Family firm that keeps evolving its business model to meet challenges
The threats of central distribution and loss-leaders have been met head-on by Gerry Ellis and Sons
Gerry Ellis & Sons Ltd can trace its origins back 125 years to 1889 when a tiny retail shop was set up by Arthur and Mary Ellis in the small town of Arvagh in Co Cavan.
From that tiny acorn has since grown one of the largest wholesalers and retailers of fruit and veg and groceries in the country.
The company as it currently exists, was set up in 1975 by Gerry Ellis, the grandson of the original founders, and his wife Kathleen. Not long after, they were joined in the business by their sons Michael, Gerard and Brian.
Michael is the company's managing director and he and Gerard and Brian show me around the large warehouses where the vast deliveries of fruit and vegetables are received daily from local farmers and growers. These are housed in special temperature-controlled stores where they are kept fresh until they are delivered to their individual stores around the region the following morning.
As we pass through the fruit section, Brian hands me a punnet of fresh strawberries and as I bite into their fruity freshness, I can see the excitement they have when they see my reaction. They have pride in the quality of what they sell. For them it is more than just business; it is their life. They tell me how each product can be fully traced back to an individual farmer. As we continue our tour, we pass through even larger stores, this time packed with boxes of everything from cereals and homemade breads and pastries to soups, sauces, washing power and bottled water.
From its inception, the company focused almost exclusively on wholesaling fresh fruit and vegetables to local convenience shops, restaurants and hotels. Over time they grew to service the growing number of supermarket outlets that were beginning to spring up in the midlands and North East.
"Most of what we sold at the time was sourced directly from local Irish growers. Some was bought in the Dublin Fruit Market and what we couldn't get here, we imported from abroad," explains Michael.
In 1989, the company decided to branch out and opened its first retail store in nearby Cavan town. Under the brand name Fresh Today, the company sold fresh fruit and vegetables directly to the public. Unsure initially as to how the venture might turn out, they were surprised at just how well the store performed.
"It was one of those turning points in the business where everything changes," explains Michael. "We realised then that we would end up opening more stores at some point when the time was right."
That time came in 1998 when Quinnsworth, which had been taken over by Tesco, and other larger supermarket chains decided to move to a new purchasing model known as central distribution.
Up to that point, wholesalers had been required to deliver their goods directly to small individual stores . However, under the new model, the supermarket chains built large-scale central warehouses to where wholesale suppliers were now required to deliver. From here, the supermarket company themselves would deliver supplies to individual stores in its branch. This had the positive effect of eliminating the need for individual stores to hold unnecessary surplus stock while providing better buying power for the entire chain.
While the move represented a positive step for the supermarkets, it would serve as a significant body blow to Gerry Ellis and Sons. They, like many local and regional suppliers were now passed over in favour of larger national suppliers.
"From one chain alone, we lost 26 individual store customers as a result of central distribution," explains Michael. "In fact, the overall impact of central distribution on the company was that we lost 50 per cent of our annual turnover."
After careful consideration, the firm decided that it would be unwise to attempt to compete with the larger players. Instead, they moved to open two more stores, this time in Longford town and in Athlone.
"These worked well and were so successful that we simply knew we had to open more stores and continue to sell directly to customers," explains Michael. "We also came to appreciate that, apart from the quality and freshness of our produce, the managers and staff we employed in our stores were all local to their areas and so they knew many of their customers by name. This personal touch was clearly a differentiator for our stores when compared to the larger supermarkets."
In 2010, the company was again challenged when the new discount supermarkets began to use cheaply priced fruit and veg as loss-leaders to attract customers in the hope that, once there, they would buy other goods.
It was a tactic that worked. Whatever about the morals or ethics of what widely became known as below-cost selling, the result for Gerry Ellis & Sons was that they again lost significant revenues; this time 30 per cent of annual turnover.
