Delighting Australians Since 1927

Darrell Lea

The brand in question was Darrell Lea. Established in Sydney in 1927 by the Lea family, it grew to become Australia’s largest privately owned chocolate and confectionery manufacturer before, er, melting down last winter to Ms Gillard’s evident distress. Fortunately, though, she was mourning prematurely, for the company was rescued in the nick of time, and is being turned around to once again profit and to produce some of the nation’s favourite sweeties for a long time to come.

The company, which went into voluntary administration, was bought by the Quinn family from Queensland. Tony and Christina Quinn own a famous related retail brand (and private-label business) which has for many years taken on and beaten multinational brands such as Nestlé, and are well known for their involvement in Australian motorsport in Australia. The family, which is high up on the BRW Rich List, issued a statement last September saying it had been looking for some time for a way into the confectionery business and that the availability of Darrell Lea was something they felt they could not pass up.

It was an exciting and interesting development for Tony’s son Klark, who had just finished a restructuring project and was looking around for his next challenge. As he told Business in Focus, as soon as news of the administration was announced, the family knew what it wanted. “Dad was away somewhere racing and he received two text messages – the same day that Julia Gillard went on TV – telling him to buy. The first was from Grandma, because she wanted to continue enjoying the company’s chocolate ginger, and the second was from me.” He relocated from the Gold Coast to Sydney within hours of the decision to buy and now lives on site.

Many things had been going wrong with the chocolate maker, he explains, and the problems had been mounting for several years rather than becoming a single crisis. But the overriding problem was that of distribution. As well as a network of independent retailers (newsagents, petrol stations and the like), Darrell Lea had its own set of shops, many of them in large malls throughout Australia, and were effectively competing with the other obvious chain of outlets: Coles and Woolworths. “The distribution model was flawed. It might have worked 50 years ago but not today.” Hard and unpalatable decisions had to be made and the entire network of almost 60 company-owned stores was shut down, to the chagrin of hundreds of staff.

On the manufacturing side, it has become extremely difficult to sustain investment in production in Australia, although as far as the economic situation is concerned, “we have to assume it can only get better from here – because at present it is absolutely disastrous,” shares Klark.

Investment was needed, something that had been lacking for many years and something the Quinns know about. “We are always challenging ourselves to improve our product and be more efficient. We are no longer competing just against companies in the next suburb – we are competing against companies in China, the US and Europe and we need to be competitive on a global scale.”

The Quinns, via their other business interests, have built excellent relationships with a distribution network which already includes the huge supermarket combines. “Australia is a very tricky market,” Klark says. “It is one of the hardest countries in the world to sell to – the size of America but with less than ten per cent of the population. The cost to serve Australia is very high.”

Klark diplomatically declined to comment directly on the current bad press that Woolworths and Coles seem to receive, but pointed out that yes, of course they drive a hard bargain, but also yes, they have the whole country covered and there is a cost to doing that. “It takes a lot to invest heavily in the Australian market. To try to be a manufacturer without Coles and Woolies would be very difficult. Hard as they are, we actually enjoy dealing with them because we also dealt the other way, without them, and it’s even harder!”

Klark predicts a time fairly soon when Darrell Lea might be moving 70 per cent or even more of its production through the giant nation-wide distributors (which are just now starting to take the products, given their half-yearly buying cycle), but he emphasises that such a change would not be at the expense of independent retailers because the firm ambition is to increase output. To that end a complete new 14,000 square metre factory is under construction at a cost of more than $20 million dollars. The greenfield site is some half-hour’s drive from the current Sydney (Kogarah) plant which, according to Klark, is a typical 50-year-old facility and just not suited to modern-day production technology. “We cannot compete as a confectionery producer out of the site we are in,” he explains. Klark has looked at the latest equipment in Europe and is currently ordering it.

The family has a very good track record of innovation and new product development and has been handling the supply chain of Darrell Lea in its usual manner – requiring parallel investment and commitment but paying well and in an orderly fashion. With the immediate ‘fire-fighting’ aspects of the acquisition now largely under control, Klark is turning his attention to an overhaul of this network but forecasts that an extensive revision or drastic pruning will not be needed. Suppliers to Darrell Lea can in turn be relieved to know they are dealing with the Quinns. “They have been with us for six months now. They see how we operate and I think they will be excited at what the future holds. They will want to continue to do business with us.”

Iconic or not, the brand itself was a classic case of neglect and being taken for granted. It seems there had been a complacency, an assumption that because it was so well known it needed no burnishing or nourishment, one of several basic blunders made on the marketing side. Another, says Klark (who shares his father’s love of motorsport, who won the Australian GT Championship in 2012), was the proliferation of up to four different iterations of the Darrell Lea logo across a product range which itself was far too extensive to make economic sense. From the time of purchasing the business, the product range was cut up to 70 per cent but everything on the shelf today are keepers, even Grandma’s Ginger.

“We are undergoing a total product revamp,” says Klark, “putting every line under the microscope.” New product packaging is due to be unveiled soon, as well. Indeed, rebranding needs to be delicately handled. “We are careful custodians of the brand and we have to be very careful how we treat it,” explains Klark. There will be no wholesale reformulations, for example.

Darrell Lea needs to be brought to a younger audience, says Klark, but of course without alienating existing customers. During the hiatus caused by the takeover and repositioning of the company, some PR was useful: the ‘biggest ever Rocklea Road’ promotion for Australia Day helped the age profile, while the sponsorship of motorsport races was more than just a link to Klark and Tony’s hobby (better make that ‘passion’). “We do have to be careful what we do, though, because this is still a premium confectionery company,” Klark says. There is a new and vibrant tagline already in place: “Everyone’s Darrell Lea.”

So what safeguards are there to prevent the Quinn family from committing the same errors as previous owners of the precious Darrell Lea brand in a few generations’ time? Klark admits to a sweet tooth and a liking for the products (and he argues that although some products might usefully be aimed at health-conscious Australians, chocolate is likely to remain a strongly ‘protected’ comfort purchase), but acknowledges there can be no guarantees that nothing will ever go wrong.

On the other hand, he told us, the brand remains almost completely undented by the events of the last year and has come through unscathed. “That brand equity gives us confidence to invest back in the brand,” he explains. Grandma Quinn’s chocolate ginger is in pretty safe hands.

Making Sense of Management

Management is the art, or science, of getting things done through people. Sounds fairly straightforward – except for the fact that people are not robots waiting to do our bidding. People have their own minds, motivations, and goals. So how do managers keep operations – and the people behind them – running as planned?

September 25, 2018, 8:16 AM AEST