A 161-year-old Australian footwear maker - Baxter Footwear - shares their experiences to thriving despite the high dollar and almost zero tariff protection. And it has survived the challenges of succession and is being run by the fourth generation of the same family.
| Entrepreneur |
Marshall Baxter, Managing Director |
| Company |
Baxter Footwear |
| Business type |
Baxter Footwear produces a premium range of boots for industry and casual wear. It uses Australian leather and a welting technique (stitching the sole to the upper) that makes the boots fully repairable. |
| Founded |
1850 |
| Head office |
Goulburn, NSW |
| Contact details |
www.baxterfootwear.com.au |
"For a long time, I wouldn't cough without checking with John."
- Marshall Baxter on mentor John Steele
|
Business Challenge
Marshall Baxter is the fourth generation of his family to run Baxter Footwear since his great grandfather Henry Baxter acquired the business, which was founded in 1850. As effective tariff protection for the footwear industry was progressively slashed from more than 250% in the 1960s to 5% now, the company has faced many challenges:
- Surviving the collapse of the footwear industry infrastructure as tariffs fell
- Dealing with the legacy of 32 family member shareholders accumulated over many years
- Succession planning between generations
- Finding a mentor
Business Response
- Tariff reductions
At the peak of tariff protection, Baxter Footwear employed more than 100 production staff at its Goulburn plant. As tariffs were cut in the 1970s and 1980s, the Australian footwear industry's infrastructure collapsed as tanners, machinery parts suppliers and trade schools went out of business. In the early 2000s, Marshall Baxter met a Chinese manufacturer via a trusted connection. The Chinese supplier now produces about 100,000 pairs of Baxter boots a year, 99% of which are sold in Australia.
- Australian manufacturing
In the mid 2000s, as the new Chinese supplier proved its worth, Baxter cut its Australian manufacturing workforce from about 70 staff to just three. The three production staff at its Goulburn plant produce about 10,000 pairs of Baxter's premium welted, leather-soled brand each year.
-
High Australian dollar
The move to China has produced big dividends for Baxter. It pays its Chinese supplier in US dollars. With the rise in the AUD against the USD, margins have fattened appreciably. However, Baxter says that overheads in Australia - such as insurance, power, workers' compensation - have increased.
- Carbon tax
Marshall Baxter says the carbon tax will only increase costs in Australia. His idea? "Legislate to cut emissions by the top 500 manufacturers - and support them to do so if necessary - but don't introduce a whole new system of taxes on business and compensation payments to consumers."
- Family shareholders
When Marshall Baxter joined the family business in the early 1980s it was in administration. There were 32 family shareholders receiving no dividends. After Marshall and his father Brian got the business out of administration, they borrowed money to buy out all the other family members (Brian borrowed from the bank; Marshall from his maternal grandfather, William Livie). The move recentralised control and eliminated the pressure of competing family interests.
- Succeeding his father
Marshall says that his father Brian (who is on the Baxter Footwear board) felt obliged to work in the business, following in the footsteps of his father and grandfather. However, Marshall says: "Brian's passion was elsewhere; he would have preferred to have been in radio or TV rather than working in the footwear business." Brian's strengths were on the production side, not finance. After the business got out of administration, Brian splurged on an unprofitable acquisition, leaving the company undercapitalised and eventually driving it back into the hands of administrators again for four years. After Marshall arranged to discount the creditors' debts by 50% and borrow money to pay them back, it was clear that he should lead the company: Marshall. Sorting out the management of a family company can be a brutal business.
- Succession planning
Marshall Baxter has two sons, Harry and Toby, who have been brought up in the business. Harry is studying commerce at university and Toby works for HSBC in Sydney. But Marshall does not want the boys to feel obliged to join the business just because of family history. "You can't dictate; you can try and instil a love of the business. They have to make that choice themselves: one or both might join the business, or they might put it in the hands of a strong manager (and keep an eagle eye on the monthly P&L statement), or they might decide to sell it. That will be their choice."
- Mentoring
Marshall Baxter credits his success as a business manager to a superb mentor - John Steele of Deloittes (which was Baxter Footwear's administrator through the 1970s). Marshall says Steele taught him to understand balance sheets and profit and loss statements. "I would go up to Sydney and have lunch with John and he would go through every line. For a long time, I wouldn't cough without checking with John."