Latina Brands: Elaine Underwood
Latina Brands is a small player in the ultra competitive UK food market. Former Sharwoods CEO and founder Elaine Underwood explains why she has the right ingredients for success.
The Duke of Northumberland’s estate just outside Guildford in Surrey is not the most likely place to find an Ecuadorian chef cooking up a South American feast. But the old Bothy, a workers’ lodge on a hill in Albury Park, is where South American foods company Latina Brands has made its home.
CEO Elaine Underwood started the company in 2001 to bring authentic South American food to the UK market. Not of the hackneyed Tex-Mex variety but instead authentic Brazilian, Chilean and Argentinean fare. Just over a year after starting out the company has its goods on the shelves of every Waitrose store, 270 branches of Sainsbury’s, 250 Safeway stores and in selected Asda and Morrison’s. This is why the firm, which was started with Underwood’s own money and some cash from venture capital outfit Springboard, will break even by the end of November.
But Underwood’s ambitions go beyond that. She wants to be a serious player in the ethnic foods market which in 2001 grew by 13% in value to 908m of which cooking sauces represented £200m. The next target is £10m turnover within two of years: “South American foods are never going to be the size of the Indian food market in the UK because we haven’t got the immigrant population, but I don’t see any reason why a £10m-£20m business isn’t achievable.”
When Underwood says this, you don’t doubt it. Her background is the perfect pedigree for a successful ethnic food business. She has more than 20 years experience in the food industry working for the Rank Hovis McDougall (RHM) food group in a variety of marketing and commercial roles, including five years as managing director of Sharwoods, where she grew sales from £34m to £60m.
Underwood started becoming interested in the cuisine and culture of South America at about the same time as she was starting to get itchy feet at RHM. She knew British interest in travelling to Latin America was on the up, and was also interested in wheat-free foods as her daughter had just been diagnosed as coeliac: Latin American food is based on maize and rice rather than wheat.
Salsa clubs were springing up in every bar, and Latin stars like Ricky Martin, Shakira and Jennifer Lopez were starting to have a serious influence on the entertainment industry, but there was still no real knowledge of real South American cooking in the UK. When Underwood made the decision to leave corporate life behind her, she started to run research groups in the evenings on whether consumers were open to the idea of new ethnic foods. She discovered a high level of interest in Latin American food in principle, a familiarity with key ingredients such as chilli, corn, lime, chocolate and coffee, but also a need for consumers to be educated. By summer 2000, Underwood had made the decision to take her interest in South American food further. She left RHM and travelled extensively throughout the continent, attending food shows, getting a feel for the cuisines of individual countries, and looking for suppliers. She also brought on board a young chef from Ecuador, Dolores, who was cooking for private functions in London.
Underwood was also joined by former Sharwoods finance director Gareth Harris, and Elizabeth Harper, who has more than 15 years experience in ethnic foods. The foursome is the same team which today occupies the re-fitted Bothy, complete with new development kitchen, at Latina’s HQ.
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Exporting to mainland Europe is firmly on the agenda but only when the company starts to achieve positive margins. It has already had a ‘trial run’ with an unsolicited request for products for the Middle East, although Holland, France and Scandinavia, all of which have a solid market for ethnic and spicy foods, are the more likely long-term targets.
First on the agenda, however, is establishing a serious foothold in Latina’s home market. “When we get to £10m we will be a player, but at the moment we are concentrating on our new product programme, and the education and marketing process.”
Latina is investing in outsourced PR, attending community and consumer food shows with samples, and organising editorial and advertising in glossy food magazines to build the brand and spread the message. When Asda starting stocking its products in store, Latina even hired the UK’s champion salsa dancers for its in-store launch event.
While she has a sharp eye for marketing and communications, Underwood isn’t ruling out investing in manufacturing at some point in the future: “If one of our products is bigger than the others and becomes a sizeable product category then it would be perfectly sensible to look at investing in manufacturing.” Latina has great plans, but Underwood acknowledges there are obstacles along the way that will have to be overcome, the biggest and most pressing being the need to “find ways of educating consumers as effectively as possible” through a variety of channels so they know what Latin American food is all about.