"The prices offered by some stores are often misleading when a customer takes into account the price of their full basket of supplies," insists Michael. "However, what is really frustrating is that this policy of below-cost selling poses a real threat to the farmers and growers who end up being paid very little for their products. Such a model is simply not sustainable."
Again the company was forced to respond. This time though, they realised that, in order to compete, they needed to broaden their product offering beyond traditional fruit and vegetables. They chose to move into the grocery market, opened additional stores and began to expand into a wide range of food, hardware and household products.
They increasingly sought out medium-sized towns in the region as their preferred locations for new shops. Here, shoppers could now stock up on groceries and household items as well as fruit and vegetables in one store instead of having to spend time or incur the added expense of driving to their nearest big town where the largest supermarkets and discounters were.
Their strategy worked and soon the company had grown to a total of 15 stores including their original stores in Cavan town, Longford and Athlone as well as new ones in Arvagh, Virginia, Trim, Athboy, Mullingar, Carrick-on-Shannon, Ballymahon, and Donaghmede and Northside Shopping Centre in Dublin.
While business is good for the brothers, they explain how they, like all small retailers, must constantly struggle with the crippling costs of rent, rates and bank charges.
It is clearly evident that the Ellis brothers a have a real love of their business. There is a definite family atmosphere in the place. Many of the staff have been working in the business since it was set up in 1975, such as May McCaughey and Tomas McWeeney, who joined fresh from school and has since worked his way up to become general manager of the retail division.
"While I am MD of the company, myself, my brothers and all the staff are really one big team," insists Michael. "As managers, we are very hands-on in the business and we wouldn't ask any of our staff to do anything we wouldn't be prepared do ourselves or haven't already done. It might sound clichéd, but without the support of our staff, and indeed our customers, over the years, we wouldn't be here," he adds as Gerard and Brian nod in agreement.
Support for their community is also important to the brothers. Pictures of their local St Patrick's football team hang proudly in the reception. They think it's important to give back and are well known for sponsoring community projects. They have also helped raise more than €1m for everything from St Luke's cancer hospital to the local palliative homecare service. Their commitment to community is something that is genuine and central to their ethos rather than a shallow marketing ploy.
As they talk about the future, they tell me that they are committed to growing from 15 to at least 25 shops over the next three to five years. Rather than being intimidated now by the large discounters and supermarket chains, they relish the opportunity to compete with them.
Before I leave the facility, the brothers introduce me to Gerry and Kathleen, their parents, who started it all off. And I also meet Michelle, Michael's daughter and Stephen, Brian's son – the fifth generation of the family to be involved in the business.
Family, community and a strong work ethic are the defining characteristics of the Ellis family of Arvagh. And if there is any truth to the view that entrepreneurship is genetic, then this is one family that has that particular gene in shapes.
Company: Gerry Ellis & Sons Ltd. Also trading as Fresh Today
Business: Wholesale and retail of fresh fruit, vegetables and grocery products
Set up: 1975 – though the family business dates back to 1889
Founders: Gerry & Kathleen Ellis. Now run by their sons, Michael, Gerard and Brian
Employees: Directly employs 84 and a further 100 indirectly
Location: Headquartered in Arvagh, Co Cavan, with 15 retail shops
Michael, Gerard and Brian's advice for new businesses
1 Keep your costs low.
"It's important to keep a close watch on all your overheads and expenses as these can really impact on your bottom line. You don't want to have all your hard work wasted because you failed to manage costs tightly. And don't be afraid to negotiate hard."
2 Work hard yourself and lead by example.
"Be a good leader, don't be afraid to get stuck into doing different parts of the work yourself. Staff respond to good leadership and being hands-on also gives you a better feel for what's happening in every part of your business."
3 Treat your customers and suppliers fairly.
"People are different. Accept the fact that no two customers or suppliers will ever be the same. Treat everyone with respect and with the same level of care and attention. It will pay off in the longer term."
Sunday Indo Business