Chairman, Costa Group
Born in: Geelong
Home Town: Geelong
Frank Costa first joined the fruit and vegie industry as a 17-year-old kid flirting with the female customers at his dad’s shop. The patriarch of produce is now 74, so you’d think there’d be few questions about the industry that would stump him.
And yet when The Power Index asks what his favourite vegetable is, the chairman of the Costa Group pauses for a good 10 seconds. Finally, Costa replies: "I really like peas. And potatoes."
Minutes earlier Costa was telling us that peas were no longer popular and his business had sold off its potato farming interests just last month.
Selling off the vegies he loves? Leading the Costa Group to becoming the biggest fresh fruit and vegetables supplier to Coles and Woolworths -- and therefore influencing what produce Australians eat and how much they pay for it -- has helped toughen up the boy from Geelong.
"I've always wanted to be the best," Costa tells The Power Index. "When I went into wholesaling with my brother, we wanted to be the best in Geelong. And we achieved that. Then we wanted to be the best in Victoria. We achieved that. Then we wanted to be the biggest and best in Australia and now we've achieved that."
It seems appropriate the patron saint of Victoria’s port city, with his raspy voice and perma-tan, lives in a converted bluestone church when he’s in Melbourne. But the house isn't ostentatious, and neither is the man who owns it.
Costa takes The Power Index into his kitchen to brew up a cuppa and set out a plate of biscuits, which he nibbles on throughout the interview as Italian classical pop covers play in the background.
It’s a far cry from the late '80s and early '90s, when Costa and his business partner brothers battled it out with the Calabrian Mafia over a racket that saw them net 50 cents for every box of fresh produce sent into the two big supermarkets.
Coles hired the Costa Group in 1990 to run its fresh-produce section and smash the extortion scheme. It worked, but only after brother Anthony Costa made a personal threat to the Mafia when Frank was offered either a $1 million annual cash bribe or death.
The Mafia may be long-gone from the Australian produce world, but the revived supermarket wars between Coles and Woolworths has seen a bit of that rough-and-tumble return.
"The way it affects us is that we've got to be more competitive again," says Costa. "One of the main attractions that they're working on offering is price. So for us to be able to supply we have to be very efficient ourselves to cut out our costs and make sure we keep them down."
That meant making Costa Group a vertically integrated company. Costa farmers grow the majority of their produce -- their main lines being mushrooms, table grapes, glasshouse tomatoes, citrus, avocados, berries and bananas -- pack it, transport it immediately into cool rooms, pack it into their own refrigerated vans and then take it directly into distribution centres or straight in to supermarkets. It's all about managing a tight cold supply chain discipline to ensure maximum freshness and shelf life, says Costa.
Rather than curse its dominance, the growers The Power Index spoke to praised The Costa Group for its leadership within the industry.
"Driscolls Australia [the Costa Group's berry brand] enables us to deal with the supermarkets from a position of strength so we don't get picked off as small growers all over the country and just rorted by them," says Greg McCulloch, the president of Australian Blueberry Growers Association.
Driscolls Australia grows 60% of Australia's blueberries. McCulloch has been growing blueberries in southern Tasmania -- some of which he supplies to the Costa Group -- for more than a decade.
McCulloch explains Costa Group paid for pesticide certifications for the berry industry for years, offers horticulture advice to growers and is far more reluctant to cut its prices for the supermarkets than smaller producers.
To keep pricing confidential, the Costa Group employs a team for each respective supermarket (and an additional account manager for Aldi) and pricing information isn’t passed between the supermarkets.
It's a difficult system, but worth it, says Costa. "We wouldn't be the size we are and we wouldn't have the potential to develop the things we are if it wasn't that we had those big customers like Coles and Woolworths," he says.
Last year was a critical year for Costa Group, and not just because of the supermarket's war over freshness. Costa sold 50% of his business -- which has 8000 employees in picking season and is estimated to bring in around $600 million in revenue -- to the American conglomerate Paine & Partners. "I’d always wanted to keep this a family business and have no other partners or equity partners outside of family," he admits.
Family comes up a lot during our hour-long chat with Costa. He has eight daughters and 20 grandchildren. Several of his sons-in-law -- as well as nephews and other family members -- continue to work for the business. Costa demands all relatives work in another business before they come to the family empire and he’s been known to hold family members back for promotion (resulting in some quitting in embarrassment).
So why sell? It came down to the dollars, says Costa. “I felt that our progress -- which was so capital intensive -- meant they were getting into reliance on bank finance more than I was comfortable with.”
Most of the crops the business focuses on are very dependable and grown inside -- think mushrooms and glasshouse tomatoes. On the plus side they are protected from changing weather and there are few competitors because the cost of entry is so high. On the down side, it requires “an awful amount of money” to build the required infrastructure. Plus, the cash-injection will help the Costa Group grow overseas.
As The Power Index left the temple of Costa, the ex-Geelong Football Club President was off to watch his beloved Cats play. He quit the presidency two years ago to spend more time with his wife Shirley, whom he dotes on.
Yet Costa is still very involved in the day-to-day aspects of the Costa Group, discussing strategy and examining profit and loss statements every week. The Paine & Partners deal requires him to stay on for five years as chairman. After that?
"We’ll worry about that when the time comes," says Costa. "I’m not getting any younger. Another four years I might be thinking that’s enough but I might not. We’ll see."
Seems his shelf-life isn't over yet.