The company’s initiatives have included the opening of a €10m ($11m) organic coffee and tea factory to new products for Whole Earth and Kallo, with investment centred on trying to drive organic growth instead of looking for M&A.
Ecotone’s investment has come against a backdrop of tough trading conditions, not least high inflation and pressure on consumer spending across its key European markets.
In 2023, turnover hit €690m ($750.6m), flat on 2022 and a slight drop on the €700m recorded in 2021.
Just Food sat down with Ecotone CEO Christophe Barnouin to discuss the challenges of inflation, low consumer confidence and negotiations with customers – and why he remains upbeat about the outlook for the business.
Just Food: How would you say Ecotone performed in 2023?
Christophe Barnouin: Our business did reasonably well. Today, we are the European leader in organic and plant-based food. We are continuing the same journey that we started two years ago, following the same vision of building a for-profit business, but a mission-led business on biodiversity. We do that through two pillars, organic on one side and vegetarian on the other, and we articulate flagship brands across Europe.
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We had the inflation peak all over Europe where all non-discretionary categories were affected and you could say that anything that was better for the planet may not have been the top priority. We had a slowdown in growth due to inflation but, when we look at market share development across Europe, we are mostly holding or gaining share, despite it being the moment of the private label. In the UK specifically, we had very good growth of 5% this year.
Just Food: How has inflation affected the business over the past year?
Barnouin: Like every food manufacturer you will speak to [will say], it has been on the agenda. We are very keen to continue with the mass transformation of bringing organic food to the masses and not selling luxury products.
What was quite striking specifically in the UK was that you had your inflationary peak, which was slightly more than the rest of continental Europe, but at the same time, organic performed better than conventional food in 2023. The figures sat at almost +9% versus +7.7%. Yes, it is driven by price, but to be honest I don’t think we increase price higher than commercial food.
Yes, we were worried by inflation but we also noticed that organic is a big business. It’s a €45bn market in Europe. It’s growing fast in the UK and when you compare it to Europe, we still have a lot of potential to [reach], but we are quite confident that the future [is in our favour]. The worst of inflation is behind us.
Just Food: Were any areas of the business badly hit by inflation and do you expect them to still be affected in the coming months?
Barnouin: Here and there, yes. We don’t observe massive deflation yet and we are not alone. We will have some peaks for raw materials in 2024 but, overall, these will be less dense than in 2021-2022.
The product categories affected depend on whether the cost of energy will continue to rise. For a product in a glass jar [like Whole Earth], the price of the glass is dependent on the energy level, and if the energy prices start to go up again because of the different [global] conflicts. Recently, it was announced that the price for containers crossing the seas in the southern part of Europe will be doubling. Because we import more material from different countries, whether it’s tea or peanuts, we will experience those peaks, which mostly happen due to geopolitical risks as well as global warming.
Just Food: What did revenue and volume look like in 2023 and how do you expect volume to pan out in 2024?
Barnouin: Ecotone saw a little growth in total sales but very minor, just as in 2022. Partly driven by price, we are impacted like others, but we are still resisting very well compared to a lot of companies that also work in sustainable food. In the UK for example, some have gone bust or basically disappeared from the market. The quality of our team and the brands show a lot of resilience, because we are in very good shape, we have been focusing on this category and spending money on the core brands. The moment the market picks up again we will be in a much better position than we were two years ago.
Just Food: Do you expect to face any specific challenges this year?
Barnouin: The key challenges are the classic challenges. I don’t want to sound completely naïve or innocent, of course. We don’t expect 2024 to be super exciting in terms of market volume goals but still there are pockets of good growth to build on. Even when there were signs of little growth in 2023, Clipper Tea grew 10% across Europe. We did a lot of good things which we are going to repeat, like investing in our core brands. That should give us quite good confidence.
Just Food: How has Ecotone been working to boost sales volumes?
Barnouin: Just because we are in an inflationary period does not mean we should not innovate. We have invested more than £1m in the UK to remove any last bits of plastic in our Clipper Tea and have also focused on building and improving our infusions. We launched a new ‘squeezy’ design for Whole Earth peanut butter which is close to what other consumers know in the honey category. We also ‘decommoditised’ the rice cake business by inventing the veggie cakes for Kallo, which has seen high performance.
Just Food: Which of your markets are you looking to prioritise this year?
Barnouin: The key market will be France, which has been doing reasonably well. It’s a big market for us given we are in the grocery business there with Bjorg and Clipper. It’s not brilliant because the market is not there, but when I check the company performance versus the market, I have increased the number between Ecotone and the number two performer in France. That’s how I measure success. And the volume developments were much better in the market at the end of the year than at the beginning, so we can see [it] picking up in volume.
