A FIVE DECADE AUSTRALIAN SUCCESS STORY TOLD BY BURSON AUTO PARTS
CO-FOUNDER GARRY JOHNSON AND BAPCOR CEO DARRYL ABOTOMEY
More than 50 years ago two men set out on an exciting automotive business venture. Being a true equal partnership the company was called Burson.
Garry Johnson (the 'son' in Burson), together with partner Ron Burgoine (the 'bur' in Burson) were determined to succeed, along with the efforts of the hard working people who joined them along the journey. The group went on to establish Australia’s leading trade supplier of automotive parts, tools, accessories and equipment. Achieved from humble beginnings selling accessories and car parts to service stations and mechanics from the boot of a car and the back of a van.
In 1985 Garry Johnson acquired Ron Burgoine’s 50 per cent share to become the sole owner of Burson Auto Parts. After taking the company as far as Johnson and his talented management team could in the years to follow, it was Darryl Abotomey and his executive management team who carried the Burson Auto Parts, subsequently Bapcor Limited, baton to national and international success.
In the following Q&A, these two icons of the Australian automotive aftermarket industry discuss where it all started and how the co-founder’s legacy has contributed to the creation of the largest automotive aftermarket specialised company in the entire Asia Pacific region.
Q: Garry, how was Burson Auto Parts born?
A: GJ: It all started from an idea that I and my friend Ron Burgoine had about going into business together. I was the accounting and finance person and he was the sales person. The only problem was that we had no money.
We were looking at businesses that were for sale and I visited a business agent who advised of the relaunch of an oil additives and chemicals business to the local market. After looking at their business plan and their established sales to date through service stations interstate, we thought it had potential.
So I took out a second mortgage on my house and, together with an equal contribution from Ron, we found ourselves selling oil additives and other chemical products to service stations and other automotive outlets.
So the fact that we were now in the automotive business was by sheer fluke, we hadn’t planned it that way at all. This business opportunity came along and it fitted into our financial capacity at the time.
We placed a great deal of product into service stations on consignment, so our customers only bought what they sold and we regularly replenished stock on a stand that we provided using a station wagon and a van.
Then we got into other products, initially with car mats, street directories and other allied automotive products that we could sell when visiting our service station customers, which included some replacement auto parts. This was how we got started in the automotive parts business.
We then established some cash vans to drive around Melbourne and regional Victoria, selling parts to mechanics who could just step into the back of the van and source whatever parts they needed on a regular basis. We ended up with nine cash vans, which were received well by our service station and workshop customers.
At around the same time our aftermarket car mat business continued to grow and we were packaging and selling our carpet mats to K-Mart, Target and other retail stores, along with our service station customers. This became a source of solid and reliable income for us through those early years, which helped us to grow the auto parts business.
We were on a weekly call cycle to our trade customers with our cash vans but we quickly identified that our customers needed hourly or bi-hourly service for parts. An opportunity came for us to take over the lease of a former Lapco warehouse in Braybrook in 1971.
While we didn’t take on the existing Lapco parts business as we didn’t have a lot of money back then, we did want the lease deal and the established shelving which came cheap. We then had our first Burson Auto Parts store, supported by a warehouse in West Heidelberg, offering faster deliveries to mechanics in the area and serving as a base for our cash vans to service other areas of Melbourne.
We then took on a second store in South Melbourne and gradually acquired existing spare parts businesses to expand our store and parts delivery footprint across Melbourne and Victoria. Soon enough we had reps out on the road as well, working hard to grow our trade business.
Ron and I worked very hard in those early days, he was in sales and I was more on the financial and operational side. By 1985 and with a network of 13 Burson Auto Parts stores, I bought out Ron and the journey of growth continued for the company focussing on parts and service.
I went from being a mild-mannered accountant to becoming an entrepreneur seeking to strongly grow the business. I planned to float the company on the ASX in 1987, to grow it through equity rather than always being in debt, but just as I was entering into the process, there was a major stock market crash and while all the preparations and the debt that goes with the process had been committed, I took some advice from my broker and unfortunately had to pull the float.
