People Power

The Castlemaine Dips Story

Dips are the new butter. That's how Piera and Russell Warke explain the impetus behind their business, which began by selling home-made foodstuffs at farmers' markets in central Victoria.

Former journalist Piera and former bicycle retailer Russell ran a take-away food business in Melbourne and then a restaurant. But on returning from a spell in her native Washington, DC, they did a "tree change" and bought a few acres on the outskirts of a goldrush-era village.

"We then had to figure out what to do about an income," Piera says. "So I started making cakes, jams, relishes and sauces to sell at weekend markets in the region." She also made dips for home consumption, and an occasional surplus was sold with the other items. "The dips sold, and kept on selling. We then offered them to stores in nearby Castlemaine and they really took off. We went into full-time wholesaling in 2001."

The business now operates from a purpose-built factory on the Warkes' property.

The Challenge

As a start-up, Castlemaine Dips faced three main obstacles: being taken seriously by suppliers, getting distribution and managing cashflow.

The Solution

For Russell Warke, relationships in the business world are not merely important. "Business is all relationships," he says. "The way forward for us was to work on them. If there's a good relationship with customers and suppliers, we all know what to expect from each other. It makes everything simpler and more efficient."

Luck has also played a part. Russell says the Champions IGA supermarket group chose Castlemaine Dips to take part in a promotion of local products. "This gave us an introduction to people in bigger companies. At a business meeting hosted by Champions IGA, I met Ian Shelton, then sales manager for KR Castlemaine, which is well known for its free-range bacon. He said if we ever needed assistance with deliveries to give him a call."

At first the Warkes did their own deliveries, driving about 4000km a month. They approached many courier companies without success. "This limited our range of distribution," Russell says. "Our all-natural products have a three-week shelf life. Even if we had found a courier, we couldn't afford to have the shipments sitting around in a depot somewhere.

"One day we got an inquiry from a store on the Murray River. There was no way we could deliver, as the store was more than four hours' drive. I called Ian, he set the whole thing up and now KR Castlemaine handles 90% of our deliveries as well as our telephone sales. For any volume product, distribution is everything, and we can deliver anywhere in Victoria within 24 hours."

Also, by thinking and acting locally the Warkes were able to bypass the Coles supermarket chain's centralised buying procedures and get their products onto regional shelves.

Focusing on relationships brought other breakthroughs. In switching from containers with manually applied labels to printed plastic ‘cups', the Warkes established a bond with Sunrise Plastics, one of only three companies that supply printed cups and lids.

"Companies producing dip containers want a minimum order of about $50,000," Piera says. "And ingredient suppliers have small margins, so they also want to deal in larger quantities. It's really difficult getting established." A deal was struck with Sunrise Plastics in which Castlemaine Dips is committed to orders of 25,000 cups but takes smaller quantities as required - a ‘just in time' arrangement that saves on storage space.

"They take us seriously even though we are a relatively small operation in industry terms," Russell says. "And we pay only as we take the smaller shipments. It's great for cashflow. We have always made a point of paying all our suppliers on time. That shows we are genuine, and it allows us to ask favours from time to time."

Cashflow was a big problem over the summer months. Retailers wanted the product in stores for the Christmas rush, but many didn't get around to paying until well into the New Year. The Warkes began buying as many ingredients and materials as possible in July for Christmas production to even things out, and Piera keeps up the pressure on any late payers. "I don't let people get far behind. We invoice regularly using new accounting software, and if someone looks like being a problem I get onto them with emails and phone calls.

"We also have a good relationship with the KR Castlemaine accounts manager. She has given us advice on collection procedures, such as cautioning late payers that any solicitors' or collection agencies' fees will be passed on to them.

The Result

Since Castlemaine Dips became a full-time wholesale business about six years ago, revenue has grown at an average of 30% a year. The growth was off a low base, but another three years at that rate will push turnover above $1 million. The dips now sell across Victoria - in regional centres such as Bendigo, Ballarat and Geelong, and in Melbourne.

"We spent $350,000 on the factory two years ago and already we could use more storage and cool-room space," Russell says. "You think you'll be satisfied when you get to a certain level, but there's always that next step and new products to be developed. We're happy for the business to keep on growing."

Author Credits