What entrepreneur wouldn't dream of turning a single store into a thriving chain of outlets? Few succeed, but someone who has is Catherine Harris, chair of Harris Farm Markets. With her husband David as CEO, Catherine co-founded the business in 1972 with a small fruit and vegetable shop in the western Sydney suburb of Villawood. It has since grown into an operation with a chain of 22 stores and three butchers across the state of New South Wales and more than 1000 employees. Harris Farm Markets was a trailblazer in being the first Australian fresh produce business to serve its customers in the style of a supermarket. From the start, the family-run concern has bought its goods from the Sydney Markets at Flemington, near the site of the 2000 Olympics. Harris Farm Markets continues to be based there.
Catherine Harris has maintained a close association with the University of New South Wales since completing her degree in the late 1960s at what was then the faculty of commerce, which is now the Australian School of Business. An Officer of the Order of Australia, Catherine has held other prominent directorships and sat on a number of boards. She is currently a commissioner of the Australian Rugby League and Honorary Consul General for Bhutan.
An edited transcript of the interview follows.
Knowledge@Australian School of Business: Catherine, take me through the start of Harris Farm Markets. I understand it started because your husband, David, found that his father had sold his successful chicken business.
Catherine: That’s correct. He was going to go into his father's business. David and I come from a long line of entrepreneurs - David’s father, and my father and mother, had all started and run their own businesses. So it was a natural fit when we left university to think, "We’ll go and start our own business, or we’ll go into one of our family businesses". When David’s father sold, he said: "Look, son, I’ll just give you three words of advice: go into a business where the big boys don’t do well, that doesn’t take a lot of capital to get into, and make sure it’s a cash business."
When we looked around there were really two options. One was retailing fresh produce - [at that stage] Franklins and Coles and Woolworths weren’t even doing fruit and vegetables in their stores. And the other option was undertaking. But I said to David: "You and I are getting married and I’m not doing undertaking." So we went into fruit and veg.
When we were building it up, David went and worked for no pay with a very good retailer, and I went and worked for Grace Brothers as a kind of corporate retailer. And in a way, throughout our careers, we’ve kept that divide as to what we both do in the business: he’s absolutely operational, whereas I tend to work more on the business as opposed to in the business. So, when we got into some financial trouble, I went out and worked in government and big business. We've always had this transition between us and it's been a very good business partnership.
Knowledge@Australian School of Business: But nevertheless, you did hit those financial problems, during the late 1980s. What do you think was your biggest mistake?
Catherine: Not enough capital. I think as an entrepreneur you get so excited about the opportunities. We were strategic in our growth, but we weren’t looking after the things that we’d normally say was [something] an accountant would do. Well, we wish now that an accountant had been sitting by us and saying, "Hang on, guys. We haven’t got the capital or the cash flow to do this." And when we borrowed, we borrowed from the bank and the bank very kindly suggested it would be much better to borrow in Swiss francs. That was really the start of it. Anybody who was in business in the '80s will know about the Swiss banks - everybody was doing it because the interest rates were so amazing.
And then, of course, we had [treasurer Paul Keating's] famous banana republic line, and I remember that night very clearly. We had to get an equity partner in and the equity partner got into exactly the same trouble. They went broke, so we tried to do a management buyout, but by then interest rates were 17%, and if you defaulted they went up to 22%. It was just unsustainable and so we went from 35 shops down to three.
Knowledge@Australian School of Business: It must have been gutting.
Catherine: It was gutting. It was terrible. But, of course, going through that process is quite interesting. I remember this very nice American guy looking at us and saying: "You know, I never employ somebody who hasn’t been through a Chapter 11." It’s an incredible, important, learning process. And if you can fail, restructure and take the good points and the bad points out of what you've learned, you’ve got much more chance of success next time round.
Knowledge@Australian School of Business: Your office here in Flemington is in a warehouse. Is this a deliberate plan to cut costs as much as you can?
Catherine: I don’t think our family has ever been into big offices and big showy cars and things. It's not part of our remit, nor part of our value system, [which has] always been terribly down-to-earth. To make it in the fruit and vegetable industries you’ve got to be one of the people. You’ve got to understand your employees, you’ve got to understand your customers, you’ve got to understand your suppliers, and you can’t have the big showy offices. It just sends totally the wrong message and it wouldn’t be David and I.
Knowledge@Australian School of Business: Speaking of David, how do you ensure you’ve got that communication, that you are working well together, and working as a team?
Catherine: I can honestly say that Harris Farm Markets is David Harris. Our biggest succession problem is how we replace David. We’ve got three other boys in the business, but David has a genius for fruit and vegetables that I’ve not seen [elsewhere]. He can pick up an orange and go: "Well, you know, of course, this was obviously an orange from Mildura and it was picked on so-and-so and it’s from the left side of the field." And I’m going, like, "It’s just an orange, Dave".
That sort of genius for knowledge and information is what makes the expertise of Harris Farm Markets. I have no expertise in that, and he is absolutely not interested in a lot of the big picture, as long as the computer and the IT system works. So how we work together is that I look after what he would call the "boring" side of the business, and he looks after the operational side.
Knowledge@Australian School of Business: And yet, when you had to go out and get a job to keep the company afloat, you ended up working as federal director for the Affirmative Action Agency.
