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Last Updated: Friday, 11 June, 2004, 12:46 GMT 13:46 UK
Lunch Lesson Eight - Growing a business
Development of upmarket stores

Like many other High Street names, Julian Graves started out as a market stall.

The luxury snacks and food retailer has built up a huge chain of outlets around the country.

In fact, its growth has been little short of phenomenal - from 90 stores in 2001 to 220 today.

Former supermarket executive Nick Shutts began by selling nuts, herbs, dried fruits and other baking ingredients at a market in Moreton-in-Marsh, Gloucestershire.

He gradually built up a dozen stalls at markets and in shopping centres before deciding it was time to move the business up a level.

Expanding

Originally, produce had been stored loose and weighed and bagged as required by customers.

A shop would give Nick the space to pre-pack his expanding range of stock.

So the first store opened at Brierley Hill in the West Midlands in 1987.

"There was a gap in the market and it's all about supply and demand," says Nick.

"The demand was definitely there, so being an ambitious individual it seemed the natural conclusion that I should move from market stalls to opening stores."

Demand

Then in 1993, long-time friend Nigel Morris came on board and the Julian Graves brand was born, created by combining the middle names of its founders.

The company opened other stores, but soon decided that there was enough demand to justify rapid expansion.

Between 1996 and 2001, 85 new stores opened and profits reached 1m.
Celebrity endorsement of products

A complex was opened at Kingswinford, combining head office, processing and distribution facilities.

Recognition

Goods are brought in from 80 different suppliers and packaged under the Julian Graves brand.

The business is now also importing its more popular lines directly from the growers.

But the owners were still not totally happy with how the business was developing.

"We were still not achieving recognition," says Nick.

"The way forward was to become a large chain that would become a High Street name.

Julian Graves stores are an easy model to replicate nationwide."

International expansion

So the company embarked on another expansion, hoping that its presence in so many towns and cities would improve the brand awareness.

Initially, funding had come from capital and from the banks, but to support this latest development, Nick investigated the possibility of floating on a stock exchange, possibly something like AIM, which is more suited to smaller businesses.

He saw this as a way of consolidating the business and giving it a solid base for expanding internationally.

But events overtook Julian Graves and in late 2003, it was acquired by the Icelandic retail investment company, Baugur, for 14m.

Baugur had been impressed by the firm's impressive growth and solid profits and saw room for continued expansion.

Nigel has now left the business, but Nick stayed on as managing director with a 20% shareholding.

Budget

Despite the sale, was there any point when he thought the business was growing too quickly?

"No," he says. "The infrastructure is and was in place in terms of distribution and warehousing, a field management team was and is in place to manage things at store level and we have support personnel at head office.

"The shop fits are kept to a cost-effective budget and payback is very quick."

But it hasn't been a question of opening shops willy-nilly.

The company has based its expansion on demographics - research has shown its core users are older women who enjoy home baking and it has taken that into account.
Company is keen to expand product range

"It's about knowing who our customers are and what products they are likely to want to buy," explains marketing manager Alison Miles.

"We added a range of cookware last year based on customers' requirements and feedback."

Concessions

Also, alongside the High Street stores, Julian Graves has opened outlets in places like hospitals, garden centres and railway stations.

"Somewhere like a hospital would be based on snacks and confectionery whereas a railway station store would be very much for impulse purchases - people would want to go in and out again very quickly," says Alison.

Concessions have also been opened recently in a department store in Wolverhampton.

"It's an opportunity to try things like this to see if they work," says Alison.

The company's latest development has been its more upmarket Experience stores, with bigger sales areas, a wider product range and greater emphasis on the origins of the goods.

And TV chef Lesley Waters, from Ready, Steady, Cook, has written a series of cookery books based on the company's ingredients.

Franchises

A small number of outlets have been run as franchises and that is something the company is keen to increase.

"Part our of latest strategy is to look for franchise opportunities or retail partners in locations where we do not feel a full-blown Julian Graves or Experience store could be opened as a stand-alone shop," says Nick Shutts.

"The current market evaluation is that the opportunity is there for 380 full-blown stores and a further 200 franchise opportunities."

Rapid growth clearly brings some benefits. The Kingswinford processing department is now run for 24 hours a day, reducing overheads and making it more efficient.

And buying in bulk for so many outlets means the business can flex its financial muscles to bring down prices from suppliers.

But brand recognition is the key target now, and that will include TV advertising as well as another tranche of shop openings.

"We need to raise the profile of who we are and what we do," says Alison Miles.


Student Guide
Prominently displayed products

Julian Graves is a chain of shops selling luxury snacks, including sweets, fruit and nuts.

It's an amazing story of growth and it all began with a market stall.

In 2001 there were 90 stores - now there are 220.

On the stall, Nick Shutts, who started the business, sold nuts, herbs and dried fruit - weighing out what the customer wanted and bagging it up.

He decided that if he had a shop he could pre-pack his expanding range.

Finding a site wasn't a problem.

He knew that the demand for his products was out there and he could create the supply to meet it.

The name was made up of the middle names of Nick and Nigel Morris who had joined him in the business.

Just think...

Make a list of the factors which might have helped Julian Graves to growth.

How do you think Nick knew there was demand out there?

What would he have to do to ensure that his supply could match the demand?

Back up

A business which is growing as quickly as this must be sure that it has all the systems in place to guarantee efficiency.

They opened a complex in Cheshire combining head office, processing and distribution.

All the support facilities are under one roof.

Just think...

What functions of the business would you expect to find at head office?

Company has a new cookware range
What advantages are there to having all their back up services in one location?

Can you think of any disadvantages?

Who are the customers?

When deciding on the location of a new store, Nick looked carefully at where the customers lived.

Research has shown that the core customers are older women who enjoy baking - so the shops are opened in locations where they go.

To encourage such customers, a range of cookware has just been introduced.

But expansion hasn't just been based on this market.

Smaller shops have been opened in hospitals and railway stations.

These focus on customers buying snacks and impulse purchases.

Just think...

How is the company diversifying?

Why is it important to match the products to the customer?

How is the company doing this?
Expanding range of pre-packed goods

Why are these changes helping the company to keep costs down?

How are economies of scale helping the business?

Growing more

The company has been considering the future. It has a few shops which are run as franchises.

Should there be more?

It has also opened shops called Experience, which sell an up-market range of snacks - and there will be more.

All the shops are built to the same design - according to type.

Because they are opening so many, costs are more economical and there is a quick return on investment.

Just think...

What advantages are there to running a franchise operation instead of managing all the shops within the company?

What is the advantage of having shops with different branding?

Why is a quick return on investment important for a business?

Recognising the brand

Although it has 220 shops, Nick does not feel that the company has enough brand recognition.

Many people do not recognise the name when they see it - so they are not aware of what the business does.

Just think...

Why is brand recognition important?

How might the company achieve it?

What effect would increased brand recognition have on demand for the products?

How would further growth affect economies of scale?



BBC NEWS: VIDEO AND AUDIO
The BBC's Rob Pittam
"It's certainly been a phenomenal growth"



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