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Byron Bay Cookie Company: A Local Brand Goes Global A Case Study produced for the Bord Bia Brand Forum 2012 © Simon Bradley Weekandoo Consulting 2012. The author is grateful to Gordon Slater, Chairman Byron Bay Cookie Company and Mark Perrin, Managing Director Byron Bay Cookie Compa\ ny Europe with whom he worked in preparing this case study for purposes of the Bord Bia Brand Forum, 2\ 012. This case study was developed solely as the basis for class discussion. Cases are not intended to serv\ e as endorsement, recordation of fact, sources of primary data, or illustrations of effective or ineffective management. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or tran\ smitted in any form or by any means – electronic mechanical, photocopying, recording or otherwise – without\ express written permission of the author. F or Gordon Slater, Chairman and owner of the Byron Bay Cookie Company, the period of sustained growth since 2006 was transforming his business. Described by Etihad Airlines in its in-flight magazine as one of Australia’s iconic brands, the high- inclusion gourmet cookie business had successfully built a reputation for quality and flavour combined with its heritage. Originating in one of Australia’s most desirable beach communities and heartland of organic farming, Byron Bay, 750 km north of Sydney; sales had grown nationally then internationally via café chains, independents and retail channels.
M oving from a pure exporting model in 2008, Byron Bay Cookie Company had invested in a joint venture, manufacturing under license in the UK for its European customers. More recently in 2011, it had begun test-marketing retail- oriented franchising agreements, Byron Bay Bakehouse, in its domestic Australian market and had opened a sales office in Texas, USA to facilitate market development in North American markets.
Internationally, competition in the sector was, however, intense. In the case of the US, Byron Bay Cookie Company was entering a market with many established regional and national cookie brands and coffee chains necessitating a strategy that played to its advantages as a niche gourmet product. Further, in the UK recently, several cheaper and lesser quality ‘me-too’ products added to the challenges of rising input costs and price pressures from buyers in coffee shop chains looking to improve margins during the economic downturn since 2008.
W ith sales in 2012 on target for €11 million from 20 different country markets, the company continued to face issues with managing currency fluctuations, complicated distribution structures and pricing pressure from competitors as well as quality control in the supply chain and marketing communications. Additionally there was the pressing need to increase automation in the baking process to support scalable growth and quality control as international sales continued to grow. These circumstances compelled Byron Bay Cookie Company to seek new sources of competitive advantage while facing the conundrum of how to grow the brand without losing sight of its origins in the face of tougher market conditions. Provenance, Quality and Taste B yron Bay Cookie Company produced a range of 20 products across 240 stock keeping units (SKUs) selling in over 20 countries globally. It sold about 70% of turnover through food-service channels with the remainder destined for retail.
International sales relied on systems of distributors selling via other distributors to food-service clients, supported by Byron Bay Cookie Company’s own sales and marketing team. Growing at about 17% per annum and employing 75 people, the business was on target to sell about €15 million worth of goods in its twentieth anniversary year, 2012. F ounded in 1992 by Maggi Miles and Gary Lines, the Byron Bay Cookie Company was literally a cottage industry start-up. Baked using a regular kitchen stove, the partners sold their indulgent cookies through local restaurants and cafés, which were enthusiastic to support local enterprise. Situated on Australia’s most easterly point, Byron Bay had a magnetic appeal for being a laid-back idyllic beach-town for international tourists, backpackers and Australian people seeking a slower pace of life. As such its name travelled far and wide with a cachet for being a piece of heaven on earth.
S ince inception there was a focus on flavour and ingredients in Byron Bay Cookie Company’s cookies, based on high-inclusion rates and high quality ingredients.
But premium pricing had never been a problem in the friendly business atmosphere of the Byron Bay community, giving latitude to Miles and Lines to perfect their cookie recipes. Marketing was primarily by word of mouth and through product championship, with resellers relaying the brand’s story supported by in-store merchandising.
A ll visual stimuli underscored the quality message, using packaging, in-store point of sales materials and electronic marketing, especially social media, to communicate the brand’s values.
In cafés for example, cookies were stacked in traditional glass jars while retail packaging for boxed goods and individually wrapped cookies was elegantly simple. Additionally in coordination with café clients, the marketing department produced branded materials to support special promotions and point of sale deals as required. Later it also began to place emphasis on processes and standards in display and merchandising such as how to fill, present and maintain the cookie jars, to ensure the first point of contact with the customer, whether in a café in UK, USA or Ireland was always the same, artisanal high- quality experience.
Gordon Slater B y 2002, however, the company had reached a point where it was evident management needed to bring in other skills to the business in order for it to develop its premium positioning in a market ready proposition nationwide and beyond. Slater, a local orthopedic surgeon, was already a fan of the cookies and believed he could bring something to the business, offering to invest in return for equity and a directorship role. He later purchased the remainder of the business from the founders, setting course for international expansion.
