As part of the Family Business Survey 2015, A.H. Beard took the time to speak with KPMG about how being family run continues to yield success.
A.H. Beard is one of Australia’s leading manufacturers of quality mattresses and bedding. As a 5th generation family-owned Australian business, A.H. Beard has built a reputation as the innovators in sleep products. Chairman Garry Beard spoke with us about their success.
How do you foster an innovative culture?
We’ve fostered an innovative culture by creating a safe to fail environment throughout the company, and a great example is in our product development team. The team are all aged under 35 and are empowered to take risks, nothing’s off the table. They came up with the design concept for a new spring support system (Reflex) which has now been rolled out across Australia and into China. They took the 'old school blinkers' off and brought new thinking to the creation of spring systems.
In the past we would have waited for the spring specialists of the world (USA, Germany) to come to us with a spring unit. This innovation, which is unique internationally, was created by our team because they operate in a culture of innovation. How does that translate to business benefit? It has given us recognition in the international playing field of the bedding industry.
How has being a family business helped with your success?
Our success is very much built on our collective vision being shared by everyone in the business from the docks and factories, right through to the front line sales people. I believe we get the support because we are a family business, both here in Australia and with our entry into China.
Being a 5th generation family business has greatly helped our entry and success in the Chinese market. In 2012 we were approached by two Chinese business women who had searched the internet for credible suppliers of quality bedding for import into the high end bedding market. Three years later we are now supplying 35 shops and expect to double that by the end of next year.
In China there are 1700 bedding manufacturers, all mass producing beds selling for up to $1,000 without a focus on quality. The Chinese customers we deal with have extremely high expectations, they expect the highest quality and are willing to pay up to US$76,000 for Australian hand-made mattresses. To meet this demand, we brought back two gentlemen who had started with as apprentices and worked for us for 40 years. They’ve trained our younger people to make beds by hand, all hand stitched using needles. We make these beds like we made them 40-50 years ago and because of the quality and the hand master craftsmanship, together with highest quality natural fibres, our Chinese customers recognise the beds as extremely good value.
We demonstrated the importance of family legacy when we opened our first (and second) shop in China, by taking the family shareholders – myself, my brother and my two sisters, together with former Prime Minister John Howard and his wife Jeanette.
In what ways have other family members played a role in your success in China?
My eldest daughter Sally has been with us for six years in our training department and provided training and materials to our Chinese salespeople.
My eldest son Matthew was the first person to do a cadetship in our business. He’s been with us eight years and is Operations Manager for our largest plant in Sydney. He is the key point for exporting beds – when you export beds you don’t get any second chances. His team has set the standard and are meeting the extremely high expectations of the Chinese consumer. He has had to put disciplines and practices in place that meet their demands, which has included a rapid up-skilling of the Chinese market and culture.
How are you using technology to interact with customers?
In 2013 we digitally launched the A.H. Beard 6 week sleep challenge, designed to help Australians get a better night’s sleep. We now have 40,000 followers. It’s not about selling our beds, it’s purely about improving lives through better sleep. We have partnered with the Sleep Health Foundation and leading sleep scientist Dr Carmel Harrington to develop a program that builds good sleep habits. Our users can receive expert advice through the blog and support from an online community.
Our Chinese partners have now seen it and will be rolling it out in China.
How does A.H. Beard ensure they are keeping up in this rapidly changing business environment, both locally and globally?
We have appointed a General Manager, Exports. He is an Australian who speaks fluent Mandarin and was educated at the University of Shanghai. He is championing our exports to bigger things. Having a senior team member with an understanding of the Chinese culture and market has been invaluable to our growth in China.
Secondly, by the end of fiscal year 2015, we will have spent over $10m across our plants in New Zealand, New South Wales and Victoria, updating them to the best machinery available, to allow us to be the most efficient bedding plant we can be, to satisfy our markets. We work on a just-in-time model, whereby across Australia we maintain order in and out the door within 5 days.
And finally, our (non-family) CEO is very attuned to what’s going on globally, and this covers new connections we are developing to licence our brand in Russia and USA. Keeping pace on an international level with what’s going on in the 'bedding game’ and constantly re-visiting our vision to ensure we are on track.
What do you see as threats to your future growth?
The volatile Aussie dollar, wage and rent increases would be the main threats to future growth. Unlike a key competitor in the USA which has experienced no growth in wage costs and a decline in factory rent costs over the last 10 years, our Sydney factory has had the burden of a minimum of 3 percent annual wage increase, and rents have gone up in accordance with CPI. We have to be realistic about what is happening in the rest of the world. America is devoting itself to getting back into manufacturing and getting their wages under control. Australia can’t keep on putting wages up every year for the sake of putting them up. Another threat to our growth would be the lack of support from the banking industry for manufacturing. Currently, manufacturing is definitely not a favourite of the banks.