The executive chairman of Coopers Brewery talks to Tony Featherstone about the challenges of steering his family’s 150-year-old business through a crowded and competitive beer market without losing its froth.
Glenn Cooper AM FAICD laughs when asked about his first beer. As executive chairman of Coopers Brewery (Twitter @coopersbrewery) and a fifth-generation member of the Cooper family, he grew up in the Adelaide brewery and fondly recalls playing with cousins on the factory floor.
Ever the chairman, Cooper gives a considered response: his first taste of beer came when his father used sparking ale to remove an ice-cream stuck to his tongue, courtesy of dry ice, in the 1950s. The taste had little effect: Cooper took until 1990 before joining the family brewery.
That delay seems almost unthinkable by family business standards, where second or third generation members join straight after school or university or, increasingly, after a short stint working elsewhere. It is even more unusual for a six-generation family company to have directors build successful careers elsewhere, over years or decades, before returning to the family fold.
Coopers is steeped in heritage. The 150-year-old brewer held board meetings around the turn of the 19th century and Cooper says the board minutes stretch back 100 years. More than 90 per cent of Coopers’ shareholders can trace their heritage to founder Thomas Cooper. The company’s five-member board has four family-related directors and one independent director.
But history can also weigh on family business. Remaining true to the values and expectations of previous and current family generations, while trying to adapt and grow the company, is rarely easy. Part of the solution is great governance — something the Cooper family embraced early on.
The Cooper family is recognised as the forefather of crafted beer in Australia, as an iconic South Australian company and as one of this country’s great family businesses. It is less known as a pioneer of family business governance and an exemplar for other family companies to follow.
Its charter says no Cooper family member can join the business before age 30 and even then, recruitment and promotion is based solely on merit. Glenn Cooper was 40 when he joined the family business, after starting a successful computer business. Cousin Tim Cooper, the company’s managing director, was an accomplished doctor for many years before joining Coopers.
With 143 shareholders, Coopers also provides insights on how family companies manage the transition from private to public ownership, when they cross the threshold of 50 non-employee shareholders. Public ownership brings greater scrutiny and, for Coopers, the prospect of unwanted predators.
Lion Nathan launched a hostile and ultimately unsuccessful takeover bid for Coopers in 2005. Cooper had the unenviable position of having to do the right thing by shareholders during the bid and also the right thing by the family’s values, history and legacy. It was a timely lesson in the importance of company controls and governance, and in the high cost of defending hostile takeovers.
Strong governance has also helped Coopers prosper in one of the most competitive and fierce markets of all: brewing. The duopolists of beer manufacturing in Australia — Japanese-owned Kirin, which owns brands such as XXXX and Tooheys, and SABMiller, owner of Foster’s — controlled 83 per cent of Australian beer production and sales in 2013/14, according to forecaster IBISWorld.
The third largest player, Coopers, had a market share of 4.5 per cent of the overall beer market, although its share is thought to be much higher in premium beer.
Competing with the big brewers has become a contentious issue for Coopers and small makers of crafted beer. In January, the Australian Competition and Consumer Commission (ACCC) launched an investigation into Australia’s $2.5-billion pub industry, after allegations of anti-competitive behaviour. The ability of big brewers to buy a large proportion of beer taps in hotels and pubs, and block out rival brewers, is seen by some smaller brewers as restricting competition.
It is a critical inquiry for makers of crafted beer. As overall beer sales continue to fall, crafted beer is becoming more popular as younger drinkers favour higher-quality, boutique beer and experiment with different types. Crafted beer has exploded in popularity overseas and is growing rapidly off a much smaller base in Australia.
At the same time, Australia’s supermarket duopolists — Woolworths and Wesfarmers —control an estimated 60 per cent of the packaged beer market through their various liquor chains.
Coopers must tread a fine line between working with the big retailers and supporting the independent trade.
This fierce competition landscape has not slowed Coopers. It is enjoying “one of the longest periods of sustained growth in the company’s history”, according to the latest annual report. After-tax profit of $30.8 million in 2012/13 was 13 per cent higher than in the previous financial year and a completed $20-million capital investment program has Coopers well placed to bottle and distribute other beers.
Cooper knows when to leave on a high. After 24 years with the company, he retires from executive duties on 30 June 2014. The 64-year-old will continue to chair the board and work as an ambassador for Coopers. “I certainly won’t be hiding in my so-called retirement,” he jokes.
More board roles are possible. In May, Cooper was appointed chairman of the Australian Made Campaign after serving on its board as a non-executive director for seven years. He is passionate about supporting Australian farmers and manufacturing, immensely proud of the Australian Made/Australian Grown campaign and is excited about its potential.
