Five generations over 150 years
According to David Michell, he and his brother Peter have kept their company Michell Wool afloat largely by being stubborn. As he puts it: “We just don’t want to go away.”
The same might be said of other family members throughout the company’s 150-year history. As owners of the country’s oldest and largest exporter of Australian wool fibre, the Michells have found ways to hold on through innumerable challenges – all five generations of them.
“Every generation has [introduced] some sort of innovation, whether it was mechanical, financial or finding new and better markets,” David says. “We’ve managed to reinvent ourselves in every generation.”
Take for instance their grandfather. He launched the company’s first China office on the eve of the 1949 Chinese Revolution.
Decades later, the brothers made their own mark in China, establishing the first Michell Wool’s first factory there in 2006. “My brother and I built a factory in China that does what we do here in Australia, but with wool from all around the world,” David explains.
This allowed them to compete globally – not because China offers a cheaper means of production (it doesn’t), but because it allowed them to source wool from other countries. “A lot of our competitors were buying other-origin wool [and selling it into] Australia, which is something we couldn’t do,” David explains. It became an opportunity to level the playing field by being able to source wool from anywhere.
Meeting challenges head-on
Of course, the big issue right now is that they can’t visit their Chinese factory due to the current travel restrictions. “I was the last visitor there in January,” David says.
The pandemic has been challenging in other respects. While China is starting to increase its orders, sales from other areas of the world remain subdued.
But the brothers have been here before. The global financial crisis saw the company take a big hit in 2008, yet it managed to survive and even thrive.
“It’s always been skinny margins at Michell Wool,” David notes. “But because we’re financial risk managers if you like, ready to react exceptionally quickly, we actually turned a real problem into a real positive with our best year in a decade. We’re trying to do the same thing with this pandemic as well. It’s a matter of looking for the opportunities in the chaos.”
Ready to take risks
The factory in China hasn’t been the brothers’ only innovation during their tenure. They also launched Michell Wool’s first retail offering, ioMerino, in 2004.
The venture was the direct result of David and Peter trying to understand customer demand. “Our customers, who were generally spinners of wool, weren’t giving us any guide as to where demand was coming from and when it was coming,” David explains.
So they looked further down the supply chain to find out for themselves. “It wasn’t until we got all the way down to retail, where the designers were looking at fabrics and designing ranges 10 months to two years in advance, that we went, ‘Woah, that’s where the demand is; that’s where the big ideas are’. It was so remote from us it was ridiculous.”
However, they quickly decided it wasn’t all that complicated. After all, as David says: “You wash it, you spin it, you knit it, and you make it into stuff. And Bob’s your aunty, you can sell it.”
Soon, they had set up a retail outlet offering merino wool t-shirts, convinced that the worst-case scenario was ending up with a few t-shirts they couldn’t sell. As David says: “Fifteen years later, we’re still doing it.”
The power of relationships
The brothers also set considerable store in their relationships. This naturally includes their staff. “It takes a lot of dedicated staff to make sure that things work,” David points out.
However, it also comes down to their customers and bankers. “We put a lot of value in relationships,” David says. “We have some great customers; we’ve had some great bankers.”
David describes his relationship with NAB banker Barry Wilhelm and his team as exceptional. “We are a very open book with them … I think you have to be. They are part of our team, not just a service provider.”
It’s paid dividends during the current crisis, where carefully planned budgets have been upended overnight. “To their credit, they’re working with us really well over this period,” David says.
In fact, according to David, NAB is the first bank that has really understood what Michell Wool does. Most bankers view the company as a manufacturer and will only accept their buildings and machinery as security; But that overlooks the fact the company is all about buying and selling wool, which, David argues, means the wool makes for better security. “It’s taken 20 to 30 years to convince anybody, and NAB’s the first bank that’s gone, ‘I get it’. And that’s how they bank us.”
Nurturing the next generation
David would be the first to admit that none of it has come easily. Ultimately, however, both he and Peter see their achievements through the lens of their family. As David says: “Success for us is being able to hand Michell Wool over to the next generation in better shape than we picked it up.”
And with his eldest now a director on the board, and his other two children closely watching, there’s every chance generation six will play its part as well.
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