Works like magic

Unless you are prepared to auction off your limbs and possibly your soul, securing a listing at one of the UK's largest supermarkets can be tough for a small business, which makes Soy Magic's achievement all the more impressive.

The Israeli start-up, which arrived in Grimsby in 2006 with plans to build a £7M new factory, finally secured listings at selected Tesco and Somerfield stores last November for light, original and chocolate flavoured chilled soya drinks. It is now developing juice drinks, smoothies and yoghurts.

But it hasn't all been plain sailing, stresses Alon Salamon, a civil engineer and project manager who was originally brought in to commission a UK factory for the firm - and now sits in the md's chair.

"We're at the stage where I would say I'm confident, but not comfortable. There are so many unknowns when it comes to securing listings. You just have to try as hard as you possibly can and be patient. My motto is: when they throw you out of the door, climb back in through the window."

While the UK market for soya products is dominated by major brands such as Alpro Soya and So Good, the supermarkets recognised there was room in the market for another player, according to Salamon. "Although soya products had been growing strongly for several years, things had started to stagnate a bit when we arrived and I think the supermarkets saw that we could bring new customers into the category. We are not positioning Soy Magic as another milk replacement. It tastes great and it's good for you and it's fun. The packaging reflects that. Some of the other brands look a bit medicinal."

But these are challenging times in which to launch new products, he accepts.

According to TNS, while the UK soy drinks market was worth a respectable £69.5M at retail sales value (year to end of February 2009), sales growth was down more than 6%, while sales over the three months to February slumped almost 12%. Nielsen data is only slightly more encouraging, valuing the market at £72.5M with sales in the year to February down 0.9%.

So why take the risk of building a dedicated plant and adding new capacity to a market that appears to have plateaued already and is now going backwards?

Several reasons, says Salamon, who built his first soy processing facility in Israel in 2000 before it was sold on to dairy giant Tnuva in late 2002.

"We could have approached a third party to make Soy Magic branded products for us and just focused on sales and marketing, but that's not what we're about. There was also the fact that we have a proprietary process for extracting the milk and we wanted to build a factory around our core process."

On a more practical level, he points out, only a handful of UK plants manufacture soy products, and they all use different processes, so setting up a deal might have been pretty challenging anyway.

Back in 2006, Soy Magic's site [at Europarc in Grimsby] was just a field, says Salamon. "I set up two groups of engineers: one relating to infrastructure and utilities, the other relating to the production process - people with expertise in liquids, specifically dairy."

From Israel to Grimsby​

Doing things in-house was crucial, says Salamon. "I like buying components, so I can cut overheads and get exactly what I want and have complete ownership - I don't want to have to go back to the supplier if something goes wrong. The know-how has to be in-house. Once we'd got everything we wanted we constructed the plant in Israel and then shipped it here and rebuilt it like a Lego kit."

While this might sound bizarre, it made sense at the time, he says: "In the UK it would have been harder because of the limited network of contacts I had then. Finally, there was also a big difference in the exchange rate between dollars, sterling and the [Israeli] shekl so it made financial sense as well."

In retrospect, this control freakery may not have been totally necessary, he admits. "I was heavily involved in every aspect of business, which I think is critical on the plant side, but when it comes to choosing the carpet in the offices, that's not a strategic issue."

Getting local support has also been critical, he says. Indeed, one of the investors is Yorkshire Fund Managers, a local venture capital company. However, practical support from UK Trade & Investment, Yorkshire Forward and the local council has proved equally important. "You need help, especially at the beginning. It's about everything from how to buy a cell phone to how to make contact with other local businesses."

Indeed, plugging into the network of food companies in the region will be critical if Soy Magic is to find novel applications for okara, the nutrient-rich by-product of the soya milk production process. While despatching it to the animal feed market is better than sending it to landfill, Salamon is now exploring more lucrative opportunities. "We're talking about a low-fat food grade material that has a high percentage of protein, a lot of fibre and other nutrients. You could use it in everything from cereals and cakes to bread, meat substitutes, marzipan, hamburgers, sausages, houmous and breadcrumbs and batters in processed fish products. The problem is, no one here seems to have any idea what to do with it, so we've got to educate the market."

GM-free beans​

While some competitors use de-hulled beans or powdered soy protein isolate as their raw material, Soy Magic starts with the whole (Canadian, non-genetically modified (GM)) bean, including the fibrous husk, he explains.

Upon arrival in Grimsby, the beans are soaked, crushed and boiled (to deactivate toxins that inhibit the activity of enzymes responsible for breaking down protein).

Then the 'milk' is extracted by separating the liquid ('milk') from the solids (okara) using centrifuges. Purified water is added to the base milk (which has 5-6% protein) to get its protein content down to 2-3%. Then other ingredients such as sugar, vitamins, calcium and stabilisers are added to the mix before the milk is pasteurised, homogenised and, finally, poured into cartons.

The final product has 1.6% fat (slightly less than semi-skimmed cow's milk) whereas the light version has less than 1%.

While some firms have struggled to mask the beany flavour of soy-based drinks, Soy Magic has developed a means of eliminating this taste during the production process, rather than trying to mask it in the end product with sweeteners and flavourings, he claims, although he is keeping tight lipped about how this is achieved. Likewise, Soy Magic does not curdle in hot drinks, which addresses the concerns of many customers who want to add it to tea or coffee, he says.

Expanding opportunities​

The firm currently employs around 20 staff, but that number could at least double if it increases distribution of its soy drinks or diversifies into juice-based soya drinks and soya desserts, he predicts. "We're currently using less than 50% of the space, so we have a lot of room in which to expand."

While Unilever's Adez soy and juice drink has been withdrawn from the UK after disappointing sales, there is definitely mileage in exploring soy and juice again, says Salamon. "We're talking about a total health solution containing fruit, vitamins, calcium and soy. The key is getting the market positioning right."

Longer-term, he hopes to build up a chilled export business as well as supplying the local market. "That's another reason we chose Grimsby: it has great transport links."

Setting up any new business is risky, he accepts: "But the shareholders believe in the product and they stand behind it. They also understand that it takes time to build a brand. Put it this way, we're still not at the point where I can take a holiday. You can't be disconnected from a business at this stage of its development. My wife would say this business is my second wife!"