James Lambert has proved that the way to a successful business is thinking outside the box.
By the age of 25 James Lambert had learnt the important lesson of the critical role of cash within a business. He ran his first business when he was in his twenties – Herdwise, a company that sold bull semen to dairy farmers, mainly in North America, to increase the productivity of their bulls.
Lambert worked for Herdwise as a sales rep for three years before he was asked to run the business by its owner Jonathan Ropner – his business partner who would later seek his expertise in turning Richmond Foods, a failing £120,000 turnover business, into a £450m giant.
Herdwise was losing money, but Lambert focused it back into the UK and grew the company into one of the largest cattle breeding organisations in the UK before selling it in 1996.
But in the early 1980s milk quotas directed that less milk was needed in Europe and 10 per cent of dairy cattle stock were to be killed.
“They were reducing cow numbers and we were breeding replacements, so we were looking at 15 to 30 per cent of our sales just gone for a year or two,” he says. “I knew the market wasn’t going to come back in the same volume but there was going to be a decent market again. Managing through that, you learn to appreciate cash.”
Two years into his leadership of Herdwise, Lambert was approached by Ropner, who was then running Dalepak and asked Lambert if he wanted to get involved with a struggling ice cream business, R&R Ice Cream.
“I said I’d have some shares and worked for nothing,” Lambert says. “The business had a turnover of £120,000 a year and four staff. This year sales will be just shy of £450m. And I expect them to at least double in the next two to three years.”
Part of the success of the business was down to spotting an opportunity with Morrisons, which at the time was a small chain of Bradford supermarkets. In 1989 R&R got all the two-litre tub business from Morrisons. “At that time Morrisons had 40 stores,” Lambert says, “and then we really took off and grew from there.
“We grew by taking a small segment of it, the two-litre tub market, and getting really good at it – getting low cost and high quality, and driving volume. The retailers had to see us because they knew we were the lowest cost and best at making two-litre tubs.”
The next step was to buy a lolly business, and an opportunity presented itself with the acquisition of Treats in Leeds. In 2001 it acquired Nestlé’s ice cream business, which was losing money after buying Lyon’s Maid.
“We built 50 per cent of the two-litre tub market, then got 50 per cent of the lolly market, so we went segment by segment, offering the lowest cost and best price. Then you get offered opportunities,” says Lambert.
“Other own-label manufacturers couldn’t make any money because we were always buying new kit, lowering our costs and we’re still always looking to increase innovation so we grow.”
This attitude keeps him from making mistakes such as those that have affected the banks. “There are two basic instincts in doing anything in life,” says Lambert. “People are either driven by fear or greed. Fear and paranoia drives most businesses. They always think someone is trying to steal their business. The City went wrong because it was driven by greed.”
The company always looks to reinvest its profits to grow. “We make our own two-litre tubs now, which has paid for itself in a year,” says Lambert. The company is also investing nearly £1.5m in an automated waste treatment plant at its site at Leeming Bar in North Yorkshire.
The next stage of growth was expansion in Europe. Lambert saw a similar market, with the same products, customers and suppliers, and was keen to acquire more companies. But he was frustrated by shareholders.
“When you’re a public company you’re judged every month, and sometimes it can force you to make too short-term decisions,” he says. “We went to see one of our largest shareholders – our shares were £5.20. I said we were thinking of going to the market, raising some money and buying some businesses in Germany and France. They went and dribbled out half their stock on the market and the share price dropped to £4.
“If we were going to have a rights issue and the dilution to the shareholders was going to be that big they wouldn’t say yes.”
So Lambert went to US equity partner Oaktree with a plan to take the company private and came out with a five to seven-year investment. Oaktree bought German ice cream manufacturer Roncadin and Richmond Foods and put the two together to create R&R Ice Cream.
“We’re looking for further acquisitions and consolidation of the market,” he says.
Also in: May 2009
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Talk about an evolution
A theme of innovation runs through this issue, and for good reason. When companies find themselves under pressure it is often the most innovative that survive.
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Down but not out
Economists are predicting green shoots, but will they bloom or wither in Yorkshire? David Casey assesses the health of the region.