Why a Silicon Valley exec bought into Breville’s global ambitions

It’s much harder to innovate consistently than build one great idea, but some companies are up to the challenge. In our latest Curious podcast, I sat down with Breville (ASX: BRG) CEO Jim Clayton to discuss why he left the fast-paced world of private equity, management consulting and South Korean conglomerates to drive a little-known Australian company with a knack for innovation forward.

This episode was recorded in June 2025. This podcast is general information and for an Australian audience only. It isn’t advice. It doesn't take into account anyone's investment objectives, situation or needs.

Transcript

Dawn Kanelleas: Today we have the great privilege of speaking to Jim Clayton, the decade-long CEO at Breville (ASX: BRG). Thank you, Jim for making the time to speak with First Sentier. We have been a long-term supporter of your innovation-led strategy at Breville, but today I'd like to start at the beginning if you like, and get you to talk about your journey to Breville given you started your career as a civil trial lawyer before moving to McKinsey. And then perhaps some more time on your most relevant last role at LG in South Korea in terms of building the expertise that brought you to the attention of the Breville board.

Jim Clayton: My career is definitely non-linear. I think that is fair. I think the big step for me actually was when I went to the Silicon Valley. So when I went to the Silicon Valley, I ended up working for a self-made billionaire that had started, I think it was on his third company, that really busted for him. And it was under Romesh Wadhwani where I really learned how to do a lot of the things that I'm applying at Breville.

So in that 10-year period when I was in the Silicon Valley, one interesting context, kind of broader context of software service, data, speed, all of this bit, offshoring came out of that construct and Breville was, I mean, sorry, Romesh is very much a fire, ready, aim kind of guy. It was a real premium on execution and speed, which is where I picked up that affliction and we started out in venture work. Then Romesh came in, moved us up into private equity with his checking account basically as the first fund. And we were buying companies and then transforming those companies. But the transformation side of that equation was a huge learning for me because we did it so many times against so many different companies.

Dawn: So you actually got to do it, as opposed to McKinsey where you got to advise somebody how to do it in an idealised situation?

Jim: McKinsey was really helpful because it's going to be whatever, a three-month project or a six-month project. So you're kind of parachuting into an industry you don't know, to a problem you don't know. You're very quickly having to try to figure out which end is up and then find out what the problem is and go solve it and present it back. But you're not doing the execution when you stepped over in private equity, it's one of these, you break it, you buy it kind of problems right.

Dawn: It is yours but it’s a lot shorter term, for example the strategy in Breville, you’ve been there 10 years, hopefully you’re there for another 10 years. Get in there, obviously execute operationally, but not necessarily be there for a long time.

Jim: What was helpful, at least for me in learning was iterate, iterate, iterate, another one, another one, another one. And you get a lot of scars on your back through that whole process, those are the learnings. And so actually when the LG opportunity came up, which is actually a McKinsey partner that I worked with way back when, convinced me to cross over. And the storyline that got me in was actually LG needed to enter new markets. They hadn't done a lot of M&A, and so they didn't have that skillset. So the idea was to add me to the team to then go help them go into new markets. So maybe about the first 9 to 12 months I was at the corporate level looking at new markets, who are we going to acquire to go in, and then how do we take the capabilities of LG to drive that.

Dawn: But also the idea of premiumisation because that brand was very much like a private label brand to the consumer in Australia?

Jim: Not by the time I got there. By the time I got there, they competed against one another. The bit that I did find a little astounding because of Samsung was that at the time I was there, LG was a US$100 billion and they were the little guys and that took me a while to get my head around, okay, we're the little ones that, because it was Apple and Google and Samsung and so forth.

So now all of a sudden I'm in a truly global company. After maybe nine months, I moved into the home entertainment business unit, which was about a $25 billion business unit, which was TVs and so forth. And I got to be at LG at a really interesting time because the iPhone had come out I think before I got there, but you could start to see the implications of that because LG was big in the phone space and then it was moving over to smart tv and then there was smart grid.