At this stage I was fortunate to be supported by two excellent people in Terry Penney in sales and Andrew Schram in purchasing. They helped me to continue our growth plan in an orderly fashion, acquiring greenfield sites and existing businesses to best serve our strong trade customer base.
We were approached by groups of stores in Queensland, New South Wales and South Australia and took over these stores, rebadged them and gained some highly experienced staff in the process. We turned the performance of many of the more average stores around completely and our business was gradually becoming national.
Being small and flexible, we were able to focus on improving and expanding our product range, taking care of our hard-working people and most of all our trade customers across the country. Our focus was always on the trade, even when our competitors turned their focus to their retail business, for us it was all about keeping our trade customers happy.
I can’t stress enough the dedication and commitment of our staff who genuinely loved working for Burson Auto Parts because as the company grew, we always maintained the same small business culture.
Q: Darryl , tell us about how you saw Burson Auto Parts before you become so intrinsically involved?
A: DA: I got to know Garry during my career at Repco and it was clear to see that from the trade business perspective, Burson Auto Parts was whipping our backsides and that was partly due to Repco’s retail focus at the time, as Garry has pointed out. Having said that, you could always see the trade business growth that Burson Auto Parts was generating in comparison to its competitors.
GJ: Back in the early days Repco was up there in the stratosphere, we never really thought that we would ever get to that level but, as time progressed, our business grew very strongly.
There was a 'club' of established Australian parts suppliers back then who also made it difficult for us to gain direct distribution of some parts. This was integral to our trade business growth, so we managed to overcome the distribution hurdles that were deliberately placed in front of us and we were accepted as legitimate direct distributors.
Q: Garry, tell us about reaching the point of deciding that it was time to hand over the reigns of your company to new management.
A: GJ: I had almost reached 70 years of age, I was trying to be a part time CEO and the owner, always trying to grow the company, but not wanting to take on too much debt. Certain areas of the business were getting away from our skill-set like IT and HR. As the majority shareholder I had to assess my commitment to Burson, including my own life goals.
After an emotional discussion with my fellow directors and shareholders, on September 7, 2011 I wrote a memo to our team saying that my time was up and that I would be selling the business after 40 years at the helm. It was the saddest memo that I had ever written.
The company was in a strong financial position with good systems and procedures, dedicated and hard working staff - all was in place for the right new owners to drive the company into a bigger and better future. While this was the right decision, it was still a very tough and highly emotional one for me.
I absolutely loved the entire Burson Auto Parts journey, I loved the phones ringing with new and exciting opportunities, opening new stores and working with such a great team of dedicated people.
Having reached a total of 92 stores, I then went through the sale process with KPMG and discussed the likely buyers, there was a New Zealand group, Private Equity, Repco and Supercheap. I didn’t like the idea of selling the company to the opposition because I cared about my staff and the hard work they had put into this company, so I wanted a buyer who would continue the Burson Auto Parts culture and journey that we had started and built from the ground up.
DA: I’d like to quote you on what you said to me at the time about selling Burson Auto Parts to a competitor. You said that you wouldn’t be able to sleep straight in bed at night if you had done that to your people - turned them over to the enemy. Even though you could have earned a substantial amount more by doing that.
GJ: So after reviewing the potential buyers I had a few coffees with Darryl as we had been friends through family connections for several years and I was impressed by his industry experience and knowledge. I told him that I was really struggling with the sale process. I didn’t like the proposals that I had received to that point and Darryl suggested that he could organise a management buy-out and would like the opportunity to present this to us.
I thought about it and called my 2IC, Andrew Schram, to have a talk to Darryl and see if he liked his proposal. I bounced everything off Andrew for the four decades that we worked together so of course I strongly trusted his judgement.
They met up and Andrew gave the thumbs-up to Darryl and his plans for the company, endorsing the belief that I also had.
So I pressed the Darryl button to move forward with his proposal and it has resulted in a fantastic journey for Burson Auto Parts with him and his talented management team at the helm over the past decade. I would never have thought that they would have achieved the growth that has been made and reach a market capitalisation of just under three billion dollars within ten years. It has been truly extraordinary and Darryl is the rock star of it all.
