Donald Russell Direct - Out of the Ashes of BSE On 26 March 1996 Hans Baumann, the CEO of Donald Russell was on his way to his annual vacation with his family. The call came through that the Marks & Spencer that the trucker on its way to the Paris store with prime Aberdeenshire beef products had been turned round. News broke of the confirmed outbreak of BSE and all meat products from the UK were to be banned from export markets. The vehicle returned home and his business faced a bleak future.

Hans Baumann Donald Russell was a start up business founded by Willie Donald and John Stone, two giants of the meat industry in the UK who wished to capitalise by selling their quality products to niche markets in Europe - leading hotels, niche retailers in France, Germany and other premium markets. Aberdeen Angus beef commanded a premium and their approach to producing primal products gave them a significant quality edge and taste advantage. The business was 100% export based on the day the ban was imposed. Much of the drive behind the business resided in Baumann, Swiss by birth and trained as a chef with experience in the horeca (hotel: restaurant: catering) industry and with a passion for quality, in an industry dominated by mediocrity. We had the privilege of working with Hans Baumann and his team during and after the BSE crisis. The challenge was to transform the business quickly to sustain the enterprise and develop markets and customers that would not only restore previous trading levels but also build an even stronger enterprise into the future. Given the space for this case study we focus on the highlights of a real success story, from the depths of despair through to what is now the leading online retailer of meat and other products and a valued multi-channel partner to many of the leading restaurants in the UK and elsewhere in Europe. Survival In the beginning Hans summoned me to Blairmore, his Highland home, between Huntly and Aberlour for a three-day summit. Encouraged by his pet Rottweiler, Bruno, we set to the task of determining the survival strategy, suitably fuelled by the business's excellent produce and the highland air. Clearly export markets were not going to reappear for some time. We challenged the concept of direct retail, online sales from every direction. Such a venture needed cash and we agreed the best route to initial sales was to those establishments that would pay for quality. I happened to have my Amex Platinum Card restaurant directory with me and that database was the start of the recovery. Relationships with a number of leading hotel chains followed including Malmaison, a long term partner and also MacDonald Hotels. This along with other wholesale customers gave the business a basic trading platform in profitable markets, and out of the jungle of Scotch Beef.

From zero sales in 1996 the business has grown to over £20m of profitable sales in 2010 with 75% retail and 25% to the trade. The website shows how Donald Russell Direct clearly differentiates itself from competition. How was this turnaround achieved? Taking the Big First Step Online competition existed in 1997 but mainly from highly fragmented farms and butcher businesses, mainly selling to local markets. No effective national, fresh meat business existed. Supermarkets did not do meat, poultry or fish well. Even in the unfamiliar area of fish Donald Russell saw opportunities to outperform the likes of Loch Fyne and The Fish Society. The decision was made to focus on high quality beef, poultry and lamb, adding in specialist Scottish fresh produce in areas such as fish, both selfish and salmon. The focus was also on better taste, where Donald Russell were able to supply the highest quality Aberdeen Angus beef, aged for 25 days to deliver real tenderness and flavour. Products were delivered fresh in quality packaging and the initial marketing material was also of a high quality. A feature in the Sunday Telegraph started the rush from what was to be the most important segment for the business - the Home Counties around London. Other promotional features followed positioning Donald Russell Direct well away from local competition. The Donald Russell people were also featured, personalising the service and displaying the loyalty of staff, many employed pre-BSE. Therein lay the basis of being able to charge premium prices for the product as part of a total customer experience. Other people, leading chefs, continued to endorse the products and the service e.g. Nigella Lawson, Olivier Roux. The big decision was taken to promote the business heavily (relative to competitors) through direct mail and to secure repeat purchases and higher value purchases. The initial quality of product and delivery assured a good response and subsequent research carried out amongst customers was hugely encouraging. Further investment was made in staff with direct selling experience and further promotion. One of the early capabilities that has endured and is now embedded in the business is an insatiable desire to secure customer feedback and data. This bred confidence that the Donald Russell experience was truly valued by customers and especially the best customers for the business. Following Wine Always thirsty for comparative information and data Baumann saw what Laithwaites had done to the traditional distribution of wine in the UK, growing their turnover from £10m to £100m in under a decade to 2000. He convinced the owners and fellow shareholders to intensify efforts in customer acquisition and recruitment. At this early stage investing around £1m was a daunting prospect but one that delivered real results with over 80,000 customers acquired. Case studies and stories that 'people like our steaks' were circulated widely and this covered with special offers around Easter, BBQs and Christmas fuelled the business to a new level of profitability. Space was bought in other direct mail catalogues and inserts placed in quality magazines and supplements, all carefully targeted at premium customer spending.

2008 UK in Crisis Turnover had grown to £20m by 2008, of which 80% was through the new Donald Russell Direct business. But in 2009 the phones stopped ringing (for 6 weeks) as customers tightened their belts adjusting the most severe recession in living memory. In a three-month period total sales grossed £1m. It was clear that current strategy of customer acquisition was not working and also becoming expensive. In January 2010 after a review the decision was taken to get back to the basics that had created the business. Ready meals were also added to the range, picking up on the desire of consumers for 'meal solutions'. Baumann insisted that they be restaurant quality and customer feedback was excellent, many saying they were the 'best they had ever tasted'. These quickly added over £1m of turnover in what was to be me one of the most profitable segments. The core of the business - beef and other meats - remained robust, but with greater emphasis on value packs, offering customers real value during challenging times for household budgets. Though average purchase levels fell the relentless focus on the most profitable segments and customers kept profits up. The focus on product, offers (backed up with free gifts), audience and timing all back up by industry leading service delivering an unrivalled experience paid off. The range of products was extended. What makes Donald Russell special? Quality ingredients took them so far, but there is n question that the personality and profile the business generated has kept it ahead of the pack both in sales and profitability. Their products tasted better, where of a higher quality and that coupled with their commitment to delivering sector leading service and experience has served them well. Sales have now broken through £30m and profits have also grown, assuring future sustainability. Baumann brought the highest service standards from the Swiss hotel and catering industry and also embrace lessons from other businesses who and created markets, not only in food and drink but elsewhere. It will come as no surprise to readers to also realise that Donald Russell's success was down to its people. From the belief and bravery of Willie Donald and John Stone in recruiting and empowering Hans Baumann, and the latter's charisma and relentless drive for success, they had the ingredients for success. Added to that the recruitment of a young and ambitious team and the support of the likes of Scottish Enterprise Grampian provided the capability and capacity to grow the business. There are many lessons that can be taken from this case study that any SME would be wise to follow. It was a privilege for Genesis to be involved at a number of points in a journey that has taken Donald Russell from the ashes of BSE to segment leading position in the food industry. Alistair Gray March 2013 PS The Vesty Group purchased Donald Russell from Willie Donald and John Stone in late 2012 for £30m, retaining the existing management team to take it forward.