With interest rates at an all-time low – and some industry pundits stating they might go lower – the opportunities for growth, especially for an industry like food and beverage, are enormous.
Mark Burgess is the experienced and affable relationship director – consumer goods leader at St.George Bank. His portfolio of customers are in the food and beverage arena and he sees solid opportunities within the industry over the next 12-18 months. It is one of the bank’s growth sectors, mainly propelled by the domestic and global demand for quality Australian produce. He’s also a good gauge of what other factors are propelling the market at the moment, and Burgess cites new technologies and food trends as being market drivers.
At a recent St.George Signature Food Event, Burgess talked of not only how the food and beverage sectors are looking healthy, but how the role of banks has changed over the past decade.
“I think within the last few years – the banks have shifted away from being what I would call ‘order takers’ – like at McDonald’s – to that of being more trusted business advisors. That is one of the reasons St.George moved to an industry model four years ago because we wanted to have industry experts to not just be there to take orders from customers, but also have insightful discussions with them about their industry as well as their growth plans and where they see themselves going. Then talking to them about how we can support them to grow and prosper. It’s really about that. It is one of the reasons I joined the bank.”
Having been a director at Ernst and Young and a senior corporate advisor, Burgess likes helping businesses grow. It’s another reason he likes the food and beverage industry.
“While we are seeing growth with our customers who are the larger players in the market, as a bank we also focus on family businesses and the middle marketplace, too,” he said.
Why? Burgess sees them as lean, hungry and leading the charge when it comes to some of the newer market sectors within food and beverage.
“Those companies are really nimble, and quite dynamic and they are looking at new areas that they can diversity in,” he said. “For example, a lot of my customers look to supply Coles and Woolworths, and it is those customers who are leading the charge in the healthy alternatives market. Then there is a push for the vegan movement, as well as alternative substitutes for meats and other core products.
“Some of those businesses are ahead of the curve and have a huge focus on innovation within their organisations. I’ve got one customer who is a traditional meat supplier and they are now getting into non-meat products.”
Although Burgess is excited about the market and where it is headed, this doesn’t mean the bank has a laissez-faire attitude towards doing business. There are still systems that have to be followed. A large portion of food and beverage businesses involve the manufacture of perishable items, not exactly great assets to put in the ledger when talking to your bank.
So what does a company have to do with regard to getting a loan if they need to recapitalise, or more often than not, expand their business?
“If we’re doing cash flow lending as opposed to bricks and mortar property lending in the food space, we look at your working capital cycle. We are relying on your debtor book to fund your business,” he said. “We look at the strength of your relationships and what your terms are like with those debtors. We then look at how efficient your supply chain is. It’s also about the experience of the management of the company, too.”
And how does the bank find the attitude of the big players like Woolworths and Coles when it comes to helping out not just those who are regular brands on their shelves, but those new to the market? Burgess works closely with them and said they are very supportive of entrepreneurs because they want to see new products on their shelves.
“They want to get onboard because an entrepreneur could produce a new product that might fly off the shelves, and that product might also be a reason why consumers go to a Woolworths store instead of Coles or vice versa,” he said.
New technologies are also a driver for the industry, and Burgess and his team are seeing those innovations first-hand from their customers.
“I was talking with a customer today who specialises in ready-made meals, and he has
been flat out,” said Burgess. “His product had a shelf life of three to four days, but because a packaging specialist brought out a new technology, his product now has a shelf life of 7-10 days. Something as simple as that has made a huge impact on his business in terms of wastage and time savings from deliveries.”
Burgess loves the industry, not just because he’s a foodie, but because it is dynamic, ever changing. He is very excited about the future of banking in the sector, and the industry itself.
“The thing I love about this role is that it is all about seeing the customers grow and prosper and supporting them in their growth plans,” he said. “Given my corporate advisory background, I can provide meaningful insights around business strategy and direction. The food and beverage space is a rapidly changing environment and it’s exciting.”