DA: It was an interesting process. I remember speaking with Garry and asking him what he wanted to see happen with the business and his clear mantra all the way through it was to ensure that he was doing the right thing by his people.
I could certainly see the challenges with selling to private equity or competitors, or to companies that bid at one price, then tried to lower it again and again. It was clear that there were people involved in the game that you would not trust to do the right thing by the company.
So I approached some private equity contacts that I personally knew from prior business dealings and Quadrant stood out because they weren’t interested in buying and gutting businesses, they were all about growing their business investments. So I put an agreement in place with them that stated all of the things that we had to achieve with this acquisition, so they couldn’t destroy the fabric of the company and its significant growth potential.
GJ: That was always my fear in selling to private equity, this was my greatest concern.
DA: Once we made the acquisition my management team and I spent six months understanding the business, its people and its processes. It was very profitable and was operating well and we didn’t change anything during that time.
We then assembled all of the store managers at a fairly average Melbourne hotel and we outlined our growth plans and sales targets for the next twelve months. It was a very positive and productive session and my famous last words to them were that if we achieved these targets, the next store manager’s meeting will be held at a far more exotic location.
Over the next 12 months our team just blew the lights out, far exceeding our targets, paving the way for us to accelerate our expansion plans. We started with 92 stores and wanted to become national quickly, as we could see the opportunity to really knock our major competitor off their perch.
At this stage we were approached by the then owners of Automotive Brands who wanted to sell their retail businesses to us, but we were extremely focussed on our trade business and let that opportunity go. We were really gaining strong momentum with store roll outs, having bought up most of the multi-store independent parts groups and having established excellent new greenfield sites across the country.
In line with keeping our people happy, one year after setting our targets, we kept our promise and took all our store managers to Thailand and that was really important in showing how much we valued their extraordinary efforts. Half of them didn’t even have passports! We had an absolute ball over there and it really strengthened our team bonding.
We turned the process of establishing new stores into a fine art and they were immediately performing strongly.
It was during our second year of owning the company that we realised that there was potential for further growth when Metcash approached us seeking to sell their automotive businesses. Part of our rationale behind acquiring these businesses was to stop them becoming competitors and to provide us with both wholesale and retail channels to market.
This was the first big step that we took and it was the right step to take, bringing in wholesale businesses enabling us to establish more quality private label products along with direct retail access. We wanted to introduce these factors gradually as taking care of our people was always of the utmost importance to us.
GJ: I used to also take my people away to reward them as well - some of them had never been on an aeroplane! We took them to Sydney, Queensland, Uluru and other great places and shared some fantastic experiences, this was all about building up the Burson culture.
Q: Just on that point Garry, do you think that same Burson culture exists today?
A: GJ: I speak to some people who are still with the company and most of them are really loving it, which gives me great pleasure to hear. Even though the company is now much bigger, the feedback I receive is that it is still a great company to work for.
There are so many promotional opportunities for people across the areas of marketing, IT, store and product management that have come with the company’s growth. I couldn’t be happier with how the journey has progressed with little to no impact on the company’s pre-existing culture.
Q: Garry, did you ever think that the company you co-founded would ever become this big?
A: GJ: No I didn’t and I am sure that Darryl didn’t either! Not within ten years for sure.
Darryl grasped the opportunity to consolidate a major automotive aftermarket company with the Metcash acquisition, to become the biggest in the country and this was an excellent strategic move, the opportunity presented itself at the right time.
DA: In the early days we set a target of having 175 Burson Auto Parts stores, it was never anything beyond that. Then as things transpired it changed our thinking somewhat, but the one thing that we have and will never lose sight of is that Burson Auto Parts is a trade business and won’t ever become anything but that.
We have expanded our product ranges and so forth, but there will always be a definite lineation between the retail businesses that we acquired and Burson Auto Parts. This works very well because our businesses are not competing with each other and they are not trying to be dual retail and trade businesses.
