Slow Food Ireland

ONE OF IRELAND’S OLDEST FAMILY-OWNED COMPANIES, WHICH CAN TRACE ITSORIGINS TO THE EARLY 18TH CENTURY, IS LEADING THE CHARGE IN IRISH EXPORTS THANKS TO ITS ABILITY TO EVOLVE AND RECOGNISE POTENTIAL NEW MARKETS.  SORCHA CORCORAN REPORTS

porridge pot

published by kind permission of businessandleadership.com

For a sixth-generation family business, Flahavan’s is particularly outward looking and the word ‘progress’ is more than just an element of its traditional porridge oatlets’ brand name.

At a time when food and drink exports are declining – according to a recent report from Bord Bia they fell by 12pc in 2009 to €7bn – Flahavan’s has managed to bring exports up to 20pc of its total sales volume, and chairman John Flahavan hopes to double export volumes in the next five years.

He tells me this not long after Dr Don Thornhill, chairman of the National Competitiveness Council (NCC) made this statement on launching the NCC report Driving Export Growth: Statement on Sectoral Competitiveness: “While overall Ireland’s export performance is holding up relatively well in spite of a very challenging global trading environment, this is primarily due to strong growth in two sectors – medical and pharmaceutical products and chemicals. Many other exporting sectors are facing significant challenges, particularly traditional manufacturing sectors such as food and computer equipment. Urgent action is required to address the critical competitiveness issues for individual exporting sectors.”

Flahavan’s is very much a traditional food company. There has been a mill at Kilmacthomas where the business is still located since the late 1700s. John Flahavan has been involved in the company since 1972 and says one of his sons is currently working on the packing line.

“We’re a family company in the most positive way. The family ethos runs throughout the company – you won’t find it on posters or mission statements,but all 50 employees recognise it. Three generations of one family have been employed here and there are a number of cousins. It means everyone puts their shoulder to the wheel and people give us long years of service – two people celebrated 50 years’service with us recently and 30 or 40 years’ service is quite normal.”

Flahavan explains that his firm’s exporting journey started with sales of the ingredient product.“For a number of years we exported a bit of the ingredient product to France, the Middle East and Spain for use in muesli, biscuits and baby foods. We developed from there, putting our toe in the Northern Ireland market in 1995 with the retail porridge product and went further into mainland UK in 2003,” he says.

“From an Irish point of view we had quite a high market share then [around 60pc of the hot oats market] and  hadn’t reached saturation. However, we decided that rather than trying to get a larger percentage of a finite market, we could achieve similar growth with the same amount of effort in a new market. This splits your risks as well as you’re not so dependent on what happens with  the competition in one market – you always have somewhere else to fall back on.”

Flahavan’s won the Exporter of the Year title in 2009. At the ceremony, Liam Shanahan, president of the Irish Exporters Association, said the judging panel was particularly impressed with Flahavan’s “continued strong focus on research and its ability to identify customer trends in its markets”.

He also praised the company’s successful product development strategy to grow the overall business despite the recession and the very difficult trading conditions in the UK, now its main export market.

While it doesn’t release detailed financial information, Flahavan says the company currently holds about 65pc of the hot oats market in Ireland,which was estimated to be worth around €20m. In the year to August 2009, the hot oats category grew by 12.5pc in volume and 6.3pc in value, according to TNS. Commenting on the award, Flahavan says it shows how people are coming back to more basic products now. “A few years ago people involved in high-tech industries and commercial property were winning awards – now there is a lot to be said for basic industries.”

PREPARING FOR PROGRESS
Over the past 10 years or so Flahavan’s has repositioned itself with a strong brand focus, market segmentation and the introduction of 18 new products in drums, sachets and pots, 16 of which are still available. The broader Flahavan’s range includes a real fruit porridge range and a selection of oat biscuit snacks.

“One of the things we noticed back in the Nineties was a movement away from traditional cereals into ready-to-eat formats. Porridge was regarded in some quarters as being oldfashioned. With all the new products we have brought out, combined with a lot of public relations work, we have attracted a new generation of porridge consumers – young people interested in convenience and health benefits. There are very few porridge products that lose health benefits once you take them into the convenient format.”

