Building bridges: how retailers and independent start-ups can work better together

The founders of Young Foodies explain the kind of support challenger brands need to thrive.

25 July 2018

For the last 10 years, the food industry has become increasingly fragmented, with more challenger brands entering the market. Younger shoppers are turning to start-ups with compelling brand stories over products from big business. As a result, British retailers have been experimenting with how to work independents into their arsenal.

Waitrose announced that it would be paying smaller suppliers within seven days back in 2016, while earlier this year Sainsbury’s launched its Future Brands hot-housing initiative. Tesco has run an incubator programme since 2014.

However, the process hasn’t always been smooth, with the new marketplace requiring fresh ways of thinking.

That’s where Young Foodies comes in. The year-old company aims to “make the small brands feel mighty,” according to co-founder Theodora Alexander, bringing them together in order to create economies of scale and give them the knowledge necessary to compete with larger manufacturers.

“Consumers like purchasing from independent brands,” remarks Alexander. “The millennial consumer is four times more likely than a baby boomer to buy from an independent brand – or specifically not buy from a blue chip brand.”

Alexander and her business partner, Chris Green, both previously worked for start-ups. Their experience has revealed areas where the current relationship between small-scale concepts and supermarkets could be improved.

“We recognise that it isn’t easy for the retailer, and we’ve had discussions to that effect,” says Green, who previously worked with baby food brand Ella’s Kitchen. “This is a relatively new thing for [the retailers] to deal with, they’re all trying to adjust to catering for the smaller business.

“I think they would be the first to acknowledge that they haven’t always been the best at supporting and nurturing a small business, because there are always going to be commercial incentives that will always push them towards dealing with the PepsiCos and Nestles and Unilevers of the world. But they are trying to find their feet.”

“At the moment, incubators and accelerators seem to focus on a lot of short-term sales rather than fundamentally building a business in the right way,” adds Alexander, who worked in investment banking with a tech focus before joining Propercorn.

“The most exciting thing for me is that [retailers] have no choice but to sit up and listen at this stage. Almost 60% of the category growth is coming from small brands, where the major players are in decline.”

Relationship counselling

So how can supermarkets and start-ups work better together?

“There is a part to play in [retailers] joining the journey at an earlier stage,” remarks Green. “So, how do they onboard a small brand and work with them over the first three years of their time within their four walls, on their shelves, to support them? And what that could look like is not rolling out into 2,000 stores, but a 100-store trial that then builds and the two parties work collaboratively to build a brand.

“There will always be challenges around internal administration and infrastructure at a large retailer, and that’s for me what they’re trying to get their head around at the moment: how do they make that process a little more agile and versatile to cater for the smaller end of the market?”

The most common roadblocks can be divided into big structural issues and everyday problems. In the first category are things like how to get buy-ins from any major stakeholder, getting a manufacturer to believe in the product and negotiating food deals with suppliers. The other half constitutes the lack of industry knowledge and juggling different aspects of a business with limited personnel.

“More than 50% of the founders we work with have never worked in the industry before,” notes Alexander. “And that’s exactly why it’s challenging to be a challenger.”

The way Young Foodies has addressed this issue is to start up an academy, in order to give industry newcomers the necessary skills, including understanding what buyers will want to know, the language to speak to the retailers, explaining their KPIs – the kind of education that any graduate of Unilever’s training scheme would receive.

The learning and development aspect of Young Foodies was not originally planned, but came in response to what the brands in the community said they needed. Similarly, the business also now helps brands find the right talent to build their teams, in addition to the pastoral support originally encompassed in the company mission statement.

On-trend eats

Young Foodies currently has 52 brands in the main community, each highly vetted to make sure that it fits the rest of the outfits in the network and won’t disrupt the peer group. Together, the brands turn over around £100m, with more than 50% year-on-year growth. There are also younger businesses that aren’t quite ready to approach retailers – about 200 – that take part in Young Foodies’ runway programme.

Within these businesses, there are clear patterns in the kind of concepts that are popular. “The biggest trends over the last five years have been new, innovative brands bringing out better-for-you, healthier alternatives; free-from alternatives, ones that have more of a healthy slant,” notes Alexander.

“We’ve also seen quite a lot of ones that are better-for-you, and then there’s better for the world. So, vegan brands but also brands that have an environmental consciousness, whether that’s through the way they do their packaging or their sourcing or their charitable connections. Take Piccolo baby food: they have intrinsically in their business the charitable connection. They do promotions that are one for one, giving food back to babies that are less fortunate.”

There are also many food-to-go brands coming to market, including single-serve drinks, snacking and confectionery. “However, I think in the last year that has been changing quite a lot,” says Alexander. “Whereas before it was potentially the kind of categories that had lower barriers to entry, we are now working, for example, with a brilliant pizza brand called White Rabbit Pizza, who are making waves on the shelves, they’re absolutely smashing it wherever they’re listed.

“They’re a challenging product, it’s a product you’d think would have high barriers to entry. And they’ve just come in and stolen the space. And we’re seeing more and more of that. So going into new aisles and challenging new categories, which is really, really exciting.”

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