Richard Brick | True. (PE & early-stage investment)
Will cold brew take off in the UK? Can independent low and no-alcohol brands maintain market share against big brewers? True investment director on future trends and how to spot real innovation in F&B
Early-stage and PE investor in consumer products, True. presents itself very differently to the typical investment powerhouses within the sector. Its B Corp certification cements the firm’s core belief in sustainability and ESG as key drivers for consumer product innovation.
True’s current portfolio, across both its early-stage and PE funds, encompasses a variety of businesses navigating both online and offline channels across quite different categories.
Investment director Richard Brick tells NutritionInvestor there is no one formula for spotting innovation within the world of consumer products, but he believes a keen focus on jumping on very young trends, revamping tired categories and digging deeper within health and sustainability can provide a solid foundation for potential success in food and bev.
Here, Brick warns of low barriers to entry for F&B start-ups making it an easy sector to jump into, despite many failing within the first few years. He also digs into some of the promising trends he has his eye on within the sector and how they might impact the current ecosystem of F&B businesses.
What’s your career background and how did you come to work for True.?
I started my career in the mergers and acquisitions team at Citi covering the consumer and retail sectors. I was always interested in the power of brand and consumer psychology and helpfully my family background is in retail – my mum’s family were jewellers and my dad’s family were tailors. When I joined Citi I was doing a range of things including across retail, consumer, and leisure, but focused on food and beverage, which included flavours and fragrances, and wider ingredients.
I did that for about two and a half years, had a little break, and wanted to get into investing. There aren’t too many consumer-focused investment firms in the UK and I joined True in summer 2014. So, for the last eight years I have done a range of things here, focusing around half my time on just food and beverage, alongside everything else that True does.
True. sits at an interesting position within the consumer and food investment space, do you know what the thinking behind its model was when it was established?
True was founded a little bit before my time, but there was always an ambition to be the consumer and retail specialist where investment and innovation were brought together for the benefit of the industry.
We have two funds: there’s an early-stage fund and there’s also a private equity fund which is where I spend the vast majority of my time, although I do spend a little bit of time supporting the smaller fund on food and bev as well.
We have a complementary innovation team, and we try and work closely with them on our portfolio brands and in our deal team, as the team holds a lot of insight on trends across the sector. Their primary role is to work with the world’s biggest consumer and retail brands. In food that’s companies like Morrisons, Waitrose, M&S, and Coca-Cola Europacific Partners. Our aim is to try and combine that innovation with our investment proposition such that we can be the most value-additive investors possible.
From the investment side we’re taking either very small or small/medium enterprises and turning them into much bigger ones. We’re supporting our innovation partners to become greater, by helping them navigate their innovation and technology landscape or their corporate venture ambitions, and by giving them sector specialist insight and ideas. We’re all about finding new ways to grow businesses so that they can better serve consumers.
You’ll definitely find PE funds by themselves, you’ll find VCs by themselves, you’ll find innovation consultants by themselves, but the beauty is how we combine all three.
How is True. operationally different to other PE and growth investors in the space today?
Our B Corp certification is less of a certificate and more of a way of being. We’re really proud of being ranked within the B Corp system as one of the best companies towards people; that’s both an internal and external validation of the way that that we are and want to be.
We have a beautiful office in in the centre of London, just down the road from St. James’ Park and that’s where we encourage massive collaboration wherever possible. The people that we speak to, invest in, and interact with really value who we are as people. I think across True we are decent people trying to do the right thing, consciously. And we do that through being innovative ourselves in our business model.
What is your investment mandate for very early-stage businesses?
In the investment team we spend a lot of time building relationships with entrepreneurs and management teams. We try and take as long-term a view as we can with founders or business leaders. I will go to different conferences and forums to shake a lot of hands and pick up a load of business cards, I’ll be trawling all sorts of different news sites and awards lists trying to find what seems interesting and innovative.
I think it’s a little bit harder in food & bev for the early-stage fund because you are making that bet a lot earlier. Our mandate is to focus on businesses that are at the forefront of shifting consumer behaviour and we want to partner with those individuals or teams that share our values, to build businesses in the right way but in a truly innovative way: adhering to the structural mega-trends but still being sound businesses too.
In the PE fund we’re currently investing our Fund III, a £275 million fund. We are trying to invest in and partner with consumer brands that often have strong digital foundations. The Cotswold Company, Ribble and Hush are all businesses that do very well online, but also service the offline market very well.
We’re targeting investments in the PE Fund with around £30 million to £50 million equity checks, and the flexibility to go much bigger or smaller, but the growth fund will invest between £100 thousand and £5 million pounds.
