Established Bristol chocolate-maker Elizabeth Shaw has been buffeted by recession, but going back to basics is helping the company to find a way forward. Chloe Rigby met managing director Malachy McReynolds.
No interview is complete without a cup of tea, and at Elizabeth Shaw the tea comes in mugs conjuring a bygone heritage. A hundred years of making chocolates in Greenbank, Bristol, is celebrated on the white mugs that picture its erstwhile factory home.
The date of the centenary was 2001 – a milestone that managing director Malachy McReynolds says was only just achieved: five years after manufacturing in Bristol had come to an end, and production of chocolates such as Elizabeth Shaw Mint Crisps and Famous Names was outsourced to six factories in the UK and Europe.
Now the company has morphed into a “brand development organisation” and a “supply-chain management business”. No longer is Elizabeth Shaw worrying about health and safety or factory security; instead, McReynolds and co think about strategies for reconnecting with customers, take soundings from brand focus groups and make decisions on supplying customers who can’t get credit insurance.
The factory-centred workforce of more than 250 is now a head office team of eight in Pucklechurch, plus three salespeople. The smell of chocolate is still discernable, but it’s a long way from the Greenbank days when the sweet scent wafted through neighbouring residential streets.
And McReynolds’ role has changed too. The father-of-six has gone from factory manager to “brand marketer.” Such is the reality of life in a global market. “There is much more capacity to manufacture chocolate than there is demand for it,” he says.
“Production coalesces around the most efficient manufacturing – wherever it is. Our Famous Names product is now made in Germany. It is probably the most expensive place to manufacture in Europe, but the ability to manufacture using automation makes it the most economic. In reality, you do that or somebody else does.”
It’s been a difficult transition. Not only has the company had to rethink the way it does business, but it’s been involved in some of the headline events of the recession so far. A £450,000 order to Woolworths went unpaid when the retail chain failed in the run-up to Christmas 2008, then its former Icelandic investor decided to sell its stake in Elizabeth Shaw after the Icelandic banking crisis.
Today Elizabeth Shaw is owned by Imagine Capital, an investment company in Oslo. “We were introduced by one of our non-executive directors. He knew an individual in that business and we started discussions this spring,” says McReynolds, who has now been through three sales of the business, including his own management buyout in 2000.
“Talk about an old dog learning new tricks – working with yet another new set of owners,” he says. “So far it’s been a good transition. We’re getting on extremely well with the team.”
The owners do, of course, have their own strategy for the company – to restore a “satisfactory” level of profitability and grow within existing markets. McReynolds says: “It is not a plan to conquer the world – it’s about growing our position in the UK market, identifying the profitable strands of business here and increasing that. Export, while it’s important to us, will grow organically.”
In short, volume sales are no longer a driver, now the £1m annual cost of running the Greenbank factory no longer has to be met. The change has meant a complete rethink: “It takes time to change people’s mindsets – for some time we’ve been making people realise that what’s important to us is selling the product at the right price and the right margin, and that we have to walk away from volume if it isn’t at the right price. We’re probably making a virtue out of necessity, but I think lots of companies have realised that everbigger sales growth annually is not quite as important as it was.”
Today, says McReynolds, staff still consider it a manufacturing company – even though it works with a range of ‘co-manufacturers’, ‘co-designers’ and ‘co-packers’ to support the brand. “We still pretty much control the process,” he says. “The recipes are ours and so are our quality assurance systems.”
The company ‘co-manufactures’ 3.5 million packs of chocolate a year – 800 tonnes – contributing to a total turnover approaching £10m.
But still, says McReynolds, the equivalent of one in ten of the UK’s working population buys a pack of Elizabeth Shaw chocolates each year. That means it still commands good brand recognition in an industry where, says McReynolds, brand is notoriously difficult to build.
“It’s horrendously difficult to launch a new product,” he says. “Something like one in ten survives a year, one in 20 survives for two years – beyond that you’re beginning to flatten out.”
Elizabeth Shaw learnt that lesson first-hand with its Clusters and Origins – single origin chocolate – products in 2006 and 2007. They failed to generate sales and were later withdrawn.
At the same time the focus came off the core Mint Crisp and Famous Names products and overall turnover slipped.
Now Elizabeth Shaw is focusing on brands that have stood the test of time. Mint Crisp was born in the 1930s, and Famous Names will celebrate its 50th anniversary in 2011. The challenge has been to make those names relevant to the modern consumer, calling in local design expert Design Activity to help.
The two brands are being launched in time for Christmas. The octagonal box and gold foil wrappings are the same, but the logo has changed and the new cardboard packaging is more easily recycled. “We didn’t revamp early enough,” says McReynolds. “We should have made changes to the packs earlier. We hope the relaunch is the start of a brand recovery.”
So there’s plenty riding on the run-up to Christmas when half of annual sales are made. And it’s so far, so good, with sales ahead of forecasts. Work is also advancing on next year’s Easter Eggs and new-launch octagonal pocket-sized packs of Mint Crisps that will sell for less than £1.
Overall, McReynolds says Elizabeth Shaw is in a good position: “We have weathered the storm.”
Also in: November 2009
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