Saturday, July 13, 2013

Who does the boot fit?

Rossi Boots is a century-old family business that may have reached the end of the family line. It's now owned and run by the third generation, but they're getting on, and the members of the fourth gen are doing other things.
The Rossiter family's business is a wonderful old Australian manufacturer. Arthur Rossiter started making boots in his shed in Adelaide in 1910 and four years later he won a contract to supply boots for troops going to World War One. It quickly grew to be significant Australian business employing 500 people at its peak.
Rossi Boots is now the only footwear brand still manufacturing entirely in Australia – at its factory in Sir Donald Bradman Drive in Adelaide.
What's more 15 of the 85 employees have been there for more than 50 years, and many of the staff are descendants of Arthur's first employees.
You get the feeling, in fact, that a big part of the reason the Rossiters still make everything here in Australia, after every other shoemaker has moved its manufacturing to China to lower costs, is that they can't bring themselves to sack anyone.
That philosophy has kept margins tight, but thanks to constant innovation and new technology the company is profitable on $12 million annual sales, 5000 pairs a week and 75 different boot styles, paying dividends to the family shareholders.
The problem is succession, as it so often is in family businesses. Chairman Dean Rossiter is now 70 and his cousin Colin, the only other third generation family member still in the business, is 84. Says Dean: "Succession is something that makes or breaks a family business".
He and Colin think the fourth generation wants to keep the company going, but they're all doing something else with their lives: property development, teaching, electronics engineering, work as a liver transplant specialist, doctors and so on.
The previous succession events were relatively straightforward. Arthur had four children – Arthur, Vera, Claude and Keith – and all four of them worked in the business. They each got 25 per cent of the company when their father passed away. Arthur, as the eldest son, became chief executive first, and then Claude.
They had nine children in total: two to Arthur (including Dean), two to Vera, three to Claude and two to Keith. Each of the third generation got an equal share of his or her parents' share, so for Arthur, Vera and Keith's children it was 12.5 per cent each and for Claude's it was 8.33 per cent.
Three of the nine cousins worked in the business – Dean, Colin and Murray – and those three increased their shareholdings a little over the years by buying out some of their siblings and cousins.
There are now nine shareholders attending the annual general meetings and a board of five: Dean, Colin, Paul Rossiter, an executive of Elders Ltd who is Murray's son, and Michael and David Gibbs, grandsons of Vera.
The chief executive is 35-year Rossi Boots veteran Neville Hayward, who joined the company at 15 straight out of school. He's the first non-family CEO, but definitely not the last.
Dean has set the business up as a virtual public company, with a board and separate management team, so it can continue on after him. Selling might be an option for the fourth generation, except Dean reckons it's hard to find buyers for small marginally profitable Australian manufacturers these days.
Then again, he might be selling himself and business short: Ken Cowley recently sold just under half of RM Williams to a private equity investor for a rumoured $53 million, so maybe there are buyers. It's all about the brand, and Rossi Boots is a pretty good one.
But a sale might have to wait for the fourth gen to fully inherit the business. One of Dean and Colin's core philosophies is to keep the business in Australia and in the family.
And anyway the company produces handy dividends for the nine families that own it, not to mention livelihoods for the many other families that rely on it for work.
And finally, there are the boots: they are very good. Australia's posties wear them and so do bushwalkers, building workers, freezer attendants and farmers.
If Australian manufacturing has any kind of future, maybe it starts there, in Sir Donald Bradman Drive.

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