Inside Retail: Harris Farm is looking into a major store expansion and at least doubling your store count over the next few years. Can you tell me about that?
Tristan Harris: So we’ve got 27 stores. And I think the thing that’s interesting in those numbers is that we have probably opened 70 or 80 or something like that. And so, apart from the big collapse that we had in the ’90s, generally, for every store that we opened we closed another. Our network was not optimised, and we didn’t have a clarity of strategy.
About 10 years ago, we clarified our strategy and it gave us a much better lead on where our stores should be, and we’ve been in a process of almost one in, one out for several years.
It’s only been in the last couple of years that our net store number has started to grow.
So it looks like we’re on a sort of take off growth phase but, in fact, in terms of store openings, it’s only a slight increase on where we’ve been previously.
There are still a lot of challenges that come along with that. When you really grow net store numbers, you’re going to train a lot more staff, you have to get a lot more people on board and, inevitably, some of the processes and infrastructure that you’re using starts to become inappropriate and you’re going to have to change it out.
But it’s certainly an exciting time over the next three or four years.
IR: What did you learn from that expansion and deflation process?
TH: One of the things we learned was you do have to be tight on your strategy, and you have to stick to that.
It’s really easy to get distracted or waylaid on stuff when you’re not clear on the strategy.
I think as you scale you have to rely on people and your ability to bring people along for the ride, attract others, develop everybody. As we’ve moved into a new state, it has required us to manage our culture more intentionally. That’s definitely something we’ve learned of late.
IR: How has the launch into Queensland been going for Harris Farm?
TH: We had stores in Queensland in the ’80s, but then basically the company went broke and started off at one store again. And this is our first move back to becoming a multi-state retailer.
It was an interesting story. Dad [Founder David Harris] had taken Sydney’s best area manager up to Queensland to manage a store, and then when the bank was selling all the stores the manager bought a store off the bank and he ran it [independently] for 29 years.
And then [recently] we bought it back from him and now he and his wife are working for us again. It was one of those beautiful stories, but I also think that was incredibly valuable for us, because we got to go back into a market where we knew that the customers would appreciate a very similar offer to what they were already getting, just a bit bigger, with more categories that they weren’t used to buying from, but the same fruit and veg.
Fruit and veg underpins sort of everything we do, and the customers were already going there for their fruit and veg, so that made it a lot easier for us to enter back into [Queensland].
We’ve built some more impressive stores at West End, and down at Isle of Capri, and so now customers in Queensland have been able to sort of engage with us knowing that we’re part of an ongoing community, and see what we have been able to learn in the last 30-odd years while we haven’t been there. We’ve put a really different and engaging offer on the ground up in Queensland and it’s been remarkably successful. Customer feedback is really, really great.
And Covid-19 and all that sort of stuff has been incredibly challenging, but it has really forged the team [in Queensland] and made them far more independent and resilient. They just had floods take out our market stand and market distribution centre, and the whole team just [really bonded together].
We know that we’ve got a good culture in New South Wales that we’ve been trying to ensure we inculcate in the team up in Queensland, and [in the crises] they did exactly what we would want our teams in New South Wales to do automatically, and that is react really, really quickly and do whatever it takes to keep the team up and running and trading.
I think the customers have really latched onto the fact that our Queensland team has decided that whatever happens, we’re going to find good fresh food and stock our markets.
IR: Harris Farm has a very long history in Australia. How would you describe the Harris Farm Market customer?
TH: Harris Farm Market shoppers are shoppers that care. They care about quality, they care about provenance, and they care about the way that we as a business that they’re buying from behave. They’re giving us their money, and they want us to live by the same values that they would expect their family to, and I think that’s something we do quite naturally.
I guess it’s been easier being a family-run business than being a listed business, since I don’t have analysts telling me every quarter that I’ve got to beat the last quarter, and if something happens that is going to be more expensive, but is the right thing for us to do and it’s going to keep our bottom line, we can make that call.
And equally we can use that activity to occasionally let our customers know who we are, what we believe in, what we value and how we behave. We can let our customers know that, despite the fact that we might have been unprofitable for a quarter.
So you can build some love in the customer, and they’ll come back to you and engage with your shop again. It gives you a long-term sustainable advantage. So yeah, a customer that cares I think is the best way I could describe it.
IR: Supermarkets have become a bastion of safety to a lot of people in the last few years. How have your customers’ perceptions of Harris Farm changed in the last couple of years?
TH: I think it’s probably changed a little bit less for us than for the major supermarkets.
It’s been incredible to see the level of trust [customers have had in supermarkets]. In the consumer surveys, the level of trust for basically every player in the entire industry has skyrocketed over the last couple of years.
