By Andrew Patterson
Ask 10 people on Hamilton’s Victoria Street about the city’s largest employer, Gallagher Group, and its likely 90% of those you ask will be able to tell you something about this iconic New Zealand business.
Repeat the same exercise less than two hours up the road on Auckland’s Queen Street and you’d be unlikely to find even 10% of respondents who could answer the same question.
Celebrating its 75th anniversary this year, Gallagher Group has grown to become the world’s largest producer of electric fences as well as being a leading global provider of electrified perimeter security fencing as well as a range of other products including, surprisingly, clothes pegs; but more about that later.
Anyone driving past the company’s expansive Hamilton headquarters on the by-pass to Rotorua can’t help but be impressed by the statement it makes about its success; complete with a sign at the gate that welcome’s visitors to its “world headquarters.”
It can rightly lay claim to that designation.
After all, this is a business where its products can be found in more than 140 countries giving it a global footprint larger than its neighbour Fonterra, despite being a fraction of the size of the diary giant.
Much of the company’s success can be attributed to the vision and drive of its energetic Chairman and CEO, Sir William Gallagher who, at 72, is only the second person to hold the job. His late father, also Bill, being the first.
As former PM Mike Moore puts it so succinctly in the forward to a new book* on Sir Williams life “…if New Zealand had another 100 Bill Gallaghers we would be the richest, most decent, best-natured nation on earth. He is truly a Kiwi hero.”
It says a lot about the value and longevity of family owned businesses which are fast disappearing from the New Zealand’s commercial landscape.
Ask Sir William to recall his early childhood growing up in the shadow of the family business and the memories quickly come flooding back.
“I was born at the beginning of the war and I can still remember my dad constantly tinkering around in the garage making tractors out of old cars."
“The electric fences which he had started to develop were all mechanical at the time and pretty basic. We used to sell most of them in winter when the grass was short because once the grass started to grow we used to have problems with them shorting out all the time.”
“In those days we used to sell around 500 units a year, although I remember one particularly good year in 1953 where we sold over 1000 units. These days we’d sell that in a day; though it’s a vastly more superior product with much more advanced electronics.”
A game changing invention
It’s fair to say the ubiquitous electric fence probably did more to revolutionise the agriculture sector in New Zealand, particularly pasture management, than any other single invention.
However, as Sir William points out, it took some time for the technology to fully evolve.
“The big advance in electric fencing came in the 1960s when Doug Phillips from Ruakura developed the ‘unshortable’ electric fence and that was a thousand time more energy efficient and led to a big advance in the technology."
“At the time we were up against more than 11 competitors. We were marginally better but we weren’t dominant by any means. What we did was develop technology that allowed the charge to be run through a transformer before being hooked on to the fence-line which really boosted its effectiveness. That gave the product much more versatility because it meant it could also be used to contain beef cattle.
“Then we discovered that we could also use the system to control wildlife, including elephants and rhinos; in fact anything that had a pulse."
“And it was when we were in Africa we had approaches from people wanting us to install systems around their houses that we got the idea for perimeter security fencing – or as I like to call it: the two legged livestock business!”
These days Gallagher Group's global security fencing division is big business accounting for almost 70% of the company’s turnover.
It provides an insight to the global perspective the company has maintained throughout Sir William’s tenure as CEO.
“My father certainly wasn’t global in his outlook. In fact, when I first raised the idea of exporting our electric fences to Australia he wasn’t too impressed telling me at the time that I was welcome to try but he didn’t think it would be very successful.
How wrong he turned out to be. Not only had a New Zealand company stumbled on an invention where there was significant global demand but it turned out we were more than 20 years ahead of the rest of the world in the development of the technology.
“What amazed me was that even as late as 1980, when I was in Germany, I discovered that the most powerful energizer on the market there had only 1% of the power that was available in our torch battery strip grazer."
“It was about then that I began to grasp the enormity of the opportunity that lay in front of us."
“Even in places like Malaysia where the government had spent more than $100 million trying to contain its elephant population by building these enormous fences which the elephants were able to tear down just as easily, we were able to provide a much more effective solution for a fraction of the price”
“Interestingly, we found the Asian elephant is particularly smart. They learnt how to use their trunks to pull out the fence posts so we installed hot wires around the posts themselves and that quickly solved the problem.”
After 75 years in business Sir William reckons he’s seen more economic cycles than most. So how does he characterise the reforms that have taken place over the last 30 years that saw exporters once lauded in the late 70s and early 80s only to be subsequently left out in the cold just a decade later?
“The early export incentive schemes really worked for us and were responsible for allowing us to use them as a springboard to achieve growth. It had a very positive outcome and we probably showed a tenfold return on the subsidies that we received. But not everybody else did of course."
“However, I look back on the early 80s as probably one of the most exciting periods in our history. I remember at the time achieving 100% growth for three consecutive years. That was actually when I learnt how the banking system worked!"
“So we got growth, no question, but was it fair to the rest of society, probably not."
“Roger Douglas [now Sir Roger] used to rationalise it by saying that it was compensation for some of the other distortions. But one thing I was always satisfied about was that we were fundamentally profitable underneath and we remained profitable."
“I still believe the Douglas reforms were the best thing to happen to NZ even though we had a much tougher time as a consequence, but we quickly learnt to adjust to the new environment.”
75th anniversary reflections
What of the current operating environment and will the company be able to achieve its cherished milestone of a $200 million dollar turnover in its 75th year?
“I think we’re going to miss our target sadly. North America is going pretty well for us, all things considered and we do have a bit of a natural hedge there with the dollar as we’re buying components in US dollars. Australia and NZ are pretty flat and the euro zone as we all know is a bit of a disaster right now. On the security side, which is my division, things are pretty flat there as well and the sector isn’t growing as fast as I had initially expected. So the $200 million target might have to be the year after this one unfortunately.”
At 72, Sir William exudes an energy that any executive half his age would be pleased to have and he remains both restless and ambitious for Gallagher Group’s future.
“I have a very capable team behind me and I get the privilege of doing the things I really like which is out front marketing and growing our international business. I still enjoy travelling and last year I went six times round the world, but this year I’ve cut back a bit and will aim for just four circuits of the globe."
According to those who have accompanied him on his travels they still struggle to keep up. Not bad for 72.
And as for how the company came to produce clothes pegs the pragmatic nature of Sir William’s management style provides a simple explanation. “It came down to a choice of either writing off a debt by the former owner of the business or acquiring the machinery; so I chose the latter. What’s more, it only took us six months to turn the business around and make it profitable so we’ve hung on to it.”
Who would’ve thought you can still buy clothes pegs that are actually made in New Zealand.
“My only beef is that whenever I’m in a supermarket I always find them on the bottom shelf.”
Maybe when it comes to valuing New Zealand’s manufacturing sector and the contribution made by companies such as Gallagher Group that initself perhaps sums up the issue in a nutshell.
*”Legend: The Sir William Gallagher Story” by Paul Goldsmith is published by Random House.
|Sector:||Agri manufacturing / Security systems|
|Rank:||7th in the Technology Investment TIN100|
|Ownership:||Private (100% owned by Gallagher family and associated interests)|