Preserving your brand values as you grow

Paul Lindley is the founder and CEO of Ella’s Kitchen, the UK’s top premium baby food brand. In part one of our interview with him we found out about the issues he faced when setting up the business and how core values and his unique vision have informed the growth and strategy of the business. In part two, Paul talks about the challenges of preserving your brand values as you grow, the advantages of being a private business and the need for the UK to encourage entrepreneurialism, innovation and our unique skills and knowledge.

How have you maintained the core values of Ella’s kitchen within your staff as you’ve expanded the business and taken on new employees?

“I think this is one of the single most important things about our competitive advantage. We are the sum of the energy, efforts, creativity and competency of the people we employ. So there’s a whole question and challenge over employing the right kind of people and there’s a second question around getting them to understand the values.

Because we were a values-based business from the beginning, because the aim wasn’t to make millions of pounds in sales and was to concentrate on the consumer, about two years ago we articulated on a piece of paper the values that our business stands for. And we now encompass that in everything we do, whether it’s outside the business in our products and our marketing communications, or whether it’s inside the business and involving recruitment, training, bonus incentivisation scheme etc.

So people are bonused on the five values we have as much as they are on financial return. And for a relatively small business of 50 people, if we get someone who is more than competent in the skillset of their job but doesn’t fit the value set, it’s just not going to work – and that will be worse within a 50-person company than a 500-person company.

So having the right people is critical to us and I think we invest much more in that side of things than perhaps many companies do. I’d put a lot of our success down to that.” 

Would you say the core values of the business have changed since you first started?

“The value set hasn’t changed. It’s been formalised in certain words that probably wouldn’t have been so articulate in the early days, but you tend to evolve things rather than revolutionise them. Things do get harder the bigger you get – something that you thought was black and white can become a bit more grey, so you have to decide which side of the line you’re going. But again, if you revert to the set of principles that you’ve got then I think that should guide you.”

Has it been an advantage for the business to remain in private ownership?

“I think private businesses have a much more sustainable long-term view and can make decisions based on the long-term, rather than how publically held businesses do. And therefore they build more sustainable businesses. That said, there are private businesses that have a majority shareholder, and there are those that don’t.

I think that, for businesses of our size, there are a lot of administrative things that can get in the way when you’re the size that we are – so I mean fast-growing, smaller businesses. The stability of being able to have the assurance of long-term decision making is really helpful. You can raise finance by debt, you can raise finance by private equity and it’s still privately held, or through other investors.

So I think being publically held is just one way, amongst a number of ways, of growing and that addresses the challenges of competition, growth and the things that form into a strategy. I don’t think many businesses of our size go down the public route.”

As a country, do we do enough to encourage entrepreneurialism?

“I think in our culture, and in our DNA as British people, we should look back with confidence and remember that we created the agricultural revolution, the industrial revolution and the comms revolution – so we are inventive and we are creative. We’re also a trading nation. We happen to live in a time zone that most of the world trades with, we happen to speak English that most of the world understands. So there are lots of advantages.

However, we don’t have the British dream, like the Americans have their American dream, where we believe we can do it and everyone will get behind us to do it, whether it be the press, or parents, or schools, or employers. American’s believe they can do it and that filters down to venture capitalists views of how investment should work.

So, should the Government help us more? I guess the Government’s responsibility is to provide us with confidence as consumers or business owners. So we need a stable environment, where we know what the interest rates will be, or what the currency exchanges rates will be, policies are consistent and the tax regime is consistent. That’s the fundamental job.

Secondary is working out where our competitive advantages are and helping us maximise those. From my point of view, we’ve built a very successful brand and I think Britain punches above its weight with brands around the world and has done for a couple of centuries. The Government believes that one of our competitive advantages is generating knowledge. We use knowledge to add value to the economy. That’s exploiting intellectual property (IP) to do that; things that are invented here. So IP is trademarks and patents, and the Government does have policies around patents – there’s the Patent Box and the R&D tax credit. So they believe that we have a competitive advantage and they’re putting money behind it. We have pharmaceutical and technological IP because those reliefs are there.

Over on the trademark side, which is equally a knowledge-based thing, there’s nothing at present. So for a small business to compete on the value of a trademark, building a brand, it’s very hard for small businesses. When you’re building a brand it’s about the medium to long-term assets, it’s not about your profit and loss. With most small businesses, there are too many other pressures to make the sale. I certainly think the Government could help with encouraging more long-term vision. If you’re investing in your brand and finding out what your customers want, get some tax relief and invest in a system that provides a customer care system that feeds back to your innovations people.

