The chief executive and co-founder of Mission Ventures on the social impact of the Good Food Fund and M&A tactic for challenger food and drink brands
By Murielle Gonzalez
The Good Food Fund has put in the spotlight pivotal issues around the concepts of health, food consumption and business models with social impact. Launched in April in the UK, the £1.8 million investment comes from Big Society Capital and Guy’s and St Thomas’s Charity.
The investors have entrusted the prototype fund to Ascension Ventures, and the growth accelerator to Mission Ventures. Co-founded by Paddy Willis, Mission Ventures will execute a 12-month programme, mentoring founders of challenger food and drink brands committed to bringing healthier snacks to market, thus help tackle childhood obesity.
The task at hand is not only health-driven but revolutionary to the market. “We are seeking to identify products that have the opportunity to engineer their price point to a level that is accessible to everybody, particularly to low-income families,” Willis tells me. The Mission Ventures chief executive reveals the strategy to prepare the entrepreneurs for the journey across the UK retail sector, and the growth opportunities that groceries and supermarkets can find if they tag along.
Price and affordability
New food and drink products from start-up companies with a ‘better-for-you’ proposition tend to be sold upmarket for a simple reason: margins. “These businesses operate production runs with ingredients and suppliers that are inherently more expensive by unit-price basis,” Willis explains. “These challenger brands target Wholefoods, Selfridges, Waitrose, Ocado and other high-end stores to achieve a sensible margin,” he says. This business model, however, bounds healthier snacking to those who can afford it and narrows market share for the brands.
Here’s where the findings of the charity’s 2018 report Healthy Returns comes into play, supporting the creation of the fund. The study identified that low-income families “want healthier food offers for their children, as long as it meets criteria of affordability, convenience and taste”. The report also concluded that “businesses who can provide healthier versions of snack and convenience food in supermarket supply chains will tap into a growing demand for these products, making these businesses a central source of food spends for families on lower incomes”.
The route to market
A seasoned entrepreneur, Willis’ business acumen in the alternative food and drink marketplace builds on Plum Baby, the range of organic baby foods he co-founded in 2004 and launched in 2006 with a five-year exit plan. The business became one of the UK’s fastest-growing food start-ups, with products available in 2,500 supermarket stores within 12 months of launch. In 2010 Willis sold Plum Baby to Darwin Private Equity in a £10 million deal.
Now that Willis is embarked on the fight against obesity through the accelerator programme, he believes that to accomplish the mission it is crucial to find ways to make incremental improvements on people’s diet, and one way to achieve that is by giving consumers improved options.
“We will be working with the challenger brands to explore their costs of goods, formulation, packaging, and supply chain processes to identify scale-up opportunities,” Willis explains. The challenge, he admits, is to see whether on a broader distribution, on a greater scale, these businesses can still achieve an affordable price with sensible operating margin, and deliver value in return for their shareholders.
The price model will be tested in stores across the London boroughs of Southwark and Lambeth, which is the backyard of the charity. Willis hopes that this effort will lead to having broader, affordable and healthier options on shelves. “Rather than someone having a sandwich with Nutella, of which more than half of its content is refined sugar, why not having it with a spread of JimJams chocolate spread, which is 84% less sugar than Nutella but still tastes as good,” he exemplifies.
The experiment will also put to the test whether price alone is enough for consumers to make the purchase decision. The investors behind the Good Food Fund will use this pilot to prove the potential for launching a much larger fund later in 2021 to continue the fight against obesity.
The Mission Map
Mission Ventures (formerly trading as Grocery Accelerator) is in the market to help food and drink newcomers prepare for growth. Willis works alongside co-founders John Stapleton — co-founder of The New Covent Garden Soup Co and Little Dish — and Apes Snacks co-founder Nigel Parrott who like him are savvy food entrepreneurs with several exits under their belts.
The trio offers business advice to early-stage companies and expertise to corporations considering a financial investment in young businesses. To date, Mission Ventures’ portfolio has grown over five years to include 15 brands actively trading, with only two closures.
Their experience of running accelerators has traditionally been around workshop-based learning programmes where founders go through “a very steep learning curve”, grasping the language of the business world. However, their approach going forward now extends to include a much more intense one-on-one approach, which they called MissionMap.
Willis describes the MissionMap as a 12-week journey similar to the process of buying a second-hand car. “You put the car in your garage and work on it, stripping it down to all its components to review which ones are still fit for purpose. What’s necessary is replaced to ensure the car is fit for the journey that’s ahead of you.” Thus, businesses leave the mentorship with everything they need to be able to grow to a successful exit, as well as ongoing access to the “mechanics”.
Equally disruptive are Willis’ views on the acquisition strategy. “In a large company, you could consider it safer to substitute R&D for M&A,” he says. He argues that buying a challenger brand once the start-up has products on the market and a follower base eliminates the risk of innovation failure and allows corporations to gain a brand they could not have developed in-house otherwise.
“Food and drink start-ups are taking up a market share of the portfolio of large corporations because they’re doing something different to them,” he says. Ultimately, it is down to the corporation to integrate the challenger brand into the organisation.
Willis says large corporations now have the tendency to acquire younger brands a little earlier in their growth journey because they don’t want to miss out on the acquisition when the brand is older.
On this note, he tells me a corporate venture model is on the drawing board that will see Mission Ventures’ ‘MissionMap’ executing growth and exit plans in a joint venture with one of the UK’s top food companies.
Date published: 23 April 2020