Thank you for sparing the time to meet BQ Baltic, Lotte. What’s keeping you busy at the moment?
We’ve just launched a new skincare selling in the Drogas drugstore chain in Latvia. We did this because organic products, including organic food, are growing consistently, including those in lower price positions. We thought it was the right time to offer organic skincare in this lower price sector, and Mossa products cost 30-40% less than Mádara’s, which is classed in the “semi-selective” or mid-priced range.
The Mossa range has only been on the market since mid-April and we are satisfied with the first results. We plan to take Mossa to other markets as well after a short time. New Mossa products are in the pipeline. We’ll see how it goes and then think of taking it abroad.
How do you go about new product development, and what is your attitude
There are 45 products in the Mádara range and we’re working on expanding that. Since 2006 when we launched our first four body lotion products [moisturising, nourishing, firming and relaxing] we have exploited the strong properties of hardy Nordic plants, which are a better source of active and vital ingredients than many southern plants. Our unique advantage in Mádara compared to other organic producers is that we invest a lot in making up for the lack of applicable data about Nordic flora. We have had to find that data ourselves and to innovate with our active ingredients – not just take the usual rose water or lavender or ginko.
Together with two very large Latvian pharmaceutical companies Grindeks and Olainfarm, Mádara founded and fund 30% of the Chemical Industry Competence Centre in Riga that has attracted EU financing for innovative research into new ingredients. Using this organisation we have in the last few years invested over €250,000 into products research, with the aim of creating new technologies to improve EU competitivity.
How did you end up sitting around the table with a group of national leaders from northern Europe last year?
I was invited to the Northern Future Forum by [former Latvian PM] Valdis Dombrovskis to present an example of young women who started companies, but I ended up talking about the economic benefit of employing older people, something I know about from my own entrepreneurial grandmother, who retired from her job selling agricultural clothing when she was 79! I was impressed by the British Prime Minister David Cameron.
His rosy cheeks and radiation of energy reminded me of my husband [Mádara director Uldis Iltners]. Mr Cameron has the same kind of drive, strategic overview and inspiration in
With Latvian “birch juice” have you discovered your magic ingredient?
There are plenty of others we are working on, but this is our most magic! We discovered that birch juice or sap can be very successfully used in anti-ageing applications, and we are researching more that will result in new product ranges, beyond the four that we have at present: anti aging day cream, night cream, eye cream and serum, which contains the highest concentration of birch juice
How complex is it to turn a natural ingredient into a market-ready product?
Four years ago we realised that consumers wanted effective anti-aging products and we knew we had to come up with really innovative formulations. Around 50% of what people are paying for when they buy anti-aging products is water, the inactive, ingredient needed to make an emulsion that penetrates the layer of dead skin to the living epidermis cells. We thought it would be cool to find an ingredient that could perform the function of water, but which would be more active. Birch sap, was the first thing we thought of.
It sounds kind of sticky…
When its fresh from the tree – and it can only be harvested for a few weeks a year – it’s clear like water, it’s not sticky at all. But it’s only clear if it is from the Nordic region where you have these freezing winters where the temperature sinks to about minus 20 or 30 degrees otherwise the sap is milky and poor quality. It wasn’t easy to figure out how to preserve it as it contains so many enzymes and sugars that it ferments really easily, and starts bubbling after a few days.
It took us two years together with the biology faculty of the University of Latvia testing architecture to determine its benefits for skin care applications, conducting cellular trials on the dermis and epidermis cells.
We found it had really great anti-oxidant activity, meaning that if skin cells are put in the environment they become younger and aging markers are reduced. Cellular trials by microbiologists have confirmed that it makes skin cells grow quicker. It’s a fantastic ingredient and makes up 60-80% of our anti-aging formulations.
At the moment we have a day cream, a night cream, an eye cream and the more concentrated serum, and we have some new ones coming as well, launched next year but I can’t say what they are yet.
Are you happy with Mádara’s current growth rate?
We are still a very small company. Our turnover last year was €2.5m, but we are expecting to maintain this 25% annual growth. The first quarter of 2014 has been really good, there’s been big growth. As usual the second quarter is not so good, but maybe we can achieve slightly more than €3m over the year.