S later was convinced people the world over would connect emotionally with the Byron Bay name once they experienced the wonderful flavours in the cookie recipes supported by branding that captured the original artisan feel of the brand. One of the first significant developments was the decision to begin exporting to the UK, which along with increased sales and brand awareness, brought new challenges in logistics and quality control.
Cookies to Europe T iming was critical to the success of the UK market entry. The café market in the UK was just taking off and it made sense to get in early. Additionally, the exchange rate between Australian dollars and British sterling was running at about 3 to 1, making it economical and competitive to export the company’s cookies. Further, close cultural ties and large volumes of people travelling to and fro between the two countries indicated that word of mouth would help generate and sustain demand for good quality products.
R ecruiting Mark Perrin as the UK sales manager, the company began targeting corporate accounts and independents around the London area. Within a few short years Byron Bay Cookie Company cookies were selling in 500 cafés throughout central London alone.
This success presented new priorities for the management team particularly in operating a reliable logistics chain that could deliver cookies to London fresh, within a matter of days since they were made by hand in the remote environs of Byron Bay.
T he company continued to experiment with ambient temperature shipping among other technologies and increasing product shelf life beyond 6 weeks while the UK business grew; yet it soon became apparent that exporting was unsustainable under emerging market conditions. Food miles for example were increasingly becoming an issue for local buyers in the UK. Secondly, currency exchange rates had negatively impacted the business’ margins, which were already reduced through the use of independent distributors. Inevitably the situation seemed to provoke the question as to how much Byron Bay Cookie Company wanted to stay in the UK market.
Strategic Developments C ompelled to commit, Slater entered into a joint venture manufacturing agreement with a company in Manchester to produce, under license, cookies according to his company’s recipes. This manufacturing facility could then supply the UK and European markets, including Ireland and continental Europe. The decision to invest in the UK also gave Byron Bay Cookie Company the opportunity to streamline costs by maintaining a direct sales presence. Perrin, supported by his administrative team, could deal directly with clients throughout the UK while working with distributors in mainland European markets and Ireland. As such the move helped reduced its carbon footprint, distribution costs while improving margins that allowed it to better cope with currency fluctuations between sterling and the Australian dollar. With the joint venture, Perrin’s role adapted as well, managing master distributors in the UK while developing the business internationally via sales activities, food shows like SIAL and Anuga and relationship building with new distributors.
I n the case of the US, the situation was quite different from the UK market, however. It was 2009 and the UK market was going well when Slater and his team decided to enter the US. Due to its enormous size, intense competition among cookie brands and resulting cost pressures for producers, management decided to establish a sales office to deal directly with local cafés and independent businesses as opposed to larger branded chains, while outsourcing warehousing to a third party. This presented Byron Bay Cookie Company with a niche opportunity reasoning larger brands could not tailor their sales and distribution structures to cater to the individual needs of locally oriented businesses.
F ocusing on smaller production runs and relationship building, Byron Bay Cookie Company began developing a foothold in this niche as an upmarket boutique cookie, exclusively available in independent cafés. With continuing growth in US sales it was considering a joint venture manufacturing agreement and was actively seeking trusted partners with whom it could work.
Competitive Advantage R emarking on the distinctly rich tastes and textures, Slater once explained, “it is the real, fresh flavor of chocolate and fruit that sets our products apart as we do not use preservatives”. Meanwhile, larger competitors could not match the quality and taste, constrained as they were by their own cost and distribution structures; a situation, which only further distinguished Byron Bay Cookie Company products from other biscuits in the marketplace.
I t remained committed to the philosophy of using top quality dried fruits, nuts and chocolates in its mixes which justified the price premium charged over lesser quality substitute products. Yet as cost pressures increased for rare ingredients such as macadamia nuts and coffee chain clients sought to improve retail margins, management worked to reassert brand value through relationship building and point of sale deals. Meanwhile it had also begun to evaluate new sources combo dealBuy any regular latte and a Byron Bay Cookie * for only: £ *Subject to availability. Image shown for illustrational purposes only. O\ ffer may exclude Byron Bay Gluten-Free Cookies.
