Ella’s Kitchen: Paul Lindley
The founder of Ella's Kitchen on the rapid rise of his healthy children's brand – and how he's keeping up with it
Ella's Kitchen is now one of the 10 fastest growing private companies in the UK. Founder Paul Lindley tells Growing Business why innovation and a relentless focus on the consumer are driving this growth – and how he's keeping up with it
Five-year-old Ella's Kitchen is going through a serious growth spurt. After steadily growing its market share – and shelf space – since its 2005 launch, growth in the last three years has been positively breakneck (an average of 150% a year), earning the firm a top-10 spot in the Sunday Times Fast Track 100 last year. Organic, natural food no longer has an obvious USP, but through a positioning and branding masterstroke, Ella's Kitchen has not only found itself a comfortable niche, it has created a whole new category for premium baby foods, says founder Paul Lindley. When this magazine tipped the fledgling firm as a One to Watch in 2006, it was a one-man-band, projecting a turnover of £800,000. Between July 2009 and June 2010, consumers spent around £30m at store check-outs on its food and drink products for babies and children. The business – which moved out of Lindley's spare room around a year ago – will more than double its previous year's £8m turnover this year. Since moving to its Henley HQ, staff numbers have shot up from three to 26. Keeping pace with this hasn't been easy, and Lindley has had to put new structures in quickly. Non-execs and senior managers have been appointed, while IT, phone and HR systems are “bigger issues than I ever imagined in terms of getting them right”, he says. Here he tells GB how the UK's fastest growing baby food brand grew up.
Unusually, Lindley had the idea for the Ella's Kitchen brand (named after his daughter Ella) before the actual products. His realisation that children's food brands often targeted the parents, while ignoring the kids themselves, and the impact on children's health that a well-targeted, healthy brand that appealed to them could have, was enough to tempt him away from a 10-year career at children's TV channel Nickelodeon, where the chartered accountant had worked his way up from financial controller to deputy managing director. Along with heightening his awareness of issues such as childhood obesity (which affects a staggering 15% of UK children, Lindley says) his experience at Nickelodeon helped him to understand how children think and relate to each other, their parents and brands – and, crucially, that they start to express their choices in non-verbal ways from a very young age. “All of our competitors really concentrate on mum,” he says. “I know from all of my experience and from being a very active father that children are influencers. They control around £2bn worth of spend in the UK, which includes things like holidays, cars, and houses, as well as the stuff they consume themselves.” With this in mind, Lindley set out to create products that spoke to two audiences – parents and children – on different levels. Ella's Kitchen was born out of the idea that food is a multi-sensory experience: children are drawn by the products' taste, colours, textures and names, while parents are engaged by the message that they are organic, natural, convenient and a substitute for home cooking. Remortgaging his house, Lindley gave himself two years to get to market, waiting until he was sure he had sufficient differentiation in his products and marketing strategy before approaching the supermarkets. His first two offerings – ‘The Red One' and ‘The Yellow One' – were ‘smoothie fruits', made with nothing but pure fruit and sold as snacks rather than juices, devised with friends and family (and their children) around the Lindleys' kitchen table.
Leading the pack
Lindley is a strong advocate of the need to innovate to survive as a growing food brand. At Ella's Kitchen, this has been evident through the products themselves (baby recipes include sweet potatoes, pumpkin and blueberries, and orange and pear breadsticks), to the use of squeezy pouches that many competitors have since imitated, right down to the marketing strategy. The company's launch was supported by a six-week campaign on Nickelodeon. Lindley negotiated a risk-free revenue share arrangement, which required no upfront expenditure. “I went to a number of TV channels,” explains Lindley. “And I said: ‘I used to sit on the other side of the desk; I know we've got a childhood health problem, and television is often blamed for that. I also know that at certain times of the year you don't sell all your advertising. You could be seen to be actively helping with better health for kids by showing products with real health benefits in a way that children will really connect with. I haven't got any money, but I hope to make some, and if I make some I'll share some of that with you.” This agreement helped Lindley to secure national distribution with Sainsbury's, on the promise that the products would be supported by a major above-the-line campaign. However, while he admits his inside knowledge helped to make it happen, he would recommend this approach to any entrepreneur, and believes the recession has made it all the more possible to negotiate better deals. “If you know your consumers are going to be watching or reading that media, you can have that discussion with the media owner,” he says. “If they have a channel or a newspaper to fill, and if they haven't got enough clients and ads, they'll either put their own promotions on, or give existing advertisers more airtime, which effectively just dilutes the price for them. We shared very top level sales data with them so that they could see the peaks and troughs around advertising. Nickelodeon saw there was a potential for extra revenue, a case study to use with new customers and the chance to actively participate in the health debate.” Television is still used by Ella's Kitchen, although activity has evolved to sponsorship of Nic Junior's lunchtime programmes, with the goal of increasing awareness of the brand. However, much of the company's marketing efforts focus on in-store promotions and activity. “The retailers respond well to the fact that we've really created a premium category within baby food that is hugely growing and no longer niche,” says Lindley. “Before, it was mass-market – it came in jars, it all looked, tasted and was priced the same. We're attracting mums that have never shopped down the baby aisle before, who see our brand as a substitute to their own cooked food.”
