Brennan was speaking late last week following Exponent Private Equity and Intermediate Capital Group’s purchase of Quorn (meat-free mycoprotein products) and Cauldron (tofu) from Premier for £205m in late January.
Asked to explain the common perception amongst analysts that Quorn (now Quorn Foods) failed to realise its full potential under Premier’s banner, with one saying in January that the firm should have been the “jewel in Premier’s crown”, Brennan said:
“Under Premier’s ownership nowhere near all the potential of Quorn was realised, but Premier bought RHM [in March 2007] and that business became the priority, while its debt and balance sheet issues – which are well known – made it hard to invest.”
Fixing production bottlenecks
Conversely, said Brennan, Exponent Private Equity bought Quorn as an “investment and growth business, not to simply slash costs”, and has already implemented ambitious capital expenditure plans.
“These include ensuring our main sites operate more effectively, fixing production bottlenecks and getting sites set up to deal with increased demand. We need a manufacturing base that can cope with international growth,” he said.
Exponent wants to build Quorn “very prominent [UK branding] position” on a world stage, with Quorn already sold in 10 countries worldwide; Premier ceo Robert Schofield previously said that Quorn’s priority was the UK market alone.
CSPI criticisms dismissed
Brennan said: “We’re already a market leader in Australia where we launched last year [mid-2010] and a key focus for us is the US market where we’re looking to boost the business fourfold over the next five years.”
To do this Brennan said Quorn is investing heavily to secure listings and support products in US retail outlets; international expansion also meant potential investment in infrastructure and staff based overseas, he added.
He also brushed aside historic criticisms from US consumer advocacy group the Center for Science in the Public Interest (CSPI) which continues to argue that Quorn can cause allergic reactions.
“I think you’d struggle to find a food firm that the CSPI hasn’t caused problems for in the US,” Brennan said.
“Over the last seven years we’ve seen strong US growth, and double-digit growth already in 2011, so there’s no evidence that they [the CSPI] are causing us any problems.”
Patent expiry issue?
Asked whether the expiry of Quorn’s EU patents in 2010 – some of them were first filed in 1985 – would hurt the business, with rivals potentially stealing market share, Brennan said:
“Some patents surrounding the core technology have expired, but the product uses a peculiar fermentation method, and we have 30-plus years experience in perfecting this on site to produce the product better and at a lower costs.
“Huge related costs include £30m cost for a fermentation tower and related equipment, so you can’t simply look at a patent and say ‘there you go’.”
Strong advertising response
Brennan said Quorn’s ongoing £4m+ television marketing campaign during 2011, stressing the brand’s health credentials was also refreshing, given that under Premier’s tenure the firm was not in a position to advertise – with Quorn “particularly responsive” to this support, or invest much in NPD.
While business volumes fell by up to 7% year-on-year at times during 2010, he said, Quorn successfully extended its ready meal range in January and was already seeing 5-6% growth in the UK.
A Mintel spokeswoman said that after the 2009 brand revamp Quorn attempted to reach a "wider, mainstream audience"; however, she said the the 2011 campaign was more focused, targeting ‘weight managers’ and the firm's traditional audience of vegetarians.
“The vegetarian market is growing, weight management is a concern, and heart disease and cholesterol issues are leading people to take meat out of diets. We’re well-placed to capitalise on this given our superior technology,” Brennan said.
The future is meat free?
Mintel's latest statistics show that the value of UK meat-free sales rose from £468m in 2005 to £549m in 2009 (where the category saw 5.9% yearly growth that year); however, the research firm estimated that 2010 would only see 0.3% growth to £553m.
Nonetheless, the spokeswoman said the future for meat-free products looked bright: "Going forward, the market looks set to benefit from the projected growth in ABs and 25-34-year-olds, both being keen users of meat-free foods. Against this background, Mintel expects the market to grow to a total of £673 million in 2015."
With a 2010 turnover of £128.8m (£16.1m operating profit), Quorn Foods employs around 595 employees across UK manufacturing sites in Stokesley, North Yorkshire (where Quorn is formed and packed) Belasis on Teesside (where it is fermented) and Methwold in Norfolk (where breading, frying and packing takes place).