Rikin Lakhani knows a thing or two about the threat cyber attacks could pose to organisations, having started his career in IT security. But the md of own-label company Kolak Snack Foods has also discovered the equally difficult challenges posed by dealing with today’s demanding supermarkets.
Lakhani, now 36, joined the family business in 2004. For the past 20 months, he has been md of the business set up by his father Ashok (now chairman) and uncle Bharat in 1984. Previously, he was the firm’s commercial director.
Lakhani studied computer science and management at Kings College London before joining the graduate programme with systems integration business BT Syntegra. After a few years he moved to a smaller specialist security consultancy company in a similar role. These jobs taught him how small firms and big corporate organisations operate – something he claims has helped him in his current role.
The career plan was always to join the family business, which is located on the Park Royal industrial estate in west London. However, Lakhani knew he first had to earn his spurs. It was important he brought more to the party other than just being the boss’s son, he asserts.
Lakhani certainly understands how the business ticks, having spent his summer holidays as a student working on Kolak’s shopfloor. But he admits it was his first encounter at a sales meeting with one of the firm’s key retail customers that the realisation dawned on him that he still had a lot to learn.
“I remember the first meeting with one of our retail customers and suddenly there was none of the nice formalities – it was straight in there,” he remarks. “It was a commercial discussion and I was a bit out of my comfort zone. But it actually gave me more confidence and made me want to do well with the customer.” Since those early days he has became more heavily involved on the sales side, growing Kolak’s product ranges in close cooperation with its customers.
In 2005, Kolak acquired Richmond Crisps in Manchester and Lakhani was also closely involved in closing that factory down and relocating its machinery to the west London factory. “That’s where I got involved more in the operational aspects of the business,” he says. “As time went on, I started getting involved in all the buying for the organisation: from all of our raw materials right through to new bits of machinery.”
Last year, Kolak acquired a small snacks firm called Berkshire Foods and NC Snacks, with a headquarters in Reading and a manufacturing facility in Gosport, for an undisclosed sum. As with Richmond, Lakhani closed the site down and moved its equipment to the London factory.
Kolak’s growth (return to top)
Despite the difficult trading environment and widely reported problems of the big four multiple supermarkets, Kolak continues grow.
“Over the years the business has been extremely successful,” says Lakhani. “We have been continuing to make acquisitions; to introduce additional product lines for our customers. Today, we have more than 575 stock keeping units and supply most of the major retailers and discounters in the UK.”
While the lion’s share (90%) of Kolak’s business is in supermarket own-label snacks, it makes some branded products, including its own Kolak and Diamond snacks and Dylans hand-cooked crisps. Today, it occupies around 23,000m2 of factory space and employs 1,073 full-time staff, operating three shifts, 24h a day, six days a week, Monday to Saturday 7am to 3pm, 3pm to 11pm and 11pm to 7am.
Last year, Kolak reported a turnover of £101M and it expects that figure to be even higher this year. Lakhani puts the company’s success down to its strategic acquisitions, its investment in extra capacity and the introduction of new products to meet customer and consumer demand.
Since opening a new £9.6M snack factory in west London in 2013, Kolak has invested a further £8M in new pellet frying capacity, the installation of a new hand-cook fryer and additional popcorn facilities, which enabled the production of air-popped and oil-popped popcorn, plus savoury assortments and toffee-flavoured popcorn. It has also invested in new high-speed packaging machines, which have allowed it to raise productivity to 110 – 120 bags a minute compared with 70 – 80 with conventional machines.
“What we are trying to do is get the maximum out of this site,” says Lakhani. “We are very flexible as a business. We’ve got regular crisps, hand-cooked crisps, crinkle-cut crisps, low-fat crisps, extruded snacks, pellet-based snacks, prawn crackers, mini-poppadoms. The only things we are currently not doing are tortillas, vegetable crisps and baked.”
£15M factory expansion (return to top)
Over the coming year another £15M has been earmarked for increasing production capacity. Plans are in hand to open a completely new factory further along the M25 corridor next year, which will allow for future expansion while accommodating emergency contingency planning, should this ever be necessary.
Kolak places great store by its sustainable credentials. It achieved zero waste to landfill a year ahead of the targets set by Food and Drink Federation’s Five-Fold Environmental Ambition. Much of its waste, such as cardboard and film, is recycled. All of its waste oil goes for biodiesel, while the starch produced during processing is sold. It is also examining the potential for introducing biodegradable packaging. Food waste is sent for animal feed and, to ensure it doesn’t upset its neighbours, all of its fryers are equipped with odour abatement kit. It has also begun to convert all the lighting in its factory to energy efficient light emitting diode systems.
Lakhani is convinced that, despite the current health agenda, customer demand for savoury snacks and potato crisps in particular will remain strong (see the video link at the end of this article). But he recognises the need to fulfill increasing demand for healthier products through reformulation to reduce their salt and the saturated fat content.
Kolak has replaced standard frying oils with sunflower oil, which is lower in saturated fat. It has also reduced the salt content of all its products and claims to have met all the targets for salt reduction set by the Food Standards Agency. Furthermore, all of the flavourings and seasonings it uses are said to be ‘natural’, while it doesn’t use any artificial colourings, preservatives or flavour enhancers, such as monosodium glutamate. “Similarly, on our popcorns we are doing healthier low-fat versions and we have also introduced a range of low-fat crisps,” adds Lakhani. “And we have introduced some healthier product ranges, such as lentil-based chick-pea snacks.”
But, he doubts the popularity of more conventional potato-based snacks will ever be surpassed. And he raises the danger of compromising taste by too much reformulation. “The more you reduce fat, snacks start tasting like cardboard and consumers will not buy them. So you have to get the balance right,” he argues.
Since the recession, consumer shopping behaviours have also changed, while the hard discounters have expanded, he notes. “Where consumers used to go to one supermarket and do their entire shop, they are now a lot more promiscuous. Consumers are making a lot more shop visits and are not afraid to shop around to get the best deals.”
He attributes Kolak’s continuing success to its spread of business across the multiples and hard discounters. “Clearly, some of our customers have been performing a lot better than others. But we are seeing an increase in demand for snacks and we expect that to continue.”
Nevertheless, the supermarket price war is inevitably having an impact and while “product quality has increased, unfortunately price hasn’t gone the same way”, says Lakhani. “It is difficult because the way our business operates, we don’t spot buy any raw materials. All of our core ingredients are all contracted a year in advance.”
Fixed contracts (return to top)
Despite the difficulties caused by having fixed contracts, Lakhani is convinced this is the correct strategy to create long-term partnerships with key suppliers and ensure consistency of supply both in terms of availability and quality. “That’s the model we operate on and that is the model we will continue to operate on.”
However, he adds: “Sometimes, I have to admit, it is rather painful because you see spot market prices of potatoes probably a third of my contract price and it hurts because you can’t take advantage of that. But at the same time, what we are giving our customers is guaranteed product quality and fixed prices.”
Lakhani believes the new National Living Wage next will be “a good thing” but hopes both his customers and consumers recognise the extra costs this will impose on manufacturers. “Because, clearly, the manufacturer can’t absorb all of that cost. Some of that cost has to follow through in the product. The cost has to be allowed to be passed through to the customer.”
Watch our video with Lakhani to find out why he believes the snack market will continue to grow, despite a greater focus on health and sugar, salt and fat reduction.