Adding heritage ingredient to the taste of success

from some marketing man's fantasies or some designer's drawing board.

I've even heard Ernest Saunders wax eloquent on the subject.

What better heritage could there be, then, than that attaching to a

Paterson's oatcake, first baked by John of that surname in 1895 in

Rutherglen's Royal Burgh Bakery, in the days when Thomas Seath was still

building shallow-draught ships in the town?

When the present owners of the Paterson brand name plundered the

company's heritage cupboard, they found that John Paterson had won the

premier silver medal for his oatcakes at each successive Scottish Food

Exhibition from 1908 to 1911.

So concerned were the organisers that Paterson would frighten away the

competition that they struck a special gold medallion, awarded to the

oatcake king as a way of persuading him to give others a chance.

That kind of history ought to be worth a lot to any business.

Admittedly, within a total UK biscuit market reckoned to be valued at

some #850m a year, oatcakes command a miniscule #3m to #3.5m share.

Even when you throw in that other Paterson staple -- shortbread --

where the total market is bigger, between #25m and #30m a year, we are

still, in quantitative terms, on the relatively insignificant fringes of

mainstream biscuit making.

Yet the sensitive exploitation of heritage, with all its intimations

of quality, can help carve out a very viable business, even in these

modestly-sized sectors, by achieving and retaining market leadership.

And that can create a solid platform from which to widen sales by

introducing new products drawing on the same traditional strengths.

If you doubt the formula, look at the success of the Fox's brand name

in the specialist biscuit market, with turnover quintupled to #100m in a

decade, in an overall UK market for biscuits which is both mature and

static.

Sadly, the Paterson's business, which moved from Rutherglen to

Livingston in 1971, has been passed from owner to owner since the 1960s,

suffering in the process, says present managing director Steve Otley,

''20 years of neglect''.

In 1984 Paterson became

Paterson-Bronte, having been merged with a Yorkshire maker of

farmhouse-style biscuits which drew its heritage from the three sisters

of Haworth. Latterly the business was owned by the Argyll supermarket

group. In July 1987, Argyll sold Paterson-Bronte to the privately-owned

whisky distillers, Robertson & Baxter.

It was R&B's second acquisition in the food sector, joining Arran

Provisions in the group's efforts to diversify into quality, branded

Scottish foodstuffs.

I remember visiting the Livingston plant in the Argyll days when the

then-chairman Jimmy Gulliver had managed to persuade Scottish Secretary

Malcolm Rifkind to open a new warehouse. One got the impression of a

peripheral business, just as happy churning out own-label oatcakes and

shortbread for Gulliver's Presto and rival supermarket chains as

building on the powerful Paterson brand name.

Steve Otley, who took charge of Paterson-Bronte 18 months ago, is

determined to change all that. The business isn't turning its back on

private label work. But Otley is determined to put real push behind the

Paterson's heritage and reputation for quality.

So far, he's spent #2m gearing the plant up to meet that challenge.

Some #800,000 went on refurbishing the bakery interior, creating an

environment capable of passing the most stringent hygiene standards.

As far as he knows, Paterson-Bronte is still the only Scottish food

manufacturing plant to be invited by Rentokil, the pest control people

(and invitation is the only entre) to join its Sentinel scheme.

Insect and rodent penetration into the plant is now so comprehensively

monitored, that Paterson's were able, conclusively, to prove that two

moths found in a pack of their oatcakes had not originated in the

factory.

The offending insects were identified as Indian meal moths. Records of

the traps placed throughout the Paterson factory showed a complete

absence of any moths in the factory over the relevant period. The

problem was traced to the health food shop where the oatcakes were

purchased.

That kind of reputation matters in an era when public confidence in

the safety of some other foodstuffs has been severely dented. But, it is

only part of Otley's investment plans.

Another #1.2m has been invested so far on equipment, principally a new

oven line, devoted to shortbread, where production has been boosted by

30% while the workers required at the packing end has been cut from 33

to 12.

''We haven't had a single redundancy,'' boasts Steve Otley, who is

fiercely proud of a loyal and long-serving staff numbering 250, rising

to 300 at peak production times. Those no longer involved in packing

shortbread can be redeployed, for example, into the more

labour-intensive area of biscuit assortment packs, a market bigger than

either shortbread or oatcakes and less subject to seasonal fluctuations.

Now, for a company with an annual turnover of #8m, neck-and-neck with

United Biscuits' Nairn brand for leadership of the oatcake sector and

number three, after Walker's and Burton, in shortbread, a #2m investment

is a very hefty commitment, especially these days when the cost of money

is in the high teens.

But, there's more. Steve Otley, a former UB man himself, plans another

#1m of investment in production facilities this year and, subject to the

success of these moves, is looking at spending a further #5m, physically

expanding the Livingston premises.

''We could not have made this kind of investment as an independent

company,'' he insists. ''We're also investing in people -- we have an

export sales director and marketing manager we never had before. Our

marketing spend has quadrupled in 18 months.''

To pay for it all, Paterson-Bronte will have to generate an additional

contribution of around #500,000 a year just to stand still.

''Through the support it's given for our investment programme,

Robertson & Baxter is demonstrating its faith in this business,'' Otley

continues. ''R&B wants to invest in Scotland. And because it is

independent and private it can take the long view.''

A graduate in food science who hails from Yorkshire, Steve Otley

joined UB in 1972 doing product development. Eventually he was managing

the development process on the snacks side of the business. He came to

Scotland in 1981 to manage UB's trout farming and processing business

and ended up selling it for them.

A move to the biscuit giant's regional head office in Edinburgh

followed, where he was responsible for UB's stable of small businesses.

But, when the regional office was run down, Otley faced a return to

England or finding pastures new north of the Border.

He chose to leave Sir Hector Laing's empire and spent three years as

operations director with Esk Frozen Foods in Montrose before moving to

Paterson-Bronte.

Steve Otley thinks deeply about the changing nature of the food

manufacturing and retailing businesses. He recalls the times, up to the

mid-sixties, when Paterson's did direct selling from a fleet of vans,

from Inverness to the Borders.

''Then the business became much more multiple retailer orientated,''

he adds. ''That created a gap which Walkers filled and I personally rue

that day. But, just you wait and see, we'll get some of it back.''

The success of the Speyside business run by the Walker family is just

one of the spurs pushing Otley and Paterson-Bronte on. He has lots of

new product ideas bubbling and that unquenchable belief that the

customer will increasingly demand quality.

''If I doubled turnover tomorrow, I'd still have less than 2% of the

UK biscuit market. But it would be very nice for our owners and our

workforce if we did,'' he says, with a smile. With Robertson & Baxter

taking that rare perspective in British industry -- a long view of its

investment -- who's to say Paterson-Bronte won't produce a lot more

smiles before long.