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Entrepreneurs hungry for slice of growing healthy food market



Dave O’Donoghue, CEO of Freshii Ireland. Photo: Mark Condren

When you hear that an Irish healthy drinks company is expanding into the Australian market to hedge itself against Ireland’s tough winters, you begin to realise the ingenuity that exists among the country’s entrepreneurs aiming to tap into a new type of consumer.

Vithit’s plans to diversify into the southern hemisphere shows the maturity of a business that has thoroughly penetrated the Irish market. The no-added sugar drink brand exists due to the appetite of the 21st century customer: one who runs early in the morning and is constantly aware of their diet.

Founder Gary Lavin explains that the new Irish professional has adopted a “lifestyle rather than a trend”.

“People are finally moving away from sugar, so there’s a hell of a lot of growth for us in the zero sugar space,” he told the Sunday Independent.



Gary Lavin, founder of no-added sugar drink Vithit

Gary Lavin, founder of no-added sugar drink Vithit

“We only see this as just the beginning, obesity is a major problem in this country. The message has taken a while to trickle down to the public. You see people jogging at six o’clock in the morning a lot more, you see people going to the gym – that is the tip of the iceberg.”

Lavin has been joined by companies such as salad bar Freshly Chopped, healthy fast food chain Freshii, falafel business Umi, and locally-sourced Sprout, which have all begun by targeting the same type of customer in Ireland.

His optimism for the sector is shared with analysts and fellow entrepreneurs alike. Dave O’Donoghue, the man heading up health food chain Freshii in Ireland, said that he was “convinced” there was still massive room for growth.

“We’re still in the very early stages of this trend in Ireland. Freshii in other jurisdictions has managed to penetrate a lot deeper than where we have,” he said. “If you look at us, it’s very Dublin-centric. There’s a little bit of a lag between Dublin and the rest of Ireland. Now I’m a Kerry man, I’m not saying anything negative, but it takes a while for a trend to travel from the States to here and then from here to the rest of the country.”

Jason Molins, a food and beverage equity analyst at Goodbody, said the change in consumer had led to a “structural shift” among shoppers who were moving away from the centre of store products towards the perimeter of the store.

“That has typically been at the expense of the traditional consumer packaged goods [CPG] brands, and some of the smaller and more dynamic local brands have been able to build a strong presence in a short period of time,” he said. “The focus has moved to fresh and healthy products and clean label has been a trend that is only going one way.”



No-added sugar drink Vithit

No-added sugar drink Vithit

Molins also cited the “continuing rise” of protein demand and the greater emphasis on alternative types of protein such as plant-based as opposed to the meat category.

“Other key trends that we are seeing is the growing demand for convenience,” he said. “With this we have seen snacking becoming an increa sing phenomenon, such that food companies need to consider that consumers have moved on from the traditional three meals per day.”

The Goodbody analyst said that there was “definitely” room for growth for new entrants coming into the market.

“The food industry continues to change at unprecedented levels. It’s been often said that there’s been more change in the last five years than in the previous 20. I’m pretty confident we are likely to see the same over the next five,” he said.

Despite consumer sentiment at its highest point in 17 years and a broadly positive outlook for the rapidly-expanding sector, new and existing businesses face numerous tricky challenges that can act as threats to their operation.

Perhaps the most-pertinent of those is the housing crisis. The severe lack of affordable accommodation is creating a huge problem for those trying to employ retail and service staff, particularly in the urban areas that are such a core part of their business.

Freshii chief O’Donoghue lamented the loss of staff that the company had trained and refined due to the rising rents in the capital.

“The biggest challenge is the cost of living in Dublin. We’re finding it very difficult to hold on to existing staff, even after paying them above minimum wage, because we have managers who are being evicted out of their houses,” O’Donoghue said.

“These are really cracking people who we have invested three or four years in who can’t live on a relatively decent wage because of the cost of housing. There doesn’t seem to be a freeing up of that. It’s a big industry challenge – that people cannot get staff. As the industry has grown, there isn’t enough staff.”

O’Donoghue set up Freshii here three years ago after spending time as the chief executive of Cuisine de France in the UK and Ireland at troubled baking giant Aryzta. Once behind the launch of the phenomenon that was the chicken fillet roll, he now finds himself at the coalface of an entirely different market inside the same industry.

“One of the things we noticed very quickly was that the chicken fillet roll business started to die because Bob the Builder was gone and construction was under pressure. This happened throughout Europe but it was much, much worse in Ireland,” he said.

