Small Business

Naked ambition

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Whether selling condoms to his classmates at school or juice to health-conscious Australians, Tim Pethick has always been in search of a creative business opportunity.

When asked if he had planned to be an entrepreneur, Tim Pethick answers in the negative but goes on to explain his early business ventures at Springwood High School in the Blue Mountains of New South Wales.

“I did two things in high school that most people would consider entrepreneurial,” he reveals. “One was to set up a film club, so we showed leased movies in the school hall. We generated an enormous amount of money and ploughed it back into facilities for the school. We had a full-sized CinemaScope screen and professional projection equipment. And we had a whale of a time.”

Showing an early understanding of market forces, something Pethick would later use deftly with the development of his Nudie fruit juice company, this budding risk taker had another entrepreneurial dalliance.

“In my second ‘business’ I used to take the embarrassment out of condom purchases by going to a local chemist shop and buying condoms in bulk and selling them to 16-year-olds,” he confesses. “I suppose that revealed I had some sort of entrepreneurial streak in me!”

Ten minutes into the interview and Pethick comes clean about his entrepreneurial tendencies.

“I probably was a closet entrepreneur and it was certainly obvious to me and to others around me while I was doing my first degree that that was going to be my destiny,” he says.

With a bachelor of commerce from UNSW under his belt, Pethick started as a trainee accountant with the aim of being a partner. But he thinks if you are programmed to be an entrepreneur, working as an employee never feels quite right.

“While I didn’t have a plan for it, I do think you realise quite quickly when you’re a square peg in a round hole,” he says.

Despite finishing his degree in 1984, Pethick did not start Nudie until 2002. However, the road he travelled — both in his own businesses and in corporations — gave him the grounding to ultimately create the Nudie experience.

His first business out of school was a company called Video Space. Working as a chartered accountant in auditing and tax, he was lured to management consulting, which rekindled his entrepreneurial spirit.

“That’s when I started Video Space, where we put advertising on rental videos,” he recalls. “It was a new advertising medium and in those days there were 22 film and video companies in this country and I had deals with 16 or 17 of them for all their space. So I sold the concept to advertisers and advertising agencies.”

And how did it go?

“Oh, it was awful — it was an abysmal failure. It failed not because it wasn’t a sensible idea, or a little ahead of its time, but because of advertising agencies. We couldn’t get through the agencies. After a while I’d go direct to advertisers and the first thing they’d do is go to the advertising agencies and say ‘What do you think of this?’ It’s the first time I bumped into traditional conventional thinking that was incredibly resistant to change.”

Feeling rejected after  this early brush with business, Pethick retreated into professional life.  He still chased equity, becoming a partner in a firm of chartered accountants, but that lasted a mere 12 months or so and only then because struggling entrepreneurs kept him interested.

“I was on this roster for the then State Bank of New South Wales and they called me into their troubled business customers before they got to the point of insolvency,” he explains. “I came across a bunch of interesting businesses and invariably I’d go in and look at a business, decide whether or not I thought there was any future in it and, if there was, knowing that these troubled businesses couldn’t pay my fees, I’d take an interest in the business.”

What we have in Pethick is a serial entrepreneur!

He even ended up with a restaurant in Penrith that ran businessmen’s lunches and used this as a marketing opportunity for the accounting practice. 

“I’d bring all the clients down to the restaurant,” he says. “It was good for a while, but I eventually left and went to work for (construction giant) Lend Lease.”

While it seemed like an entrepreneurial cop-out, Pethick believes that experience taught him a lot about business, himself and the commercialisation of products.

At Lend Lease, Pethick says he produced Australia’s first superannuation product, called Super Pay, for its subsidiary MLC.

Then there was a whirlwind run of jobs with hi-tech inclinations involving Village Roadshow and Encylopaedia Britannica in the United States that ultimately took him to Evan Thornley’s LookSmart, where Pethick held a chief executive position along with options over 7 per cent of the company when it was valued at $7 billion. Alas, that was before the tech wreck and the collapse of the dot-com boom.

When Pethick greeted the new century with Nudie, he met it with a plan — a clear plan.

“The initial inspiration was a product in Chicago, called Fantasia, ‘just fruit in a bottle’,” he admits. “I loved the product, the concept and the website. I just loved everything about it. It was a product ahead of its time.”

His inspiration came not only from America. Innocent, in the United Kingdom, a similar premium juice product, also captured his attention.

“I loved their brand and loved their product. I looked at both those along with others in the US and I thought ‘Yeah, great, but I can do it better’.”

With these benchmarks, Pethick says he devised a strategy to outperform market counterparts in both a brand and product sense.

So how does a person become so savvy about business?

Pethick thinks the education process, especially for an entrepreneur, starts at university. But there are lifelong add-ons.

“As you go through life you collect other things that build on that and get you to a point and, for me, Nudie was the peak of that pyramid. All of that has been brought to bear in a very focussed way.”

