Jonathan Lander | Volvere

The chief executive of the growth and turnaround investment company in London wants to build a portfolio of food businesses and says frozen is a winning category

By Murielle Gonzalez

Buying and selling companies for a living is a risky business, but Jonathan Lander, chief executive of Volvere, has made it work for him for years – 18 to be precise. “We’ve never failed in any turnaround we’ve done,” he tells me. Lander adds that he founded the company with his brother in December 2002, and his words convey a sense of pride. “We have either bought a business and made it profitable and sold it, or bought it and made it profitable and kept it.” The latter has been the approach of choice since the acquisition of frozen pastry manufacturer Shire in 2011 – and the deal marked the beginning of Volvere’s food portfolio.

“We didn’t know anything about food manufacturing, but we liked the management team, the factory, the food category Shire was in, and gradually worked with the management team to build it back up again,” says Lander.

Lander emphasises that Volvere invests in companies in distress in any sector, but also in any company or business that’s not in distress but which complements the existing portfolio. “That’s what we did with [the acquisition] of Indulgence Patisserie – it was not in distress, but complementary to Shire.” Headquartered in Colchester, Indulgence joined Volvere’s portfolio in February last year.

Volvere – the past tense of the Latin word meaning turned around – entered the market through an IPO on the London Stock Exchange that raised £3 million. The initial idea was to invest the proceeds in buying companies in financial difficulty. “With £3 million you can’t do very much,” says Lander, noting the danger that companies that fail to keep running smoothly may, in fact, not be great businesses.

Over the first few years, Volvere bought and sold typically one business at a time. Lander says the company couldn’t afford to do more deals because the acquired businesses were loss-making or underperforming for a long period. “We gradually built capital, buying and selling businesses typically within three years,” explains Lander.

Volvere invested about £500,000 in the deal with Shire Foods – and now owns 80% of the business. The company reported a 26% revenue increase in the 2019 financial year to £23 million, and £1.38 million profit – up 62% compared with the previous year. “We expect that sales in 2020 will be higher,” says Lander.

Following Shire’s acquisition, Volvere has focused on looking for companies in the food industry and Lander admits that frozen is a particular area of interest. “We also look at businesses in the chilled and ambient segment, but our first choice is frozen,” he says.

A decade has passed since Lander got his hands on a food business for the first time, and the expertise he has acquired about the sector becomes apparent during the conversation. Lander talks about getting better margins, retail sales rotation, and customer relations with ease.

Volvere: Frozen food focus

Lander says he’s interested in frozen food companies for several reasons – products are cheaper to produce, goods have a long shelf life without adding preservatives, and the uptake of frozen food products is on an upward trend. He also argues that the quality of manufacturing and the consumers’ perception of frozen food is changing for the better.

“The perception of frozen food in the UK, and possibly in other countries as well, was of being low-quality, cheap food, not fresh, so not good for you – but that’s an outdated view,” he says. “The other wrong view on frozen food is that it’s only suitable for pizzas. Consumers used to see frozen only for vegetables – peas for example. However, this view is also changing – you now see frozen ready-meals, pies, and prepared vegetables, all chopped and ready for cooking.”

Lander believes the variety of frozen food in the marketplace is changing, driven by supermarkets like Iceland in the UK, which almost entirely sells frozen products.

“Frozen food is also cheaper than chilled and ambient,” says Lander. “It’s cheaper partly because of the perception we talked about earlier, but also because it’s cheaper to make,” he says.

Lander explains that manufacturers make money when they can do long production runs – a week’s production of one product can be stored frozen in a warehouse until it’s sold and then distributed to the client. He argues this method is also better for retailers because the longer shelf life means supermarkets throw away less food.

“Frozen manufacturing makes the business more efficient, so you can offer products to supermarkets at a lower price,” he says, noting this way margins are higher. “Some of the benefits of the lower cost of manufacturing is passed on to supermarkets, and thus to customers.”

