By Jeff Bell
Why would your company seek to vertically integrate your business?
If so, how would you do it?
And what of the benefits and pitfalls?
These were some of the questions put to Craig Musson, CEO and Owner of Wafex, when he led a conversation for Band of Leaders Australia (BOLA) members entitled Vertically Challenged at the group’s monthly meeting on Thursday 6 March at Casa Nostra in Osborne Park.
Wafex is Australia’s leading flower company.
BOLA is a peer membership group for business owners and chief executives. We seek to take our members beyond achievement to success—the essence of leadership. Inviting Guest Conversations is a key activity in our day-long group meeting.
Craig (pictured, right) said that 3 years ago, Wafex decided to bring their diverse operations into an integrated whole—they considered that they were good at growing flowers, were good at wholesaling, had good operators in their offshore operations, had adequate funds to invest and were prepared to be patient.
Their methodology involved not undercutting other wholesalers, adding a margin at each stage and not competing with growers. They accepted that they would lose some wholesalers, and they had inherited software that they considered “best in class”
However they found many pitfalls in their operation, a lot of double handling and reworking, many transactions that didn’t generate value for the customer (multiple purchase orders and credit notes) and different cool room setups—the business was way too complicated. They also found diverse software applications and their main platform was not a good fit.
“We were ‘stacked’ rather than integrated,” Craig said. “And we had a margin-on-margin problem with pricing.”
So they spent more time looking at the software capabilities required, then acknowledged and dealt with the pain of process change. They settled on Microsoft Business Central software and added point-of-sale bar code sales and a pre-order system.
They also devised the One Wafex Strategy, which included protecting the margin for everyone in the supply chain and allowing all in-house businesses to be profitable in their own right. They also maintained separation between wholesaler and retailer—looking at their customer base, directing them accordingly, and making it easy and cost effective for them.
Wafex also struck exclusive supplier arrangements internationally. They have also continued selling native flower varieties—for which they now have very few competitors. The Wafex plant breeding business has allowed them to remain competitive, especially with wax flowers, and they have licensed growers in other countries to grow the WA varieties in bigger quantities than locally.
Craig emigrated to Australia in 1991 after setting up a leading floriculture operation in Zimbabwe. From humble beginnings Wafex today has a presence across 26 countries.
It has grown into a vertically integrated flower business comprising breeding, flower production and marketing with offices in California, Nairobi, Quito, as well as Perth, Melbourne, Sydney and Brisbane.
The business has enjoyed over 33 years of year-on-year growth—with some stumbles—and now employs over 130 staff.
Craig has travelled extensively and has developed specialties in strategic planning, business excellence and international trade.
In 2004 he was selected as a member in the inaugural year of Leadership WA and today he contributes on a pro bono basis for not-for-profit organisations in need of mentoring or strategic planning.
Craig held a position as non-Executive director of Horticulture Australia Limited for several years. He is engaged in local communities as a keen sportsman and Level 2 Cricket coach and is happily married, with a son and daughter in their 30s and who have had stints working in the business.
BOLA members will next meet on Thursday 3 April, again at Casa Nostra in Osborne Park. We will also be inviting friends and prospective members to a Guest Conversation by Steve Tennant, ex-EGM at Georgiou (the major construction and civil engineering business), followed by lunch.
Typically, our agenda also includes the processing of several strategic opportunities raised within the group, wide ranging business and personal issues, as well as leadership development tools and activities.
Prospective members and referrers are invited on request.
In the meantime, each BOLA Prime member will have a monthly coaching session with their BOLA Chair, Jeff.