Patties' plan to take on Maccas

17 Jan, 2016 01:00 AM
Patties CEO Steven Chaur is determined the tainted berries scandal is now behind the company. Photo: Paul Jeffers
Patties CEO Steven Chaur is determined the tainted berries scandal is now behind the company. Photo: Paul Jeffers

Four'N Twenty pie maker, Patties Foods, is exploring merger and acquisition deals to beef up its savoury business and further distance itself from last year's tainted berries scandal.

It is almost 12 months since Patties chief executive Steven Chaur took a phone call from a Department of Health official which he said changed the course of the company and put its growth plans "on hold".

The official said three people had been diagnosed with hepatitis A after they ate frozen berries manufactured under Patties' Nanna's brand.

Mr Chaur vividly recalls the time - 1pm on a Friday. The next day the department issued a public recall. Mr Chaur said this was despite no packets or batch codes provided of the tainted berries.

It sparked a process that would lead to the sale of Patties' entire frozen berry business and what Mr Chaur described as being "guilty until proven innocent".

"The Health Department weren't able to specifically pin it down through the microbial and viral testing. Neither were we," he said. "Of course, the Health Department have their epidemiology, which is a survey-based analysis, and they say 'as far as we are concerned that's accurate'.

"But really, when you pull the product apart and look at the entire testing regime, both internally with Patties and the fact that the so-called culprit plant in China was tested, no evidence of hepatitis or E. coli was found."

Patties had hoped sales of its frozen berries - which he said had been growing at 40 per cent, generating about $140 million in national sales - would recover, but by December he realised the damage was irreversible. The berry business was sold for $1.8 million.

"Everybody in the category was feeling the pinch, not just Patties but also the private labels and the importers in terms of lower sales. We as a board took a strategic decision to concentrate on the business that we are really good at and the business we have been doing for 50 years, which is making pies, pasties and sausage rolls."

Patties, known mainly for its Four'N Twenty and Herbert Adams pies, is still scarred from the claims. Its share price is yet to recover, falling 18.6 per cent.

But Mr Chaur will not dwell on the past and is eager to push forward with its savoury business. Plans include makings products healthier with more fibre and protein, and less salt and fat, to take on McDonald's and Subway.

He said Patties was open to mergers and acquisitions to strengthen its position in the savoury category. The company controls about 21 per cent of that market, worth about $1.4 billion.

"Patties therefore, still has significant room to grow domestically in core pies and sausage rolls outside the low-margin grocery channel, which is worth about 60 per cent of our sales."

Mr Chaur said the company viewed the competition not as other pie makers but fast food companies.

"I don't think we'd be able to fully take on Maccas but certainly we are drawing lessons from those guys in terms of how to market our product, and even coming up with seasonal and promotional lines."

It has already attempted to reinvent the pie in a partnership with Pizza Hut, creating a Four'N Twenty-stuffed crust - incorporating eight party pies into the crust of a meat lover's pizza.

"It was an absolute meat overload, but it sold very well. That for us was a really good foray into looking at how do we get into this QSR [quick service restaurant] space? From a financial markets perspective we have been kind of tarred with a particular incident, which has kind of put the company on hold for 12 months, and I now have some clear blue ocean in front of me to be able to sail into the sunset with the things that we are really good at and want to do."

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17/01/2016 11:09:00 AM

What other foods do Patties import from China? What do McDonalds and Subway import from China?


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