Interview: Robert Graham, chief executive of Graham's

Published on 03/06/2011 20:09

THE sun splits the sky as Robert Graham prepares to officially open the latest extension at Airthrey Kerse Farm, where his grandfather laid the foundations for the family dairy business 72 years ago. The 41-year-old chief executive is reviewing his welcome speech and, although guests are due to arrive in less than two hours, he takes a break to give an interview.

"I gave it a run-through earlier, but it needs some work," he admits with easy-going demeanour. "What I really need to work on is the gag - I just can't deliver it quite right."

Though a bit ambivalent about his public speaking duties, Graham is grateful for the warm weather enveloping the Stirlingshire headquarters of Scotland's largest independent dairy. The ceremony marks what is expected to be another significant step in the evolution of Graham's The Family Dairy, which will post a rise of some 20 per cent in sales for the year ended March on the back of strong growth south of the Border.

The latest offering is a line of spreadable butter, understood to be the first to be produced by a Scottish dairy. Graham reckons it could prove as valuable as last year's launch of the successful "1% Organic", the UK's first semi-skimmed organic milk.

Both 1% Organic and the Graham's Gold line of milk, butter and cream from the family's Jersey herd at Kippen have been a "real success" during the past year, he adds. As a result, Graham's-branded products are now stocked on a UK-wide basis in supermarket chains Asda, Tesco, Sainsbury and others, paving the way for expansion out of the company's Scottish sales stronghold. Graham is keen on the strategy.

"It has been a significant year for new business - some of that growth has come through acquisitions, but those acquisitions came later in the year," he says, referring to the September 2010 purchase of Claymore Dairies of Nairn, which took the company's total number of employees to 415.

"Mainly what we have seen is organic growth."

While the supermarkets are driving much of this, Graham points out that a large proportion of the company's business is still generated from the so-called "middle ground" of supplying restaurants, coffee shops, schools and independent retailers. He proudly points out that not even Sainsbury - which sources all of its own-label organic milk and Scottish cream from Graham's - dominates the sales tills.

"It is important, no matter what business you are in, that you have a diversified customer base," he says. "Our biggest customer is just 10 per cent of our turnover."

The business is also striving for more diversity in its product line.While milk still accounts for about 80 per cent of the past financial year's 50 million in unaudited turnover, sales of butter are now worth about 5m annually, with creams and ice-creams making up the remainder.

Graham believes the new spreadable butter will substantially boost the firm's sale in that category, as the trend among consumers in recent years has been towards more natural and local products. Spreadable varieties now account for nearly two-thirds of the overall retail butter market in the UK, and there are as yet no signs of that diminishing.

The decision to build the 1.2m specialist extension at Airthrey Kerse that will make this butter was not Graham's alone, however. He works closely with sister and marketing director Carol - with whom he plays the odd game of tennis - as well as his father, chairman Dr Robert Graham.

"It is still very much a family business, and titles don't mean a lot to us," says the younger Graham. "My dad and sister are very much involved, and we run the business together."

One of the biggest issues currently vexing the management trio is the ongoing battle against spiralling costs being driven by soaring prices for commodities such as oil, which factor heavily into the packaging and distribution of the dairy firm's products.

Graham concedes that over the long run, the cost of these commodities will only continue to rise.

"It seems that way, so that is the world we have to plan for," he says. "How do we deal with it? We have to be lean, lean, lean, and quick on our feet."

It's one of several ways in which the business has changed since he first joined in 1991, when turnover hovered around 1m.

Though he has overseen a ten-fold increase in sales since becoming chief executive in 1996, Graham pokes fun at suggestions that he was always destined to join the family operation.

"I have no idea how it happened," he laughs. "One moment I was a student studying accounting and cruising around not doing too much, the next moment I was up at four in the morning milking cows. How does that happen?"

Background

BORN in Bridge of Allan in 1970, Robert Graham earned a degree in accountancy from Heriot-Watt University before joining the family's dairy business in 1991. He succeeded his father, Robert Snr, as chief executive in 1996, though the latter is still heavily involved in operations in his current role as chairman.

During his time as chief executive, the younger Graham has led the company through a number of acquisitions. The latest of these, September's purchase of Claymore Dairies, marked the 25th takeover by the company in little more than a decade.

During the year to March 2010 - the latest for which Graham's The Family Dairy has filed accounts - profits broke the 1m barrier for the first time, on turnover of 41m.

Turnover for the year to this March is expected to be confirmed at around 50m once those accounts have been audited.