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FEATURE1 April 2011

Off to a good start

Baby food brand Ella’s Kitchen owes its success to consumer insight, says founder Paul Lindley. He told Robert Bain why startups must be encouraged to get close to their customers.

If the research industry wants a poster boy for the value of its work, it could do a lot worse than Paul Lindley. From a standing start five years ago, Lindley now leads a multi-million dollar food business whose products are a familiar sight on supermarket shelves across the UK and beyond – and he gives much of the credit for his success to consumer insight.

It was when Lindley was working at Nickelodeon that he had the idea of launching a new baby food brand using the knowledge he’d gained of the kids’ market as well as his own experience of raising his daughter Ella.

In 2006 the first Ella’s Kitchen products hit the stores in their distinctive colourful pouches. The company has spent the last two years near the top of the Sunday Times list of fastest-growing companies and achieved sales of £35m in 2010.

Lindley believes a combination of research and first-hand experience helped him achieve this, and he’s now calling for the government to give companies tax breaks on their consumer research spending, to allow more entrepreneurs to emulate his success.

Getting started
In the two years it took to get Ella’s Kitchen off the ground, Lindley sought insight wherever he could find it, investing some of his limited funds in research as well as “begging and borrowing insight and getting whatever help I could”.

Lindley told Research: “I did lots of Googling, trying to understand the problem with overweight and poor health among children, and I did a lot of local focus groups with friends, family, my wife’s book club, nursery groups, just to try and get as much free feedback from people I thought would be in our target group.”

The company also got access to data and advice through a regional development fund supporting food businesses, and from retailers who believed Lindley was on to something.

It was all about building a business case so that he could approach the major supermarkets and say, ‘Here is a proposition that will work,’ according to Lindley. “And it did.”

“Whether it’s financial staff, logistics staff, salespeople or marketing people, it’s really important to our brand that everybody understands our customers”

There are, he believes, three crucial points that his firm understood but competitors hadn’t. “First,” he says, “our consumer is a child. The rest of the market focus on the purchaser, which is the parent – generally the mum. But she’s not the consumer. Children influence parental decisions in so many different ways – with our packs it will be grabbing hold of them, being attracted to the colours, playing with them… Second, being innovative is a point of difference for us. We’ve put recipes together that people haven’t done before. We’re innovative in the format of the pouch packaging and in our marketing campaigns. The third thing is that we are an emotional brand, a personal brand. Ella is my daughter, she’s 11 now, and the experiences we had feeding her, and the fun and games and tricks that we used when she was trying different foods, I tried to bring to our products and our marketing campaigns. Of course we use dieticians and paediatricians and nutritionists to help develop our ranges, but we also try to relate to our consumers and ease the difficulties that children have in taking new foods.”

Once Ella’s Kitchen was better established it was able to start using research in a more structured way – subscribing to data from the likes of Nielsen, Kantar and TNS, as well as EPOS data from retailers. It has its own database of thousands of customers and conducts qual research with Razor.

“We go and talk to groups of mums who know each other in a social setting,” says Lindley. “We recruit groups of the appropriate demographics to ask specific questions of them, we do company shops, we go into homes and understand how meal times work with toddlers and babies. Within that we have what we call the ‘consumer closeness’ programme, so that all the 35-odd people in the company can engage with consumers. Whether it’s financial staff, logistics staff, salespeople or insight and marketing people, it’s really important to our brand that everybody understands our customers.”

The company has also partnered with academics to research the role of the senses in the eating behaviour of babies and young children, and the resulting ways in which they influence their parents’ buying decisions. Lastly Lindley points to his customer care team, who he sees as invaluable for keeping in touch with the market.

Investing in the future
Lindley knows first-hand the pressures that entrepreneurs face and the temptation to do without research, especially if you’re convinced you’re on to a winner. As one of the founders of The Consumer Forum (alongside King of Shaves, Green & Blacks and Lovefilm among others) he is doing his bit to promote a consumer-focused approach
in business.

