a power shift from organisations and institutions through to individuals. And this is being shown a Colmar Brunton’s Millennium Monitor. What they monitor is Australia’s changing social sentiment. What they have found, is we are moving from an era of conformity where we had trust in institutions and organisations, through to this rebellious era. What we are valuing is empowerment and individual responsibility and taking on change ourselves.”
This is leading some food and beverage brands to adopt a rebellious approach, such as the likes of Soul Fresh, which owns the brand The Milk Thief.

“They’re saying, ‘we’re a movement, not a corporation’. They are saying they are a disruptor of the status quo versus doing what we’ve always done,” said Natoli. “They’re focussed on creating healthier and better foods for consumers instead of focussing on delivering foods and beverages at the lowest cost possible.”

The second macro trend is the idea of getting more from less. This is around the intersection between disquiet about the state of the environment, combined with consumers concern about their personal health. It’s about growing things with less impact on the environment but also being healthy. She cites the example of Mike Lee from US-based Alpha Food Labs, who is looking at the biodiversity of the supermarket shelf. Natoli said he has flipped things on its head. Usually, when it comes to new product ideas, it is marketing or product development people who come up with new concepts and go out and tell the farmers, or the suppliers, to grow this or produce that.

“What Alpha Labs is doing is turning that around and going out to the farmers and saying, ‘what are you growing? What is good for the soil? What is in season?’ and then the company takes that and makes a product from it. It is the opposite of what we would usually do from a food production perspective,” she said. “They want people to see that these products are not just made from wheat, rice and oats, but they are made from things like lentils, fava beans and moringa powder, millet – all kinds of different grains and that is a way to introduce biodiversity into the food chain.”

The final part in the macro trend equation is the expectations that people have when it comes to what they are consuming. Natoli said they have high expectations of food producers as well as high expectations from their food.

“This is where transparency and knowing where your food comes from – who made it, what’s in it – comes in,” she said. “Also the use of technology in terms of things like augmented reality, where you can scan a barcode of a product and find out the story behind it. Also around health and wellbeing and how we can really improve it through what we eat.

“Companies like Habitoir, which is a US company that takes some of the insights around genetic testing, and develops personalised nutrition plans that meet peoples’ expectations around how food can deliver better health to them.”

Natoli also believes that even though there is a lot of automation, robotics, artificial intelligence and augmented reality creeping into the food processing and manufacturing space, there is still room for human interaction. Some companies even make it part of their marketing plan.

“Harris Farm, they often put themselves forward – like one of the brothers Tristan Harris – as commentators,” she said. “They put a face to the brand. It gives it that human element.”
And getting back to her point about the rebellious disruption going on, The Havas Media Group recently completed a survey that involved 300,000 consumer and 1,500 brands across 33 countries. What it found was that brands that are more meaningful outperform the stock market by double over a 10-year period. Being meaningful meant contributing to the collective well-being of society.

“Overall the future is coming at us quite rapidly and we don’t want to get caught sheep walking. We have to be really future ready. If we can spin those three plates together at the same time, then that is going to help us navigate in this decade of disruption. Many a false move was made by standing still, so whatever you do, just don’t stand still.

“It is really great for food businesses to have the opportunity to come together, to network, and connect, particularly over a meal. To create those social connections over food and to share their ideas and learnings.

“I think the way of the future is really about collaboration and so an event like this that St.George has put on is really beneficial for helping to do that.”