Mad Butcher ‘flawed’, argues liquidator after another store closes

The liquidator of a string of Mad Butcher franchisees says he stands by his view that the business model for the franchise is “flawed”.

More than 20 outlets have been liquidated in the Mad Butcher’s lifetime, including five since 2017. This number does not include stores that closed after the end of franchise agreements.

Last week Mad Butcher Northcote closed its doors, and outlets in Albany, Glen Innes and Whanga¯rei have also closed this year.

The Mad Butcher became a household name through the 1980s and 1990s, but in recent years and under various ownership structures has found it hard to navigate a rapidly changing market.

The franchise began in 1971 when Sir Peter Leitch — often called “the

Mad Butcher” — opened Rosella Meats in Ma¯ngere, which was subsequently renamed the Mad Butcher.

Leitch identified a niche supplying affordable meat in Auckland. But following the rapid expansion of supermarket chains and the rise of highend niche independent butcheries, the franchise has had a turbulent run in recent years.

The chain is going through another spate of store liquidations this year, after about seven through 2015 and

2016.

In the Mad Butcher’s heyday there were 40 stores. Today there are 18, according to the company’s website. It now also operates online businesses in Auckland and Whanga¯rei.

The first franchised Mad Butcher outlet opened in 1998. The company was majority owned by Leitch until

2007 when Michael Morton, the partner of Leitch’s daughter and now franchise co-owner Julie Leitch, took full ownership.

NZX-listed Veritas Investments, which this year changed its name to Good Spirits Hospitality, acquired the business in 2013. It paid $20 million in cash and another $20m in shares to Morton, who remained the investment firm’s biggest shareholder. That was until Morton and Julie Leitch bought back the business for $8m in July last year.

The pair each have a 50 per cent shareholding in the Mad Butcher today, while Good Spirits focuses on bars and pubs.

Over the years, various Mad Butcher outlets shut down as profit margins got smaller and competition increased.

Leitch’s original Mad Butcher store closed in 2016. At that time, liquidator Peter Jollands of insolvency firm

Jollands Callander — who has been appointed liquidator for a number of failed Mad Butcher outlets since 2017, including the most recent in April — attributed the franchise’s demise to flaws in the chain’s business model.

Jollands this week told the Weekend Herald he stood by those claims.

“The business model is flawed, and as such is unsustainable,” Jollands said.

Jollands said profit from Mad Butcher stores was “insufficient to sustain a business” — the reason so many outlets were going under.

“There is no profit, or if there is, it’s diminishing.”

He could not comment on questions about the management of the franchise as he said there were matters of a similar nature before the courts.

A case involving Mad Butcher Holdings and SonCam Limited, the company that formerly operated the Albany store, will be heard in the High Court at Auckland this month.

Contacted by the Weekend Herald, Morton said he would not offer any comment if the article referred to the chain’s history before July 2018.

Retail and marketing expert Ben Goodale said the Mad Butcher chain had been hit by fierce competition from the supermarkets and competitors such as the Aussie Butcher, which were able to offer lower meat prices.

“Value is an over-served part of the market and it is an easily commoditised product with low margin. For instance, when Pak’n’Save offers a meat week I’m sure it’s hard for the Mad Butcher to compete, and customers can pick up everything else they need at the same time,” said Goodale.

“Growth has been in the premium end of the market; boutique and organic butchers have seen growth, where some of the bigger chains like the Aussie Butcher have been able to trade up into.

“Margin can be very different here and people will pay more for aged meat, organic/free range, special cuts and gourmet sausages.”

Goodale said there was money to be made in the premium end of the market, but said the Mad Butcher chain probably struggled because of the consumer perception of it being associated with value.

“The Mad Butcher, I would anticipate, would find it harder to trade in this space partly due to where their shops are, and such a strong brand equity in value; it doesn’t mean that they don’t offer higher end meats, it’s just that it wouldn’t be the consumer perception.”

Chris Wilkinson, managing director of First Retail Group, said franchising required a “unique edge” to succeed.

He said Mad Butcher today found itself in a “no man’s land of undifferentiated businesses struggling for relevance”.

“Mad Butcher’s previous unique selling proposition in terms of bulk and value has been increasingly eroded by the likes of discount supermarkets, wholesalers, ethnic meat suppliers and even chains such as Reduced to Clear, who have grown in the frozen categories.”

The franchise needed to find a new point of difference, he said.

“Continued challenges played out across the stores closing would have impacted customer, franchisee and supplier confidence.”

“The business needs to find new points of difference, a refreshed pitch and possibly a new brand,” suggested Wilkinson.