We also have key brands like Clipper or Whole Earth which we have launched across Europe and have proven to be a great success. Having these brands in other markets has allowed us to slightly gain market share and, even in the moment where private label should be killing us, they don’t.
Just Food: Does Ecotone have a presence in private label?
Barnouin: Yes, but let’s be clear – over 90% of what we sell are our own brands. We have a small portion of private label but we don’t rely on it. We are a branded business and remain a branded business, but from time to time, we work in partnership with a customer if they can support us with our core brands. About 5% of our revenue comes from private label.
Just Food: There appears to have been some tension in the supply chain in France recently, with supermarkets adding ‘shrinkflation’ labels to products. How has Ecotone tackled pricing negotiations with French retailers?
Barnouin: We do acknowledge organic is sometimes more expensive but if we have a critical mass to absorb that on cost, because we are quite a big organic food company, we can be competitive. The price of Bjorg dairy alternatives for instance is not so dissimilar [to] a well-known non-organic brand. Take Clipper Tea, it’s also quite competitive in price and we don’t need to do shrinkflation to achieve that.
I’ve been in this business for more than 15 years now. I consider the French trade like the UK or Dutch trade, they’re my partners. We have a joint business plan and are here to support the growth of their [organic] category. I need to bring the volume and margins of mass, that’s how I develop that category. We have always found a partnership with them and I am confident we will still. Of course, it’s a power struggle but the fact that we have focused on core categories of slightly better brands, and that we are continuously promoting the category more than other competitors, gives us some power in that struggle.
Just Food: What has consumer confidence looked like across your European markets over the past year and do you see it changing?
Barnouin: Consumer confidence is low everywhere. It’s low in the UK, it’s low in France, the same can be said for the Dutch and Spanish [consumer] as well. It is at a low point, but my bet will be that the future is brighter and the moment we are going to see interest rates going down, automatically inflation is going to decrease, and people are going to find more purchasing power. We hope to see that positive effect by the second half of this year.
That’s my macro [view] on consumer confidence but I am a mid-sized company, and I am the owner of smaller brands, so I don’t fully depend on that mega trend. If I do my job properly, through better business plans with the customer [and] new innovations in plant-based, then I can maintain that growth rate.
Just Food: Environmental sustainability is a key part of Ecotone’s business strategy. What progress has the company made in reaching its sustainability targets for 2025 and 2030?
Barnouin: We currently have 80% of organic food in our portfolio [2025 target is 85%] and we have 97% vegetarian food, hitting the 2030 target of over 95%.
We are using over 90% renewable energy and are on track to remove plastic completely from our products [83% of products were fully recyclable in 2022.]
We are also engaged in a programme to reduce the carbon footprint by half in 20 years. We [plan to] do that by finding ways to make products closer to our distribution centre. Take almond-based drinks, which we produce across continental Europe. We choose almonds that come from Europe and not from California, that’s my choice. It’s slightly more expensive, but it uses less water and the carbon footprint is much better when it comes from Sicily and from Spain, is manufactured in northern Italy and is sold mostly in southern Europe.
Just Food: How much does sustainability impact consumer buying choices?
Barnouin: It is becoming more important, as long as it’s not just a concept and they see what it means. To give an example, we were the first on Clipper Tea to remove bleach in tea bags, and now with the factory investment in Dorset to remove the last bits of plastic from the product, we show the proof [of our sustainability], and we do this for every product.
Our consumers want that, and specifically we are talking to ‘eco-active’ consumers. In the UK, this is young people who are excited by our brands and are demanding more sustainable products and they demand proof. At the end of the day, that’s how we constitute a competitive advantage with our mission of promoting biodiversity.
Just Food: In 2019, the business was taken over by private-equity group PAI Partners and Charles Jobson. With these investments typically lasting three to five years, is a new buyer on the horizon?
Barnouin: For the past 15 years there has been one minority shareholder, Charles Jobson and his family, a private investor who’s been keen to continue supporting us on the mission of sustainable food and will continue to do business with us. He is holding some 30-40% in the company.
The job of PAI is not to stay forever. We were very happy to find [them] because they are experts in food, and they are a long-term shareholder. They don’t care whether it’s this year or the year after, the partnership we have with them is to say they support us in one day handing over a better business. That matters much more than the timing.
Just Food: Will M&A play an important role in Ecotone’s growth strategy for the year ahead?
Barnouin: It’s part of the strategy, and it depends on what’s the right fit. The M&A market has gone down in size lately, but that gives a lot of opportunity as well. Some people that [previously] didn’t want to talk to us may want to talk to us now. This period is a good chance to continue that conversation.
Ultimately, the best core strategy is to grow volume on our existing categories. That’s how I’m going to [achieve] goals, by improving my own business, not by buying someone else. We have observed over the past two to three years that the best return on capital is the one that you don’t spend.