Business Leader of the Year: Craig Norgate

Craig Norgate

Two years ago, Craig Norgate wasn't sure whether or not to stay in New Zealand - the United States with its huge opportunities was calling.

But two years is a long time - and after deciding to stay and diving back into agriculture - Norgate has won the New Zealand Herald Business Leader of the Year award.

That award would have seemed unlikely in the middle of 2003. He had just lost his job as chief executive of Fonterra, it decided not to renew his contract, and he was seriously considering a move to the US.

"But I'd made the decision a long time ago that I wanted to bring my family up in New Zealand and so I decided if I could find the right thing to do that's what we'd do," says Norgate, who with his wife Jane has three children, Dylan, Jordan and Alexandria.

"That's where my heart lay."

The decision to stay has borne fruit. Norgate, 40, has implemented a rapid series of takeovers and mergers that have transformed the sluggish and inefficient rural services sector in New Zealand.

The company the former accountant and his partners formed - PGG Wrightson - is now by far the nation's largest rural retailer. It has more than 100 branches around the country serving 90,000 customers in what is New Zealand's largest industry and major export earner.

It is one of the top 20 companies on the New Zealand Stock Exchange and has annual revenues of about $1 billion.

Norgate had a rapid rise to the top of Fonterra. He had been chief executive at Kiwi Co-operative Dairies before it was merged with NZ Dairy Group to form Fonterra and had won the top job aged just 36. But his tenure there lasted just two years.

"I think the challenge at Fonterra was for two years to make this thing work then let somebody take it through to the next stage, so it was a logical time for a change," he says.

"As much as I was always going to have to be pushed out the door, it was the right time."

Having made the decision to stay in New Zealand, Norgate decided to work for himself and, in late 2003, formed Rural Portfolio Investments, a 50:50 joint venture with Otago's McConnon family, which had owned Mainland Cheese before selling out to Fonterra.

He began biking to his rented offices in central Auckland from his St Mary's Bay home in Auckland. In the process, he lost weight and is now probably a little - though only a little - closer to what he weighed when he played on the wing for the Taranaki Under-17s.

The offices are little changed too. The second-hand furniture picked up from another tenant for $2000 is still there and there's still only Norgate and one other staff member to occupy it.

He said RPI was formed to buy into some medium-sized companies, preferably in the farming sector.

"Agriculture is what gets me out of bed in the morning. I didn't want to look at small companies because small companies are hard work, so I wanted the biggest thing you could get your arms around on a leveraged basis."

RPI settled quickly on Wrightson - a struggling North Island-based rural services company.

Initially, RPI thought it could buy Fonterra's 19.2 per cent stake in Wrightson, which had been quietly put up for sale while Norgate was still in charge.

But after approaching Fonterra through an intermediary - who didn't give their identity - they were told the stake wasn't for sale.

"We'd invested a fair bit of intellectual capital by that stage and still liked the idea so thought, 'just because they're not going to sell doesn't mean we can't build a sensible stake and try and help the business out'."

RPI bought a 13 per cent stake on market and then launched a takeover bid for 50.01 per cent of the company.

Throughout the bid, Norgate was often asked what his plan was for the sector. "There's no plan," he said time and again, insisting he just wanted to get his hands on the company then see what to do next.

Later, it became obvious there was a plan, admitted now by Norgate.

"We always felt that the industry needed consolidation, that if we could get our arms around 'Wrighties' and sort it out, then over the period of time there might be the opportunity to pull the major players together and create a company with a bit of substance.

"I guess the direction was always pretty clear to us, but we just didn't expect it to all happen as quickly as it unfolded."

RPI won a controlling stake of Wrightson for a little under $120 million in June last year and Fonterra sold out of its stake a few months later.

Next, Norgate moved on Hawkes Bay rural services company Williams & Kettle. The move came sooner than he had planned when he heard in December last year that someone - which turned out to be Fonterra - was buying shares.

Inside an hour, Norgate responded with Wrightson's own, higher bid for a stake in the company. Norgate said the response could have been even quicker: "I was in the shower, I missed the first call."

Wrightson amassed a 19.9 per cent stake in Williams & Kettle and launched a full bid. Norgate then met the board of the 125-year-old company.