How much control of a company do you take as a PE investor?
We are really partners to whoever we invest in and I think that’s a key part of why we put so much time in during the early days on building relationships with brands and founders. It’s important that we are not operators, we do not go in and take charge of the business, we’re backing teams and backing people. If their founders were backing their vision, we are buying into what they have already built out, and supporting them with our network, our innovation expertise and our proposition to reimagine business, to really push them on where we can. We are always thinking about sustainability and ESG, but also the longevity of a business model. We want to partner with people who value partnership and the sorts of influence that a global sector-specialist investor could bring.
We are big supporters of helping businesses further their ESG credentials. Many people have the idea of private equity being cutters and pulling back when taking on a business. We are not handbrakes, but rather we see what we can do to accelerate things – you can see that throughout our portfolio, whether that’s Ribble investing in offline capabilities or online tools, The Cotswold Company growing its store-base, Hush looking at international growth, or Sneak Energy having a look at how an offline traditional distribution model might work. These are all tools that we have at our disposal to help capitalise the team properly to execute on these movements.
How have you seen trends and categories evolve in terms of where you think the interest and value in F&B innovation is?
It’s a category where a lot of people think that they can make a splash and a lot of ex-bankers and ex-consultants enter the space as arguably the barriers of entry for an F&B business are relatively low and the innovation trends are relatively well reported, versus other start-up sectors. You’ll find a lot of people hopping on trends and in the last seven or eight years within the UK I can think of things like kombucha, all sorts of nut milks, flavoured waters, cold brew coffee, CBD and various different health trends. And innovation comes in lots of different guises, but it’s incredibly difficult to succeed. The true success stories within F&B are few and far between.
We invested in [energy drink brand] Sneak last year and that business is a wonderful direct-to-consumer story that emerged pre-pandemic but really exploded during the pandemic. A similar story is [mochi ice-cream company] Little Moons. These are two relatively innovative businesses that have reached scale and for Sneak it was in a shorter period of time than Little Moons. But innovation in the space can come from anywhere, even from a slight re-tweaking of older incumbent businesses and brands.
What key areas they should F&B entrepreneurs be focusing their energy on?
There’s definitely a lot of short-term noise around HFSS (high in fat, salt and sugar) and the regulation there. It is valuable for businesses to find innovative ways to capitalise on the long-term movement of staying ethical and healthy while still appealing to the indulgent category. Proper was a B Corp-certified company long before people started talking about it, for example, but fundamentally they just made really good-tasting classic snacks and got wide distribution rapidly
Tony’s Chocolonely: everyone loves it and for good reason. It’s transparent. In the minds of some consumers, it doesn’t always get it right and it can’t always get it right, given how big and how messy the supply chains are. Tony’s are as honest as they can be about that. Businesses that can resonate with consumers’ desires to do the right thing are going to win out.
We know a doughnut business called Urban Legend, which is science-driven and creating a low calorie and healthy option. The dichotomy towards trying to do good and trying to balance your wallet is obviously a very acute need at the moment.
What are you looking at next in terms of interesting ideas, trends and innovations?
So within food and bev it’s still innovation, through health and wellness primarily, with sustainability following. These have been the biggest trends in consumer for pretty much for my whole career, although they have really accelerated in the last three or four years.
I’d also call out disruptors of traditional categories that might promote health and wellness or sustainability through different formats or channels. I think within food and beverage there’s a lot of interesting stuff happening (particularly in “VMS” or supplements), but some companies get to a certain scale or size, and it seems like from the profit perspective, things can’t quite kick on for whatever reason.
Mochi and Little Moons is one example where something was big in the US, and it grew materially in the UK later on. I think CBD will be quite interesting from a regulatory standpoint, here [in the UK] it hasn’t quite reached the same height as in the US. Cold brew coffee is really fascinating: all my friends in the US are drinking cold brew rather than hot coffee, whereas culturally I think the Brits just want a hot brew, for whatever reason.
The businesses that are capturing data and digital best are also really able to capture that key change in consumer behaviour, not so much on ingredient innovation, but just behavioural innovation. Within food and bev it’s those that can capture eating or drinking occasions in a way that correlates with those behaviours, and do so profitably and without material cash burn in the build-up phase.
The low and no-alcohol trend is interesting in that respect and there are a lot of very interesting brands doing exciting things in that category. I’m watching with intrigue what the bigger brewers are doing. Heineken is basically only advertising its 0’0 option now. I would hope that independent brands like Lucky Saint don’t get crowded out and can retain their brand message and autonomy and stand up to those to the big players long-term, but the marketing firepower behind ‘Big Brewing’ is significant.