Me and my factory

Why it pays to follow the herd

Zouq has turned Lancashire Farm Dairies into a £25M business
Zouq has turned Lancashire Farm Dairies into a £25M business

Related tags Milk

Azhar Zouq, who knows a thing or two about yogurt, having grown Lancashire Farm Dairies into a £25M business, talks to Noli Dinkovski

Key points

Our story has been one of organic growth, and we are still growing.

Only five years ago, our turnover was £8M. Today, it’s £25M so it has been quite a journey.

The business was started by my father, Ghulam, in 1984. Situated on Drake Street in Rochdale and then trading as Pakeeza Dairies, the company started off buying yogurt ready-made from a dairy in Peterborough. When the dairy went into liquidation, Pakeeza turned its hand to processing milk and manufacturing yogurt – albeit in a very small way.

I studied agriculture at Reaseheath College in Nantwich, and also worked on the dairy in Peterborough – both invaluable experiences. I started working for Pakeeza straight after college, and became md a couple of years after.

Right up until 1999, we were only making about 10t of produce a day, and only operating three days a week. It was around this time that we moved to a purpose-built site across the road from where we are today.

Essentially, the business grew through independent retailers, and it remains the bread and butter of our business. As it stands, we’ve got a really strong independent network across the UK, but in particular along the M62 corridor and in London and Birmingham.

About six years ago, we entered the supermarkets. Around the time, they were bolstering their ethnic sections, and as yogurt is an essential element of Asian cooking, we were well-placed to capitalise on the trend.

Lancashire Farm Dairies

In 2011, we began trading as Lancashire Farm Dairies to bolster our leading brand and strengthen our provenance. Pakeeza Dairies, however, remains the company name.

While the Asian shopper remains important to us, and our leading brand is the Natural Bio yogurt in the 1kg format, we’ve since seen a massive growth of white British people using our products for things like smoothies, condiment sauces and dips.

In line with this, yogurt tastes are ever-evolving. Going back 20 years, yogurt was generally more acidic, with a lemony taste. Today, people are after milder, sweeter varieties, so we have had to adapt.

UK yogurt sales are flat overall, but there is growth in two areas. Firstly, Greek yogurt is becoming an ever-more popular replacement for sour cream and crème fresh – because at 10%, it contains just half the fat.

At the other end of the scale, health-conscious shoppers are looking for very low fat yogurts, a demand that we meet with Lancashire Farm Fat Free and the fruit flavours. I would say 40–50% of the volume we put through retailers comes from these two areas.

Growth and investment

To keep up with growth, we have had to continually invest in the premises and in the processing equipment. We are always investing in tanks, valves, linear machines – any kind of automation, in fact.

It’s vital to keep upgrading to stay ahead of the game. For example, we’re currently replacing flexi pipes with matrix valves – an investment of £250,000. That should be completed by the end of January. We are also adding pot-filling and tub-filling lines.

Another thing we’ve done is bring a lot of our testing in-house. We’ve also just taken on a food technologist. All of these things help to bring more control to the manufacturing process – instead of sending samples out, we can now do everything in our laboratory.

Despite the increase in automation, we have had to nearly double our staff to 150 in just three years to keep up with the growing output. Those people have generally been more skilled, which has added value to the business.

To spread our risk and grow further, we have diversified into wholesale and own-label – and we also sell bulk yogurt to other manufacturers. The own-label side in particular has grown tremendously, helped by the fact that we are working with some of the fastest growing retailers.

Challenges

I know it all sounds like plain sailing, but the yogurt market isn’t without its challenges. One of the biggest is the current price of milk, brought about by the Russian embargo on imports and the end of the EU milk quota system, which both happened last year.

We are seeing farmers exiting the market, mainly because some manufacturers are taking advantage of the excess supply and are buying below cost.

The consequence for us is that we are trying to sell products with added value in what is becoming a commoditised market, which makes life harder. It has also increased the number of yogurt products out there – in fact, I think there are more now than there ever has been.

You only have to walk down a supermarket yogurt aisle to see it is an exceptionally saturated place. Retailers also want to offer greater choice and variety than ever before, which presents both an opportunity and a threat to manufacturers. Rachel’s Organic being delisted from Tesco last year was just one example.

Another challenge to the business was when the European Food Safety Authority (EFSA) ruled in 2012 that the health claims of probiotics were unproven. A wide range of our products include cultures like Bifidobacterium BB12​ and Lactobacillus acidophilus​, which we had to reclassify as ‘bio-cultures’.

It was a costly impact in that we had to change the packaging, but the law is the law and we had to abide by it. It didn’t hinder our sales long term, but in the short-term we encountered a huge number of customer inquiries.

Strong competitive edge

You need to have a strong competitive edge to stay in the supermarkets, and we believe we have it. And there is plenty of growth available for us. While we have a great nationwide reach, there is still the potential for more. Asda is a case in point – we are in about 200 of its 525 stores.

Overall, I think it’s about having a balance of value-added products versus more standard products – and that includes own-label products.

Our Lancashire Farm brand continues to grow by 10–20% year-on-year, and I think there’s no reason why the company cannot grow by 40–50% over the next three to five years. The factory is running at 70% capacity, so we don’t have any problems on that front.

We also are starting to ramp up our marketing spend, which has been very limited in the past. Expect some experiential activity from us this year, and some bigger things in 2017.

Factory facts

Location: Kingsway West Business Park,

Moss Bridge Road, Rochdale, Lancs. OL16 5LX

Size: 6,500m2 across two buildings

Staff: 150

Turnover: £25M

Products: The Lancashire Farm range, comprising: Fat Free; Greek Style; Strawberry; Mango; Coconut; Live Whole Milk; and Raita.

The Pakeeza, Desi and Henna brands, plus own-label products and raw yogurt for other manufacturers

RETAIL customers: Tesco, Sainsbury, Asda, Morrisons and independents

PRoduction lines: An equal number of pot-filling lines and bucket-filling lines, with one more of each to be installed this spring

Output: 100t a day

Personal

Name: Azhar Zouq

Age: 44

Domestics: Married to Mariam with two sons – Hamzah (aged 4) and Umar (aged 2)

Outside work: On the rare times I’m away from the factory, I love spending time with my children. I also enjoy swimming

GREATEST ACHIEVEMENT: Having grown the business organically over two decades and being headstrong with the challenges that have come up

ADVICE TO YOUNGER SELF: Don’t be afraid to innovate – the yogurt market is a completely different world today than 30 years ago, and is constantly changing

Related topics Dairy Dairy-based ingredients

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2 comments

Miss

Posted by Sara t,

I religiously buy the Greek style yoghurt-I eat it daily! Recommend it to everyone, I don't know what you do but it's amazing. Like the best yoghurt I've ever tasted. Well done!!
(Everyone I force to try it becomes addicted too)

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Well done

Posted by Nadia Robins,

Well done Lancashire Farm/Pakeeza Dairies. I've been a fan of your yogurts for years, particularly the Bio-culture natural yogurt which is a staple on our breakfast table. Thank you!

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