And so here comes this wave in a sense of smart. And the thing that I always found interesting about LG and Samsung or they're the only two players that are in every room of your house, where everybody else kind of focused on one. You really did get this macro view of everything that was going on because smart grid was driven for very different reasons than a smart tv, which is different than a smartphone. But just seeing this whole thing and then you got to see this company literally struggle in this articulation of how do you bring software and service into a hardware company.

But I think getting to work as long as I did at LG, which is for six years, you start to see the power of that company and that culture and what they can achieve and why they built the business that they did. It's really fascinating, but it's as much cultural as anything else, which for a small town kid out of Texas was a big change, big deal. 

And from there, I then get the random phone call for Breville and interesting, at the time I'd not heard of Breville, my wife had, I didn't know what it was. But I was 98% convinced that there's no way that a company from Australia in that space could succeed. 

And it's not anything against Australia, you don't have a big domestic market to build up because usually you lean on the domestic market to get big to fund it. Then you go out, and the Koreans are an example where they had to go out early, so there are times when it's happened, but it's much harder than first build GE, and then go global in a sense.

Dawn: How did he convince you?

Jim: So for me, what was interesting, and this is partly LG was at the time primarily a fast follower model, which is their innovation was really in the manufacturing process as opposed to coming up with the iPhone or something. And as I was working on trying to go into new markets, I started to really get a feel for how hard innovation really is to come up with be the one that came up with the idea. Chasing someone who has the idea is a very different game than being the one that has come up with it

Dawn: Building the infrastructure around it. That's kind of easier once you've got the idea.

Jim: Exactly. And so I started out with, this probably is not a thing, but I said send me analyst reports and stuff so I can look at it. And then the private equity guy in me looked around and it's like there's no debt on the balance sheet. Okay that one's interesting. That was step one. Then the second thing I saw was this company was only direct in five countries. So theoretically that meant possible. And the part of it that was really important to me was not their success in the US but that the UK had worked because that meant that in theory, Europe was in play. They hadn't executed it, but they had validated that, hey, this might work.

Dawn: So there was a value proposition that was resonating with customers.

Jim: Whatever that was, at the time, I didn't know what it was. And so I was like, all right, so they have validated these little in a sense little startups is the way they had approached it and that they'd validated the UK, which meant okay, maybe. 

The part that was really interesting to me was that there is this natural barrier to entry into the vertical. 

And I say this because at LG, the competitive list was Samsung, Apple, Google, Huawei, Hisense, TCL, Xiaomi, and you're looking at serious companies with serious capability and all of a sudden now you're looking at this one vertical that has this natural barrier to entry, which is why we don't see any of them in this vertical. And that barrier to entry is there's no manufacturing scale. And so instead, what I started to see when I started.

Dawn: It can be easily outsourced.

Jim: It's not about outsourced, it's numbered of units, which is TVs. It's 60 million a year. You can get scale in manufacturing then that can be the advantage. But when you touch food, you touch culture. When you touch culture, it gets very local. So Breville means something in this country, the sandwich maker, the sandwich press, not in the US at all. 

So there it is, the founding kind of piece of this whole company is not relevant in this other market. Because it’s food, matters here, doesn't matter there. And so what you actually start to see are little micro markets kind of pop up all over the world because there's no manufacturing scale. And if you think of what makes those big guys really successful, it's the ability to get to scale. 

So that one was interesting. And then I remember I was at CES with LG and across the street from the conference centre is a Sur La Table. And so when I would get free time, I'd walk over and I walked over three times. I wanted a different salesperson. The first time I went, I think I asked for a KitchenAid mixer, then I wanted a Cuisinart food processor, and then I wanted, I think it was a coffee machine. And all three times I was cross-sold to Breville.

Which is bothering me. I mean honestly, I was like, wait a minute… Why is this happening? So then I would go, I've never heard of these guys who are they? Australian company? Off it would go. And the part that was bothering me about all that as someone who'd been at LG for six years trying to figure out this new idea that we could go into was that those three products have nothing to do with one another. But I got cross sold to Breville. 

And what that meant was that Breville was innovating across category. And that's the thing that doesn't happen. So what you tend to see is this one company is really, really good at the one thing. They've tried it a hundred different ways and they'll die on the hill for this one thing they're best at. And that comes from all the deep experience of trying every single way that you could to make it the best. And this is the best balance.

