Australia-based Freedom Foods Group is balancing its ambitions to grow at home and abroad. A supplier of allergen-free products in Australia, Freedom Foods is expanding its domestic presence through a focus on innovation. At the same time, the company is trying to grow its dairy, snack and cereal sales in China and the US. Katy Askew spoke to Freedom’s general manager of marketing and innovation, Tom Dusseldorp, to find out more.
Freedom Foods Group, the Australia-based cereal-to-beverage group, continues to be a business in active pursuit of growth.
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It has been four years since just-food discussed Freedom Foods’ strategy with one of the company’s senior management and, in that time, the business has continued to invest in its domestic market, as well as announcing a series of moves in China and persevering on its bid to crack the US.
In the year to the end of June 2013, the fiscal period of our last interview with Freedom Foods, the company generated net profit of AUD13.7m (US$10.3m) and revenue of AUD88.9m. In the 12 months to the end of June 2016, Freedom Foods ran up a net profit of AUD50.6m, with revenue reaching AUD170.4m.
A mix of organic growth and acquisitions has driven Freedom Foods’ growth and, talking to just-food at the Natural Products Expo West trade show in California last month, Tom Dusseldorp, the company’s general manager of marketing and innovation, set out the company’s latest moves at home and abroad.
Freedom Foods is launching a swathe of new products in Australia this spring. With 30 new SKUs being launched into the health food channel over the past two months, Dusseldorp says that the domestic team has been “kept busy”.
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By GlobalDataAs one of the country’s largest health food brands, Dusseldorp believes it falls to Freedom Foods to drive the growth of the segments in which it operates by building consumer interest. “There has been a real lack of innovation [in the Australian health food sector],” Dusseldorp says. “What we all know about Australia is we do pick up food trends pretty quickly and we work them through pretty fast. We are a great test market for a lot of global companies to try out new ideas because we have a population of 23m. When you make a mistake, it’s not a game changer.”
Dusseldorp predicts the growing consumer interest in plant-based alternatives to dairy will be a big driver for Freedom Foods’ domestic sales. Freedom Foods holds the licence to Almond Breeze, the dairy-free beverage brand owned by US co-op Blue Diamond Growers, in Australia and the company is investing to try to “leverage the plant-based opportunity”, Dusseldorp says.
“We are investing AUD100m in a state-of-the-art factory in Australia. We are commissioning in [May] a new plant. It is about leveraging the scale that we already have in the plant-based sector. We are one of the largest suppliers of almond milk in Australia… For us, we see it as a massive market and in Australia we are seeing phenomenal growth. We see a big, big opportunity,” Dusseldorp says. “We have also put a bottle line into our Ingleburn site in Australia that will allow us to access impulse. In Australia, impulse non-dairy is nowhere at the moment. Flavoured dairy milk is 100m litres in Australia and growing well so there is a real opportunity for a plant-based alternative.”
Another area set for growth is Freedom’s snack brands, Dusseldorp continues. “We want to deliver portable health – but it doesn’t necessarily have to be just a bar. We are experimenting more in the bite space. Protein has really led portable snacking in Australia. Snackability is the biggest growth driver for us. We have also launched a range of quinoa chips under our Crafted Blends brand, which brings a healthy chip to the Aussie market. We have gone into the process of how do we reduce saturated fat to get a better health star rating for a chip. We will be the only ones to achieve a four-star rating in Australia with chips, which is really exciting.”
Food manufacturers in Australia can sign up to the “health star” nutrition labels scheme, introduced as a voluntary measure in 2014.
Freedom’s domestic activity also includes a series of new snacks and cereal products. The company has rolled out a new snack brand aimed at children, called Messy Monkeys, which Dusseldorp says was developed in response to demand for products that do not contain “hidden nasties”, such as excessive levels of salt.
“The kids opportunity for me is the next opportunity for our business,” Dusseldorp says. “I have kids and I struggle to find snack food that I would give my children. I have talked to 100 other parents who feel the same. The Messy Monkeys range is extruded, quinoa-based and then we add vegetable powders and a tiny bit of sodium. Nothing wrong with salt but you don’t need 600 milligrams, you just need 100. It is getting that balance.”
The company is also targeting millennial consumers, with Dusseldorp claiming the cohort is largely under-served by health food makers in Australia, who, he says, are more focused on the “main grocery buyer”, typically aged between 38 and 40. Freedom Foods plans to roll out a snack bar Dusseldorp describes as the “food equivalent” of energy drink brand Red Bull. The product is made up of slow release energy sources such as cashew butter, he reveals. “We are launching a whole new brand called PEG which is a bar brand, which is all about millennial nutrition. I think of it as the food equivalent of Red Bull. It is all real and good-for-you.”
The PEG brand is “about going out and having fun” and “embracing energy” with less emphasis placed on health. “I think for us [this is] the square peg. We are calling it urban energy,” Dusseldorp says.
While Freedom is adjusting its tone for a millennial audience, the healthy attributes of its products are also increasingly being placed in the spotlight. The company – which has a wide free-from product line-up – has adapted its communication to focus less on the allergens its products do not contain and more on positive nutrition. “When you talk about food and all you tell people is what is not in it, that is counter intuitive,” Dusseldorp says. “We changed the way we spoke about our foods and decided to create foods that do a heap more. That is when Crafted Blends, our first step into nuts, came out. Then you see the evolution into [wholegrain ingredient] BarleyMax; we are evolving everyday in terms of what we offer.”
