With new investment backing and a new food-to-go range imminent, UK allergen-free foods firm Kirsty’s is targeting fast growth.
Kirsty Henshaw started her business in 2009 following a long search for free-from food options for her son after discovering he had several allergies.
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Very much a lifestyle business, things changed when she went on to enter business pitch TV show Dragons’ Den in 2010 and worked with ‘Dragons’ Peter Jones and Duncan Bannatyne after winning their backing.
She bought them out three years later but from then until now a category that has come to be known as free-from has become much more crowded.
However, with one estimate suggesting the UK gluten-free food sub-category alone will be worth $195.8m by 2026 with a CAGR of 7.6%, there’s plenty of market share to go after.
Just Food’s Andy Coyne talked to Henshaw about the North Yorkshire-based company’s ability to cope with increased competition and plans to grow through diversification.
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By GlobalDataAndy Coyne (AC): Kirsty, how would you describe the market for free-from food products now? I’m guessing it’s very different from when you started out 15 years ago?
Kirsty Henshaw (KH): There has been a shift in that the unnatural food we are eating is making us more intolerant and allergies are on the rise. Supermarkets are giving more space to this than they did before. Where there weren’t many in free-from there are now many brands. Our ambition is to be one of the biggest brands out there and we’re looking to develop new lines. There’s lots of competition but not so much in ready meals. We are number one in that area. Our drive and determination to continue to be the UK’s number one free-from food brand has shone through.
AC: Ready meals is a strong area for supermarkets’ own brands. Is private label your main competition?
KH: We have a slightly distinctive offer because we are dairy-free as well and we are positioned within health but private label is our main competitor. It is a challenge because they don’t need a marketing spend and we do. But our whole factory is allergen-free, which means we can produce things quite cost-effectively and our products are very competitive price-wise.
AC: Who do you see as your typical consumer?
KH: Allergies can come at all times of life. We see our main customer as a 50-year-old woman with Coeliac disease.
AC: Kirsty’s was recently backed to the tune of £2m ($2.6m) by a fund operating on behalf of the government-owned British Business Bank and operated by Mercia Equity Finance. What difference will this make to the business?
KH: We were privately owned until recently when we got that investment. That will speed up innovation and allow us to grow faster. That’s what they want and we approve of that.
AC: It’s not the first time you’ve had investors, of course. Famously you were backed by two of the ‘Dragons’ from TV business pitch show Dragons’ Den back in 2010. But you bought them out three years later. What was the thinking there?
KH: Peter Jones and his team were very much about licensed deals and we established those at the time. We licensed the brand name to manufacturers so they could make products with our name on it and pay us a royalty. It worked well for a couple of years but I didn’t think this was an efficient way for a free-from company to operate in terms of our own ability to innovate. I bought them out in 2013 and then it was just me in the business. After a couple of years, we explored setting up our own manufacturing and in 2020 we launched our own factory.
AC: You mentioned speeding up innovation. Is NPD the key to the future growth of Kirsty’s?
KH: Yes. We’ve got a portfolio which already includes children’s frozen ready meals, frozen pizza and frozen desserts and we’ve now developed a food-to-go range of sandwiches, salads and wraps using an external manufacturer. The food-to-go range is a new development for us as it has a short life. It’s very exciting but very scary at the same time.
AC: And you’ve developed a kids’ food brand, Flourish by Kirsty’s, with three SKUs.
KH: They are all proven favourites with little ones: Pasta Bolognese, Chicken & Sweetcorn Pie and Cottage Pie. Each meal is gluten and milk-free, as well as being free from eggs, nuts and soya. They’re also low in salt.
AC: Aside from NPD, where do you see growth coming from? Are there further distribution opportunities at home or might new markets be on the agenda?
KH: We’re not in the discounters but we’re in all the other major stores. We’re looking at getting exports off the ground and are talking to different distributors. We are already in Ireland. But it’s very challenging with the need to get vet certificates etc after Brexit. I’d like to see the new government get rid of stuff like that.
We’re looking at getting exports off the ground and are talking to different distributors.
AC: What about other channels, foodservice or private label?
KH: In foodservice, we are in the middle of hiring a new manager. I’d like to get that properly off the ground. We are looking at private label as well. But I’m about the longevity of the business. We only go with the opportunities that are right for us.
AC: You set out plans to triple revenues back in 2021. How are things looking now?
KH: We are up to 55 employees and we’ve seen double-digit growth. We’ve grown revenue by £1m a year over the last ten years.
AC: Like all food manufacturing businesses, you’ve faced a lot of headwinds over the last few years with rampant inflation in the supply chain and soaring energy costs being just two. How have you coped?
KH: You must remember we got the keys to our new factory four weeks before lockdown. We probably wouldn’t have done it if we’d known. We got the keys and then we were into a new world where there was very little labour and we were sending people home. Everything hit us at once. I can laugh now because we survived it but I had never felt stress like it. But I’m a Prestonian single mum and I dealt with it. And then we had Brexit as well. We import pizza and desserts and ingredients. There were delays and shortages. Many different elements go into ready meals. There could be 20-plus ingredients in a product. We sometimes had to switch what we were offering as a result.
AC: And with regard to more recent headwinds, have you had to take pricing actions to recover increased supply chain costs?
KH: Things have got easier lately but we pay well above minimum wage and that will go up again. Labour costs and energy costs are still rising. We have absorbed as much as we can but we will have to pass these on by the spring at the latest.
