Sep 17, 2019

Mister Free'd set for UK supermarket listing in 2020 Freed Foods, the UK-based company behind Mister Free'd, a brand of gluten-free tortilla chips, has secured investment from Panoramic Growth Equity . Dean Best talks to Freed Foods co-founder and CEO about what's on the horizon for an SME that already has major listings in Europe. just-food: How did the investment come about? David Ventura: We had been looking for three months, speaking to different funds, angel networks. PG's name come up. We had a couple of offers on the table. What we really liked about them is it's a smaller outfit, a bit more entrepreneurial and we felt the values were aligned. Some of the other funds we've seen in London were a little bit bigger, a bit more corporate. These guys are based in Glasgow. They're in it to make money – everybody is – but their way of adding value seems to make more sense than some of the other guys we met. just-food: What do you mean by your values being aligned? David Ventura: They're not very aggressive. What we heard from the market was some of the funds would be a little bit more aggressive in restricting what the founders can do, maybe putting more people on the board. We felt [PG] would believe in the business and add value but leave us a little bit of room for manoeuvre. They've got experience in food and beverage, too. They invested in a company called Heck four years ago . The company was doing similar kind of turnover to us – so around GBP2m (US$2.5m) – and today they're doing GBP25m. A ten times multiple in four years. If we can do the same we'd be super happy. just-food: What prompted the decision to look for investment? David Ventura: The funding is to fuel growth. We've been pretty lean. We've raised a little bit of money from friends and family and we did an angel round two years ago. We felt now was a tipping point where the product and route-to-market was ready, we had a lot of contracts signed and lined up for the year but we needed that little bit of money to really pump the brand. To date, we've been pushing product, rather than the brand. To push the brand, you need funds. There's a raft of stuff now we can do that we were doing on a shoestring. just-food: The funding will be predominantly used for marketing? David Ventura: Correct. Building the team. So far, it's been a team of three. We want to build that out to five or six. We're going to internalise some of the functions we were outsourcing – marketing, for instance, we were doing ad hoc with a few marketing agencies when we had the money. Taking that internally with a brand manager means he or she can be just focused on the brand 24/7. just-food: Where does this leave the shareholding structure? DV: So, PG has 20%, myself and Tomas [Mesa, co-founder] are left with a little bit less than 30% each and then we have friends and family and some others who have the last remaining part. Nobody has more than 4-5% of that. just-food: What was the spark for you to move from investment banking into food? David Ventura: We've been always entrepreneurs at heart. Investment banking was a rite of passage rather than an end per se. It was to build a network and we've learnt a lot about business in general. I'm a coeliac and have been dairy intolerant for the past 20 years. Tomas is more of a foodie. We kind of combined those and thought: 'Let's try something different.' We quit our jobs and went for it. just-food: Why crackers and tortilla chips? David Ventura: We felt the healthy theme was going to hit Europe massively. We thought that was where people were going. If you look at people nowadays, people are going to the gym all the time and people are looking at what they eat, whether it's calories, protein, whatever. We thought there was a gap in the market for a delicious savoury snack. just-food: Outline your presence in the retail market in the UK and internationally. DV: As you can hear from the accent, I'm not from the UK. We decided to attack both France and the UK at the same time. We had a little success in France a year-and-a-half ago with Monoprix. We then started rolling it out to Carrefour, Franprix, Casino. We're in most of retail in France. It's a little bit more fragmented in France in that you can be in different formats, different regions. We're not national in all formats in all of the big names but, in some way shape or form, we are present. We're doing quite well. just-food: France was your first retail market? David Ventura: It was. The UK is now catching up. In the UK, when we started, we immediately hit the high end – Whole Foods, Holland and Barrett, Planet Organic, As Nature Intended and the independents. On the smaller 40g bags, we've just got into WHSmith, our first route of market to mainstream retail. On the back of that, we have a few contracts signed up for early next year. The money will help with that. A big launch with a big supermarket needs to be supported. That's something people sometimes overlook. Putting stuff on the shelf is great but you actually need to support it. You need to have the right promotional and sampling strategy in place. There's a raft of guerilla-type stuff you need to do on the ground, you need to do a bit of PR and you need to support that with social. just-food: Are these contracts in early 2020 with one of the major four supermarkets? David Ventura: They are, yeah. We're happy, obviously. It's early still in our journey but we feel there's a good reception in the market for that type of product. just-food: The snacks universe is ultra-competitive. You'll be up against