Strategy tips for business owners during crisis

Saturday, 01 August 2020

Jessica Mudditt photo
Jessica Mudditt

    Owners of gourmet biscuit maker Charlie's Cookies, Ken Mahlab and Jackie Magid, used the COVID-19 shutdown to reset their business strategy – and now share key lessons.

    In mid-March, Charlie’s Cookies sales and marketing director Jacky Magid was presenting a new product menu to Qantas as the rumblings of a spike in COVID-19 cases in Australia were getting louder. “It was the day that Qantas CEO Alan Joyce AC announced he would take a pay cut due to the slump in air travel. But none of us in that meeting expected that in a week’s time, all the planes would fall out of the sky, so to speak,” she says.

    The speed at which business came to a standstill was horrifying, says Magid’s husband and Charlie’s Cookies managing director Ken Mahlab. “Our goods were on the back of trucks en route to distributors when we got phone calls saying that they couldn’t accept delivery,” he recalls. “We wanted to preserve relationships, so we agreed to take our products back provided they paid the return freight charges.”

    Other customer orders fell like dominoes. Since buying the business for less than $100,000 when it went into administration in 2004, Magid and Mahlab had grown turnover to nearly $10m by building up an impressive customer base. Customers included domestic and international Qantas flights, top-end hotels, standalone cafes and catering companies that supply to major venues such as the Melbourne Cricket Ground and Melbourne’s Rod Laver Arena. Other food service customers included corporates, schools, universities and mining sites. However, all these enterprises were profoundly affected by the need to stem the spread of the coronavirus. All that was left of their customers were independent, higher-end supermarkets.

    The following weeks were a blur, with efforts focused on putting the business into hibernation. Mahlab stood down most of his 50 employees, some of whom had been with the company in senior roles for a decade. He and Magid redeployed as many of their casual staff as they could to not-for-profit organisation Fareshare, which rescues, cooks and distributes food to the needy. The next step was to create a projected cashflow.

    “Our CFO Joelle Zajc deserves superhero status,” says Mahlab. “Our exposure was at a point where we would have ended up so far in debt we couldn’t justify it. So we set it at a level we were happy with and modelled how we’d get there.”

    News of the federal government’s JobKeeper plan in late March was met with relief, both for their staff and because it eased some of the financial pressure. Magid pitched the idea of stay-at-home corporate gourmet food boxes to existing clients such as Toyota. She also had traction with large retailers, although a supermarket’s decision to stock an item cannot be implemented swiftly. But Charlie’s Cookies was still left with a large amount of inventory.

    Silence is golden

    From April onwards, things went eerily quiet. “What COVID-19 did was take out all the white noise,” says Magid. “When you walked out onto the street, it was quiet. And it was the same for our business. The phone didn’t ring. We got to choose what we focused on every day, rather than reacting to the needs of our customers.”

    “We realised COVID-19 brought a once in a lifetime opportunity to get laser-focused on the business strategy,” adds Mahlab.

    A strategic review had been undertaken the year before, when the pair had decided to consolidate their range and simplify the supply chain with their newly installed advisory board. “We drafted a plan and the advisory board sent it back to us repeatedly, saying things like, ‘Simple is five products, not 50.’ It was really valuable to have that expertise and independent input,” says Magid.

    From April, fortnightly meetings were held remotely with the advisory board, which helped Magid and Mahlab steer their way through a complete strategy rethink. “Things had come to a screaming halt in the space of two weeks,” says advisory board chair Anthony Moss GAICD. “It was very dramatic and there’s a grieving process around that. Then, after what I call the ‘triage’ phase, came the very challenging reframing question: ‘How can we see the positives in this?’”

    What COVID-19 did was take out all the white noise. We got to choose what we focused on every day, rather than reacting to the needs of our customers.

    Jackie Magid

    Narrow the focus, simplify the process

    Mahlab and Magid stripped everything back and realised their focus had become too broad. “We had become a company that was accessible and friendly to its customers, but also reactionary,” says Magid. “We had almost become a service business rather than a product business. We did whatever we were asked to do, rather than what we wanted to be known for — which is being super-efficient and delicious in the mini-bites space.”

    The pair undertook a detailed mapping exercise around the markets they wanted to serve, which, included large retailers, and how to serve them. “Before COVID-19, they may have been challenged to get that clarity,” says Moss. “Even with an advisory board, there’s the tension of managing business as usual, which is particularly challenging for manufacturing companies. When an SME is in growth phase, there’s a tendency to want to take advantage of every opportunity — even when it’s not perfectly aligned with what you’re trying to do.”

    The resurgence of infection in early July was a blow. “We’ve been working on things that will lessen our dependence on what had been critical hospitality and aviation work,” says Magid. “One of our pivot strategies was to start exporting to China, but the deteriorating [trade] relationship hasn’t been very helpful. Our Queensland distributors are back ordering as they normally would, and NSW is getting back to normal, but our Victorian customers are in trouble. Crown Casino and the hotels were planning on opening this month, but that won’t happen now.”

    Safety remains paramount. “We have to be careful in managing any risks associated with production,” she says. “We’ve got suppliers and ingredients coming in from hot-spot areas so we’re being really vigilant — we’re unpacking boxes with gloves on and truck drivers must stay in their vehicles.”

    Yet despite it all, the Charlie’s Cookies crew remains upbeat. “I’d be surprised if we weren’t 50 per cent bigger after COVID-19,” says Mahlab.

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