"I don't think anyone likes being taken over, but we were able to outline our vision for the sector and how we'd effect integration if we were successful," he says. "I think that gave them some comfort."

That meeting helped persuade Sir Selwyn Cushing to sell his 19.9 per cent stake in February and Wrightson quickly completed the $104 million takeover the next month.

It was the second time Norgate had beaten his former employer - which appeared to have its own ambitions in rural supplies - in the battle for another company, although Norgate says he doesn't see it that way.

"I don't get out of bed in the morning for that. I never look back.

"The reality is it's not an important part of their business. At the end of the day if the elephants want to win, the elephants will win."

In July, RPI and Norgate proposed a merger with Pyne Gould Guinness.

Shareholders liked the plan and voted in its favour in September. This was no mean feat, given that only a few months before the South Island company had, in partnership with Fonterra, been competing with RPI for Williams & Kettle.

Along the way to forming PGG Wrightson, Norgate made a personal profit of about $30 million. And those who held Wrightson shares and now own shares in PGG Wrightson have more than doubled their money in the past two years.

Norgate grew up in Hawera, a rural-servicing town in Taranaki. After attending the local high school, he studied accountancy at Massey University then moved to Hastings to become district accountant in the Department of Maori Affairs.

Then he moved to Lactose as commercial manager, aged 23, which he describes as his first "senior management role".

From there, he joined meat company Lowe Walker for a year before moving to Kiwi Dairy at 26, as one of two people effectively running the co-operative.

"My mother hit the roof when she found out I was going to Kiwi," Norgate says. His father had worked there for 25 years and died early. "It's pretty all-consuming. He enjoyed it there."

Norgate thinks it's hard to imagine working anywhere but in agriculture.

"I guess I have a fair bit of pride about what was achieved in the dairy industry and would like to think I might be able to help out elsewhere.

"While the old stock-and-station business is pretty tough, you're dealing with real people who are passionate about what they do."

PGG Wrightson's first priority was to "have a far more robust relationship with our clients".

Farmers often now get goods and services - such as fertiliser, fencing and finance - from other suppliers and Norgate is hoping the size of PGG Wrightson - which has a market capitalisation of about $620 million - will give it enough efficiency and buying power to make it competitive in these sorts of products again.

"We want to try and have the sort of relationship that existed 20 years ago, where farmers see us as a critical part of their business."

Norgate says he has no desire to return to an executive role - his official job titles are board member of PGG Wrightson and general manager of RPI - because he is better at what he calls "strategy and direction".

"I'm not one for a whole bunch of detail," he says.

"I'm enjoying what I'm doing. I had the best part of 15 years in a CEO role and that's long enough."

Norgate says he'll remain involved in the new company for at least a decade, which begs the question of what he'll do if he isn't planning to take an executive role.

He says there aren't any plans for any more major industry consolidation, but adds: "I've got a clear sense of how agriculture may evolve internationally and, for that reason, can have a fair sense of where our company can go."

Norgate expects farmers will begin tailoring their produce more for specific retailers, such as individual supermarket chains. "You might have Tesco lamb for example.

"There'll be very strong linkages all the way from pasture to plate. We're in a pretty good position to help facilitate that."

Ask Norgate for more detail about what this could mean for PGG Wrightson and he replies: "There's no plan." But it's hard to believe him.


Craig Norgate
* Born 1965, Hawera.
* At 21, he had his first management role as district accountant for the Maori Affairs Department in Hastings.
* At 26, chief executive at Kiwi Co-operative. During his tenure, the dairy company's revenue grew from $300 million to $4 billion.
* At 36, wins top job at Fonterra, becoming New Zealand's highest-paid chief executive.
* At 38, dumped by Fonterra, in June 2003.
* Launches Rural Portfolio Investments in September 2003.


Why he won
* Craig Norgate revolutionised the sluggish, inefficient and often parochial stock-and-station business in a little over two years.
* Through a rapid series of takeovers and mergers, he formed a national rural services company with more than 100 branches and 90,000 customers.
* By October, he had formed PGG Wrightson - the country's largest rural services company - with a market capitalisation of about $620 million and annual revenue of $1 billion.