And so now I'm sitting here with this Australian company because not only would they cross sell me and they would say, oh, by the way, they're the best at this one and this one and this one and this one.

So I'm sitting over here at LG trying to come up with one idea. I mean, I'm not kidding, like and here's this Aussie come. He is like, and they're acting like it's not even sport. So that was honestly the thing where I said, okay, maybe there's something here. Then I went back as a part of that process and you guys had gone through the juicing bubble there it was, it popped. So stock's down all this kind of bit, and I said, I want to see the data ex juicing, take it out. And what you saw was a core that working with all these other items.

Dawn: But they weren't putting much focus into it, but it was resonating with consumers.

Jim: But it was steady as it goes. It was actually the juicing bubble hid what was happening underneath. So then I'm kind of going, okay, wait a minute. I've got a stable base underneath this story with no debt on the balance sheet and a vertical that's protected with UK validated lots of countries to go, and a company that seems to be able to innovate across category.

And I've got a lot of experience in infrastructure and building distribution and marketing and understanding that side of it that maybe had been under invested.

And at that point, I don't know that to be true or not true in a sense right now. Then I started, so we went through that process and I started and then I found out the things that they didn't tell me.

So then you find out, and it was honestly, I was about two weeks in, it took about two weeks to figure it all out, and the net of that two weeks was it was the most fascinating company because it was really, really good at the thing that is the hardest to be good at, it’s really not good at all the other things that are easiest to be.

And so I went to my chairman at the time and I said, okay, well now that I see what you've got me into, I'm two years behind where I thought I was going to be. I was like, well, there's kind of good news, bad news, and the good news is it means there's some really easy wins in this process because all we have to do is kind of fix the functional capability in a sense. They had the rest of it and that was what kicked it off. And the rest is history as they say.

My starting position was 20 steps back.

Dawn: You didn't have anything to lose.

Jim: I mean, honestly, even with the board, it's like these guys took a real flyer. It is not like they didn't see the same thing. And so for me, this is where I fall back actually on my time at Symphony. I had the idea of where I thought the company could go, but I didn't tell anyone because that's 5 to 10 years out, you put that one on the board, and now I know you're completely lost. And instead with the investors, with the team, with the board, so forth. I set very short-term goals. I called it and then went and delivered it and then called it and went and delivered it.

Dawn: So it was incremental, ticking boxes.

Jim: And it's only to start to build the story that I mean what I say, and I say what I mean, and if I say it, it will happen. And that was it. And so you'd have to go back to some of the investor presentations of FY16 or something, but you'll see that I created kind of a scorecard and I said, here are the things, watch these, don't watch those. I'm going to move this from here to there, and then I would go out and I would do it. And that started to build a little bit of confidence, not in the first year. I always measured every report out by what percent of the people do I think believe what I'm saying. For the first year was zero. It was absolutely zero, which is fine.

Dawn: I remember that.

Jim: I was still doing what I said I was going to do. They just didn't believe. And then I remember you get these funny vignettes, but there was an investor that came up to me after one of the meetings and he said, well, I've sat through four of these now. And each of the four, you've basically said exactly the same thing. And each time you did what you said, that's very refreshing.

Dawn: Yeah, that's what gave us confidence.

Jim: That was the beginning. In other words, this was this construct, which is, and the one that was actually very funny is when I was at Symphony, we called these transformation programmes, but I went out and I looked in every company on the ASX was under a transformation programme. And that wasn't a good word, honestly, everybody was under one. So I was like, okay, it's not one of those. So I called it an acceleration programme. I rebranded it because that's really what it was. But the scariest bit of the whole thing, I say the riskiest bit of my time was in those first two years because what I figured out was that I was going to have to put the company through a top to bottom PE, burn it down, rebuild it, and it wasn't anyone's fault, it was just how they had gotten to where they had gotten, which is I literally had to centralise every single function, re-platform the whole company and so forth. And that was the scariest bit of will people stay with you while you go through this?

Dawn: It had nice bones, but it didn't have, if you like the infrastructure to support it.