It is a focus to win, to make it the best, to come out on top that inevitably seems to be the most common characteristic of successful entrepreneurs. Pethick, like others in this book, understand comparative advantage, which they learnt in first-year economics, and they milk it for all it is worth.

Pethick believed the juice industry had failed to build equity into an attitudinal brand – or any brand for that matter.

“Most juice brands are what I’d call functional – they focus on the attributes of the product and are largely indistinguishable from a positioning or personality perspective,” he explains. “I tried to build a brand that had real personality and attitude that would stand out from the crowd.”

Knowing his limitations, Pethick tapped into the skills of an advertising agency to come up with the quirky name of “Nudie”.

“Once you’ve heard the name Nudie you never forget it and our approach to developing the brand ensures it brings a smile to most people who encounter it.”

Pethick acknowledges that he has learnt from Richard Branson and his cheeky Virgin brand.

Always the innovator, Pethick used a marketing plan based on giveaways to hit the market — it was his primary marketing strategy.

One clever innovation was to give out flyers with the juice calling on people to take it to their local shopkeeper to request Nudie be stocked. Customers actually did a lot of Nudie’s marketing. He also used a fun website to add value and further engage young drinkers, in particular.

“I started off with my partner Hank Kingman cruising the streets in our Nudie van,” he recalls. “We just gave it away. Once people tried it we knew they’d buy it.”

Apart from a love of fresh juice, Pethick could see the financial potential of this type of business.

“The rational reason was no one had yet sought to develop a product such as ours in this market place, yet the super premium juice space is very large overseas,” Pethick says. “In the US it’s a US$500 million-plus a year marketplace. In the UK it’s probably around £100 million a year. Here we are in a land where we have plenty of fresh fruit, a healthy attitude to life, plenty of sunshine and no bottled juice products that are nothing but fresh fruit!”

The plan was to be first to market and create a new category.

Learning from his background and training, Pethick has taken the precaution of protecting his intellectual property by taking out trademarks in most categories so that the Nudie brand name can ultimately travel.

“We could be building another Virgin brand,” he dreams out loud. “There might even be a Nudie airline!”

That was Pethick’s position before his venture capitalist partners took control of the company and decided to take on newcomers and engage Coca-Cola in the fridge cabinets in supermarkets and convenience stores around the country.

Pethick, the entrepreneur, at the time of writing was examining how the Nudie brand could be extended to other products.

He says the experience of Nudie has made him very fond of business models with no fixed cost. 

“I look for opportunities where there’s little cost,” he says. “That removes risk and removes the level of investment required. I like business opportunities where there’s a positive cash flow as quickly as possible.”

In retrospect, Pethick believes the Nudie business was built on the back of evangelism.

“The traditional model is often created with a crappy product. It is wrapped in … clever advertising that doesn’t really tell the truth. They use that clever advertising to push this crappy product in people’s direction. The Nudie model was to create a really good product, a quality one significantly different to anything that’s out there, and then put a wrap around it – marketing which is completely different and is authentic. This is integrity. I think Australian consumers, in particular, are so responsive to that. They want to be treated like they’re intelligent.”

Pethick says he admires Branson and celebrity chef Jamie Oliver, and concedes he is a workaholic.
 
“Most people would describe me as a workaholic. I love problem solving and if I am a few hours away from my lap top, I’m jumpy.”
Pethick says his biggest lesson is that people are incredibly important to business.

“Finding the right people, developing the right people, building relationships in the right way, doing it with integrity in all the ways that you relate to people in business. My approach to that now, formed after many years, is to treat people with respect and always, even if you are firing someone, you have to leave their dignity in tact.”

His warning to others?

“Don’t make commodities — you’re always dependent on price competition. That’s the dumbest thing you can possibly do in business and it creates an environment where you have to work hard to make the business work.”

And the key to business success?

“I guess my personal view is that innovation is critical to business success and you get innovation by positioning a business or a product or service in business in a completely different space and in a place where no one else is. That’s how you get out of a commodity competition.” 

On his personal development as an entrepreneur, Pethick believes he has mellowed significantly and quite deliberately over the years.

“People don’t want to be around people who yell at them all the time, so I am far more patient than I used to be.”

Squeezing more out of a brand


The Nudie story is not just about juice — it has been a brand-building exercise.

“No one had done anything like what we’re doing in the Australian marketplace,” Pethick says. “In the context of this business the interesting thing about me is that I’ve had no juice industry or food industry experience before.”

And it is not just about branded juice.

“It’s primarily a brand play, not a juice play,” he explains. “Potentially there are many other Nudie-branded products.”

That may be the ultimate goal, but Nudie the juice company has left its mark, racking up annual sales of $20 million a year and capturing 70 per cent of the premium juice market. Its success not only gave birth to other small, copycat businesses but prompted Coca-Cola and Berri to enter the space.

Published on: Wednesday, July 22, 2009

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