“It would be very easy for an entrepreneur who didn’t have my background to think, I’ve got my idea, I’ve talked to three of my friends and they all think it’s a good idea so I am going to go for it and invest,” Lindley says. “But a good entrepreneur has to strike a balance. You have gut feel and the data is an aid to that gut feel. In the beginning it’s hard because your budgets are very tight. Less enlightened people will not bother investing in understanding consumers, because they’re just seeing the next six months, but when you’ve got a brand you have to. For example, we innovated to bring pouches to the baby food sector, but we don’t own intellectual property around pouches, so without establishing a brand we would lose the benefit of that. I knew that we had to invest in building a brand and making sure that we were the people closest to consumers.

“I don’t necessarily mean a lot of money, it might mean time, it might mean creativity, just getting out there and asking people.”

Although it was far from easy, Lindley is conscious of the advantages and opportunities that he benefited from in terms of experience, contacts and support. Many others starting out now, he fears, will be less fortunate. “I came with 10 years’ experience at a business focused on my target market,” he says. “A 22-year-old with a great idea won’t have that. Somebody who’s being made redundant from a public service job won’t necessarily have that. And it would be even more tempting for those sorts of people to ignore the investment that they would need to make for the longer-term benefit of their brands. But if the product’s not quite right or it’s not marketed in the right way, then that first order may not become a second order. One third of businesses fail in the first three years – it’s a really difficult set of decisions to make.”

Another obstacle for new, small brands is the domination of the market by big, established players who are well-known and have the resources to fight off the upstarts.

“Big companies are more adverse to risk than entrepreneurial companies, they like to see in retrospect whether the trends that smaller companies have established are going to last. You can look at what Innocent Drinks has done with the smoothies category or how King of Shaves has taken on Gillette and Wilkinson – that sort of innovation causes the bigger players to ultimately change too. And innovation is good for society and for consumers because it produces better products.”


Tax breaks for consumer research?

To help more companies achieve what Ella’s Kitchen has, Paul Lindley is pushing for generous tax breaks on consumer insight – including market research, consumer database building and social media activities. He wants entrepreneurs investing in these activities to be able to keep more of their profits.

The idea is to offer tax relief of 150% to 175% on spending in these areas, similar to what is already offered for investment in R&D. If the company doesn’t make a profit, the taxman loses nothing. If it does, its investment should mean it makes more in the long term, benefitting everyone.

“It’s easy for us to sit there and say we were successful because we listened to our consumers, but for more companies to become like us, they might need more incentives than we had”

“The idea came out of the Consumer Forum,” says Lindley. “It’s easy for us to sit there and say we were successful because we listened to our consumers, but for more companies to become like us, they might need more incentives than we had. It’s about making businesses really understand their customers and building British brands to compete internationally.”

R&D relief has been in place for a decade and was raised in this year’s budget to 200% (going up to 225% next year), so Lindley has reason to hope politicians will be receptive to the idea of similar incentives for insight investment.

“The basis of R&D relief is that companies in their early years find it difficult to invest in something they perceive as risky. They’re investing for the longer term, so the payback won’t be straight away, and they’re fighting within their budgets against more imminent returns that they might be able to get. That’s exactly the same as building a brand – it’s an intangible asset and the benefits of that investment are only going to be felt over the longer term.

“The government has staked its reputation on the growth of businesses – SMEs especially – but they have relatively few clear policies to encourage them to grow. Our policies are being independently costed up, but early evidence shows that the returns from improved branded business will exceed the tax breaks given in the shorter term.

“The costs of the failure of businesses are obviously big personally to the entrepreneurs, but the cost to society is even bigger. So anything that we can do to encourage better entrepreneurs and less failing businesses must be in the interest of the government and of UK plc. We’re good at consumer brands in this country, we’ve got a great heritage. But small brands find it too difficult to establish themselves, and now people can just as easily buy something from America or China or Brazil as they can from the High Street. We need to give them 21st century support, otherwise we will lose that competitive advantage to places in the world that are more creative and innovative in encouraging entrepreneurialism.”

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