Making fat profits from lean cuisine

Making fat profits from lean cuisine

The man credited with reinventing the cereal Special K is bringing a special something to vegetarian staple Quorn. Andrew Mernin reports

When Quorn’s existence was jeopardised not so long ago, it was the carnivores that marauded to its rescue. The meat-eaters were where the vegetarian staple found unlikely salvation and, thanks to their intervention, it is now in the best shape of its life.

From stagnation five years ago, the £200m-a-year firm has just recorded a record period of global sales and it is on track in the longer term to become a “billion dollar” business. So says the clever executive behind Quorn’s resurgence, Kevin Brennan, who believes carnivores now make up three quarters of Quorn’s global customers.

The ex-Kellogg’s man, who is credited with turning a small cereal brand called Special K into a market leader worth billions of dollars, joined Quorn in 2010. At the time all was not well at the food firm’s HQ in Stokesley, North Yorkshire.

“It had gone into a very sharp decline and had been pigeonholed in the UK as a veggie food,” he says. “It was no longer seen as relevant and there was also a lack of investment in the brand.” Brennan joined Quorn six months before Premier Foods sold it to private equity group Exponent, and his primary remit at the time was to stop the rot.  

“In terms of exports, the best way to describe it would be a very old-fashioned bunch of people working with small distributors selling food that was really made for the UK market, rather than brand building.

“All the things that you would expect to see in a modern factory, like continuous improvement plans and a performance metric culture, were not there. From a people point of view, there was absolutely no ambition. There were some great people in the background, but you couldn’t speak to anyone about what we were going to make next week, never mind next quarter. Culturally it was stuck in the past and in every aspect it needed turning around.”

Despite the bleak picture he paints, he saw more potential in Quorn than he had in the cereal he nurtured into a global super-brand.

“I knew if we could turn Special K into a billion dollar business, we could do it with Quorn,” he says. “There were all these things that we weren’t doing well and I knew if we fixed them it could really fly.

Special K was great at riding a health trend but if you look at its uniqueness, it wasn’t that much healthier than some other products. With Quorn we had something that, compared to meat, is transformational in its health credentials, whether that’s in relation to fat, calories or cholesterol.”

Quorn’s turnaround has been driven by three selling points; it’s healthy, a sustainable source of protein and it’s not meat – but new labelling makes it clear it’s not just for vegetarians. It is made through the fermentation of a type of fungus to create ‘mycoprotein’, which is naturally low in saturated fat and high in fibre. With obesity rates in the UK doubling in the last 20 years and 64% of adults in Britain now classed as overweight or obese, products like Quorn have their place improving the nation’s waistline.

Its sustainable status is also accelerating sales. So damaging is the impact of farming livestock on the environment that green-conscious venture capitalists like Bill Gates and the wealthy co-founders of Twitter have been pouring millions of dollars into meat free alternatives.

An estimated 70% of the world’s agricultural land is used for livestock. But this could increase as the population grows by an expected 30% to over nine billion by 2050. Globally, the UN’s Food and Agriculture Organisation believes livestock is responsible for 14.5% of greenhouse gas emissions. 

Quorn’s popularity – especially in the UK – is also aided by growing mistrust of meat supply chains in the wake of the horsemeat scandal. A YouGov poll last year showed 47% of UK consumers thought there was still a risk of contamination issues in the meat industry. Such trends play into Quorn’s hands.

In 2014 it reported record sales of £150.3m, up 6.7% on 2013 and significantly higher than the £110m in 2011. Last year also saw the brand add 1.86 million new customers. Its latest results show a £14.6m – or 8% – growth in global sales in January alone, representing its strongest month on record.

Sales to the US in the period grew 64% on the previous year. This was at a time when most food manufacturers were enduring flat sales. In the UK, sales rose by 6%, or £10.9m, and growth was registered in all of the 15 countries it supplies directly.

The firm is currently investing £30m in doubling production capacity at its facility in Billingham, Teesside, creating 400 jobs. While the wider market conditions have propelled Quorn to a strong position, fundamental changes to the business have been instrumental in its success.

Perhaps the most important have been efforts to move the perception of Quorn away from its old veggie image. Brennan says: “We started to communicate more about food, so our ads became about making a chilli or a spaghetti bolognese, rather than reeling off hundreds of health benefits, which could make the product sound a bit weird.

“That made it relevant to people and less daunting in terms of changing their habits. That has evolved now with people like Mo Farah in our campaigns as a symbol of a healthy lifestyle.” Improvements were also made to Quorn’s meal product recipes.

“If you’re trying to sell health benefits, the products still have to taste great. The days of taking cod liver oil everyday because it’s good for you are over because it tastes horrible. We are making food better and better because it brings people in and keeps them with us.”

Exports account for 19% of sales, with the company selling into 15 markets directly and seven through third parties. As well as extensive coverage across Europe, territories as far afield as Australia, South Africa, New Zealand and Thailand have opened up. Brennan had to dismantle and rebuild Quorn’s export networks when he joined the firm – and the changes are now bearing fruit.

“We had to go back to basics and study the whole world and so we got as much data as we could on 80 countries.

“We took all our markets, existing and new, and evaluated them in terms of potential and then prioritised where to target.” While some markets have been accessed via partners – such as frozen food giant Findus in the Nordic region – the US needed an office on the ground.

“The US is both the biggest prize and the most challenging market,” says Brennan. “The trade is just so different there than anywhere else. There might 150 different [supermarket] customers there and some of them might only operate in one city. It’s exciting but challenging.”

Regardless of the challenges, Quorn’s US figures are pretty healthy. The group started 2014 with products in 300 Walmart stores and ended the year in 2,300 locations. At the current US growth rate of 25 to 30%, the market is expected to grow to around £30m by 2019.

Further overseas opportunities are also looming, particularly in the Indian market. The company’s research and development arm – in which around £3m per year is invested – has been working on new gluten-free and vegan-friendly products.

“Demand for gluten-free products is a trend throughout the world,” he says. “Similarly the vegan market could be huge. We do use egg, which means currently vegans can’t use our products. This means a whole group of vegetarians that will never eat Quorn.

“It was always quite difficult to deliver the right texture [without egg], but we have just found a way through that and we plan to launch something globally this year.

“There is a particularly big opportunity in India, where a third of the population doesn’t eat eggs for religious reasons.

“We’re not in India currently but we have done a lot of work on the market and this new product could be critical to our success there.”

In the UK Quorn has a 58% share of the meat-free market. Its food service arm, which lists the NHS, JD Wetherspoons and Premier Inn as customers, makes up 10% of trade. At the last official check, it was the 35th biggest selling food brand in the UK making it bigger than Heinz Tomato Ketchup, Doritos and Innocent.

“We should be able to keep growing by 10% every year in the UK for many years to come as there is definitely momentum building. For the first time ever carnivores make up 75% of our customer base and there is a massive shift.

The average vegetarian is eating Quorn in three meals a week so there are many more meal occasions to go after.

“I said when I started here that Quorn could become a billion dollar business and I firmly believe that it can.”