“What continued to grow was healthy and supreme indulgence, with the latter being where the doughnut trend belongs. We decided to go into the healthy sector and found that the business was particularly good in office districts.”

O’Donoghue says consumers there are fitter and “much more aware of their diet”. While he said they are more than willing to have a treat, he also said that these new consumers will be back into the gym and Freshii “first thing Monday morning”.

He said there was “pent up demand” for his new offering, and insists that the whole sector is in “growth mode”.

“Finding locations is easily the biggest challenge to our growth and it has gotten more difficult over the last 12 months,” he said.

“We’ve had that problem from multiple properties. We want businesses to be sustainable over a 10-year period, so it’s up to the landlord if they want us part of their premises long-term.”

Freshii now has 13 stores dotted across the country and, as reported by the Sunday Independent last week, that will more than double over the next four years.

“When we made the plan we said we didn’t want this everywhere. We could have this in a lot more outlets than we already have,” he said. “We wanted to keep Freshii special and it’s a destination, and we didn’t want to have mini-Freshiis in a load of convenience stores because I went down that route with Cuisine de France. What happens over a decade is you become ubiquitous, you become the Hoover. So your fresh products become associated, but your brand isn’t resonating with the consumer.”

One company aiming to take advantage of those growth opportunities is Leon, a natural fast food chain that is due to open in Ireland early next year.

Ciubus Concepts, a new franchise partnership established by Waterford accountant Stuart Fitzgerald and his business partner Brian McIntyre, has secured the franchising rights for Ireland. The pair aim to roll out 20 outlets across the country over the next five years.

Fitzgerald maintains that the Irish consumer has become more open to new concepts and that they expect to see the trends they have seen abroad on the high streets of other cities.

Despite their ambitions to open numerous restaurants, Fitzgerald has found appropriate commercial property hard to come by.

“The availability of property is somewhat scarce. When you consider the configuration of a city like Dublin, an old Georgian city with a lot of old architecture, a lot of units come to the market that may not be suitable given the nature of the construction of those buildings,” he said.

“There is also an expectation out there among sitting tenants that is unrealistic. If you have to outlay a six-figure sum for key money, on top of a very high rent, on top of fit-out, on top of your pre-opening costs, your runway on getting a return on that investment is much, much longer than in instances where the key money is more realistic.”

The Leon Ireland chief also agrees with the views of Goodbody analyst Molins, that there is significant room for growth within the health food market.

“I think it’s a good time to be a consumer in Ireland,” he said. “The Irish market isn’t as cluttered as some international markets, unlike London, which is a very condensed market in terms of food to go. Ireland is competitive, but I think there is always room for innovative offerings.”

Minister for Finance Paschal Donohoe’s decision to hike the Vat on the hospitality sector from 9pc back up to 13.5pc, has left hotels and restaurants reeling. The reduced rate, which was introduced in 2011, has netted the Finance Minister €466m in additional taxes each year, according to estimates.

The change in Vat was not the only major government incentive to have an effect on the food and drink industry in recent times. The sugar tax, which was introduced in May, added 30c per litre to drinks carrying more than 8g per 100ml. A blow to the sugary giants such as Coca- Cola, but a boon to Irish health drink industry leader Vithit.

Lavin’s company has agreed a deal to double the level of stock consumed by Sainsbury’s in the UK and is on track to make Vithit the biggest-selling health food drink in Britain by the end of the year. He maintains that healthy food and drink is a “lifestyle rather than a trend”.

Without naming names, Lavin also warned against companies taking on debt to fund unsustainable models within the industry.

“It’s not really a trend and people should think of it as such,” he said. “This idea of going in, running out of money and then seeking more funds… I think the funding will dry up and these businesses need to be more sustainable on a month-to-month basis.”

His business is entirely self-funded and has committed to expanding into Australia to hedge his bets against those in the Northern Hemisphere that decide against cold drinks in the winter. He has also rebuffed the idea that he’s built the business purely to sell it on.

“What we saw as a potential weakness for our business was that we are northern-hemisphere based so obviously in the winter people drink less drinks so we wanted to bolster that,” he said.

“People always ask me do we want to sell out? We’re not one of those companies who set up, burn cash for two or three years, get funding and then leave. I started my first vitamin drink 19 years ago, and the Vithit brand has been around since about 2007. We’re kind of here for the long haul.”

Sunday Indo Business



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