business managerment

Sunday Times 02.10.16

Now I know my onions, middle England can feast on organic veg

GUY WATSON is something of a black sheep. The 56-year-old grew up on a farm, where he milked his parents' cows and collected eggs. But when the time came to strike out on his own, instead of livestock farming he plumped for growing and selling organic fruit and vegetables. The problem was that the aspiring entrepreneur did not know one end of a marrow from the other. "I was technically incompetent," admitted Watson, who founded Riverford Organic Farmers in 1986. "I didn't know what I was doing. I was blindly driven by my ego and the need to prove myself."

The Oxford graduate had worked as a management consultant for two years but got swept up in the "buzz about organic produce" that began in the mid-1980s. Setting out on his own was hard work. Watson paid his father £250 a month to rent three acres of land and paid £5 an hour for a plough. When he was not sowing, weeding or picking vegetables, he visited other organic growers in Britain and the Netherlands to learn his trade. "It was a steep learning curve," he admitted. In his first year he made £6,000 selling his produce to local shops from the back of his old Citroën. Just four years later he was supplying supermarkets including Waitrose and Sainsbury's. However, in the late 1990s he turned his back on the big chains. A fierce price war was raging, and suppliers such as Riverford got caught in the crossfire. With his profit margins squeezed, he stopped selling to supermarkets.

From then on, all his produce went into the weekly "veg box" offering that Riverford had launched some years earlier. Selling directly to consumers was "refreshing" compared to selling to the faceless supermarket giants, he said. Watson has profited from the growing hunger for organic food in middle England. Today Riverford delivers about 50,000 boxes to customers each week. They hold a preset selection of contents that can include a variety of meats, eggs, dairy, fruit and veg.

One such package last week contained potatoes, calabrese broccoli, leeks, chillies, red onions, swiss chard and red peppers. "Customers can't have exactly what they want, but they are happy for us to make the choice for them," he said. Box buyers spend an average £25 per order. The business, which employs 525 people, made pre-tax profits of £790,000 on sales of £47m last year. "We're not making as much money as we should because we sell a highly perishable, low-value product," said Watson. That makes it harder to manage and transport stock, reducing margins. Riverford has three sister farms (including one in France) and imports 18% of its produce from Italy, Spain and Morocco.

Watson's two older brothers and sisters are all involved in the business. Their parents, John and Gillian, leased the 860-acre Riverford farm near Buckfastleigh, a small market town in Devon, from the Church of England in 1952. He was born eight years later and educated at a comprehensive school in nearby Totnes, where he now lives with his second wife, Geetie Singh, 46, and his stepdaughter Mabel, 7. Together they own the Duke of Cambridge, an organic pub in Islington, north London, which Singh opened in 1998. It was one of the first organic gastropubs in the capital.

Aged 18, Watson got a place at Oxford to read agriculture and forestry sciences before returning home in the early 1980s to work on the farm. He left two years later to become a management consultant, working in London and New York. "It was a rebellious phase," he said. Although his fortunes have been built on veg boxes, Watson was initially sceptical about the concept. "Packing a box where the farmer decided what went in was unheard of. Most people would champion [the idea] that the customer is king."

In 2014, Riverford launched recipe boxes to match start-ups such as Hello Fresh and Gusto. But Watson is not too concerned about the competition in this area: "We're just following along and I'm happy with that. I don't think anyone is making any real money out of it." He owns three-quarters of the business; his first wife owns the rest. They have four children together: Alice, 26, Beth, 24, Caleb, 20, and Donald, 18. Despite being a business run by five siblings - Ben oversees the Riverford farm shops, Oliver and Louise look after the dairy farm and Rachel is marketing director - Watson hopes the staff will own the business one day, as a cooperative, focusing on social enterprise.

In the meantime he vows to keep private investors at arm's length. "They have a blinkered view of life and most of them don't have a clue how to run a business. All they care about is money, so why would I want to sell it to the highest bidder?" His advice for entrepreneurs is to know your customers: "They give you immediate feedback on your product and no amount of market research will substitute for that."

Watson added: "Get people in who can cover the areas that you're not good at."

Questions
1. To what extent do you believe they are entrepreneurial? Underpin your answer with theoretical
discussion on what makes an entrepreneur. Compare and
contrast their behaviour in setting up their own company with relevant theories on
entrepreneurial behaviour.

2. As an independent consultant, what advice would you give them
about how to expand the business and about the potential pitfalls they might face.

3. While effective planning and control of financial resources is essential for all firms, small
firms face more obstacles than larger ones in ensuring this effectiveness. Outline the
reasons for this and discuss the ways in which small firms can optimise the use of
funding within their business.

4. What issues has GUY WATSON experienced in growing his business? Would any of the
theoretical growth models that you are aware of be of any use to him in overcoming
these issues?

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