Flahavan’s entry into the UK market in 2003 gave it a headstart in terms of its overall approach to product development. “When we researched the UK we found it was more convenience- focused than the domestic market and felt this trend would be coming down the road to us in Ireland at some stage. The UK market helped us to be an early experimenter in understanding how the convenience cereal market works,” Flahavan notes.

“We brought some existing products to the UK but actually started selling a couple of smaller products in the UK first and then introduced them into Ireland – the spiral-bound drum and microwave pot. We were the first in the UK to introduce these formats, although there were other products available in single sachets.

“After spending a lot of time visiting European markets and the US, when we came to launching in the UK we decided on driving our own innovation rather than duplicating any other offerings. We thought about selling a boxed product, but saw that others had introduced this, such as Quaker, and left the market just as quickly. People expect regular porridge oats in a bag. By going with the drum, people started to look at it differently.”

Flahavan says the company’s exporting strategy into the UK was “quite deliberate”. The team sat down and wrote a business plan around it with a clear sense of direction on which retailers to list with first. One of the main lessons Flahavan says he’s learnt from exporting to date is that before you start looking to launch a product, you should choose some existing networks and support structures.

“In the early days we worked closely with Bord Bia’s London office. This saved a lot of time and unnecessary effort and helped us to identify where the best gap for our product was and the best format of the product to suit that opportunity. We did a lot of gap analysis ourselves, but Bord Bia put us in touch with non-competing companies that could give us good advice, such as suppliers to Tesco or Wholefoods in a non-competing food category. This process allows you to learn from their experience of what’s important,which can be everything from the supply chain to promotional activity.”

Flahavan’s spent time looking at appointing a distributor but came to the view it could better serve the retailers in the UK directly itself. It now supplies Tesco, Asda, Sainsbury’s, Waitrose and Wholefoods. In the Irish market, Flahavan’s marketing strategy has been based around leadership, while entering the UK market in 2003 required a different approach, Flahavan says.

“We were well known in Ireland with a high market share, which meant we could enjoy economies of scale and look at considerable advertising and promotional activity. However in the UK, we weren’t known. Flahavan’s was a challenger brand and the type of emotive imagery we would use in Ireland wouldn’t be appreciated by consumers there.

‘A FEW YEARS AGO PEOPLE INVOLVED IN HIGH-TECH INDUSTRIES AND COMMERCIAL PROPERTY WERE WINNING AWARDS – NOW THERE IS A LOT TO BE SAID FOR BASIC INDUSTRIES’

“It became important for us to have a clear understanding of what the emotive and functional aspects of the brand are. You have to have a strong functional bedrock to the brand, which is great taste, great performance, ease of delivery and ease of preparation. When you go into a new market the emotive aspects won’t be as high and you have to try to build the brand up around these functional aspects.”

In practice this meant less of an emphasis on advertising and more on getting the product into people’s hands, such as through in-store promotions and public relations activity. As observed by the Exporter of the Year judging panel, research is at the heart of everything Flahavan’s does and appears to be one of the secrets of its success.

“We spent a lot of time up-front researching the market thoroughly before selling anything. We invested in quantitative desk research as well as heavily in packaging research for new concepts. We see research as an investment rather than a cost. Our attitude is that once you put a new product out there, it’s very difficult to pull it back and this can be costly.  Thorough research takes some of the risk out up-front,” says Flahavan.

“We used to always say internally we needed to ‘prove the market first’, rather than making an up-front investment on the capital side. This meant that we would rather spend money on research and do things quite manually to begin with in production. We were prepared to take a lesser margin to get the product launched and see it succeed. Once it did we could go back to the capital investment with more confidence.”

Flahavan’s has tried to source everything possible in the Irish market from raw materials to machinery but this wasn’t always possible.This had a consequence in terms of currency risk, however. “Buying some things such as packaging and other machinery in the UK allowed us to offset some of the currency risk associated with sterling. It doesn’t take out all of the problems, but it does allow us to hedge the currency risk with incomings to balance outgoings.”

So, what about the future? Flahavan sees most potential in English-speaking countries. “Porridge is generally recognised as a breakfast option in the English-speaking world, whereas in continental Europe people use oatmeal for muesli and fresh breads, rather than boiling it for breakfast. There could be an opportunity for us in the US as we would be the only truly authentic Irish oatmeal brand available.  We’re looking closely at this and I’m going to a food fair in San Francisco to explore it further.” Watch this space.