A rare combination of entrepreneurial spirit, historical sensitivity and grit has seen Mark Laucke re-invent the Laucke Flour Mills brand.
You won the Central Region 2012 Ernst and Young Entrepreneur of the year award, how does it feel to be called an entrepreneur?
When you consider that I am 63 years old it’s quite an accolade!
Until the award I’d never really thought of myself as an entrepreneur – I was just a miller. Working through the application process forced me to review every aspect of the business and myself.
What I’ve learnt is that an entrepreneur is an entrepreneur regardless of the size of their business, their industry or their background.
An entrepreneur is not simply a successful businessman – it can be damned easy in some areas to get lucky and get rich. Entrepreneurship is about vision and perspective, and outcomes as measured by the ability to achieve success despite severe obstacles arising along the way – it’s achieved consequent to putting in a lot of hard work and effort.
Laucke Flour Mills was founded in 1895 by your grandfather, Friedrich Laucke, a migrant from Germany – would you consider him to be an entrepreneur?
He must have been an entrepreneur for him to do what he did.
He arrived from Germany after a stint of compulsory naval service “to see the furthest ends of the earth”, and was soon without a penny to his name. By fate, he bumped in to his German former employer as he was about to depart, and so found a job as a miller. He had broken both his feet and then contracted Rheumatic Fever and yet even so he worked two jobs. Within four years, he had taken over a distressed flour mill in Greenock, survived a boiler explosion, installed new technology in the form of a Producer Gas engine, consolidated and soon started expanding across South Australia.
Any person that has the gumption to leave the comfort and familiarity of their home and set up a new life; experiencing a new environment, language and political system, and overcome enormous hurdles must have had something special about them.
It’s often said that family businesses are resistant to change yet in the last twenty years Laucke Flour Mills has reinvented itself, how did this come about?
When my grandfather died my father and uncles took over the business and life became very comfortable, but often with comfort comes inertia.
My father once told me ‘Son, one day this will all be yours’, but could not explain what this meant. In reality, there was no vision for the business, no understanding of its financial position or even knowledge of who owned the shares.
Then, as a teenager, a customer told me they bought flour from Dad because he was a nice guy, even though the flour was not good. Further, I recognised that the family bakery sector on which we then relied was dying. At that time I knew that fundamental change was needed.
My cousin, Condor, was of similar mindset, so we took control of the family business. Ten years later in 2000, we separated as planned into two separate businesses: Flour Milling and Feed Milling. Although Laucke Flour Mills is now a fourth generation business, enormous changes have been implemented and a business model has been developed which has completely re-invented the business, taking it from a simple milling business that was a generation behind its competitors to become a food manufacturer which is now perceived as an industry and market leader.
The new business model consisted of three core elements.
Firstly, a model that is not vertically integrated, ensuring that we’re not distracted from our core business, and not perceived by customers as competitors. Secondly, a culture which is customer focused with high integrity. Thirdly, we seek to develop partnerships not only with customers and suppliers but also competitors.
This progressive change in business model is still ongoing, with the greatest changes occurring over a span of about ten years. The hardest thing to change was the business culture, based as it is on the mindsets of people.
The business has changed not only culturally but also in terms of ownership – has this presented any challenges?
Not at all. In the early nineties we were approached by a number of multi-nationals looking to take over the mill. That was the catalyst for generational change. Condor and I solicited three offers then made our own bid matching the best offer that we’d received.
Our cousins were more than happy to sell us their shares, knowing that the business was our passion and that they were then released to pursue their own interests. Our advisor, Grant Wilson, made the whole process really simple, sensible and fair.
Then in 2004 I saw the opportunity to realise my intention to have our flour milling business become, as planned, a nationally significant business through the purchase of another mill in Bridgewater, Victoria. Condor was not in favour because from his perspective feed milling offered better returns on investment and less risk.
We knew then that it was time to go our separate ways. But we had to act fast – I had less than two weeks to split the business and acquire the Bridgewater Mill.
Again, Grant made the whole process straightforward and equitable. Although he raised concerns that acting for both Condor and I may be a conflict of interest, we both knew it would not be a problem and said so without hesitation – he had our best interests at heart.
It was all organised like a military operation and timed to the minute. On my way to sign up for the new acquisition, I was signing the final Laucke documentation on the airport check-in counter and stamping the documents using my own blood as ink – how fitting!
Becoming the sole shareholder, I realised that I missed the robust board discussions we’d had as a family business. Although I didn’t need shareholders, I needed a Board. In 2004, I set up an advisory board with Grant and a third director Murray Najar, which has been invaluable. Together we form a great partnership.
You mentioned earlier that entrepreneurship is defined as success in spite of obstacles, what challenges have you faced?
The biggest challenge for us has always been competition. The flour milling industry reached a peak of numbers in the 1870s and has been extremely competitive ever since, with those industry-founding millers falling by the wayside or becoming part of larger businesses ever since. We’re now the last of the original family owned flour milling companies in Australia.
Therefore, tough competition has moulded who I am and what I do, so I have always shaped the business to cope with such competition, and risk-managed every facet of the business.
Even so, in 2004 over a period of about nine months, a competitor attempted to drive Laucke Flour Mills out of business by offering products to all our customers at prices that were below cost. Our business development and local and international expansion came to a standstill while we defended our core business.
We advised our key customers that we could not price match, but significantly reduced prices, then cut costs and pruned every aspect of the business so as to focus on those customers that appreciated the value that we provided. Understanding our commitment to them and appreciating our quality and service, we retained the loyalty of most customers but profits disappeared and losses mounted.
We survived by doing very well what we had adopted as our business model, and by having sound advice from Grant and Murray.
In the decade since then, we took the opportunity to build on that foundation, rebuilt the business according to our vision, consolidated the business, and eliminated debt.
Significantly, we have had our endeavours recognised and appreciated by everyone with whom we interact. Our profile is high, and we stand poised to potentially triple our business consequent to the current redevelopment of our Bridgewater Milling operations.