 I thank you everybody for inviting me along this evening to talk about one of my favourite subjects, and that's Whitaker's chocolate. I'll give you a brief history of Whitaker's, and then I'll talk about a few of the principles that we follow. Let me tell you from the outset that there are no silver bullets in all of this. Mae'n amlwg, mae'n dweud yn ymddangos arall, a'r amlwg ddweud Andrew i'r Bryn, y dyfodol y byddwn yn ymddangos, mae'n ddweud a'r amlwg o'r cyd-dweud, a'r cyd-dweud yn ymddangos cymdeithas cyllidau cyflwynt Cymru. Mae'n amlwg ymddangos ar Wyddikas, ac mae'n amlwg, mae'n amlwg, ymddangos cyllid Cymru, is the world-loving world-class chocolate from Poirot, and that's what drives everything. So everything about the business has to be world-class. The company was founded in 1896 by James Henry Whitaker, and he had emigrated from the UK. He had lived in Macclesfield, now none of you would have been to Macclesfield. Oh, you have. Now you know why he left it then. He arrived in New Zealand in 1890 and set up Whitaker's in 1896 in Christchurch. It then moved to Wellington, and the factory was in the centre of Wellington just off Vivienne Street, and it moved to the current site in 1969 in Poirot, and it was on one section, and subsequently we bought the section next door, which has got a big warehouse on it, and about 18 months ago we bought the section on the other side. So we are fully committed to New Zealand, we're not moving to China, Thailand, Australia or anywhere, we're fully committed to New Zealand and we've invested a lot in the factory and we're continuing to invest. The company is still New Zealand-owned. Andrew and Brian are the current directors, and they are third-generation Whitakers. There are fourth-generation Whitakers in the business. Holly Whitaker is a marketing manager. Matt Whitaker is in charge of the international business, so they're fourth-generation in there. Both Matt and Holly have young children as well, very young children, so there's a fifth-generation coming through, so the dynasty will continue. So let me show you this first chart. Now I'll show you this chart for two reasons. The first reason is the winner of the most trusted brand, the second and third companies are normally Sony, Toyota, Samsung, although they've slipped a bit. It is big multinational companies, much bigger than Whitakers, but size doesn't always count. We have a very strict policy on quality of the product and I think that's why we win this award. We're also the most loved brand. Which brand do you reckon comes number two in the most loved brand? It's your blacks. So we're the only team in the world that continually beat your blacks. So we're very proud of that, and it's a chart I love showing. That's the second reason I like it. Everybody in the company is very proud of that. We probably don't celebrate success as well as we should do, but for the last few years when we've won that, we've taken the whole company out to lunch. It's an award that goes back to the heart of the company. It is a family company. The people that work there are very proud to work there. So let's talk about a few of the principles. If you think about Whitakers, or think about most consumer markets in New Zealand, the consumer is bombarded with choice. The consumer problem is choice. It's not one of supply. Most products are in good supply. It's one of choice. Whitakers is up against Cadbury, Nestlé, Lint and Mars for huge multinational companies, much bigger than us, much bigger resources, and they're blue chip companies, very good companies. So we have to make sure that what we do is better than what they do. Otherwise, we won't survive. We'll just sink. So successful brands build a strong brand culture. Consumers like to be in a community, and you're all in a community now, and brought together by a brand called Balkan University. Strong brands act like magnets, and they build these communities around them. And what they do is the people in those communities, what we say is we want to move people from being spectators. That's people that are aware of the brand to supporters. And supporters of a brand will not go to another brand. So it's very, very important to build those supporters. Many years ago I used to work for Unilever. And during one of the companies I worked for, the CEO was an accountant. Actually worse than that was a Dutch accountant. There's no Dutch accountant in the audience. That's good. I did come across one in an audience once. Anyway, he was a Dutch accountant. So I went into his office one day. I said, I need a meeting with you next Tuesday. Now, Wednesday? No. Or can I meet you on Thursday? No, that's the type of conversation, dynamic conversation you used to have with him. And I said, oh, why can't I see you next week then? I'm away. Holiday? No. Business? No. I said, well, I'm getting a bit irritated by it. I said, well, where are you going? He said, I'm going to a convention. I thought, oh, a chartered accountants convention, that's going to be good. And I bit my leg. And I said, oh, are you going to a chartered accountants convention? No. He said, I'm going to a Harley-Davidson convention. Well, he must have seen the look on my face. And he started talking about Harley-Davidson. And he almost became animated for a Dutch accountant. And he told me how, when he was at university in Amsterdam, he had bought a Harley-Davidson that's the first one he had. And ever since then, he'd always owned a Harley-Davidson. And every year, wherever he was in the world, he tried to get to the Harley-Davidson convention. And again, I had to bite my lip because you can imagine it. This dull, boring, grey Unilever accountant would change his suit and put on his Harley leathers for one week a year. And he'd go to this convention. There'd be company directors, bikers, gang members, and goodness knows who. But the important thing is Harley-Davidson acted as a magnet. And it drew all of those people into it. Does anybody here own a Harley? No. And I guarantee, I don't know anything about motorbikes, but I guarantee that if you own a Harley-Davidson, you're