Food entrepreneurs can learn from Fever Tree and Chobani
Consumer insight and obsession with quality were key to the success of these brands
Chobani founder Hamdi Ulukaya with employees after announcing last week that he was giving them shares worth up to 10 per cent of the company when it goes public or is sold. Earlier this year Ulukaya turned down a very public acquisition approach from PepsiCo. Photograph: Alexandra Hootnick/The New York Times
The holy grail of all new brand builders is to create a disruptive innovation that sets a new agenda and sparks sustained category growth.
In the food sector, the most commercially successful of such innovations are often not original scientific breakthroughs, but clever re-presentations of existing product types based upon a deeply understood consumer insight. Such success, however, is the exception; an estimated 80 per cent of new brands fail.
The leading food brands on our supermarket shelves continue to be familiar, with long established names. The best of these continue to reinvent themselves, retaining relevance to their loyalists while evolving with changing consumer demands.
There are some very strong local and regional food brands (such as Avonmore, Tayto and Brennan’s Bread) but many leading brands are owned by huge multinationals that dominate food production.
Each of the top 40 global food companies is larger than the combined value of exports of all Irish food and drink. In Ireland, 60 per cent of all prepared consumer foods are imported (about €3 billion yearly) mostly coming from these multinationals.
Real opportunity exists for Irish food entrepreneurs: to create brands that better meet the needs of Irish consumers, to achieve import substitution and, for a select few, to create a brand with export potential.
Last week, I had an opportunity to have dinner with Charles Rolls of Fever Tree. In 2005, working with his partner Tim Warrillow, he responded to a perceived need for a genuinely better quality ‘mixer’.
New great tasting vodka, gin and whiskey brands had arrived on the market, but consumers were, as he says, “desecrating the spirit” by adding very basic, and often artificially sweetened, mixers.
This insight formed the foundation of a well-executed plan to develop and launch the premium mixer brand Fever Tree (the source of quinine, a key ingredient in tonic water).
They had an obsession with the product and its ingredients, and with setting up a supply chain to offer distributors and retailers significantly enhanced margins. They pursued an initial public offering on the London Stock Exchange in 2014; rapid growth continued (up 70 per cent in 2015), reaching sales of £60 million and operating profit of £18 million.
Today that business has a market capitalisation of almost £700 million with a forward price-earning ratio of 52 (compared to Britvic’s 17), reflecting the belief that current growth rates will continue as consumers recognise and value the premiumisation of what had been a very dull sector.
A couple of years ago I met Hamdi Ulukaya, a Turkish emigrant into the US and the founder and chief executive of Greek yogurt brand Chobani. In 2005, coincidentally the same year as the launch of Fever Tree, he spotted an opportunity to develop a better quality Greek yogurt.
It was produced with an obsession for quality, using sustainable ingredients and with a slogan “How Matters”. It matters to them how they source their ingredients, how they run their factories, how they support important social causes.
Still a private business, Chobani’s annual sales are now in excess of $1 billion, it has become the number one Greek yogurt brand in the US and created over 2,000 jobs.
It has outgunned multinational yogurt makers Danone and General Mills to reach the top spot, and earlier this year turned down a very public acquisition approach from PepsiCo. In 2013, Hamdi deservedly won the EY World Entrepreneur of the Year award.
Mind the gap
They have truly disrupted their product categories with breathtaking success, generating new jobs, and created hugely valuable businesses.
These stories can inspire Ireland’s food and drink entrepreneurs. A new cohort of ambitious start-ups are about to begin their own entrepreneurial journeys, applying to take part in ‘Food Works’, the highly regarded accelerator programme provided by the combined resources of Bord Bia, Enterprise Ireland and Teagasc.
The best of these start-ups have spotted consumer trends others have missed, with ambition and executional ability to disrupt and achieve significant scale, dreaming of becoming the next Fever Tree or Chobani.
Michael Carey is managing director of East Coast Bakehouse and chairman of An Bord Bia