Quorn set to be $1bn brand
Plans for world domination are afoot on one of Teesside’s many old industrial estates. The plot is very much related to the region’s famous chemical industry, but not in a way you might at first think.
Quorn, a vegetarian food brand, is an unsung business hero in the area. The brand was established on Teesside as a result of a joint venture between the former chemical company Imperial Chemical Industries, which once had a strong presence on Teesside, and Marlow Foods in 1985.
The patented mycoprotein that is the basis of all Quorn foods is a fungus known as Fusarium venenatum and is produced on an industrial scale at the company’s Billingham-based production facility.
The man behind Quorn’s plans to take over the world is chief executive Kevin Brennan, who works at the company’s Stokesley-based international headquarters, which is a 15 minute drive away from the Billingham site.
A lot Like Special K (Return to top)
Brennan took over at Quorn in 2010, when he was hired by its previous owner Premier Foods (which bought Marlow Foods and Quorn for £172M in 2005) to turn the business round to be sold. The sale of Quorn was intended to hoist Premier out of the financial trouble it was in at the time, he says.
Since heading the brand, Brennan has had his sights set on making Quorn available in every country. His ambition is driven by his past experiences at the cereal giant Kellogg, where he helped to turn the company’s Special K brand into a $1bn (£640M) turnover global business as its marketing director. “But, I hit a point at Kellogg where all of the more interesting jobs were based in the US and, from a family point of view, that didn’t work,” he explains. “So I looked to move on and got the opportunity to run Quorn [as general manager] under Premier Foods.”
Now, as chief executive, it’s Brennan’s ambition to turn Quorn into a business that’s just as successful as he helped to make Kellogg’s Special K. And the deep pockets of Quorn’s new owners – Exponent Private Equity and Intermediate Capital Group – which bought the brand from Premier for £205M in 2011, are helping Brennan do just that.
“At the time I joined, Quorn reminded me a lot of Special K because it had the potential to be great, but there was no investment from Premier,” he explains. As well as under-investment, Brennan points out four key areas Premier had failed in allowing Quorn to succeed. First, Premier had let sales of Quorn in the UK slide, which was mostly as a result of under-investment.
Exports (Return to top)
Second, Quorn had turned into an export business and was manufacturing products for the UK market, but selling them directly overseas. “The food didn’t appeal to the countries it was being exported to because it was made for the UK,” Brennan points out. “Take a lasagne: in the US it has to have basil in it and in Belgium it has to have a frill – these markets aren’t going to accept a UK lasagne that has neither because it’s just not a lasagne to them.”
The third problem with Premier’s business model for Quorn was again down to investment, but in the supply chain this time, he adds. And lastly, the business had too few high-quality, ambitious people with an idea of how to take things forward, says Brennan: “We had some great people, but some had more ambitious and exciting plans for the business than others.
“Quorn does have a lot of potential and we’re starting to bring that out and they [Exponent Private Equity and Intermediate Capital Group] were willing to invest to do that,” he adds.
“But, in fairness, when Premier had money, it invested and only stopped when it got into trouble in 2011 – yet, they arguably sold their strongest brand.”
Rebuilding the company (Return to top)
Since Quorn’s new owners took over, Brennan has been busy. He has “dismantled and rebuilt” Quorn’s international business, introduced the brand to new countries and convinced more meat eaters than vegetarians to consume Quorn products, he says.
“It’s taken a lot of time to strip the international business and rebuild it again,” he explains. “We’ve got it right now and we're creating products specific to the markets we're in, which is key.”
Brennan re-launched the brand in Australia last year. In Sweden he struck a deal with the ready meal giant Findus to return that business to double-digit growth after “years of stagnation”. And last year, he opened a new office in the US to further the business there. “We set our office up in the US in January 2014 and have made incredible inroads in gaining new customers.”
“We’ve just gone national with Walmart in the US – we’ve been with them for two years, but we’re quadrupling our distribution, which is a major boost.” Now the new deal with Walmart has been finalised, Brennan expects business in the US to grow by 25–30% a year.
Currently Quorn is sold in 15 markets. The company turned over £150M last year and is set to increase that by a further £50M this year, he says. “We’re not planning to slow down either. If you look at our growth trends, it's accelerating rapidly and we're confident that we should see double-digit growth within the next two or three years, which is positive.”
Growth (Return to top)
To ensure that double-digit growth, Brennan will roll the business out across Europe, starting with Germany, where there was little or no market for the meat-free category five years ago. The meat-free market in Germany is now worth £90M and is set to be the world’s third largest market by 2020, he claims.
“Italy is also coming on-board – it is a £30M market, which is set to grow by 50% a year and be worth £100M within five-years.”
Progress has also been made in South Africa, where the brand has had a presence for more than a year, but, like in Australia, had a major re-launch late last year. “I would say that there are 25 other markets that we could enter, such as India and Malaysia,” Brennan suggests.
However, of those 25 possible markets, only a handful would work logistically at the moment, he admits. “India has huge potential – 30% of the population consumes a vegetarian diet – but at the moment we would be lucky if we could find 800 stores in the country with one reliable freezer to store the product.”
Although plans to sell Quorn in the likes of India aren’t going to go ahead any time soon, Brennan will still need to boost Quorn’s mycoprotein capacity to keep up with increased demand from the other expanding markets.
Mycoprotein output is currently at 24,000t a year, according to Brennan, but that will increase by 50% when Quorn’s new £30M third fermenter is operational at Billingham –where all mycoprotein is manufactured – later this year. “The new fermenter just shows how much the new owners are willing to invest to make sure the business is a success,” he adds. “I’ve never spent £30M on a piece of kit in my career!”
Investment (Return to top)
Investment has also reached Quorn’s Stokesley-based manufacturing and packing site, which recently had a new £1M flow-freeze facility installed. Millions have been spent on automating the packing lines, as well as its mixing and retorting facilities.
Large investment has also been made at the company’s third site in Methwold, Norfolk, where products are pasteurised to extend their shelf-life, although Brennan would not specify how much.
“Constant reinvestment is being carried out to make the factories more efficient as we grow,” he says.
In total, the various investments will create more than 400 direct and indirect jobs in the coming months at Quorn, which already directly employs more than 700 people across the world.
“What’s nice is that, because we’re a growing business, we’ve been able to automate, so, in certain areas, we do need fewer people. But we are still employing more people than we were five years ago because we need more people in other areas,” Brennan says.
“To run a third fermenter, we need more people, but we just don't need as many people on the packing lines because we have automated them now.”
Meanwhile, as far as Brennan’s plans for world domination go, he is still a long way off, he admits. He is years away from replicating the success of Special K and turning Quorn into a $1bn (£640M) business.
“It might take us 10 years, it might take us 15 or 20, but in the end I will see Quorn sold everywhere and we will have a $1bn global business,” Brennan says.
Meanwhile, listen to our podcast in which Innova Market Insight’s director of innovation explains why food firms will be more interested in alternative proteins in the future.
Quorn sites in the UK
Billingham:
More than 24,000t of mycoprotein is produced at the Billingham site, where 100 staff are employed.
Stokesley:
Final product manufacturing takes place at Stokesley, which employs 500 staff.
Methwold:
Pasteurisation is used to extend product shelf-life at Methwold, where 50 staff work.