Joining the boards of other family companies is also possible. Cooper is an avid supporter of family business and believes his experience running and governing one of Australia’s largest and oldest family companies can help others.
Perhaps his greatest lesson is how a family company uses governance to help guide it through 150 years of history and six generations, while laying the platform for many more generations to come.
Here is an edited extract of Cooper’s interview with Company Director.
Company Director (CD): What does the future for the Australian beer industry look like over the next 10 years?
Glenn Cooper (GC): The industry is never going back to where it was. Younger beer drinkers these days are much more experimental. They try lots of different beers and move between them, rather than settle on one beer and drink that forever. That trend is also true of other industries, such as fashion or food. Although less beer may be consumed overall, we will increasingly consume better-quality beers. The growth in crafted beers has a long way to run in Australia and Coopers is well positioned for that trend.
In terms of the beer industry, I would like to think Coopers could become a true third force in brewing in this country, but it won’t happen in my lifetime. The two big players in this market (Kirin and SABMiller) are just too dominant. It is a similar trend overseas, with big brewers, such as Budweiser, being bought out by other big brewers. That said, Coopers has and can build a bigger share of the local beer market, especially in premium beers.
CD: Why has the take-up of craft beers and ciders been slower here than overseas?
GC: There are some major regulatory differences that support the craft beer industry overseas. In the US, for example, you cannot buy 80 per cent of a hotel’s beer taps and block out smaller breweries. I can’t comment on the ACCC’s current investigation into the alleged misuse of market power of large brewers in Australia, but it is very difficult for smaller brewers, or smaller pubs for that matter, that don’t have scale, to compete in what is effectively a duopoly. I will say that the investigation of the market power of the big brewers in Australia is certainly worthwhile.
CD: How hard is it for your distribution when Woolworths and Coles control up to 60 per cent of the packaged beer market?
GC: As with a lot of suppliers, it is always a tough fight to get sufficient shelf space in the supermarkets’ liquor chains. That said, we are happy with how things are going with the big retailers and we work hard at the relationships. Coopers is also very supportive of the independent liquor trade.
CD: Why is Coopers bucking the trend of an overall decline in beer demand, with your sales up strongly and double-digit profit growth in 2012/13?
GC: Coopers has been in a substantial growth phase for several years. Our push into the eastern states has paid off, with Coopers much more accepted across Australia now. We have also been able to balance our portfolio between supermarkets and the independent liquor trade. It is very important that we don’t overload Coopers; the business has a flat management and cost structure. Growth in crafted beers has been another big driver. We have been brewing crafted beers for 150 years, so the move to higher-quality beers is a great trend for us.
CD: Is strong growth in small crafted beers also a threat for Coopers?
GC: We don’t see it that way. To use an analogy: the playground of premium crafted beers has become much more crowded in recent years, but it has also got a lot bigger at the same time. More competition is a good thing. It is helping to grow the overall crafted beer market and introduce more Australians to high-quality beer. Coopers has also been busy launching new crafted beers in the past few years. We have even started to sell Thatchers Gold, which is the number two cider in the UK, after Tim Cooper and I were beaten into submission by others in the company to move into cider.
CD: What was the rationale behind your $20 million investment program, completed in 2013?
GC: It was about supporting strong growth in our sales and giving us more production-line flexibility. We bottle Carlsberg, Sapporo, Kronenbourg and Mythos beers, which all have different shapes and sizes. The expansion of our facility has gone very well and gives Coopers a lot of growth options.
CD: How important is growth in Asia for Australian breweries?
GC: It’s a huge opportunity. As in Australia, younger people in Asia are starting to experiment with different types of beers, especially imported beers. They are showing more interest in upmarket beers from well-known beer countries, such as Belgium. We now sell Coopers beer in Singapore, Hong Kong and South Korea, and believe we are in a terrific position to do more in Asia, given that we are Australia’s largest independently owned brewery.
But it is early days. Export sales are still only three to four per cent of our overall sales. So much depends on the currency. An Australian dollar at or above parity [with the US dollar] really slows exports sales down. At US 92¢, Coopers has a chance to export more beer and if the currency falls to US 85¢ then our export strategy could ramp up.
CD: What did you learn from Lion Nathan’s hostile takeover bid for Coopers in 2005?
GC: It taught us the value of tightening up internal structures within the company. And in having good relationships with shareholders. Although I was confident that enough of our shareholders would reject the bid (94 per cent of them did), I wasn’t sure how many would. I recall having a great sense of relief on the day the final ballot was read out.
It was a difficult time for me as chairman. On the one hand, I had a duty to achieve the best possible outcome for the company. But on the other, I had to uphold the family’s history and legacy. I had my own views on the merits of a takeover, but could not lobby others.