some big names. David Ventura: Absolutely. Look, what Kettle and maybe Tyrrells have done to the premium potato crisp market hasn't really been done to the tortilla chip market. It's Doritos, with 90% market share. You have Manomasa in the market. They're attacking the mammoth with a strategy that is a bit more artisan [and] gourmet, with carefully-selected ingredients. We're attacking it through the healthy lens. just-food: How do your sodium levels stack up? DV: Very low, practically zero. We're low in salt, low in sugar, high in fibre, high in protein, vegan, gluten-free and, importantly, have a clean deck. That's super-important for customers today. We don't have a laundry list of things that people don't understand. just-food: As well as selling into some of France's major retailers, you also have listings with one of Germany's biggest, Rewe. DV: France and the UK are our two main, core markets, the ones where we want to invest and really explode. Having said that, we're very opportunistic in that we attend most of the big trade fairs in Europe. We meet distributors and if these people want to have a punt on us and start selling we're keen to do that. [However], it's very difficult for us to control those markets where they're huge markets and we don't speak the language. We're one step removed. In France, we feel we understand the market better and have a better chance of creating value. just-food: One of the major considerations for an ambitious SME is to choose which markets to prioritise. David Ventura: Now we have the investment, the idea would be to have an exit in three to five years. If we look at our strategy, having, say, 25 markets with GBP200,000 in each market is not going to be as valuable as if you can make GBP2-3m in each of these key markets. That really proves the concept. Selling a couple of pallets here and there to random countries is great but it's not really the brand exercise we want to achieve. just-food: How many markets are you in? David Ventura: On top of the two key, we do a little bit in Germany, Italy and the Middle East. Germany is very vegan-driven, whereas we're seeing more of an organic theme in France and a bit more of healthy theme in the UK. In Germany, you have vegan aisles in the supermarkets. That message is prominent with us, so there's no reason why we couldn't exploit it. We're not going to be investing heavily in these markets before we see some traction. There's a bit of a push and pull. We want to do both in the UK and France. We want to see the pull a little bit in those markets. just-food: Where's your manufacturing? just-food: What impact could Brexit have on the business? DV: It has had an impact. Crossing the [English] Channel has taken us maybe five or six days, whereas it was three to four days. just-food: You're already seeing that kind of impact? DV: It's small but the trucks are delayed, which is not great. We have an intermediate warehouse in the UK from where we dispatch. We haven't had any service issues with our UK clients. Having said that, we are sending a little bit more stock to the UK at the moment just in case there is a hard Brexit, so that we have a bit of stock covered at least until the end of the year. Being a UK company with 40% or 50% of our sales in export means we are naturally hedged; even if it goes no-deal we would be OK. We have a third layer of preparation in that we are in advanced discussions with UK manufacturers, so that if shit hits the fan, we would have UK production for our UK clients and European production for Europe. just-food: Any fall in sterling would help the export but have an impact the other way. David Ventura: Correct. We don't have all our eggs in one basket. Sterling going down is better for exports but worse because we buy in euros. just-food: You turn over GBP2m now. Have you got a sales target? David Ventura: In three years, we want to be hitting GBP9-10m. We've been doubling revenues over the last three years every year and we plan on continuing that [through] opening more stores and new markets and, as we grow into a market, sales velocity and like-for-like sales increase. We feel GBP9-10m is a little bit of the sweet spot where we've seen some M&A activity starting to blossom. If you look at Nakd , Bear , all of these guys were turning GBP10m+ before any M&A activity becomes interesting for a big player. just-food: Is the business profitable at a net income level? David Ventura: No. We generate gross profit, gross margin and how we reinvest that into the business is a function of how quickly we want to get to that GBP9-10m. We could be sitting here doing it in the next ten years and being super careful. The aim now we have the investment is to speed up and also defend ourselves against a very competitive market. If we were to do it in the next ten years someone might come with the money and say they're going to do it better, faster, stronger. just-food: In three years' time, would you and Tomas like to fully exit? David Ventura: We're 35, in three years, 38. We're not looking to cash out and then do nothing for the rest of our lives. If we can stay involved in the business, great, if there's a good offer on the table we'll take it and go and do something else. We're entrepreneurs at heart. We're loving it at the moment. It's fantastic to have a brand grow from zero. And it's a big change from doing Excel models and PowerPoint presentations in investment banking. P.S: If you liked this article, you might enjoy the just-food newsletter. Receive our latest content delivered right to your inbox.