From the Ground Up - McCain Foods Limited

McCain’s Timaru plant, on
New Zealand’s South Island.
As of 2007, Yung was managing McCain’s New Zealand business as part of his
job as CEO for Australia and New Zealand. “We don’t call New Zealand the seventh
state, as that is offensive to New Zealanders and arrogant on the part of Australians,”
he says. Instead, Yung borrows from the government of China: “When it took Hong
Kong back, it referred to ‘two countries, one system.’ So here we say, ‘two countries,
one company.’”
The two countries are effectively run as one marketplace out of the Ballarat headquarters.
Other than plant managers, the only executive based in New Zealand is the
sales manager for that country. When McCain first entered the New Zealand market
in the 1980s, it ran it as part of the Australia operation, but the two markets were given
separate management in 1997. They were converted back to one in 2005. McCain’s
major customers, such as McDonald’s and Woolworths, the supermarket chain that
is the largest retailer in Australia, operate in the same way.
“The consumers are not different enough to not treat it as one business,” Yung says.
The main difference for McCain in the New Zealand retail market is that it is not the
leader, as it is in Australia, but second behind Heinz-Wattie’s. Wattie’s, now owned by
the U.S. multinational Heinz, is a well-established New Zealand brand that launched
its business there much earlier than did McCain.
Obviously, a company owned by Heinz is not going to be a pushover. Neither are
McCain’s major competitors in Australia. Simplot, another major U.S. food company,
now owns Edgell, McCain’s chief competitor in french fries and vegetables. In
dinners, the main competition comes from Nestlé with its brands Maggi, Findus,
and Lean Cuisine. Nestlé is also a major competitor in the pizza category with its
Papa Guiseppe brand. McCain is the market leader in both food service and retail in
Australia and a strong second in New Zealand, but there is no room for complacency:
all of its major competitors have deep pockets.
John Clements spent seventeen years with McCain, running
the Australian operation and later, for a couple of
years, serving as a member of the McCain Foods Limited
board of directors (Opco). He has been able to observe
the company’s growth and success, both from a distance
and close-up.
“The secret of the success in Australia and worldwide,”
he says, “was the way Wallace and Harrison did business.
They were very good delegators, and so we had an
enormous amount of autonomy in Australia. They were
rushing around the world opening factories in different
countries and starting new companies, and they didn’t
have large amounts of time to devote to Australia.
“Also, they were always more keen on expansion than on milking the company
for profits in the short term. There was tremendous willingness on the part of the
two McCain brothers to spend capital and allocate resources to any new project that
looked promising. That suited me too because there were lots of opportunities in the
frozen food business in Australia.
“For example, although we started off purely in fries, within a short time we
built a pizza plant, a specialty plant, then, by acquisition, we got a full range of frozen
vegetables. Then we went into frozen dinners, where we are the market leader.
Then we went into New Zealand and bought companies there and built a french
fry plant.”
McCain’s success in Australia is a good example of the utility of the company’s
“drink the local wine” philosophy, which allows it to adapt effectively to each market
it enters. In Britain, consumption of french fries is greater and, consequently,
McCain was able to build a strong consumer presence with that product alone,
dropping other product lines where competitors were strong. Such a strategy would
not have been possible in Australia where, as a result of immigration patterns, rice
and pasta have greater importance in the national diet. To build a successful retail
business in Australia required more diversification. McCain had no choice: it had to
build strong positions in vegetables, pizza, and dinners to stay profitable.
In 1976, Clements’s first year, McCain lost money in Australia. In his second year,
the company turned a small profit and has been profitable ever since. During the
early years, all of the profits went back into the company to pay for advertising and
marketing.
120 From the Ground up
down under 121
toP: Community
involvement: McCain
employee Stan Brett is chief
of the volunteer Hellyer,
Tasmania, fire brigade.
bottoM: John Clements,
1990.