Link to original article: https://www.independent.ie/business/brexit/cost-of-practically-everything-rising-40359452.html
Cost of ‘practically everything’ rising
Inflation, Brexit fallout and changed shopping habits are squeezing margins at East Coast Bakehouse, says managing director Sean Murphy
The combined effects of Brexit and the pandemic are driving up costs and hitting margins, according to the managing director of biscuit maker East Coast Bakehouse, Sean Murphy.
“We have inflation on practically everything we use at the moment, which is obviously squeezing our margins and [we are] having some difficult conversations with customers,” said Mr Murphy.
Located in Drogheda, Co Louth, 30pc of the biscuits and cookies it produces are for its own brand. The remaining 70pc of its produce is sold as private label to grocery retailers.
Its customers include supermarket giants Lidl, SuperValu, and Dunnes Stores.
At the start of the pandemic, the company benefitted as shoppers engaged in panic buying of groceries.
However, by the middle of 2020 “we found it quite difficult to engage buyers and get them to take on new business”, Mr Murphy said.
“Our business relies on growth and therefore the delay of getting that new business made it quite difficult for us in terms of getting growth into the business and getting ourselves to a more financially secure place.”
Towards the end of last year things improved, as businesses and consumers became used to life under Covid restrictions.
“We have seen buyers and other brand owners be a lot more open and engaged as they look to grow their own businesses… across quarter four last year and into this year a lot more new business has come onboard and [there has been] a big step up in terms of discussions with potential customers,” he said.
Meanwhile, Brexit has hit the price competitiveness of Irish producers versus UK rivals and disrupted supply chains.
When the UK voted to leave the European Union in 2016, East Coast Bakehouse’s factory was being commissioned.
“This plant was designed to primarily service [the] UK and Ireland, and of course the pound went from being 75-80 pence to the euro to 90 or 95 or almost parity, so our competitiveness was significantly disrupted.”
Agreement on trade between the UK and the EU was reached at the end of last year.
Since then the pound has started to strengthen against the euro, which has been good for Irish companies that do business in the UK.
Nonetheless, Mr Murphy says the increase in the value of the British pound “needs to go a long way yet”.
In terms of sending produce to the UK, the company was well-prepared and has “not had any significant disruption of goods going into the UK”, according to Mr Murphy, however, he says it is “more challenging”.
A bigger issue has come from getting raw materials into Ireland.
“European suppliers, I don’t think really understood that a landbridge was going to be an issue and they were sending products via the UK still,” Mr Murphy said.
“We had one case where one of our nuts deliveries was tied up in Dublin Port for three weeks because the right documentation wasn’t in place, and that product had come out of Europe. And some of the UK suppliers really didn’t know what documentation was required.”
So far this year, the company has had “a lot more engagement” from retailers around the possibility of East Coast Bakehouse supplying supermarkets with more products.
“We have got a couple of live conversations at the moment, that’s us contract manufacturing their brand. That, I believe, is driven by simplifying supply chains…the likes of Tesco are looking at bringing more of their private label [production] onto the island of Ireland to simplify their supply chains, which is a good opportunity for us,” Mr Murphy said.
Meanwhile, just over a quarter of small and medium businesses (SMEs) in the food sector here say the UK remains their most important market.
Research from Love Irish Food and PwC found almost 70pc of food SMEs say the Republic remains their most important territory for growth.
Of 68 firms surveyed, 24pc said that more than one-fifth of their company’s revenues this year will come from trade with the UK compared to 19pc in 2019.
Sean Murphy says East Coast Bakehouse has “a really positive pipeline”.
“We are in a much better position than we were this time last year. There are two drivers of that, one is we have improved our own capabilities and the second is now the new world is a lot more obvious to people, everyone is starting to refocus on driving growth.”+
Bland food leads to boredom and boredom leads to take-out! That’s the mantra of Cali Cali Foods, which was established in the summer of 2018. Fast forward to the summer of 2021, and Cali Cali’s range of products have made their mark on several FMCG categories. Maev Martin talks to founders TOM GANNON and NIALL McGRATH about the next step on their mission to make healthy eating tasty, while positively impacting on society and the environment
During a holiday in California, fit food entrepreneurs Niall and Tom met up with LA resident, fellow Dubliner and celebrity chef Donal Skehan. Over Korean BBQ tacos, the trio hatched a plan to take the melting pot of Californian street food flavours and the latest Californian healthy eating trends to Europe with a new brand called ‘Cali Cali’. “Flavour, quality and healthy benefits were of the utmost importance from the beginning,” says Tom. “Equally importantly, we wanted to develop a brand that gave consumers a beacon of (orange!) light in the confusing category of
healthy food and snacking. We wanted to bring the two worlds of healthy living and eating together with the flavours of foods of the world. “This mindset led us to embark on a number of adventures that took us from northern San Francisco to the tip of Baja California in Mexico as we sought out the authentic new and old flavours of California. Whether it was small batch beef jerky in Monterrey or family recipes of hot sauce in the street markets of Cabo, it was on these trips that we decided to launch not just one style or category of product, but a range of products across several categories, while staying true to our healthy eating and living mission.”