not going to buy a Honda or Suzuki or whatever because you're a supporter of that brand. And again, I don't know the technical details about motorbikes, but the thing that really separates Harley-Davidson from those other motorbikes is the emotional driver. It's all about the freedom of the road, which was encapsulated in a film in the late 60s, and I'm looking around the audience and probably... Well done, well done. Normally when I'm doing this, our generation is not well represented. I've never seen the film. Again, emotional drivers are so important because rational aspects of a brand can be copied. The emotional ones are unique. And as I say, Harley-Davidson has this emotional freedom of the road. So this year you're going to leave a guy for one week a year, he's free. And he goes out and drives his Harley around. So very important to build a culture. And we do build a strong culture with Whitaker's because we are a family company. We are New Zealand, but above all, we are fanatical about the quality of the product and its chocolate. It's a small indulgence. You're going to eat it, you're going to put it in your mouth. You do not want to be disappointed. And quality is absolutely critical. And that's how we... And we're the only major chocolate company in New Zealand that do the whole manufacturing process. Import the cocoa beans, the whole process, the whole nine yards through to the end product. And we do that. It would probably be cheaper for us to import cocoa liquor because there's companies around the world who specialize in producing cocoa liquor. And because of the economies of scale they've got, it's cheaper. But you can never, ever guarantee the quality. By doing it yourself, you guarantee the quality. And it's chocolate, people put it in their mouth. If you put palm oil in it, people will pick it up. And quickly. Everybody's an expert on chocolate, particularly females. And people notice a change very quickly. So build a strong-brank culture and build strong relationships with customers. The best way to build a relationship with your customer, get the product quality right, but then build a strong relationship with your customers through storytelling. All brands, all great brands have good stories behind them. And with Whittakers, we focus very much on what we call... What is unique to Whittakers? First of all, the bean to bar. And that is a signal of quality. You know, Cadbury, Nestlé, Mars cannot claim bean to bar in New Zealand. We are family in New Zealand. And with the New Zealandness, we don't want people to buy Whittakers chocolate because it's a New Zealand brand. I think it's a bit pathetic really. We want them to buy it because it's the best quality chocolate. And they love the quality of the chocolate. The fact that it's a New Zealand brand helps, you know, is another added factor. And family. Family is important because generally family-owned companies and family-driven companies have just more detail, more passion, more energy going into the quality of the product. You know, I've worked for multinationals and I worked for family companies. I can tell you that the focus on quality in family companies is far greater. I'm not saying multinationals don't look at quality but compare us with Cadbury. So build strong relationships with the customers through the storytelling and ideally have unique properties that you can tell to the customers. I'll talk about some of the aspects of what we do at Whittakers in building the company. First, company must have a clear vision. And everybody in the company must understand that vision and the vision must be, I think, ambitious. And everybody understands it as the ambition that everybody works towards it. And as I say, our ambition is for the world-loving world-class chocolate from Poirirau. And the essence of that is world-class chocolate. And as I say, that drives everything else. And we wouldn't survive or prosper unless we really focused on that. And the world-loving means we are very strong in New Zealand but we do have ambitions to develop an international business. It will be slow because by definition a consumer goods company based in New Zealand any other market it's going into is going to be bigger. And we are coming off a small base but we are gradually building our business. So we are in a lot of the Asian countries. We're now in Canada. We're in China. We're in Walmart in China. So little by little we're building the brand in that international markets area. But it will take time. But it will take time. But that's the vision. And in doing that we will never ever lose the world-class aspiration because that is very important. The value of the company really comes back to the quality. And we always say we do not cut corners. However, we have a product called a sandy bar. And guess what? We cut the corner. Now this is where Brian and Andrew are very clever and going back to that world-class aspect. Santee bar was sold in dairies for years, unwrapped. Now we wanted to get it into supermarkets. You cannot have it in supermarkets wrapped. So what we did, or what Andrew and Brian did was to find a machine that would wrap a sandy bar. Now if any engineers or packaging people amongst you will know that wrapping something with a curved end like that is very difficult. And in the end they searched the world and found a machine in Italy, took it back to Wellington and I think in typical New Zealand fashion and made a few amendments to it and made it work. They sent these products to Italy and said your machine is wonderful. It's packing these sandy bars now. Italians couldn't believe it. I think they even sent somebody out just to make sure that it was true. But again the important point is now the accountants would have said, well square up the end, you know. The production efficiencies will be much better. Everything will be a lot easier. The machine will be cheaper and everybody will be happy apart from the consumer. And the accountants, don't get me wrong, accountants have a role. They were right to ask the question but what they do, they ask the question but they missed the point