UK business Fresh Marketing distributes brands locally, exports British brands overseas and sources private-label for retailers. The company is also building its own range of brands, which include Fuel 10K, a product that was one of the pioneers of the breakfast drink category in the UK. Dean Best spoke to Fresh Marketing co-founder Barney Mauleverer about his plans for the business and how the increased scrutiny on sugar, as well as Brexit, could affect the company.
|Brands:||Fuel 10K breakfast, I Am Super soups / grains|
|Export agent:||Brands including Lizi’s and Manomasa|
|Annual sales:||GBP6m. Forecast GBP8m for 2016/17 year.|
just-food: The UK food sector is assessing what the country’s decision to leave the EU will mean for the industry and for how they do business.
Barney Mauleverer: Our type of business, which sources manufacturing from Europe, is really quite affected by the big one, which, really in the short term, is the exchange rate. We are reasonably hedged, but hedges run out and what we really care about is the medium-term situation because if that does become dramatic, we will have to make dramatic changes like price increases or even move manufacturing back to the UK. Our Fuel drinks, granola and Protiflakes are in Germany. Our I Am Souper soups are made in Italy, and our grains and soon our beans are made in France. We’ve got some UK-based production – our porridge pots and our wheat biscuits.
It’s our job to steer the business. We’ve already started working on trying to take on more products that we pay in pounds and sell in euros, so that we start creating a natural hedge and benefiting from that exchange rate. We have also introduced an area of our business called Fresh Ventures, which is helping brands in the UK on NPD projects where we can take consultancy fees, which contributes to bringing another kind of income stream in to support any damage that we might get from the exchange rate. It’s just about being nimble and quick and adjusting your business model according to where the opportunities lie.
We’ve had concurrently in the last three months our three biggest months ever in terms of turnover but, from the profitability point of view, the exchange rate drags it right down. We should be having a wonderful time at the moment. But nothing’s that easy, and if it was everyone would be doing it.
just-food: At what stage do you think you could have to bring some of that continental manufacturing back to the UK?
Mauleverer: We forecast every quarter. There are a number of things you can do before making that sort of dramatic move – like doing less promos, less steep promos, or talking to your manufacturers, saying ‘Are you going to help us out?’ You try and trim as much as you can before you make that jump. If we went to parity and it looked like we were going to be parity for the next two years, we’d have to do it. Or we’d go to our retailers and say we’ve got to put our prices up. Everyone’s in the same boat really at a reasonable scale apart from those that are producing in the UK, but in this country things don’t grow like they do in the Caribbean and around the world. Nuts and dried fruit, they’re all dollars. So, a weak pound against the dollar will make their ingredients really expensive. Everyone’s going to be slightly shafted by it.
The other hope is that Europe starts having more problems and the Euro actually just weakens naturally.
just-food: Have you seen any impact from Brexit on consumer confidence in the UK?
Mauleverer: No, I don’t think so. Food and drink tends to be the last bastion that is properly affected. Big-ticket items are the ones that get affected first. Things seem to be pummeling along, but we may get affected by how the retailers are affected and if they then start changing their strategy and going more own label or what have you. Our job is to try and make sure our products are good value and reasonably priced.
just-food: Looking at other parts of your business, what impact do you think Brexit will have on Fresh Marketing as an export agency?
Mauleverer: It’s a great time for exporters if you are paying in pounds and getting paid in dollars and/or euros. Our business used to be 90% export. It’s now 80% own brand import probably. That’s just because our own brands have been growing while our exports are going down. So, we’ve definitely got a real push on trying to find more brands that we can help export and benefit from that. The exchange rate, it’s a good time for it. We have sort of slowed the emphasis on that side down as our own things have been going up, but actually, it’s probably quite a good bolt to say: ‘Actually now it’s a really useful valuable part of what we are doing. Let’s bring back some more focus on it.’
just-food: Another recent significant development in the UK is the Government’s announcement last month of a “plan of action” to tackle child obesity, including a tax on soft drinks and a voluntary programme to reduce sugar in nine categories by at least 20% in four years. What do you make of the plans?
Mauleverer: We here do feel pretty strongly that the Government should be more involved in a social issue that is affecting our future generation. I have four young kids and I would suggest the Government works on a long-term solution to educate the young – and old – and make added sugar socially unacceptable, as they have done with smoking and drink-driving, as examples, and explain the difference between naturally occurring sugars and refined sugar, plus the importance of taking regular exercise. If consumers demand it then this, in turn, will force self-regulation in the industry. A small tax is perhaps just annoying rather than impactful but forced warning messages would certainly have an effect. If the Government could do anything it would be to expose any brand adding more than 5% added or refined sugar to their products by imposing a front-of-pack warning label. Taxes won’t work.