With that in mind, Cali Cali immediately launched into two completely different categories – snacks and condiments/sauces. “This was a deliberate move as we didn’t want to get pigeonholed into one product category,” says Niall. “We followed this up with four new products in three new categories. In May 2020, we launched Cali Cali Pop-A-Grains, Cali Cali Superbars, Cali Cali Supersnacks and Cali Cali Seasonings. All these products are delivering flavours that we are extremely proud of. In fact, we are so proud of them that we are entering these four products for the Great Taste Awards. They have fantastic, better-for-you credentials, and their launch has been executed in a manner that is relevant to todays’ discerning consumers.” Real food The concept of providing great tasting Californiastyle street food flavours combined with California-style healthy benefits, while using real food ingredients, is the common theme running through Cali Cali’s pop-a-grains, sauces, protein bars, crisps, seasonings and snacks. “For example, our new Cali Cali Superbars are great tasting, with flavours such as Chocolate and Himalayan Sea-salt, but they are also high in Vitamin D, high in protein, gluten-free, and
vegan-friendly,” says Niall. “And they have been created without sugar alcohols, which you find in most protein bars. Finally, we use real Belgian chocolate, which is sweetened with chicory root.” The term ‘real food’ crops up quite a bit on the Cali Cali website, so how do Tom and Niall define ‘real food’? “We spent a lot of time working in the US over the past few years and we looked at several trends in the market and one of the most significant wholesale food distributors, KeHE, as well as Whole Foods Market, were very particular that they would not sell products that contained sugar alcohols such as maltitol and erythritol,” says Niall. “These are sugar alcohols that are used by most protein bars to sweeten their chocolate. The market had moved on and manufacturers in the US had stopped selling these products. They were looking for products that tasted great but were using ‘real foods’ as they put it, hence the emphasis on ‘real foods’ on our website and in all of our product information.” No hidden nasties Consumers are also looking for products that display their ingredients in a clear and easy to understand format. “They want to read the rear of the pack and be able to understand the ingredients without having a science degree,” says Niall. “What we are looking to do with Cali Cali is to get ahead of this trend and bring this to European buyers and consumers, so you find that with all our product offerings, the shopper simply reads the information on the packs and they won’t find any nasty stuff. For example, in our Supersnacks, they will simply find chickpeas and fava beans.” Another term that features regularly on both the Cali Cali website, and in conversation with Tom and Niall, is ‘bad stuff’. “We don’t use bad stuff in any of our product ranges, and by that we mean artificial flavours, preservatives, or MSG,” says Niall. “However, we still manage to deliver outstanding taste profiles in our allnatural seasonings.” Their range of wet sauces is a perfect example of a product that is manufactured from purely wholesome, natural ingredients. Fellow Love Irish Food member company, Follain in Cork manufactures the five sauces in their wet range and is also manufacturing Cali Cali’s new Gold Collection of premium ketchups, which uses premium ingredients such as real Kimchi. The Gold Collection will be launching in the market this month. Cali Cali’s ‘better-for-you’ credentials are further highlighted via partnerships with other reputable manufacturers and retailers. They teamed up with Manor Farm, yet another Love Irish Food Company, to create a chicken Meet the MakersFresh wing meal kit complete with Cali Cali sauces, and featuring blue cheese, celery sticks and recipes, which they sold through Fresh the Good Food Market. Cali Cali is also working with Kerrigan’s Butchers on a summer BBQ meal kit that was launched over the June Bank Holiday weekend and will be available for delivery nationwide. Start-up challenges Niall and Tom founded the Cali Cali with chef Donal Skehan, and they are keen to stress the importance of his input to the success of the business. “Donal was instrumental in the development of the authentic street food flavours of the sauces and crisp ranges,” says Tom. “He was living in LA at the time, so having him on the ground was a great advantage because he had his finger on the pulse and was up to speed with all of the latest trends and flavours.” According to Tom, one of the most important aspects of launching a new brand is being clear about the brand identity. “Being clear from the outset about our brand identity and what it stood for really helped us to keep on track and reduce wheelspin,” he says. “We were convinced that there was a gap in the market for an umbrella brand that consumers could always trust to give them great tasting and healthy food, as well as snack products that were healthy but done in a cool and relevant way. We went so far as to create a ‘brand world,’ which was based in an LA street food market, and we tested every decision, from product to packaging, against the question ‘would this work in an LA street food market?’ That became the benchmark for any decisions that we made regarding the development of our product ranges.” Cali Cali’s sauces are currently their bestselling ranges. “They are neck and neck on the sales front at the moment, but we expect that our sales mix will change following the launch of our new ranges over the past few months,” says Tom. Packing and distribution Cali Cali has opted for co-packing (contract packaging) over own production for its product lines. “This approach affords us the flexibility to scale up and down, as well as to switch into better performing ranges,” says Niall. “It also allows us to offer more ranges without the constraint of needing to own the lines. In addition, machinery and factories are expensive in terms of upfront costs. We are looking to increase the product range that we produce here in Ireland, and we anticipate further production in Ireland for the range in 2021.” He also points out that contract packers can be an important support when it comes to product development. “We like to develop our recipes in-house and to bring the products to the contract packers, as this keeps our ideas fresh and innovative, hopefully at the cutting edge,” says Niall. “But we also like to work with the teams in the contract manufacturing companies to optimise the recipes, so their expertise is vital in the production process.” One of the biggest challenges facing any start-up business is getting its distribution strategy right because that is what creates sales for the brand. Both Niall and Tom have exceptional business backgrounds in distribution. Having worked in Richmond Marketing for 20 years as marketing director (Niall) and head of sales (Tom) they were responsible for the launch of major FMCG success stories such as Red Bull, Hendricks Gin, Peroni and Vit-Hit. And, of course, they were the duo that co-founded the Fulfil brand. “We understand how getting this right is key,” says Niall. “You can have the best plans and the best brand, but if you have no sales flowing, the wheels will come off the wagon very quickly. For that reason, we initially partnered with leading FMCG sales, marketing and distribution company Tennant and Ruttle to get this right. They gave us the platform to grow and pushed us on to the point where we were able to take our products to international markets, and that is what we are now doing with Boyne Valley.” Future vision In October 2020, Cali Cali announced that it had entered a strategic partnership with the Boyne Valley Group. “Boyne Valley have taken a majority stake in our operation, but the Cali Cali business is a separate entity and will continue to be led and managed by both myself and Niall,” says Tom. “However, our strategic partnership with Boyne Valley Group allows us to leverage the fantastic resources of Boyne Valley in Ireland and in export markets. Over the next five years, we would like to see the brand on sale in a mixture of approximately four strategic and 10 trading markets and, as a result, delivering significant turnover. Our vision for Cali Cali is to be the go-to brand for tasty, healthy, easy, and ethical eating/snacking, delivering the flavours of the world to a growing customer base in Ireland and in international markets.”
How did Cali Cali first engage with Love Irish Food? We came across Love Irish Food at Bloom many years ago. When we were setting up Cali Cali Foods, we engaged with them early on to bring them on the journey of what we were trying to achieve and how we were trying to keep as much of the manufacturing on the island of Ireland. CEO Kieran Rumley and marketing manager Aidan Long were very supportive from day one. How important has Love Irish Food been to the development of your business? The organisation has played a key role in the development of the Cali Cali brand. We took a stand in the Love Irish Food tent at Bloom in May 2019. It turned into a massive sampling and consumer feedback session, with tens of thousands of consumers getting the opportunity to sample our products. The feedback we got from consumers and buyers who attended led us to adapt some of our flavours and packaging. That meant that, when we launched in Q4 of 2019, we had a more tailored offering for consumers and buyers. Would you recommend membership of Love Irish Food to local producers? Absolutely – not only have they helped in the initial engagement piece around Bloom, but also in terms of developing our profile with advertising and promotional activity. Love Irish Food membership also gives you access to like-minded businesses that you can network with.+