because the whole mnemonic of this brand was that curve. And cabars have had a whack at this over a number of years. They brought out a stick like this. Guess what? The ends squared up. So the product didn't have any identity. That whole curve is the identity of that product and the history of the product. So it goes back to the values. It goes back to world class and defending the values not only of the company but of the products, the individual products as well. And very successful, very successful. In fact, the problem that we have is we can't really meet the demand for that. But again, it's that. If it squared up the end, it wouldn't taste any different but it would lose that identity. Don't listen to the accountants. So values. Strong identity. This was the first pack that we had in gold. Again, this was launched in the early 50s, unwrapped and sold in areas for years. We wanted to get it into a supermarket so we had to wrap it and it was wrapped in 1984 and that was the first gold wrap. Gold is very much the colour of the brand because again, if you're shopping in supermarkets, you don't really like it. And you're up against a lot of other products so you want to have a clear, strong identity. When you go to the chocolate section, we say what we try and achieve and we say we want, with all the blocks, merchandise, we want a wall of gold because then people can easily identify the Whittaker's product. We want a wall of gold. Now there might be a little wall of purple next to it, but ignore that. So the strong identity is very important and gold is very much the brand colour which is a premium colour. It denotes a premium product and we are very strict on that because strong identity is particularly important in supermarkets. Positioning. This is how people perceive the brand not only in their hearts but in their minds and often the heart is more important than the mind. So when we position the brand we talk about bean to bar because that's very much shorthand for quality. People realise that if you're spending that amount of detail in roasting the beans and the beans are roasted for a certain amount of time there's some magic there which Brian and Andrew have developed over the years. So they are very strict on that quality and so bean to bar is important. The family is important because again what that communicates about the quality, the effort and enthusiasm that goes into the product so most of our advertising is signed off from Andrew and Brian and again the New Zealand part is important as well. Also we certainly underpin that with the quality of the ingredients we put in only used Ghana and cocoa beans and all of the ingredients that we put in we have higher percentage of inclusions than other brands. So if you look at our hazelnut product for example it's got a higher percentage of hazelnuts in it than the cavalry product and that's true across all of the products. So again that goes back to the positioning of the brand in people's minds it's better quality. In one of the focus groups we did many years ago and focus groups with chocolate are very interesting because you have to segregate them you cannot have males and females in the same group because females have this sort of slight guilt complex about chocolate and if there's males in the group they won't talk. If it's just females in the group they do talk and for many years when I was working with Unilever I worked on product categories like detergents, toothpaste, deodorants things like that and if you did a focus group they would last probably about two hours by which time it was dragging a bit because there's only so much you can say about a detergent really. The first one that we did with chocolate at the end of three hours was that the moderator of the group came out and said have we got enough information and poor woman she was absolutely exhausted because there are eight women in this group and they've been consuming chocolate all the way through. And there were some lovely comments that came out of it. Firstly it was when we were launching a square a square as product and it's 10.5g, a square is 10.5g of chocolate and one woman said oh it's 10.5g of chocolate that's fabulous I can eat as many as I like and I could never quite work out the logic again. And then another woman said oh I really love Whitaker's products and they're so generous she said I like Whitaker's products because they've got bigger and better nuts and I thought well I don't think we can use that in advertising. So positioning is very important. Communication is critical. If you think about the vision, the values, the identity and the positioning communication, successful communication brings all of those together and very much builds the bridge to the consumer. So it's very critical in building that relationship to the consumer. It must have been about five or six years ago now. We launched the creamy milk product with a five roll refined process. I won't go into all the detail but the process of refining it through five rollers gives you a smoother product, a nicer mouth feel and just an overall better quality. And again this is where Andrew and Brian are really clever because Whitaker's never had a problem with quality which is true. It's better quality than the other product and obviously I'm biased. But it's better quality, it's got 33% cocoa, competitor brands won't have as much. A dark chocolate doesn't have any milk solids in it and I think the reason for that is that competitor brands do because I think they're using cheaper cocoa beans and they might be slightly more bitter so the milk knocks the flavour back a bit. Not sure but anyway we do not use milk solids in our dark chocolate. If you're a dark chocolate lover and haven't tasted our dark chocolate, taste it because it really is fabulous. All from Ghana and cocoa beans. Sorry I digress slightly. With the milk chocolate Brian and Andrew had this sort of nagging doubt in the back of their mind. If we want to be world class there's an improvement that we can make by using a five roll refining process. It will just improve the smoothness, the mouth feel