Jim: Yeah, it was weird. It was really good at product innovation and in this vertical, that's the single most important thing. And that was really my bet.

Which was even if I screw up in this transformation, how we do it, as long as NPD keeps kicking out the products they kick out, revenue's going to grow. And this was the big bet, which is, can you fix the plane while it's flying and everybody's watching? Only if you have an innovation engine that's going to deliver even if you screw this up. And that was it. The other thing that I went to the market with, and this was also a Symphony play, was I said, look, every time somebody comes in to do the transformation, what that means is EBITS going to get knee capped for about three years and there's going to be this beautiful hockey stick. And when you are in a world where there is no trust, you don't have three years, you got three months obviously. 

So I went out to the market, and this is the other thing no one believed was I went out in the very first meeting and I said, I'm going to get from A to B and I'll commit to you. It will not come from EBIT, which is I'll protect EBIT. 

I'm not going to steal from it to make it go faster. I'm going to do it the hard way and literally transform the pieces that I need out to drive the acceleration. Now, there's not a single person that believed that one for sure, even the board didn't believe that one, but that's what I did. And part of what I did, and this is something that's really different about how we run the company, is to make that happen. I had to change the way our incentive structure worked, because I couldn't steal from EBIT.

So what you can't find is, well, I was going to hit EBIT except we paid our short-term incentive and now you didn't hit EBIT, right? Because this whole thing goes circular on you. So what I did was I created this screwball formula, which basically puts EBIT in as a fixed cost just like rent, which is, it was as fixed as rent. That one doesn't change. Now you can play with all the others.

And that was where that started because I'd already made the commit to the market. And if you mean what you say and say what you mean, you can't steal from EBIT, but you steal from EBIT and then it's, it's all lost, right? So that early commit, and I think once we survived really the first two years, and not only did I not steal from EBIT, but we grew EBIT. I didn't promise that one by the way, but we did.

Dawn: As you say, sometimes really what is EBIT given where you are going, you're actually stealing from shareholders long term by delivering EBIT today.

Jim: So this is true, I call it dead money,

Dawn: So do we, but we know that the market responds.

Jim: It's yes and no, right? Which is if you think about when I think about how do I drive return for our shareholders, there's two variables and I'll pick EBIT, EBIT’s one of them, what did you actually drop? And then what do I multiply it by? So if you take EBIT to zero, zero times any number is still zero. So part of it is I describe it as the ante to get to play another round, which is you need to prove that you can.

Dawn: It's your insurance policy with the market if you like.

Jim: It's a bit of a trust and a sense of, yeah, I can drop this and still go do what I want to go do. It's a part of that trust stuff, I think. And so within that construct, I say, this is the cost of being public. You don't have to be, but there's a lot of good things that come from it. And this is one of, this is the ante at the table. If you can't consistently do this, then you shouldn't be. And that's okay. So I don't whine about it, I just do it because that means we've picked a public structure and within that, this is what it costs to play.

Dawn: Like you do in private equity, it's IRR in the public markets. This is the pact you make

Jim: And the big difference for me is that I've had my eye on 10 years out from the beginning, I'll come back to when I interviewed. It was actually funny, when I came down to interview, the board asked for me to present to the board, and I remember talking to the head hunter was present, what I don't understand, it was like, I don't know, whatever you want to talk about. And I'm like, how am I going to do an interview of anything I want to talk about? And it was, well, what would you do with the company? I was like, I don't even know the company. How am I going to do this? So I really did a PE outside in and I was like, look, this is your multiples collapse, your stock's down, here's why. And your business model's broken and here are your degrees of freedom. And I laughed, maybe it was about five years ago, six years ago I went back and I stumbled on that document. It's still true.

Dawn: Yeah, of course.

Jim: Meaning it's not rocket science. It's just execution. And that's kind of what the last 10 years have been.

Dawn: Thank you, Jim, for, giving your time today to speak about Breville. If you are interested, please tune in for more episodes on this podcast as we explore some more of how Breville, has managed to export its innovation to the world.

Managed Fund

First Sentier Australian MidCap Fund

Australian Shares

View

Managed Fund

First Sentier Australian Small Companies Fund

Australian Shares

View