We have never borrowed to develop export markets. If we borrow it means there are investors so we [dilute] our shares, and there’s always something to pay back. Money is really important but knowing the right way to spend it in particular markets is much more important. There might be a time when we need a really big market expansion and we might need to either go public but for now we have done it with our own resources.
What is your export strategy?
When we want to grow we really have to focus country by country, we cannot expand everywhere at once. Our experience tells us that if we want to develop a market, we need to be directly involved, and that takes resource. Focusing on a country involves frequent travel there, or perhaps sending people out there. If we don’t have a great local partner we need to hire an employee and have a local representative.
This is something we understood after some time – the need to be present, and to invest in each of the countries, it takes a lot of attention and analysis.
Where are you concentrating your forces at the moment?
We are still very focused on Nordic Europe, we still see at least one more year of work here, and then we will pick our next target. Our main markets are the closest to us. In Finland our brand recognition is perhaps the third highest in the category, surpassing within three years companies that have been in the market for 60 years.
Now the challenge is to become a known brand for all consumers, not just for niche consumers of organic brands. We need to educate regular consumers who aren’t already interested in “natural” brands. Denmark is also a important market and there are many others where we are well-placed: Switzerland, the Netherlands and the UK where we have a bit of an online market. Further afield in Asia, it’s Japan, Hong Kong and South Korea.
Do you have an ultimate goal for the business; are flotation and/or an exit at the back of your mind?
We haven’t yet decided whether we would like to go public or not. We might consider that in two years, no sooner. As for an offer of being bought out, I can’t really answer, it would depend on whether I saw there was no way to go any further with a particular goal. Say for example if I needed help to bring Mádara to New York... But I’m an entrepreneur If I sold it I would be super-bored! Of course I have a nice garden and I could look after my flowers, but not for long. My real goal is for Mádara to be a global niche brand, and we have all the [potential] to become one. We can’t be Estee Lauder, but we can join the other desirable niche brands.
Are there models of global brand building in this sector that you admire? How about Anita Roddick [founder of Bodyshop, the natural cosmetics and skincare chain, now owned by L’Oreal]?
Anita Roddick is not my idol. Maybe I could relate to the beginnings of the company, but it went away from that. My idea is to offer the best quality products in terms of packaging and ingredients. Body Shop products now are not so natural and not such good quality. There are strong social aspects, with fair trade and so on, which is very popular but at some point they made a lot of compromises, which in my eyes downgraded the brand. I am a bit sceptical about companies that are mostly defined by copywriters and brand strategists.
This is why I don’t want to lose control. We are the house of Mádara and we create everything ourselves. Everything comes from our heart, that’s super-important.
Are you joining with other natural Latvian companies and tourism bodies to help market the country’s green and organic brand across the world?
Not really yet, but this is something we could do more of in future. Not only does Latvian science have a lot of special knowledge about the chemistry and pharmacology of local plants and herbs, but the closeness to nature of Latvian people is genuine. If you come to Latvia on 21-22 June, you will see women wearing crowns of flowers, following the tradition that they get energy from these. It’s a tradition that survived partly to help preserve our identity.
How Lotte’s hobby became a passion
Lotte Tisinkopfa-Iltnere, 31, graduated in languages and business from the University Latvia, and studied business and Japanese culture in Kyoto as part of a pioneering international exchange programme. She started Mádara, which now employs 40 people, in 2006 as a development of her “personal hobby” and a quest for organic treatments to counter her own skin allergies. Her blog about her discoveries quickly built up a cult following in the early years of social media; “it was just ladies chatting, and giving feedback”. With her sister, two friends, a shoestring budget, and “soft support” in services like packaging from family members, they launched a skincare product range, based on traceable and sustainable products. An EU fund for women entrepreneurs helped, but as Lotte explains “the time was right, people realised the need to use green products, and four young women starting their own factory was super-appealing to the media, there weren’t any magazines who didn’t write about us!”.
In 2008 they set up their factory, and started exporting, and in 2009 the company opened their first of three branded boutiques in Riga shopping centres.