Catherine: Yeah, which was [to administer] the Equal Employment Opportunity for Women Act (1986). I was headhunted to that job and had been working at the University of New South Wales at the time. It was a very interesting piece of legislation. I don’t know if anyone would remember, but we had people such as Bob Joss and Dick Warburton, who were very senior business CEOs, saying: "This is a great piece of legislation and we think women’s employment issues are extremely important in the organisation." Well, there were so many jaws that dropped [at that], and it really changed the attitude of the legislation. We made it a business [proposition], putting it all down to an important business case.
Knowledge@Australian School of Business: And yet, a couple of decades on, we still have people arguing that the legislation hasn’t gone far enough and that we ought to have quotas - notably, quotas for women on boards of large companies. Where do you stand on that?
Catherine: I think it would be a very sad day for Australia if we ended up having to have quotas, because what it says is that Australian companies have failed - and not just failed in employing women, but in their level of innovation and entrepreneurship. It’s something that I’m seeing now. We know that everything has changed, that there are uncertainties and that it’s very tough out there in business. You can do two things when that happens: you can see this as an opportunity to jump on and do something very creative as an organisation, or you can shrink back and become more conservative and put more restraints on things. And I think [the latter is] what’s happening in Australia.
You can see the level of conservatism in Australian boards. Look around, and [it's mostly] all white, all male, all 60 - or 55 to 60-plus. What does that say? This is Australia. We are part of Asia, yet there are very few Asian people on big company boards. There are very few women. There are very few young men with open-necked shirts. I think it’s sad, and if we have to have quotas, well, it means, my god, how conservative are we?
Knowledge@Australian School of Business: And when you’re dealing with the best mix in your day-to-day business, we’ve got to deal with the Goliath in the room. I'm talking about the dominant supermarket chains. Do they need shaking up as well?
Catherine: I think, when you talk to suppliers, that we definitely have to do something in Australia about the fact that we only have two majors. And when we’ve had big inquiries into the grocery business in Australia, we know the story is that suppliers [feel they can't speak out for fear of damaging their businesses]. So it is a very difficult situation, but, absolutely, really unconscionable practices happen.
[Something] that is public is a submission I put in. We were selling blueberries. Everybody knows what’s in the market at any one time and [at that point] you could buy blueberries in the market for $5.99. And in [the Sydney suburb of] Gordon, those blueberries were selling at one of the two big majors for $5.99, which was a very good price. But next door to our shop they were selling at [the other major for] $2.99, which was half cost-price.
After this had been going on for a little while I rang a friend of mine, who was important, and said, "I’m just telling you, I’m putting this, as we speak, into the inquiry". Well, I can’t tell you that prices of blueberries went up three minutes later! But [instances like] that would be happening all over Australia.
Knowledge@Australian School of Business: But how can you take this on? Do we need to legislate against it, or do we just need to improve the attitude of bigger companies?
Catherine: They would argue that this is competition, that we are competing against them and that’s good for the customers. The point is, it’s not good for the customers in the long-run. And I’ll give you an example. When we moved into [the regional city of] Orange, we couldn’t believe that we had people queuing up at the door on the day we opened. So we asked a few of the customers, "What’s this all about?" And they said, "We used to have five fruit shops in Orange, and one by one the supermarkets just undercut them. Then, when they were all gone, all the prices went up, and they are now so expensive."
That’s what happens. If you cut out the competition, then there isn’t any competition. And it’s no good having a short-term view of this argument about having only two big majors in Australia. Yes, in the short term it’s great that we have $1 milk. In the long term it’s bad for the suppliers and it cuts out competition.
Knowledge@Australian School of Business: But, of course, you aren’t operating tiny stores any longer. They are pretty much like a supermarket, which has long been part of the attraction. Now the larger stores are almost taking you on at your own game, offering exactly the same wide range of produce. How can you keep up with that and continue to modernise the business?
Catherine: It's funny, but I always used to say to [former Woolworths CEO] Roger Corbett, "No, Roger, it’s fine. They just go to Woolworths to buy their chemicals." He'd say, "we’re the fresh food people". In fact, Roger Corbett was a fantastic retailer and difficult to compete with. But take the case of this warehouse. We've been talking for an hour and by now it will be empty. It's not actually a warehouse, it's a distribution [point]. We compete by doing all our buying at one o'clock in the morning. The produce comes here before being sent out to all the shops and by 10.30am everything is gone. You won't find that in the big supermarket chains. They send it to a warehouse where it may sit for three days before it gets out.
So that's one of the ways we compete. Our produce is fresher. We also compete in that we’re smaller and more flexible. We have a different buying system. They are huge chains but we have as many buyers in the markets as they do. I think we compete by just being better. But it is hard, there’s no two ways about it.
Knowledge@Australian School of Business: Let’s look to the future for Harris Farm Markets. With the expectation that the present low interest rates will continue, is there a case for getting heavily geared up again and embarking on a massive expansion plan?
Catherine: Of course. We have three of our five sons in the business and they’ve taken it to a whole new level. It's been wonderful for David and I to see. I think they’re much cleverer than I am. One has a masters in finance, another has an honours engineering degree, and the other has worked for a number of retailers. And so they’ve all got different roles in the business and are each experts in their fields. They’re driving the business to a higher level and it's very exciting.
Knowledge@Australian School of Business: Looking back over the past few decades, there’s no doubt that you’ve had that passion, that drive, and that consistency. Catherine Harris, it’s been great talking to you. Thank you.