The second obstacle to growth is the broader economic picture and the current retail climate. “The pace of change has slowed in the retail trade. The big players are focused on price wars but we have to keep them focused on innovation in the market. The challenge is to get them to speed up the rate of change in line with consumers,” says Underwood. She cites Tesco as an example: Latina products are not yet in Tesco stores as its process for taking on new products has slowed down, but Tesco’s customer magazine has already made a number of requests to feature Latina.
What is baffling is how the company has managed to get into the other leading retailers and be as serious about becoming so big when it only directly employs four people. “Like any other start-up, you have to be prepared to do a lot of different jobs compared to corporate life,” says Underwood. “That’s part of the fun of it, anyway, and you don’t get a strong business without drive and enthusiasm.”
Whatever challenges lie ahead for Latina’s team, Underwood reckons the hard work has been worth it, especially as she had become so disillusioned with corporate life: “You do get to the point even when you’re running even a good company when you wonder if the values of the company are still the same a yours. Of course profits are hugely important but business is about more than that. You have to be very careful that you don’t diminish the value of a business by taking the short-term, unsustainable route to profit.”
From the beginning Underwood anticipated Latina would be a product development, marketing and sales operation that would bring quality products to market, but would not invest in manufacturing itself. The existing two product ranges are made by two different producers – found through contacts from their RHM days – and the three new ranges under development this year will be manufactured by a further three companies. Latina works closely with manufacturers on production, but is holding on firmly to its creative property, as it develops and owns all the recipes.
While Dolores was working on recipe development, Underwood and Harris started fundraising in March 2001, armed with their business model. As well as investing heavily in the company themselves, they managed to secure enough private funding from associates they knew in the food industry to get the company off the ground. They then had over a dozen meetings with management backers Springboard before finally hammering out a deal in September 2001.
The VC has invested ‘a modest amount’ in a share of the company’s equity, and Latina has access to a convertible loan that converts into further equity. Underwood holds 60% of the business and says Springboard has brought more than financial support to the business: “I had all the usual conceptions about what VCs were like, but Springboard has a real network of management start-ups and a longer-term view of the business. They take an interest but are not looking for immediate returns from a business like ours where the process is slow but in the end the gain could be substantial,” she says.
Although at this stage Latina is a niche range of products, the supermarkets were interested from the outset: “They make decisions based on many things, but essentially they taste the product and behave like consumers and imagine the consumer reaction. We couldn’t have approached them without feeling confident about our products and proposition.”
Apart from the taste and novelty of the products, the healthy, low-fat, gluten-free aspect of the food range was in Latina’s favour, as food retailers now have to be extremely clued-up on health issues.
Underwood says the company is not yet big enough to warrant bullying on price from the supermarket buyers: “As a niche player we’re not in the frame for the heavyweight muscle – there’s no point in the multiples getting heavy handed because we’re just starting out. Typically the biggest corporates are put under the most severe financial pressure, but retailers also want quality products in store and they will cultivate us and allow us to grow. We have spent more on trading support than was in our original business plan, though.”
Despite this, the price of the Latina range is an issue. Even though the products are being produced and positioned as a premium brand, consumers still demand value: “The price must reflect the quality of the product but you still can’t be too wide out from the value brands.”
And brand is the key for the companies future beyond sauces. “We’ve never seen Latina as a one-channel company just involved in grocery. One of the intentions of the business is to expand into the food service sector, as many of our products are suitable for catering, staff canteens, themed food events, and pub and health club menus,” says Underwood.
At a glance
Activity: FoodFounded: 2001Employees: 4Money raised: Personal investment and VC funding from SpringboardTurnover: UndisclosedLocation: Guildford, Surrey
If one of our products is bigger than the others and becomes a sizeable product category then it would be perfectly sensible to look at investing in manufacturing