At Fresh Marketing, we’re all the more aware that adding refined sugar is not on the list for NPD – we have recently launched a range of Fuel 10K Quark pouches and this week our baked beans range, both of which are no-added sugar or low sugar. We have removed 30% of total sugars from our milk drinks and just about to reduce the sugar further in our porridge pots. Taste buds will change and have to adapt to less added sugar in these types of products. I feel for the bigger older brands that have established taste profiles – but you have to move with the times.
just-food: Looking at your drinks, Fuel 10K was one of Fresh Marketing’s early proprietary brands, starting in granola and then three years ago moving into breakfast drinks, a significant category in Australia and New Zealand but one that was just bubbling away in the UK. The category has more recently attracted Weetabix and Australian brand Up & Go. Reformulation appears to be one strategy you are following to compete. Was it consumer insight that prompted the reformulation work on drinks or were there discussions with buyers looking for these kinds of efforts?
Mauleverer: It’s a bit of both. I think no one could avoid the importance of sugar in the diet these days, but also we felt we could probably achieve a product that tastes as good if not better without adding any extra sugar. We’re not using things like stevia or xylitol, but we’ve just been able to tweak the recipe to make sure that it punches through strong enough but of course reduce the sugar impact. When you’re playing with protein you want to have the right balance of carbs and protein in a drink like this. There was a good dose of consumer feedback that we were responding to as well.
just-food: Were you seeing consumers perhaps move away from your projects because of the sugar element? How does the added sugar in your drinks compare to the likes of the lines from Weetabix and Up & Go?
Mauleverer : After the reformulation, Weetabix sits at 8.3 grams of sugar per 100, Up & Go at 7.4 and we’re at 6.4. What we were really trying to do is get our sugar levels to match our protein levels, which we’ve been informed that nutritionally that’s a good place to be. We just feel we are positioning ourselves in a better value position than the other two. That’s the way we have to work, without the deep pockets these guys seem to have.
just-food: What impact did Weetabix and Up & Go coming into the UK breakfast drinks segment have on your sales?
Mauleverer: We were always terrified that we would just get booted out but as it happens we had early enough good sales for the retailers to think there’s something in this. They gave the breakfast drink category more space. Then when Weetabix launched, telling people it was okay to drink breakfast out of a bottle, that only really could have had a positive effect on the category as a whole.
When Up & Go came across with their Australian heritage and deep pockets, we were a little worried again that that was doomsday, but Up & Go had purposefully gone for a consumer, a look and feel that’s similar to Weetabix, whereas we truly think the consumer that is wanting this sort of product is a younger, perhaps more male millennial, rather than a catch-all everyday consumer that Weetabix, particularly, historically targets.
Can Weetabix hold up in this category and grow as much as they think they’re going to grow? It’s going to be an interesting conundrum. With their massive muscle and getting shelf space, they’re of course going to get a quick start, but I think it’s going to be really interesting to see how they’re faring in a couple of years’ time or so. Then perhaps by that time, breakfast drinks will have become the norm. If it becomes anything like Australia, where Sanitarium just developed this category to an immense size compared to the population size, then that could be the answer for breakfast cereal buyers here.
just-food: Fuel 10K was a brand developed in partnership with Tesco.
Mauleverer: We had a great relationship with the breakfast buyer at Tesco who wanted to launch a new brand in granola. It’s the way Fresh Marketing tends to operate. We work collaboratively with the retailers as best we can. One or two of them are more difficult than the others but if you start a relationship in that sort of way and are prepared to move and bend and tweak and twerk, you’re more likely as a smaller brand to find the gaps and holes without having to pay your way in.
just-food: Were more recent products – the Fuel 10K Protibrick wheat biscuits and the I Am Souper soups – developed in a similar way?
Mauleverer: We developed a great relationship with Asda. We ended up being put forward for an internal Dragon’s Den where we presented Protibrick as a new innovation taking the wheat biscuit to a new level. That kind of got us ridden up through the ranks within Asda and noticed by some of the directors. When it came to talking about the soup category, which we had cited as a similar category that had been in decline for the last four years or so [and] we felt that we could pick up our model, our similar consumer set, and talk about protein in a new pack format.
just-food: You said around 80% of Fresh Marketing’s turnover is through your proprietary brands. What are Fresh Marketing’s annual sales?
Mauleverer: Last year, we did GBP6m turnover and we’re on track for eight this year to the end of March. Our plan for Fuel is to get it to a GBP10m turnover within the next couple of years, mostly driven from UK sales, product development and white space. That would take Fresh Marketing to around the GBP15m mark. Similarly, with soup, we’re off to a good start and once that gets to about the GBP3m or GBP4m turnover we’ll pull that out to a limited company and target that brand at GBP10m.
Once you get to GBP10m, you’ve done the course and you’ve survived three or four years or so, you then become quite interesting to the bigger players, they kind of start looking at you and saying ‘who are these guys?’