If you want to know why Tasmania is known as the ‘apple isle’, you need only ask Tim Reid, managing director of his family’s business, Reid Fruits. As a fifth generation farmer, Reid and his family have been in the apple game since 1856.
It started when Reid’s great-great-grandfather James settled in the Huon Valley, south of Hobart, after emigrating from Ireland. James worked odd jobs by day, planting fruit trees at night by lantern in the small farm he cleared with an axe.
There have been many changes over the last 150-odd years, plus several generations and many milestones. By the 1950s Reid Fruits had established one of Tasmania’s first central apple-packing houses and by the 1980s, more than 10 per cent of Australia’s total apple exports were either grown or packed by Reid Fruits.
These days, the family business has moved its focus to the cherry game, with some 80,000 cherry trees now taking pride of place in the family’s new orchards in the Derwent Valley. Reid is heavily involved in advocating on behalf of fruit growers in Tasmania, in his role as president of Fruit Growers Tasmania Inc.
He often finds himself away from the orchard travelling to expand the export reach of Tassie fruit, or debating with high profile politicians about regulation changes or restrictions.
For Reid, who is joined in the business by his wife Debra, son-in-law Nic Owens and daughter Allison McShane, there was never any real decision to be made about whether or not to join the family business.
“I was born in an era where there was an expectation that the sons in a farming enterprise would eventually take over the family business,” he says.
But Reid possessed an entrepreneurial streak, and quickly realised he had a lot to offer the business. “My strategy to gain an early management position was to purchase several small fruit properties over a period of around 10 years, from when I was in my late 20s. These properties were held by my wife and myself and operated alongside the original family orchards.
“The fruit produced from the newly acquired properties was processed through the packing facilities owned by the family business and within a decade, the orchards belonging to my wife and myself expanded to become bigger than the original family farm.”
This proved to be a major succession move, too, as Reid readied himself to take the helm of the family business.
“When the time came for my father and uncle – both of whom were the principle shareholders in the family business – to retire, my wife and I already owned the biggest portion of productive orchard. My Dad gladly handed over his share to me and also assisted in the negotiation for a fair purchase price for me to buy out my uncle.”
Handing over the reins
Reid recognises the succession process was “relatively easy” compared to many other succession processes he had witnessed, thanks to forward planning in purchasing neighbouring properties over several years. “My wife and I already owned much of the business.”
It was this vision and planning for the future that Reid insists is paramount for any family business. “All too often we see examples where a good family business has been lost due to poor succession planning,” he says.
To that end, he has already put in place formal procedures to secure the future of the business when he’s ready to retire.
“Because I have four daughters, some of whom take an active interest in the business, I have restructured the business to form a mini corporation. We have introduced some investors into the business to raise capital for diversification into cherry production and to expand the business.
“My wife and I no longer hold title to the properties – the land and all the assets are owned by the company and we simply hold the majority of shares in the company. We have established a small Board of Directors including an independent chairman, and I hold the position of managing director.”
While he says he was expected to take over the business, Reid admits it wasn’t something he regrets, and says he “never wished to do anything else”. But he recognises his daughters may feel differently, which is another reason he has set up the business as it exists now.
So when it comes time for Reid and his wife to retire, he will simply divide his shares into four equal portions and hand them on to each of his four daughters.
“They can then decide whether to sell their shares – with preference to the other daughters – or maintain an interest to the extent of taking a position on the Board.”
He has also ensured the business grew to such an extent that a well-paid manager could be employed for the business.
“So my daughters don’t have to worry about the day-to-day running of the business when my wife and I retire, if they so wish,” he explains. “Either way, the business is well set up to continue with or without continued family involvement. I’m quite pleased with how the business is run at the moment; it will be handed on to the next generation as a good and viable business.”
From strength to strength
A lot has changed from the days when James Reid walked the orchards by night. And it’s largely thanks to strong leadership in recent generations.
“Having some outside shareholders in the business forces discipline in the way we manage the business,” Reid says. “The business is recognised more as an investment rather than an inherited duty or responsibility. The structure also forces the family to work towards a balance between extracting dividends for external reinvestment or for quality of life purposes, rather than pouring every hard earned dollar back into the business as seemed to happen in previous generations. We take more of a corporate view of the business nowadays.”
Although the business is ready to survive without him at the helm, Reid is not going anywhere in a hurry.
“I am not planning to leave the business in the near future, however, if I should fall off my perch sometime soon, Reid Fruits is well set up to continue under the management of our Board of Directors, and the company holds life insurance on me to assist in the employment of a new managing director.”
His focus on the future, even from the early days, is something that many family businesses would do well to replicate. But Reid himself recognises the mindset can be a challenge for some.
“Gaining recognition of the fact that every family business needs a succession plan is the biggest hurdle,” he says. “I would advise those who do not have a plan to act immediately to put one in place and to seek professional assistance in doing so. Professional assistance is critical to avoid a possible family dispute – and it’s better to recruit professional assistance before a dispute occurs.”