Four'N Twenty pie maker Patties Foods plans to take on McDonald's and Subway

Jared Lynch
January 14, 2016
The Age
Patties Foods is distancing itself from last year’s tainted berry scandal by sticking to what it does best, writes Jared Lynch.
Four’N Twenty pie maker, Patties Foods, is exploring merger and acquisition deals to beef up its savoury business and further distance itself from last year’s tainted berries scandal.
We took a strategic decision to concentrate on the business that we are really good at … which is making pies, pasties and sausage rolls.
It is almost 12 months since Patties chief executive Steven Chaur received a phone call from a health department official which he said changed the course of the company and placed its growth plans “on hold”.
Three people, the official told Mr Chaur, had been diagnosed with hepatitis A after they ate frozen berries manufactured under Patties’ Nanna’s brand.
Mr Chaur can vividly recall the time – 1pm on a Friday. The next day the health department issued a public recall. Mr Chaur said this was despite no packets or batch codes provided of the tainted berries.
It sparked a process that would lead to the sale of Patties’ entire frozen berry business and what Mr Chaur described as being “guilty until proven innocent”.
Patties Foods teamed up with Pizza Hut in 2015 for the carnivorous Four’n Twenty stuffed-crust pizza.
Patties Foods teamed up with Pizza Hut in 2015 for the carnivorous Four’n Twenty stuffed-crust pizza. Photo: Supplied
“The health department weren’t able to specifically pin it down through the microbial and viral testing. Neither were we,” he said.
“Of course the health department have their epidemiology, which is a survey-based analysis, and they say ‘as far as we are concerned that’s accurate’.
“But really, when you pull the product apart and look at the entire testing regime, both internally with Patties and the fact that the so-called culprit plant in China was tested, no evidence of hepatitis or E. coli was found.”
Patties had hoped sales of its frozen berries – which Mr Chaur said had been growing at 40 per cent, generating about $140 million in national sales – would recover, but by December Mr Chaur realised the damage was irreversible. The company sold the berry business, generating $1.8 million.
“Everybody in the category was feeling the pinch, not just Patties but also the private labels and the importers in terms of lower sales.
“At that point in time, we as a board took a strategic decision to concentrate on the business that we are really good at and the business we have been doing for 50 years, which is making pies, pasties and sausage rolls.”
Still scarred
Patties, known mainly for its Four’N Twenty and Herbert Adams-branded pies, is still scarred from the claims. Its share price is yet to recover, falling 18.6 per cent to $1.14 since last February.
But Mr Chaur is determined not to dwell on the past and is eager to push forward with the company’s plans for its savoury business. They include makings its products healthier, such as adding more fibre and protein, and less salt and fat, to take on fast food titans McDonald’s and Subway.
He said Patties was open to mergers and acquisitions to strengthen its position in the savoury category. The company controls about 21 per cent of that market, which is worth about $1.4 billion nationally.
“Patties therefore still has significant room to grow domestically in core pies and sausage rolls outside the low-margin grocery channel, which is worth about 60 per cent of our sales.”
Mr Chaur said the company viewed the competition not as other pie makers but fast food companies.
“I don’t think we’d be able to fully take on Maccas but certainly we are drawing lessons from those guys in terms of how to market our product, and even coming up with seasonal and promotional lines.”
It has already attempted to reinvent the pie in a partnership with Pizza Hut, which involved creating a Four’N Twenty-stuffed crust – incorporating eight party pies into the crust of a meat lover’s pizza.
“It was an absolute meat overload, but it sold very well,” Mr Chaur said.
“That for us was a really good foray into looking at how do we get into this QSR [quick service restaurant] space? How do we make the Four’N Twenty pie as relevant? And I think the marriage with Pizza Hut did a very good job.
“From a financial markets perspective we have been kind of tarred with a particular incident, which has kind of put the company on hold for 12 months, and I now have some clear blue ocean in front of me to be able to sail into the sunset with the things that we are really good at and want to do.”