Businessman rises like phoenix from the ashes of tea factory; IN ASSOCIATION WITH Rensburg Sheppards Investment Management The Profile Tony McDonough meets PAUL NEEDHAM, managing director of Lancashire Tea.
WHEN the tea factory of which Paul Needham was operations director burnt to the ground in the summer of 2005, he describes the following months as the most traumatic of his life.
The Gold Crown factory, in Kirkby, was destroyed by the blaze in just 2 1/2 hours, according to the fire brigade report.
But, less than a year later, Needham had picked himself up and, along with fellow Gold Crown manager, Lynn Hitchen, set up Lancashire Tea, in Newton-le-Willows.
With the help of pounds 100,000 from Merseyside Special Investment Fund (MSIF) it launched on April 1, 2006.
"It was probably the scariest thing we had ever done in our lives," said the 50-year-old father-of-two, who is managing director. "We remortgaged our homes and put everything we had into setting up the business. I have never been this exposed in my life."
The gamble appears to be paying off. Lancashire Tea, which is a blend of 12 teas from Kenya, Malawi, Rwanda and Sumatra, is now available in every major supermarket chain in the North West, as well as in hotels, delis, cafes, farm shops and tourism outlets.
And, in recent days, the company has achieved a breakthrough. Sainsbury's has agreed to stock the product in 389 stores nationwide. This could take turnover this year up from around pounds 600,000 and through the pounds 1m barrier.
Needham is convinced Lancashire Tea is superior in quality to all the other major brands on the market - including its rival in the so-called "war of the cosies", Yorkshire Tea.
"What you find you get with many brands is an after-taste that can have a bad effect on your tongue if you drink it all day," he said.
"We use a very high quality blend with around 70% of it coming from Kenya (supplies are guaranteed for the coming months despite the political upheavals), it produces a very strong colour and a very smooth taste.
"We believe we have the best premium tea in the market. It has been tested in the North and the South, and tastes just as good with hard water and soft water. Other brands have to produce different versions for different parts of the country."
The trick, of course, is to convince the tea drinking public of the quality of the product, and it is in advertising and marketing where Needham believes the firm faces its biggest challenge.He said: "People use the products they are used to. My wife uses Persil washing up powder and it would be very difficult to persuade her to switch to Bold.
So if someone has always bought PG Tips, why should they change.
"In the UK you have PG Tips and Tetley who would both claim to control around 25% of the market and then you have Yorkshire Tea with about an 8% share.
"Despite our turnover growth we have not been able to hit profit yet and that is partly because we don't have the budget for major advertising campaigns on television.
"If you look at Twinings, they have put Stephen Fry on their TV advert and immediately their products are stocked across the country.
"We have to rely on other things - getting pieces in newspapers, travelling to fairs around the county and word of mouth."
In an attempt to promote the brand, Lancashire Tea is opening a chain of tea shops across the county with the first one opening in Wigan at the end of last year.
Three more are planned in the coming weeks for Blackburn, Accrington and Leigh.
If successful, these may be followed by a second chain of "nostalgic" tea shops called Gracie's - named after the famous Lancashire songstress, Gracie Fields.
Needham added: "The tea shops make good sense because, if we put up with adverts or banners in town centres, it would cost us thousands anyway."
Needham, who has been married to wife Rita for 26 years, was born and brought up in Crewe and, on leaving school, spent a couple of years working as a railway signalman.
When he was 19, he entered the tea industry for the first time, working at the Co-op's factory in Crewe.
"That was a big operation," he said. "In its heyday, the plant was probably turning over more than pounds 50m a year. I started off there cleaning and moved onto blending and eventually became a foreman. For the last two years I was there, I was actually running the place."
Around 14 years ago, Needham became operations director of the Gold Crown site in Liverpool, which was then based in the city centre. It later moved to an 84,000 sq ft site in Kirkby.
But, in June, 2005, disaster struck. The plant was destroyed by fire and the future looked bleak for him and the workers.
"It was absolutely devastating," he added. "We set up a crisis management centre in Speke and all the employees were paid for a month. Production of the brands was diverted to other manufacturers."
Attempts were made to restart the business in the following months but insurance wrangles made this difficult. Eventually the owner of the business acquired the Ty-Phoo plant in Wirral and asked Needham to join him.
However, he declined and instead, along with Lynn Hitchen, started Lancashire Tea. It employs eight people at the factory plus another 10 in the tea room.
He said: "I have business cards that say managing director but other ones that say salesman. Everyone who works here will do absolutely everything. If I have to brush up then I will brush up. The workforce we have here is exceptional."
He admits that if the business is to survive it needs to significantly step up sales from their current levels. The plant has the capacity to produce 2,000 tea bags per minute - more than 2m cups of tea a day - so room for growth isn't a problem.
As well as the Lancashire Tea tea bags the firm has started producing loose leaf tea and is about to launch a coffee brand called Eclipse.
Needham is working days in excess of 12 hours, and his car has clocked 68,000 miles in the last year and a half, and insists he and Hitchen are in it for the long haul.
"We are not fly-by-night merchants," he said. "And this is not any kind of get-rich-quick enterprise. But, if we are to succeed, then we need to convince people to give us a try."
Highest educational qualification: Chartered Institute of Personnel
Biggest achievement: Starting Lancashire Tea
Biggest regret: Not doing this 16 years ago
Best advice received: Treat everyone as you would like to be treated
Unfulfilled ambition: To build a successful business and give people job security
Tea shops make sense: Paul Needham, managing director of Lancashire Tea Company Picture: MARTIN BIRCHALL
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|Publication:||Daily Post (Liverpool, England)|
|Date:||Jan 30, 2008|
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