The other lesson learned was the sheer cost of defending a takeover attempt. We spent $8 million on legal fees and other advice to defend the bid and more again in lost time. It was incredibly disruptive.
CD: At the time, Lion Nathan seemed to offer a good price for Coopers. Why did you reject the bid?
GC: In my view, the current generation at Coopers did not start the brewery or get it through all the tough times. That was done by the family members who came before us. What right does this generation have to sell the brewery?
I always thought you could not put a price on what Coopers has achieved over its history. The board sees itself as custodian of Coopers, and our shareholders know they are stewards of something much bigger than just a financial investment.
At the same time, the company must always adapt to an ever-changing business environment. We cannot just dwell on the past. Our challenge is to keep changing, but always stay the same in terms of the Cooper family’s values and beliefs.
CD: What is it like dealing with 143 shareholders, most of whom are descendants of the company’s founders?
GC: It is actually not that hard. I would argue this is the happiest our shareholders have ever been. Coopers has always had ups and downs, but it has enjoyed a strong period of growth and profitability over several years. Our shareholders can always pick up the phone and talk to me directly if there are any concerns. That’s the great advantage of running a family-owned company.
CD: Where do family companies go wrong in their governance?
GC: The problems usually emerge in second and third generations. Once you are up to the fifth generation, or sixth generation in our case, the structures are usually well established, rules have evolved and if you haven’t got it right by then, you probably shouldn’t be in business.
The trap is to bring children or family relations into the business straight after school or university, when they are not ready. Coopers’ charter requires that no family member can join the business before age 30. The Cooper family members on the board and in management each had a strong career before they joined the family business. I would argue that this has been one of the keys to our success.
Another challenge is the transition from private to public ownership, once you pass 50 shareholders. Life as a public unlisted company is different to being a private company because you have to publish more information. The threshold is much higher in the US. It should be the same here.
CD: Four of your five board members have executive positions. How hard is it to separate executive and board functions in Coopers?
GC: We like it that our family directors have executive roles in addition to sitting on the board. It ensures Coopers has a very flat structure and that our directors are constantly involved in the business. I have a slogan that you can always measure the people behind Coopers: there is no Mr Foster’s or Mr Lion Nathan who has to stand behind their brands, like we do.
CD: Your company set up the Coopers Foundation and donated $2 million to it last year. What are your plans for the foundation?
GC: We are really excited about the foundation’s potential. We originally set it up because we were giving to lots of different charities and getting funding requests from even more. We wanted a more structured approach to our giving and also for the foundation to have its own income sources. For example, monies from bottle deposits go to the foundation so that its income can keep growing.
CD: Are you satisfied that enough is being done to grow the South Australian economy?
GC: Sadly, South Australia is still struggling along. In my opinion, the current state government has not sufficiently supported business and is now paying the price. It has taken its eye off the ball in terms of encouraging new business and helping maintain existing business. The result is that South Australia has lost too much business. The state government needs to understand that it is private business, not government business, which drives economies.
CD: Now that you will retire from executive duties in Coopers, will we see you on more family company boards or even listed company boards?
GC: Although I’m technically retiring from Coopers’ management, I will be an ambassador for the company and travel around to lots of pubs. You could say I’ll be the Wolf Blass of Coopers!
More board roles are possible. I was appointed chairman of the Australian Made Campaign in March and have an interest in helping other family companies with their governance. I feel I have a lot to add in the area, having been with Coopers for so long. I wouldn’t rule out joining boards of listed companies and certainly won’t be disappearing from business in my so-called retirement.
CD: What attracted you to the chairmanship of the Australian Made Campaign?
GC: I was honoured to be asked to chair this organisation. I have a great passion for helping support Australian farmers and manufacturers. I believe the green-and-gold Australian Made/Australian Grown logo has huge recognition, and a vital role in helping consumers identify and support locally made and grown goods. We need more businesses and the federal government to get behind one logo and give it their full support.
CD: Was it always your plan to come back to Coopers after starting your own computer software and services business in the early 1980s?
GC: Not at all. During my schooling, my parents told me the brewery might not survive and the Coopers cousins were discouraged from joining the business. It wasn’t until the late 1980s that we had a sense that Coopers was going to last and even then it had its ups and downs.
CD: You must have a great love for beer, having grown up around it. Do you still get involved in developing and tasting new Coopers beers?
GC: I’m no brewer. That job belongs to my cousin Tim Cooper. But I still get involved in all the tastings and have a great love of beer and the Coopers company. I grew up around the brewery and remember spending plenty of time there with all my cousins and playing in the cellars.
CD: How do you relax away from work?
GC: I love golf, fishing and going to the country and mixing with farmers. We have a beach house on the Yorke Peninsula in South Australia which is one of my favourite places in which to unwind.
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