Lessons For Starting Up a Food Business of Scale
“The guy who writes the bank adverts isn’t the same guy who lends the money,” said Michael Carey (pictured), one of Ireland’s leading authorities on starting and scaling food businesses, at the second annual Food & Drink Business Conference & Exhibition held recently at the Aviva Stadium in Dublin. The theme of this year’s event was ‘How to Scale a Food & Drink Business’.
Michael Carey is currently chairman of Bord Bia (Irish Food Board) and co-founder and executive chairman of The Company of Food, a Dublin-based investment and consultancy firm specialising in supporting start-up businesses in the food sector. He is also in the process of establishing East Coast Bakehouse, a new, large scale and innovative biscuits manufacturer offering Irish and British retailers an alternative source for private label and branded products.
Establishing a Business of Scale
Michael Carey identified three ways of establishing a business of scale – 1. start small and grow; 2. acquire and consolidate; and 3. start a business of scale from scratch. Each route has its own particular challenges.
Michael Carey adopted the second route in developing Jacob Fruitfield Food Group, following the management buy-in of Nestle Ireland in 2002 and the subsequent acquisition of the Jacob’s biscuits business in Ireland from Groupe Danone in August 2004. Jacob Fruitfield Food Group commanded strong positions in a range of major sectors of the Irish food market including biscuits, marmalade, chocolate and mint confectionery, and sauces. He and his management team sold the Irish ambient food business for an undisclosed sum in 2011 to Valeo Foods to form a business with combined sales of about Eur300 million.
€15 Million Venture
Michael Carey and his team have now embarked on the third route by launching East Coast Bakehouse. Involving investment of €15 million, East Coast Bakehouse is transforming a recently renovated 50,000 sq ft premises at Drogheda in County Louth, into a state-of-the-art bakery, innovation facility, warehouse and offices. The new venture is scheduled to commence production in early 2016. The fledgling company will launch its own new brand and also manufacture retail private label products, serving both the domestic and export markets.
Funding for the venture is being provided through the sale of a 30% equity stake, by Enterprise Ireland (the new business is expected to create in the region of 100 jobs) and bank finance (Ulster Bank).
“Enterprise Ireland has played a pivotal role,” Michael Carey pointed out. “Their advice is invaluable and far more important than the funding. The project would not have been developed in Ireland without the help of Enterprise Ireland.”
In terms of banking, Michael Carey found that most of the banks approached “showed no appetite for risk.” He also said that the ISIF (Ireland Strategic Investment Fund) will be crucial for funding food businesses in the future.
Six Lessons
Michael Carey concluded by listing six lessons that he and his management team have learnt.
1 All the kettles need to boil at the same time. Co-ordination of all the different elements of the business launch is crucial.
2 The best advisors might not be cheap but they are great value.
3 Team matters. It is a struggle to establish a new business and so it is important to have other members of a like-minded team around you at difficult times and to remain resilient.
4 There is a huge amount of good will toward local start-ups. The market is tough but the venture has had a very positive response from the retail trade.
5 The guy who writes the bank adverts is not the same guy who lends the money.
6 The worst day as an entrepreneur is better than the best day of working for a large company.