of the product. Just give it a nicer edge. And I said well it's not a problem. Quality is not a problem. We think we can do it, we can do it. The machinery for this the investment ran into five figures. It was huge, it was huge. But it did improve the quality of the chocolate. Now from a communication point of view really difficult because if people are happy with a product they think it's better than the other products on the market. The last thing they want you to do is change it. Why change it? I like your product. It's better, I like it, why change it? Because we can make it even better. But I'm not sure that I want you to do that. So the communication was very very difficult. We explained to the agency that we were improving the product and the communication had to convince people they needed to try this product because it had been improved. Even though they liked what they were eating at the time. Most difficult problem to actually do in communications. If you've got a problem with a product and you say we've improved the product we've put enzymes in it or blue specks or whatever it is with detergents. We've improved it. It'll make your washing whiter. Try it. Easy story. It's a simple story. This one was very difficult. So the agency and I give credit to the agency. Our accountant didn't. They came up and they said there's only one person in the world that can convince people to buy this new improved chocolate. And we said oh who's that? Nigella Lawson. Oh good god. And when you think about it and we thought about it for two minutes really. You want to communicate chocolate which is indulgent, smooth and Nigella is ideal to do that because she is indulgent, very smooth and the rest. And the good thing about Nigella is she is very popular popular with everybody. Not only females but males as well. And probably for different reasons but very, very popular and ideal to communicate chocolate values. We told the accountant and because as you can imagine Nigella is not cheap. So we told the accountant and told him how much it's going to cost and he went quite white and when he sort of recovered he said oh well what's the ROI going to be on Nigella? And he said oh come on. Only an accountant can reduce Nigella to an ROI. And I said I don't know. I don't know I said and I can make up some figures if you want but I just don't know. But what we can say is that since she advertised this initially and this is now the number one SKU in the chocolate market. Now five years ago if you'd have said to me and I'm the chief market officer of Whittaker's would Whittaker's creamy milk be a higher seller than Cadbury dairy milk which has been around for years part of New Zealand history part of the culture and everything would it be a higher seller? I'm not sure that I would have bet my house on it. But anyway it did. And we have used Nigella very successfully to launch the this is the artisan range which is using obviously Whittaker's chocolate but using artists and companies from around New Zealand to incorporate into the chocolate. So this one has got Marvel's sea salt and caramel brittle which is fabulous. We haven't tried that. Fabulous. And again we use Nigella and in that 100g market we've just launched a new range which is called the destinations range and so this range is using artisan producers from New Zealand with the destinations range we've actually got out to the world bringing artisan products to New Zealand. No expense paid. Again no if you think about it we want to be world class. And it's been interesting this is the Italian piedmont hazelnut so the hazelnuts come from piedmont in Italy very very expensive was one of the original areas that peanuts were grown. But again we searched the world and that's where we got those hazelnuts from. So again if you want to be world class you have to and this 100g range if you think about this 100g range the major brand in the 100g sector was Lint and Lint a very good company a very good quality chocolate very well marketed and we have gone in there and they had 70% of that market before we went in there 75% of the market because there was no other competitors they've now got about 30 and we've got about 40 that is the value of Nigella as I say to the account that's it and he goes butter butter butter but she's expensive can't we get somebody cheaper of course we could we could get somebody cheaper we did have a bit of slight criticism in using Nigella because she's obviously not New Zealand and we're a New Zealand brand and one or two people said well you know why didn't you use a New Zealand foodie and don't get me wrong there's some very good foodie foodie people in New Zealand but I don't think any of them are world class yet they wouldn't have the world class reputation of Nigella they may do in the future they may do but I'm not sure that they would have the same impact as Nigella does at the moment and let's say that may change in the future but we're talking about now but to go in and take that type of market share away from lint it goes back to great product great quality product and great communication using Nigella and that's the value trouble with accountants they only look at cost you have to look at value so communication very very important so in all of this what have we learnt you know and there's a number of key lessons coming out of this for us and I think it it applies to the Whitaker's business but I think it is they're general and I think they apply to a lot of businesses the first thing you have to have a strong brand you know and no matter all the studies that have been done around the world about successful profitable companies the strength of the brand is always paramount have a strong brand understand what your rational values are but even more so understand what your emotional drivers are because your emotional drivers will be the unique values of your brand and you must have a strong brand because you're in competition there will be other brands coming in you know you just want to be very very strong now the next point in tuition and talent it's a bit difficult to explain we do not do