'You can feel the heartbeat of a business', says turnaround brewery chief
PUBLISHED: 06:00 12 September 2018 | UPDATED: 08:05 12 September 2018
Archant © 2018
When turnaround expert Steve Magnall joined Suffolk brewery St Peter's in 2015, the business was going through a tough time.
It was loss-making, carrying too much stock, and staff were working four days a week on long shifts. He cut production and hours in order to shift stock and get back into a profitable way of working.
The £4m turnover business, which includes a pub in London as well as the brewery plant at St Peter South Elmham, near Bungay, and employs about 40 staff, is now turning an expected profit of around £100,000 this year and is on target to reach £500,000 by the end of 2020.
Managing cashflow was one of the biggest issues for the incoming chief executive as he has made his way around the business working out how to make it more cost-effective within a tight budget, and without an investment pot.
The company is owned by branding supremo John Murphy, now in his 70s, who bought a set of redundant farm buildings along with the beautiful moated St Peter’s Hall 21 years ago, and decided to create a new international British beer brand sold in distinctive oval-based bottles – in essence becoming one of the original “craft” brewers.
Later, he became ill, and the business “bumbled along”, explained Mr Magnall. A variety of people tried to make it work but without success.
Two decades on, the owner felt he had invested enough in the business, meaning that when he brought in Mr Magnall to turn it around, the new boss needed to find other ways of raising funds.
Within that tight framework, the new boss still managed to make investments, such as in new on-site silos, saving £60-70,000 a year on storage, through cashflow. He has also overseen the installation of a new bottling line this year, supported by a European Agricultural Fund for Rural Development, and the acquisition of a vital strip of land means the factory can expand.
Mr Magnall, an industry heavyweight with a strong track record in turning around businesses, spent eight years at Bury St Edmunds-based brewer Greene King before heading to Thwaites in Lancashire.
“My background is turning businesses around – not in Greene King’s case obviously,” he explained. Thwaites he turned to a healthy profit within three years, the old but appropriate adage, ‘sales are vanity; profit, sanity’ always top of his mind.
“Most businesses are around understanding the profitability of your products. Most businesses gear their businesses around volumes rather than profitability,” he said. “I have a skill for recognising how businesses tick and therefore what’s needed to correct it – you can feel the heartbeat of a business.”
When he arrived at St Peter’s, he looked at costs, and realised there were problems. In one particular case, the business was making a loss of 3p per bottle with each order that went out.
Mr Magnall has worked for many top food firms, including Heinz and M&S, always moving on to the next challenge.
“I have lived in 30-odd houses and I really don’t bother about stuff like that,” he said. “I go where the job is.”
When he became brewing director at Greene King, his brief was to “get some control on costs and quality”.
“Every year the costs had gone up by 5%. The first year I was there the costs went down,” he said.
A key part of his strategy when walking into a business is to get the staff on board by being honest with them, he said.
“One of the most important things is team. I do a team briefing with the staff. I share where we are,” he explained. “I talk about everything so there are no secrets and no surprises.”
True to its roots, a good chunk of the St Peter’s business is overseas, with each market unique in what it requires.
Canada likes cans, Russia deals only in oval-base bottles. China is the new frontier.
“You’ll never compete with Greene King or Marstons on price - not a chance in hell, so we have to be different,” he said.
With the UK beer market in decline, the business has moved into niche markets, most notably with the launch in 2016 of its alcohol-free ‘Without’ range, which has proved a huge hit and become the fastest-growing brand of its kind in the UK.
As well as gluten-free and organic, the St Peter’s range includes flavoured beers such as raspberry and elder and citrus beers.
In 2016, St Peter’s made a loss of £202,000, in 2017, a loss of £46,000 and in 2018 a profit of £40,000 as momentum builds.
Now after three years at the helm, and with 11% year-on-year sales growth, the business is back on track, and Mr Magnall has decided to hand over the reins.
“For me, moving on, it’s now time for someone else to come on board and either put some money into the business or become a bit more innovative in getting the funding,” he said.
Mr Magnall is moving on to another Suffolk business. He will join wife Rebecca as director of the family’s bakery business, The Two Magpies in Southwold.