Paddy Willis co-founded and exited his successful organic baby food business Plum Baby Ltd, which was voted into the Top 10 of Startups Hot 100. He made a 10-million-pound exit to Darwin PE and the company delivered 5% market share within 20 months of launch. Willis has since worked with a number of other entrepreneurs as an adviser, mentor, investor, and CEO. Most recently, he has taken on the role of co-founder and director of Grocery Accelerator Ltd. The company supports ambitious food and drink founders and has already backed thirteen businesses, including over £2 million of seed investments. He has also lead the development of Bathtub 2 Boardroom, a charity that provides co-working space and business support for early-stage entrepreneurs across all sectors. Start Up Funding Club interviewed Paddy to learn more about his story…
How did you find the process of starting up and scaling Plum Baby?
I co-founded Plum with my then wife, Susie. Neither of us had any experience in retail or the fast-moving consumer goods sector. We had the idea in early 2004 and approached Sainsbury’s later that year. They offered us a listing immediately, but it took us until March 2006 to launch. Our biggest challenge was finding a manufacturer. A year and a half later, we ended up with a French company, which was able to make the product the way we wanted, but still, we had to invest in equipment and the training of their staff. Even though they had assured us they could expand to meet growth, it turned out they couldn’t secure funds themselves. So, within twelve months of launch, we needed to look elsewhere. We had a very uncomfortable four months in which we were transferring production to a larger supplier. During that time, we were being shorted by our first company and we had to short our supermarkets in turn, which is never good. Fortunately, we had a great Sales Director who was a young mum herself. She worked part-time for us, but was very experienced. We figured we needed £400,000 to achieve a multimillion pound exit. Within two years of launch, we had raised £3.75 million in equity and debt. Never underestimate the need for working capital in a fast growing products business! This involved several different rounds and was a massive drain on management resources.
How long after launching the product did you make an exit? Did the buyer approach you or were you actively looking for a sale?
We started the sale process about four years into the trading of the business. We used Spayne Lindsay, whom we had been introduced to early in our history and who we trusted. Initially, we thought it would be a fight between Heinz and Numico, but in the end, they weren’t interested and we had to turn towards Darwin PE.
Was the decision about selling your business easy? Was it the right time to do so?
We always targeted a five year horizon. In the end, it became a prudent move to look for a buyer, because we had two VCT investors who could invoke a sale on their terms some 18 months after we started the sales process. The business was still growing, but it also suffered from a catastrophic drop in foreign exchange. The euro was at 1.25 when we started, but fell to 1.10 in a matter of a few months. With most of our products made in Europe, the profit was being ripped away. Given this was 2009, it was never going to be a good market in macro terms, but the issues with the VCTs meant we couldn’t be complacent and wait.
What was the exit process like for you and how long did it take?
As mentioned, it was a tricky time in the market and we were very surprised at the lack of interest from trade buyers. Spayne Lindsay did a good job, but there was a worrying period when the bids were low and Susie and I would have fallen victim to the preference shares that the VCTs had. We might have walked away with almost nothing whilst they got their millions back.
What do you think Plum Baby had that the buyers wanted?
Darwin and Lion Capital, the eventual front runners, really wanted a premium food brand for their portfolio, but had both missed out on some iconic consumer brands like Innocent and Gu. We had also commissioned a third-party research that showed how the brand could extend to following kids and parents for a longer time, beyond the toddler stage.
What do you think are the necessary ingredients to be an attractive business for a buyer?
A strong brand, a powerful market proposition, loyal consumers, decent margins – or the prospect of them -, and growth potential through the deepening of a range or brand extensions. We had left export very undeveloped in anticipation of a trade buyer plugging it into their own model of distribution, but evidence that a brand will travel is also important.
Do you think that entrepreneurs should have exit in mind from the start of their ventures?
Absolutely. They should know where they’re headed and build their strategy accordingly.
What was the main tool you used to market your business and create consumer awareness with Plum Baby?
Lots of sampling. When we launched, there was limited Facebook activity, so we relied on guerrilla marketing tactics and retailer offers to prompt trial. If you’re doing a good job, parents will spread the word quicker than wild fire. We also pushed the “Mumpreneur” angle with Susie, and that triggered a lot of good PR.
How do you get onto the shelves of major retailers?
By being persistent. Plum was fortunate, because we even had people ring us, which is rare. You should understand the retailer interests, timescales and ranging windows. Shelves are not elastic, so you need to know where you fit in and who you should remove. Make a strong case, know your market, and show how hard you’ll work to pull products off the shelves.
Why did you choose to co-found Grocery Accelerator rather than go down a more traditional angel investment route in food and drink startups?
I was curious that the model for business accelerators I was seeing and experiencing in the tech world was not yet deployed to the food industry. So I wanted to explore whether it might work, given the generally longer timescales for things to happen. When I met Rob Ward, the co-founder, we both agreed it had to be possible, and here we are.
How do you think the industry will change in the future?
I believe we will continue to see more fragmentation of the weekly shop, with more short-term purchasing, focus on food waste, which could have an impact on multibuy, and increasing interest in provenance, brand story, etc. This is particularly true for the millennial consumers, who would prefer their purchase to have some good impact. I suspect we will see more diversity in the subscription services, and naturally, the monster that is Amazon will continue to grow. They may not be a threat immediately to the big multinationals, but they will be increasingly nervous as to what Bezos, Amazon’s CEO, might do next!