And obviously, as a part of that industry, that’s a very nice thing. Retail is not easy. It’s a fast-paced, 364 days a year, 24 hours a day slog sometimes, so you feel like you’re busting your guts.
A few years ago, there was a bit of an anti-supermarket sentiment in some of the media, and certain programs really smashed the supermarkets on a regular basis. I don’t see that anymore. Then again, I guess I probably watch a lot less free-to-air television these days.
IR: When you talk about the other major supermarkets in Australia, there has been a big push from Woolworths and Coles in the last few years to make their operations more sustainable. Where is Harris Farm on that journey?
TH: It’s been fantastic to see those major retailers really get their heads screwed on with regards to sustainability.
We felt like we used to lead in a number of instances, you know, with things like ‘Imperfect Picks’ and in getting rid of plastic bags and that kind of thing. And then all of a sudden the strength with which those majors came out in sustainability gave us a real reboot internally.
We’re asking ourselves, What are our responsibilities? Are we going hard enough and fast enough? Because I think our customers expect us to act quicker than those guys, to do more and show the industry, and our customers, that we’re trying harder and delivering faster.
We switched to 100 per cent renewable energy in January this year. And we thought we were going to get a bit of a steal on the market and be the first one to do that, and about two months before we switched it on, the major supermarkets came out and said, ‘We’re planning to do it in 2025.’ So, there was no news story for us when they had already announced that they plan to do it – it’s just that we’re three years earlier.
But it is really nice to be able to look at the lights that are on in my warehouse at the moment, and know that I’m not burning carbon to put those lights on.
I think almost every other sustainability issue pales into insignificance compared with the carbon issue. The food waste issue is really, for me, only about carbon.
So if you’re going to produce 20 per cent of the food, and in doing so you’re also producing 70 per cent of the world’s carbon emissions, then you need to reduce food waste because of its impact on carbon. There are all sorts of other ways that carbon is produced, but there is a hell of a lot of work for every company on how to reduce their scope one, two and three carbon emissions.
We’re in the process of identifying or doing a close measurement of our scope one and two. Obviously, putting all of our electricity to renewables took a huge chunk out of our scope two. So, we hope to be able to identify all of the sources of our scope one and two [emissions], and be able to have an active reduction, if not an elimination, of those numbers, and then offset them. And we’d like to be able to do that quite quickly.
Scope three is going to be a nightmare for all supermarkets. We’ve got 1500 or 2000 suppliers, and I’ve got 100 people in my entire head office. How do I get 2000 suppliers to accurately and quickly identify what their carbon footprint is, and then how do I get them to change that?
It is a massive challenge, and it will be for every retailer. I think there’ll be a lot of innovation, there’ll be a lot of market movement, and there will become much more of an opportunity on scope three [emissions], but we’re focusing on scope one and two now.
We know where the biggest chunk of scope three is for us, and so we’re working actively on that. The products that we sell and the carbon that is generated by them is an issue; there are a lot [of emissions] in beef, but agriculture in general is about 70 per cent of global emissions.
There’s a lot of work going into regenerative agriculture, which could turn around that number really significantly. At the beginning of last year, we ran a big campaign on regenerative agriculture, supporting regional food producers and highlighting their products in-store and, ideally, what we will see is growth of that kind of program.
We will get agricultural products to go from a carbon footprint of 70 per cent, down to maybe minus 2 per cent of carbon or something like that, if agriculture is able to do the job of sucking carbon out of the air and burying it back into the soil.
That is probably one of the biggest wins I can imagine for the whole fight against emissions globally. It would be just enormous.
So we’ve been supporting that, and we are continuing to support some regenerative agriculture organisations and working with some suppliers on reducing emissions through carbon-neutral beef and agriculture, etc.
I think that’s where we’re at right now. But we’re also in the process right now of reviewing our total opportunities over the next five years or so.
A lot of businesses are really, really actively working to tackle this as a problem. Everybody recognises that this is one of the biggest strategic risks that they face, and in some cases is actually a strategic opportunity.
IR: Last Year, Harris Farm launched the ‘Repurposeful Picks’ range, where you’re recycling perishable foods and reusing them in other products to reduce food waste. How is that tracking?
TH: It’s been a huge uptake by customers, but it’s operationally extremely challenging. And as you’d imagine, you’ve got to be able to work out how much money you are making or losing on each product.
You set up your supply chain and your accounting systems and everything to be a one-directional flow: product comes in, it gets sold, and you do or don’t make money on that.
Whereas, if you bring a product in and then convert it into something else in-store, and then add some other products into it, which adds additional cost and labour, it becomes harder to understand the monetary value of those products.
So, we’ve kind of just shut our eyes and said ‘making money on this product is not important’. What is important is that we solve the issue of food wastage and that we build a category so that we can, in future, identify the profitability that could be there.