The onset of Covid-19 hasn’t been good for anybody, but shifting consumer behaviour has impacted positively in the frozen category. In the UK, appliance firm AO.com reported a 200% spike in freezer sales in March, leading to a shortage of the equipment by July – and supermarket sales of frozen food in the 12 weeks to June surged by 19.4% – a whopping sales increase of £285 million.

To the point

How did Shire manage to make a profit amid the restrictions of Covid-19?

Shire did well because of the increase in supermarket sales. The business does have a food service component, but it’s quite small – less than 5%. The largest clients are discounters,

Aldi and Lidl, for example, don’t have an online delivery service like Tesco, but because these supermarkets are growing so much, they’re still doing very well, and sales were good for us.

What is the strategy to turn around Indulgence Patisserie?

When we bought Indulgence, the company was primarily a foodservice business – and we all know how terrible Covid-19 has been for this sector. So, the recovery has taken longer.

With Indulgence, we’ve been introducing the business to our supermarket clients, and that’s the strategy, not to rebuild the restaurant side of the business.

What’s the secret sauce Volvere has to turn underperforming businesses around?

It’s a combination of things. If the business has been in financial difficulty for a while, it often has a very stretched balance sheet – lots of debt. So, typically, we use an insolvency technique to remove the debt, either via administration or company voluntary arrangement.

But there are subtle things we do, too. We sometimes change the management team, but generally, we have worked with the existing team. But most of the work is on improving financial information.

Some companies don’t know if they are making or losing money, don’t know whether some products are loss-making or are profitable because their financial information is very poor. So we improve that.

We support the company with its clients. We like to think that we stand with our companies in front of the customers. We go and see customers with them, and when a pitch is made for a new line, we are there, too.

And we move people around within the group. It saves money, but it also improves people’s careers and ambitions. They enjoy more of what they’re doing because they’ve got multiple companies to work with. And that’s something we’ll do more as we buy more businesses.

Are you open to selling the businesses in your portfolio?

We never say never, so it depends. We would sell everything that we have at the right price. But our current thinking is that there’s more value to be made by growing them, and that’s our current plan. I want to grow a much bigger food business within Volvere.

What competition looks like in your side of business?

Competition is very limited in the turnaround area. This business requires a very specialist skill – there are two or three people who do it. I think we’re the only one who could say that we have never failed. We’re quite careful about the businesses we buy.

And there’s very little competition for us because we’re not doing £50 million to £100 million transactions like traditional private equity houses. They don’t play in our area of buying loss-making companies – that immediately rules out almost everybody.

How do you pitch your interest in the business to a company?

If I’m pitching to a company that’s in difficulty, I say we’re not looking just to do a quick deal and flip a coin; if we decide to buy into you, we’ll invest in you, and I can show that we’ve never failed in doing that. There’s always a first time, but we have never failed.

We don’t have a portfolio approach. We don’t just buy 10 businesses and hope six of them will make it, and I think that gives us a competitive edge.

What M&A opportunities do you see in 2021?

I see it as a year of two halves. The first half will be terrible, generally, both in terms of people’s ability to live normally and in terms of profitability for companies that are in the leisure sector – restaurants and foodservice. It will take months to reach the point of herd immunity with Covid-19 vaccination. So, it’s probably going to be second half before we start to see normality coming back.

In the second half of the year, banks will start to look at their portfolio and see who can afford to repay, and who cannot, and we’ll see companies in financial distress – many of them in food manufacturing and foodservice.

Lander tells me that Volvere is cautiously optimistic about the M&A landscape in the coming months. He believes there will be a pool of investment opportunities, but transactions need to be decided carefully.

“I think there are more interesting opportunities for businesses that don’t just sell to restaurants, but deliver food to schools, to hospitals, and to workplaces, for example,” says Lander, noting many of them may have reduced demand, but it can come back up more quickly than restaurants. “There’s no doubt there is distress in the foodservice sector, and that is providing opportunities for us,” he concludes.