any consumer research and don't get me wrong I'm not saying you know consumer research is not relevant but we do not do any consumer research because our philosophy is we should know our business and you should know your business better than anybody else certainly better than consumers and I think and marketing people are dreadful for this they tend to hide behind consumer research and companies tend to hide behind consumer research you know you often hear people say I'm not sure what you want to do we've got a few ideas let's ask consumers about it well if you don't know consumers aren't going to know your business is life and death to you it's not life and death to consumers if your business fails you don't get any money and you don't eat with consumers if you think about toothpaste it's not the biggest decision of their day you know so we rely a lot on intuition and it goes back to talent you know if you're going to follow that you have to have very talented people working on your business and we very careful in the selection of our people and we invest in them heavily so on the marketing side we've got two marketing managers one Jasmine Griffin and the other is Holly Whitaker and I would have employed Holly even if her name wasn't Whitaker because she had spent she had gone through university and she had spent time in London working as an art director for Sachi and Sachi in London now anybody that knows the London advertising scene will know will be very talented and very tough to survive in that I think you know notice period is 24 hours if you're lucky very very tough and she did very well in that so we have two marketing managers both of them have been to Stanford because it's the best business school in the world now I know where I'm standing and again you know probably a brave thing to say but I think the people at Auckland business school will admit at the moment Stanford has a better reputation than Auckland and in the future that may change that may change but at the moment again it goes back to world class Stanford is world class is Auckland world class at the moment not sure and it may change but we invest heavily in those people because we expect them to use their intuition and you could say it's the way that we do it rightly or wrongly it's the way that we do it and I suspect we are a bit different in that way and this is another thing that may seem a bit strange we are not a consumer led company and again I think people get this wrong in that you see these dreadful ads which say we have listened to the consumer and this is what we are doing now and you think oh and normally it's after the company has made a massive mistake and we have and this is very much Jasmine's area 700,000 people on Facebook that is an enormous slice of New Zealand because chocolate and we are lucky because chocolate is an interesting category and we have there is a dialogue with them continually and you learn an awful lot that way so that's our consumer research we have a relationship with a consumer we are not consumer led I'm not sure if that makes sense but because consumers don't know what they want they just don't so that's the way that we run it which may be different and you may say that's wrong but it's the way that we do it so intuition and talent is very important and they go together you know your business better than consumers you know what you want to do more than consumers have the courage to do it take the consumers along with you don't wait for them to tell you what to do if you wait for them to tell you what to do you'll be behind all the time speed to do things quickly so quick that the accountant can't stop us but I think speed is important and let me tell you this some years ago we had an ad on TV when the palm oil thing came up an ad on TV a pack shop and going through a list of things that they had done that whole ad took because we'd seen what they had done and we thought well consumers should know about this and the whole ad took two days to write conceive, shoot and get on air because there was an opportunity there there was a moment in time there was an opportunity so if you see that you've got to seize it and it was very successful it was very successful sales shut up 35% over the next few weeks the good thing about it was what it gave Witticus was a huge sampling campaign I couldn't believe a number of people that hadn't tried Witticus we got all these people coming back oh I just tried Witticus it's fabulous and I think it's been around for 100 years should have tried it before but it gave us a huge sampling campaign and what was good was the sales didn't just go and come back down again because it went back to the quality of the product you know the quality of the people tried it they perceived it was better and stable and if you look at the Witticus market share in the block market that's in this market over the last probably sort of 10 years, 12 years it's quadrupled and we haven't done it on price we've done it on quality our product sells at a premium to Capric this product sells at a premium to Lint because we are not price driven we're quality driven and it will always be that way as long as I'm there it will always be that way because in the end if you're price driven somebody will always come in lower than you always happens so intuition, talent, speed and take risks you have to take risks and I always think taking risks is the fun part of the business but if the intuition and talent is right the risk is reduced you don't really reduce risk by doing market research you came a bit and that's another thing we're marketing people get market research wrong they want to reduce the risk so they say reduce the market research and ask the consumer and a lot of the time it fails and people will say oh this is failed and they say well and the defence for marketing is well research said this it doesn't matter what research says it's failed so I think if you're using research just be very careful what you're using it for just say why are you using it why can't I answer the question why haven't I got the competence to answer the question