Goodman Fielder turnaround strategy a lesson for SMEs on focus

The announcement from baking giant Goodman Fielder that it will close several manufacturing facilities and direct its marketing spend at a handful of product ranges is a good lesson for SMEs on how to focus on your core offering, an expert has said.

The company made the restructuring announcements yesterday following the reporting of a $146 million loss last month. It will now close at least 15 factories over the next three years and nearly double its marketing – but only focus on five key products.

The move echoes the advice of sales experts who say focusing on a core offering during tumultuous periods can help weather the storm – and Barrett Consulting chief executive Sue Barrett agrees.

The lesson, she says, is essential for SMEs to learn in how to focus their offering.

“Many businesses struggle to figure out what they are about,” Barrett says.

“Having your message being clearly understood in a noisy marketplace, much like the one we’re in, is essential. And a lot of organisations are realising their product in and of itself is not the central focus of sales.”

The advice echoes the traditional “80/20” rule, which suggests businesses should source 80% of revenue from 20% of product.

Many entrepreneurs have famously suggested businesses should focus on saying “no” as much as possible to make sure they do not lose their way. Apple founder Steve Jobs was well known for this approach.

Goodman Fielder announced yesterday in its investor presentation the company would do the following:

• Reduce its manufacturing plants from 53 to 35 by 2015, by either selling or closing poor performing locations.
• It had slashed 600 jobs over the past year as part of a cost cutting exercise. Chief executive Chris Delaney said there will be more of these divestments over the next 18 months.
• The business had also sold off Integro oils to GrainCorp last week – Delaney said the business made up 25% of sales but only 13% of EBIT.
• Marketing expenditure is set to rise 90%. But it will focus on just five product areas out of a possible 30.

The announcements all suggest the company is doubling down and focusing on its core offering. The move is a critical one, as the business comes under pressure from supermarket price wars.

The end goal is delivering earnings per share growth of 6% by 2014-15, Delaney said.

Barrett says the challenge is not just making sure a business focuses on its core value, but maintains “a value chain”.

“If they’re looking at their core strengths, and focusing on delivering that, that’s fine, but they also have to make sure that’s strategically effective in delivering their goals.”

“So if Goodman Fielder focuses on what they are there for, one would hope they’ve done the thinking correctly about how it fits into place.”

But more importantly, Barrett says, their customers both in supermarkets and in the business sphere need to understand what they offer, and how they offer it. Any attempt to create focus that doesn’t drill down into that proposition can be misguided, Barrett says.

“Customers have to understand the message, so that they understand what the business is there to do.”

“They have to make sure the intention, the message, and the value is clearly articulated.”