We also know what each business is all about and we respect that there are distinct differences between retail customers and trade customers. Trade is all about service and working closely with mechanics, it requires a far more intrinsic knowledge set to best service our customers.
The other important change was our move into specialist wholesale businesses, we bought into the bearings and auto electrical sides of the business and in 2017 we acquired Hellaby’s auto parts businesses in New Zealand.
We also had the ability to get involved in the truck and heavy duty side of the business because no one was doing it the Burson way, using the synergies of the entire group. We have now become the only group in Australia that supplies parts for all types of vehicles – cars, light and heavy commercial and trailers.
Our specialist businesses deal with each vehicle sector separately, linked to our sourcing businesses, which allows them to access quality products directly. We are adding about 60 new locations each year across all of our Australian automotive aftermarket businesses, when we already have the largest footprint of any automotive aftermarket business not only in Australia, but across the entire Asia Pacific region.
Each business sector has five year targets and they are already exceeding our expectations. We have specific growth plans for every business in the group and each is progressing perfectly. We have approached these growth plans in steps and have not tried to do everything at once, which has worked extremely well for us.
Q: Garry, did you ever think that there would be a Burson Auto Parts store overseas?
A: GJ: No, I never did - it was exciting enough opening 92 stores across Australia, let alone now having reached 200 stores and to be still growing today.
I’m very proud that Burson Auto Parts has become the first Australian auto parts company to successfully expand into Asia. Others have talked about it, Burson Auto Parts was the company that actually did it.
Q: Darryl, what sets the Burson Auto Parts style of doing business so special?
A: DA: There are three core things that Burson Auto Parts has done extremely well. We have ensured that all the people in our stores, including those who deliver the parts, are Burson team members and not contractors. Our people build strong relationships with customers and are in fact the face of our business. They make our customers feel important and valued.
Secondly, we have set a target of each store making deliveries to its workshop customer base within 30 minutes or at the most within the hour, this customer service focus is imperative to our continued success.
The third and biggest Burson difference is that our team members will do whatever they need to do to get the part to the customer, even if they have to buy it from a competitor. While we carry the broadest range of parts in store compared to any competitor, our team members are authorised to do whatever is necessary to ensure that the customer always gets what they need promptly.
All of our staff are rewarded based on their store performance and all Burson Auto Parts store managers earn a percentage of the profits that their store has generated. This has really made our managers and staff more committed to the business, treating it is as if it was their own.
GJ: We started paying bonuses when KPI’s were reached in the early years as well and our staff retention was incredible. Our staff always worked so hard, they would even drop off parts on their way home or before work in the mornings, doing all they could to provide the best possible service to their customers.
DA: Garry used to ring everyone in the company on their birthday and I kept doing that for the first 18 months, but then we became too big and I now send cards these days instead. So I now spend most of my Sunday nights writing birthday cards!
Garry also presented service awards for long term staff and we have continued this tradition with gift cards, ensuring that the long standing Burson culture of taking care of the company’s people remains strong.
Q: Garry, how do you best summarise what has taken place since you stepped away from running the business that you created?
GJ: Darryl didn’t try to reinvent the wheel, he identified that this was a great company that needed improvements, growing the existing company culture and building on it. He has taken the time to get to know the people well and it is a huge credit to Darryl and his team with how it has all progressed.
I couldn’t be prouder of what has taken place and I have to make special mention of all the hard working Burson team members who went that extra yard to make Burson Auto Parts a great Australian company from the very start.
Darryl and his outstanding team still have more opportunities to pursue. To see the organisation that I started grow so much, to still be connected as a major shareholder and to be trotted out every now and then to do things for the company is great. Not many people who relinquish control of their companies can still be a part of it.
DA: This could have been a very different story though - an interesting thing came up when we were preparing for the Burson Initial Public Offer (IPO). A number of the larger American auto parts companies were looking at acquiring our business at that time.
Two were very keen and we received an unconditional offer from one of them the morning after we had been told that we were underwritten and all was set for the IPO. It was for virtually the same amount that we had been valued.
If it had happened the night before, we may have been having a completely different conversation today.