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Banoffee Pie www.byronbaycookies.co.ukFor more information and to download a range of Point Of Sale material please visit how tostack and fill your cafe cookie jar 1 Carefully place the cookies in the jar, using ei ther the tongs provided or whilst wearing a pair of disposable gloves. 2 To form three neat columns place one cookie at the back of the jar then two at the front (slightly overlapping). Continue filling the jar in a circular fashion until it is full - this shoul d use exactly 18 cookies (3 packets) 3 Tie a label loosely around the neck of the jar, not a round the handle. Please let us know if you need any replacement tags. 4 Always rotate your stock and keep the jar full - no one likes to buy the last cookie! On a weekly basis you should wa sh, clean and dry the jar to ensure that the cookies are kept in the best conditions. 5 Store your back-up stock away from direct sunlight and heat - ideally at room temperature (13-22°C). 6 Never drop a box of cookies as they will s hatter! Remember to display your point of sale so everyone knows that you sell the world’s most delicious cookies! Please follow these simple steps to make Byron Bay Cookies work for you.\ .. www.byronbaycookies.co.uk Go BANANAS FoR BANoFFEE PIE FRAPPE Go BANANAS FoR BANoFFEE PIE FRAPPE Enjoy a Banoffee pie frappe for only £ Made using a Byron Bay Banoffee Pie Cookie! of competitive advantage through new product development.
O ne such area was the company’s success in developing product lines for the ‘nothing-added’ segment, with particular success in the gluten-free category. Key to the company’s success was, in Perrin’s opinion, attributable to the fact that gluten-free products were marketed to all customers rather than as a specialty product line sold through health food shop channels for example.
T his allowed Byron Bay Cookie Company effectively differentiate its cookies, available in mainstream cafes and retail outlets, from other copycat brands entering the market place competing mainly on price. Additionally, more recently, management had begun leveraging the intellectual property of its recipes into new consumer oriented propositions such as its Cookie Mix and its franchising retail concept both launched in 2011.
F urthermore, management had also begun a phase of mergers and acquisitions to beef up its portfolio. In that respect, it purchased a number of smaller Australian brands operating in related food categories including Luken & May Biscuits and Falwasser Crispbreads.
Bringing both gourmet food brands into the fold, management launched Byron Bay Gourmet Foods. W ith a focus on quality and healthiness, these newly acquired product lines featuring crackers and crispbreads were aimed at the higher end specialty shops such as delis, cafés and food service sectors. It was hoped these additions would present cross- selling opportunities into existing channels for products from its enlarged portfolio.
Looking Ahead W ith all the developments in the period 2010-2011, the business was experiencing double- digit growth, but it was still below the 20% target. While the augmented portfolio presented new commercial sales opportunities, it was the move to exploit the intellectual property inherent in Byron Bay Cookie Company’s cookies that seemed to represent the greatest potential for longer-term international sales growth. In addition, the decision to establish a joint venture manufacturing arrangement in the US would begin paying dividends in the medium-term.
W hile it was still too early to determine the potential for the franchising model, it was evident that the company’s ability to leverage its intellectual property into exciting and novel niches such as gluten free cookies and cookie dough mix, was paying dividends, consolidating its brand in the market place and extending it into credible new ventures.
T hese developments seemed well-suited to neutralising the threat from cheaper and lesser quality ‘me-too’ brands including those developed for supermarket retailers and those competing in the café space. Yet as the company continued to grow internationally it would face challenges in reconciling the conflicts between the needs for consistency and Byron Bay Cookie Company’s reputation as an artisan brand as well as the need to be competitive while remaining true to its quality commitment.
L ooking ahead, Slater was adamant the creative energy behind the products would remain in Byron Bay, the heart and soul of the company, while other elements could easily be outsourced or simply re-located as market circumstances required.
To bolster the company’s strategic position he had implemented plans to recruit more highly skilled personnel into the team, including food technicians, marketing and sales people that would support this focus on international growth.
In the meantime he and Mark Perrin and the newly appointed US sales manager were due to discuss how to coordinate sales activities in the coming year. G azing out over the golden crescent of beach nuzzling the lush forests of Byron Bay, Slater called his secretary to arrange his next business trip to the US and UK.
Pondering how much had changed since he took over the company in 2002 Gordon Slater wondered what was the best way to grow his company and retain that iconic status for which it had become known?
Key Learnings R etaining a brand’s artisan appeal when it internationalises brings significant changes to operations and communications management, presenting risks the brand may lose touch with its roots. Defining export and internationalisation strategies that I dentifying the core value in the brand is critical- it may not always be the obvious. For Byron Bay which has built a reputation on provenance and heritage, management seem to have identified the recipes as their core value, building new businesses around that intellectual property in the form of franchises and cookie dough for example.
L ean organizational models may help keep costs down but there is a balance to maintain with brand building activities and the risks of commoditization by losing control of the brand story through layers of distribution.
B alancing push and pull marketing to support a quality and premium brand positioning may present challenges in the absence of direct relationships with the end customers.
Byron Bay Cookie Company attempts to build those relationships through 2-for-1 promotions and in- store merchandising while pushing premium positioning with its clients, independent cafes.
B yron Bay Cookie Company’s international success seems to have benefited from the reputation of their hometown and their internationalisation strategy seems to have followed a classic approach pursing initial markets that were culturally similar e.g. UK and Ireland and therefore possibly easier to enter. Notes and Take Homes From Byron Bay Cookie Company