To that end, Freedom recently embarked on a process of assessing and – where necessary reformulating – its existing range in Australia and is working with nutrition scientist Dr Joanna McMillan on a nutritional rating scheme.
“We want to make sure that people are eating good food. And if they are not, what are we doing as an organisation? For us, we have really drawn a line in the sand to say we are improving our entire range. We are now ripping apart every product we make. We have employed a consultant in Australia, Dr Joanna McMillan and she is going to create a red, green and amber profile for our products. Anything in red – which we haven’t got thank goodness – will be removed immediately. Anything in amber goes on hard wired to evolve and change.”
The company has already looked at the levels of salt and sugar in its main domestic cereals, while increasing the amount of fibre contained in the products. “We just reformulated our three core cereals in Australia – rice flakes, rice puffs and cornflakes – because the competition had caught up. People were bringing out gluten-free but they were still high in sodium, some have high fructose corn syrup, so we reformulated. We now have almost double the fibre of anyone else on the marketplace. For us, our sugar base is already really low but we have really looked at bringing down the salt levels, balancing out the trifecta, which is salt, sugar and fibre content. And we did this with no issue, no push back.”
Linked to the idea of positive nutrition, Dusseldorp believes there is a “huge” opportunity for Freedom Foods to expand its snacks and cereal business in the area of prebiotic fibre and gut health through ingredients such as BarleyMax, developed by Australian science research body, CSIRO, in partnership with Popina Food Services, a business Freedom bought in 2015. “It is probably the single biggest area across our markets,” he says.
Outside Australia, Freedom Foods recently formed a joint venture with US investment firm AFT Holdings to “accelerate” the Australian company’s “sales and earnings base” in the US. The group is pushing to expand the reach of its brands that contain BarleyMax as a point of difference in the market.
The range has already been “well received”, Dusseldorp suggests. However, he concedes expansion in the US has been a “learning curve” that included moving out of the allergy-free space which, he says, is “interesting but it is a niche”.
Nevertheless, Dusseldorp is excited about the US market, where entrepreneurial companies are driving interest in the large natural channel. He reveals Freedom Foods is excited by the prospect of operating in a market where the retailer base is more diverse than in Australia.
“[In Australia] you do have to play in some half-price promos throughout the year. You can’t avoid it. Australia as a food market is far more aggressive than the USA because there is not as much competition [at a retailer level]. For us, the exciting thing about the US market is that you do have that diversity of retailer. You have a really well-established natural channel, which I find really exciting… Back home it is far more cut-throat.”
While the group’s fledgling US business is an interesting avenue for future expansion for Freedom Foods, Dusseldorp believes the greatest market potential lies in China, where the company has invested significantly in recent reasons.
Dusseldorp reveals the company’s largest revenue stream is generated by dairy products it co-manufactures for Chinese dairy companies. However, he believes a good opportunity lies in the less developed cereal and snacking sectors.
“The cereal and snacking opportunity in China is still very much in its infancy. It is the emerging younger consumer that is experimenting with cereal and western style foods, especially in breakfast,” Dusseldorp says. “They are rejecting the traditional breakfast foods – the hot breakfasts, konjis, because the young people in China have great access to digital channels, which their parents are not as engaged with. They are also incredibly busy and they acknowledge the fact they need more on-the-go options, which cereal and snacking can provide.”
Dusseldorp, however, adds: “The sheer size and scale of China, the underdeveloped nature of western food over there, is a huge opportunity. Well, everyone says it is. Whether it will emerge to be the biggest food market for western food in the world is TBD at this point.”
For all its potential, Freedom Foods is also facing a number of challenges in China, including changes to import regulations that have hit the performance of other Australian food manufacturers, such as infant formula maker Bellamy’s Australia.
“The challenge in China is not only the cultural challenge, for western companies to understand the consumer and [distribution models]… The other challenge is the regulation changes in China,” Dusseldorp notes.
Freedom Foods is prepared to tackle these issues thanks to its “well connected” in-country team, Dusseldorp claims. “We have people on the ground, we have had for years. We’re in dairy, so we work with some of the biggest dairy companies in China, so we really keep our ear to the ground. You also don’t pretend to know what you don’t know. That is one of our favourite sayings. We are actually seeing more and more what we don’t know – and when you are aware of that you can mitigate the risks.”
Another issue facing western food manufacturers hoping to grow in China is the fact consumers in the country do not always differentiate between the plethora of western brands hitting the shelves of tier one and two cities. “I think that is one of the biggest challenges that companies have when they look at China. They see it as an overnight success. They want the lottery ticket. And yes, there are examples of that. But my analogy is always the same. There are people that win the lottery. You and I don’t. The vast majority of us don’t.”
So, how does Freedom plan to succeed in China? “It’s about the hard slog,” Dusseldorp says. “It is about consistent investment. It is the fundamentals of any business. You build it from the ground up and you do the hard yards…. It is about time, place, continuity, all of the things that reek of effort.”