While kids' food is not an area people tend to scrimp on, the recession has still proved a challenge for Lindley – albeit one he has risen to admirably. While growth and product development have continued unabated, he has had to fight for price rises with customers in order to maintain the quality of his products and to protect his margins. He warns any entrepreneur looking for their first listing to avoid being seduced into making too many compromises to secure shelf-space – no matter how tempting this can be. Give away too much too soon and you risk your business' long-term sustainability, and it can be difficult to claw back margin later, he warns. “Don't set up a business where profitability is not sustainable and you're not making the margins you need to make, especially if you're a branded business, because you need to invest in marketing and new products along the way,” he says. “If you give away your margin at an early stage, it's much harder to get it back when you're successful.” While demand has never been an issue, scaling up to meet it has proved more problematic. “The problem of running out of stock against the problem of holding too much stock is where your cash gets tied up. You don't want to lose sales, but you don't want to tie your cash up in stock, and that balance is a real challenge,” he says. “You've got to be on top of your cashflow all the time, and structure your commercial deals so that cashflow works and can help with that growth. A serious challenge came when we had a much wider range of products, many more factories and many more suppliers, and we needed a consolidated distribution centre, and therefore we had to hold stock. It's a person's job now, and introducing KPI incentives and goals in that area is just as important as building sales or keeping gross profits to the right level.” Lindley – who will no doubt mourn the loss of the Regional Development Agencies (RDAs) if the coalition's plans to replace them with ‘enterprise partnerships' come to fruition – says the government's Innovation and Growth team, funded by SEEDA, gave him invaluable advice on creating a team, defining the roles you need, preserving your founding values and coping with rapid growth.
Product development has been frantic, and there are now 46 products, across 11 ranges, which focus on six-month-olds to six-year-olds. Meanwhile, Ella's Kitchen is stocked by all the major supermarkets and many independent retailers. The company's expansion into baby foods has been a particular triumph, and Ella's Kitchen now owns around 10% of commercial baby food sales in the UK. “If we rested on our laurels then we wouldn't be unique in two or three years' time, so we're always looking at other ways to bring innovation to that category. As long as we remain innovative and put the consumer at the heart of what we are, we'll fuel more growth,” says Lindley. At Ella's Kitchen, every new product is developed using the same approach. “We don't start with how much money we can make out of this,” insists Lindley. “Instead, it's about what needs for the consumer we are fulfilling and how would it help their lifestyle? We'll work backwards from that and we'll make the numbers work, but without compromising on our brand values and product quality.” He might have used marketing effectively, but he insists the company's values are no gimmick. A certificate displayed proudly on the firm's website confirms it as one of a handful of companies that has never used certain e-numbers linked to hyperactivity in children. Meanwhile, accolades have come in swathes, including being crowned food and drink brand of the year at the Grocer Gold Awards 2010, (beating Cadbury, Walkers, Hovis and Doritos to the punch) and being voted the most trusted baby food brand by an independent survey of 10,000 mums conducted by Mums' Views. Children – hardly renowned for their tact – are still very much involved in the product development, Lindley says. In fact, he insists that their propensity to tell it like it is makes them ideal focus group material. After all, ingenious marketing might lure a first time buyer, but if the product's not up to scratch they won't be coming back for more. “As consumers, when they try new products, they're so honest. There's no social graces. If they like it, they'll love it, and if they don't they'll tell you in no uncertain terms. Even very small babies will pull a face, or they will reach out for it for a second time if they like it.” Likewise, job titles such as Ella's Dad (managing director), head of making friends (marketing director), head of making deals (sales director) and head of running like clockwork (operations director), might sound contrived, but Lindley says it's all part of a genuinely un-corporate culture that has been a big part of the business' success. Just over a year ago, he brought on non-execs (including the former global marketing director of drinks giant Diageo) who agreed. They took a minority shareholding and put some money in, although Lindley says their real value is in their knowledge and experience, either of small businesses growing very fast or in the sector. “Our un-corporate image is appealing and our non-execs have bought into that,” he says. “We're talking from a really personal level. I'm a dad talking to someone else's dad. It's a point of difference, it's real, and they very much believe the long-term sustainability and value of our business will come naturally out of keeping those values and not looking for short-term returns – although we have been profitable from year one.”