Everyone understands economies of scale and plans are a very real thing in food production. But if I’ve got 27 loaves of bread to make into garlic bread today, and 13 tomorrow, that’s neither scaled nor planned. So it’s hard to make it efficient, but I think it’s important from the point of view that food waste causes carbon emissions, and it is almost criminal the amount of food that is wasted globally, just because of the resources that have gone into making it.
IR: The floods in Queensland and New South Wales were devastating to farmers and supply chain alike. Did this affect Harris Farm, and how is the business supporting impacted communities?
TH: A lot of the New South Wales flooding is very recent. The damage in the Northern Rivers is a little bit better understood at this stage, and we have been affected a little. Our Queensland distribution centre went under, and we lost all of our computers and a couple hundred grand worth of stock. It’s expensive, it’s painful, but it’s not critical.
We were able to see what was about to happen and switch over to pulling product out of New South Wales and putting it on a truck for overnight delivery [to Queensland]. So we didn’t actually miss a single day’s trade in terms of product; losing that DC is more of an inconvenience.
Our store at Manly got flooded recently, so we had to close it and there has been a big mop-up operation going on down there.
That’s been about the extent of the direct physical impact on the business. There have been a lot of blackouts and stuff like that, as well.
But what we’ve been doing in terms of our response to the community, our first focus, to be honest, has been just keeping the stores open. Because anything that stops us putting that food on our shelves is doing a massive disservice to the community, and when we got that under control, which was very quickly as I’ve said, we switched to how we help the community.
We donated a couple hundred boxes of fruit and veg to the Mud Army up in Brisbane. There are people out there working to clean up, and often it turns out they are really hungry and thirsty, and when you rock up with a van with some apples, oranges, peaches, and bottles of water [they love it].
People pull together when there’s an emergency and despite the tragedy of the emergency, it’s always such a beautiful thing to see. And the stuff we’re doing is no better or worse than what a lot of other people are doing.
We donated a whole bunch of products to the Triple M relief fund in Brisbane. There was a team in Fortitude Valley doing hot meals for people, so we put food into there. We took a couple of pallets of products to Mooloolaba and Lismore, and we overbought rice at the end of the lockdowns so we distributed around 10 pallets of rice to a whole lot of welfare centres and community centres.
I think the challenge at the moment is to figure out how we are able to help in a way that is meaningful at scale, rather than just helping individuals. That’s what we will be keeping our eyes out for down at Manly.
And then, the thing that we’ve got to offer beyond food is people. We’ll have our team ready at a moment’s notice to go, ‘Right, we’ve got a school, or a community hall or whatever, that needs some hands and feet, let’s go.’
IR: We all know that there have been some major supply-chain issues hitting supermarkets. Has Harris Farm been impacted in the same way and, if so, how has it recovered?
TH: We have definitely not been impacted in the same way [as others], and I would say the reason for that is that we come from a fruit and veg background.
The way that we operate is very much about sort of seeking out the best in terms of quality and value, and the best in fruit and veg moves around a lot. So, we tend to be traders: there’s never a long term, set-and-forget [decision that] these are the guys that are supplying our bananas or eggs or whatever.
So because we trade, we’re buying off a lot of people and when you are buying off a lot of different people at any one time it means lots of suppliers across lots of different areas.
So when there is a major issue, you know, like a supplier shuts down or whatever it may be, we’re able to move, and we’re also very used to moving very quickly.
It becomes a system and culture, and just an absolutely integrated way of operating, and in those sorts of circumstances it is not nearly as hard [to operate].
Also, obviously, we’re much smaller – 27 stores. I couldn’t do the same thing at a thousand stores. So our impacts were much lower and, to be fair, we’ve had a fair bit of luck. We’ve worked really hard, and our culture’s really good, and our systems are great, etc, but inevitably, there are some businesses that also had all of that and just had some bad luck and got really slammed. That didn’t happen to us.
IR: What else is important to you as a leader?
TH: I think the other major thing that is impacting people at the moment is burnout. People are referring to it as the great resignation, and we’ve been trading the whole way through and then there’ve been lots of exceptional challenges.
We’re finding that our teams, while we don’t seem to be seeing the same level of turnover or staff loss that is being seen in other industries, are tired and sick of drama all the time.
Everybody would really like a break. Everyone would really like to just have a month of regular trading conditions.
And we do [have policies in place], and that’s what I think almost every company has, but I think the time is coming for innovation in that space. How do we do a better job of that? That’s the challenge we’re grappling with at the moment, and I think it will become apparent over time. There will be thought leaders and companies that are able to do better stuff for their teams to help them manage that, we’re just not sure what they are as yet. But I’m sure it’s coming.
This interview originally appeared in the April issue of Inside FMCG magazine.