And the final area is tax, which is the Government’s remit. It’s great for private businesses, actually, as you’ve got a whole different load of stakeholders in private businesses that are trying to go in the same direction. You’re aligned behind a strategy, it’s providing tax into the economy and jobs into the economy. But who are these stakeholders? You might have private investors, who might have Enterprise Investment Scheme (EIS) relief and pay zero tax on their gains; you might have an entrepreneur who might only pay 10% tax on their gains; you might have enterprise management incentives (EMI) options with people who pay capital gains tax of 20% or so; you might have people getting bonuses which are taxed at 40%. So these stakeholders aren’t aligned because the tax system is not aligning everyone yet, even though we’re all trying to achieve the same goal.

But I think the main thing that the Government can do for business is set that groundwork for stability and confidence, find the things we’re good at and then help small businesses do them even better.”

You measure the success of the business using what you call ‘Tiny Tummy Touch Points’. How did this idea come about and how does it work?

“The idea of Tiny Tummy Touch Points (TTTP) comes from trying to reduce things to their simplest form. If you can get over in a tweet, for example, what you’re about then that’s simple – and if you can’t then it’s too complicated. So we’re trying to knuckle down so that everyone in this building, all our stakeholders, all our suppliers and all our customers know why we’re here. We’ve defined TTTPs as they way we do this.

A TTTP is a time when a child has one of our products and it touches their tummy, so it’s a serving of one of our foods. If it’s a meal, it will be one TTTP, if it’s something like our Nibbly Fingers, where there’s five in a box, that would be 5 TTTPs. It’s an easy thing that we can measure to see how we’re doing. We have an ambition to reach a billion TTTPs, so by a certain date we’ll have accumulatively provided a billion portions of our food to kids. And these will have improved their relationship with food and the convenience to their parents.

Just outside this room, in our main office, we have glass jars with little caps from our products in there. Every month we fill that jar up with the TTTPs we’ve generated that month, so everyone can see how we’re doing and can see the hockey-stick curve of how we’ve grown. And that obviously translates back to money and profits, but we won’t earn those TTTPs unless we provide to a consumer the thing that they want to buy. It’s a really simple way of calibrating our vision.”

The recession hit two years into the business being set up. How did that affect you?

“I suppose the top line is that the recession didn’t affect our sales. We’ve grown and we’ve doubled our revenue for most years through a recession. And I suppose the question is ‘Why would that be so?’. There are concerns around child nutrition during a recession, as we’ve highlighted in campaign, Averting a Recipe for Disaster. But, ultimately, in general parents don’t compromise on their children’s food and health, so we’ve grown. However, we did worry about our supply chain and whether our suppliers were solvent and looking to the future with the right strategies. And whether the exchange rates were solid or not – the euro’s changed by a factor of a third over the first few years and we’re particularly exposed to the euro with our import costs.

My generation tends to think of recessions being tied to debt availability, which it isn’t really, in general. It just happens that this recession is. It’s not particularly been a problem for us as we’re a pretty attractive debt proposition to the banks now at our size. But what about our suppliers? We have a supplier in Italy where the interest rate has just gone through the roof.

So because the world is so complicated, recession does affect every aspect and consumers do feel the pinch at the front end. But we’ve managed to premiumise the baby food category during a recession.”

Do you signs of the infamous ‘green shoots’ of recovery?

“Like most people, I hope to see them. I don’t think consumer confidence is back where it previously has been and I think that’s because there are so many leftfield things that can happen these days; the euro crisis, US sub-prime mortgages etc. Even in our world, harvests have been all over the place in recent years – there was a whole wheat inflation thing a few years back when the Russian harvest failed. We don’t use a lot of wheat, but chickens eat wheat, so that could affect us when you’re faced with inflation.

I think with stability, green shoots will come but I don’t think I’m seeing them just yet.”

You’ve achieved an awful lot with the business in seven years. Do you think they’ll be as much change over the next seven years?

“Well, I would hope that our vision and our values don’t change at all over the next seven years. We want people to carry on using our products, improving children’s relationships with food and getting them to have healthy habits as early as we can in life.

If you look at the billion TTTPs aspiration and how we achieve them; we need to be in more markets, we need to have more products, we need to get people who have never bought our products to buy them and we need to get people do buy us to buy us more often. That’s the four major ways to grow a business. And we’ll continue to use our vision and our innovations to do that.”

You can read Ella’s Kitchen’s new report into child health and malnutrition, Averting a Recipe for Disaster, at www.avertingarecipefordisaster.com where you can also pledge your support for their 25-year plan to combat childhood obesity and malnutrition.