Stepping down after a near-decade at the helm of Quorn Foods, Kevin Brennan talks to Dean Best on the growth of the UK meat-free firm and what the company needs to do to continue to prosper in an ever-more competitive market.
In the almost ten years Kevin Brennan led Quorn Foods, it is unquestionable the UK-based business – and the meat-alternatives category the company helped shape – has undergone significant change.
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And, sitting down with just-food in London last week, just days after stepping down from the helm, Brennan is certain Quorn can still play a leading role in what he believes will be the rapid expansion of the market for alternatives to meat.
“The category is so exciting. It’s quite unbelievable. I don’t think even I really thought this quickly it would get this exciting,” he says.
In August 2010, Quorn’s then owner, the UK manufacturer Premier Foods, hired Brennan, who had spent 11 years at Kellogg, to run its meat-free operations, which had been struggling.
Five months later, Exponent Private Equity bought the division, including Quorn, for GBP205m (US$328m at the prevailing exchange rate). Brennan remained in charge and, four-and-a-half years of solid sales growth later, Philippines food and drinks group Monde Nissin bought what had become Quorn Foods in a deal that valued the meat-alternatives business at GBP550m.
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By GlobalDataUnder Brennan, Quorn has been able to ride – and drive – the growing interest in meat-free products, particularly in the UK. However, the category is very different to the one he encountered when taking the reins in the summer of 2010.
“Back then it was a question of vegetarian food – but very quickly I saw the potential when I saw the quantity of food that could be produced and saw the potential for a mainstream health idea out of it,” Brennan says as he reflects on his tenure. “Quite a bit of that was intuitive. It wasn’t the view in the business. I just kind of stuck with that belief through thick and thin in the early days when it wasn’t necessarily as apparent.”
Brennan leaves a business in growth; in 2018, Marlow Foods Ltd, which trades as Quorn Foods, saw sales rise 7% to GBP220m. Profits were down in 2018, reaching GBP27m, versus GBP32m in 2017 but the decline was amid an investment in R&D Brennan believes will be vital for Quorn as it moves forward under its new CEO.
Marco Bertacca, the former Unilever and CSM Bakery Solutions executive who was most recently managing director of Alaska Milk Corporation, another Philippines-based food business, has taken the reins at Quorn at a time when consumer demand for meat alternatives is growing in a number of markets – but when competition is intensifying.
“It is, in an exciting way, a double-edged sword,” Brennan says. “I don’t think anyone’s debating now the category is going to be very, very large. At the moment it’s a very small category in food terms but all the predictions are that, somewhere between 15 and 20 years from now, it could be ten-fold the size.”
At present, the growing number of still meat-eating but ‘flexitarian’ consumers fuelling the growth of the category in markets like the UK and the US are, in the main, buying meat-alternative products for health reasons, believing the foods are healthier than conventional meat.
But Brennan has been vocal in his criticism of some of Quorn’s peers in the meat-free industry, questioning the health credentials of certain products and he stands by those comments.
“I am absolutely convinced virtually everybody that buys a product in this category thinks that product is healthier than the meat equivalent. People position themselves by calling themselves ‘plant’ and describe themselves as though they’re a healthy version [of meat] – and yet are laden with [ingredients such as] coconut oil,” Brennan argues. “Huge investments are getting made into products that fundamentally aren’t any healthier than that meat product. I can’t see the category maturing and that not being picked up by consumers.
Moreover, Brennan says the meat industry, particularly in the US, have realised the health attributes of meat-free products are “a big issue and they’re already coming after the category”.
He adds: “They’re not stupid to go: ‘Hang on, arguably some of these products are more processed, no more healthy and maybe do miss out on some of the micronutrients.’ It’s true for certain products. Not all.”
As the meat-alternatives market matures, Brennan also believes more consumers will start to pay more attention to the environmental impact of the sourcing of the ingredients that goes into the products. Last month, after years of work with The Carbon Trust, Quorn announced plans to put information on the carbon footprint of its products on labelling. Pointing to the fermentation of protein that lies behind the production of Quorn’s products, Brennan believes the company can gain an edge on its competition by emphasising its sustainability credentials – even if, at present, only a minority of shoppers think about the environment when buying alternatives to meat.
“What we’re doing with fermentation is the process isn’t using a material amount of land. The process that we have is going to be a really powerful position on a ten-, 20-year horizon,” he insists.
“We know the data says there just aren’t enough people today bothered by the climate. I think over time, as the sustainability issue grows, people will then go: ‘What’s this product made out of?’ That’s got a few years before that gets traction but it will come. We’re going to focus on that message to be ahead of the trend.”
It’s a laudable stance but how convinced is Quorn consumers will catch up? The company is facing ever fiercer competition and could instead major on other areas such as health. “We’ve actually done some testing of that message in the US and it went down really well, almost off-the-scale advertising results,” Brennan insists.
“We’ve spent ten years educating the consumer on the category and on our benefits and I think we’ve got a licence to be able to take the consumer with us. We could just as easily say ‘health’ and, in the short term, the effect would be the same. What this [strategy] is going to do is help be seen by the consumer to be leading the journey and not waiting until it’s ‘a jump on the bandwagon’ time.”
The US is Quorn’s second-largest market by sales, with the UK remaining the biggest and still accounting for around three-quarters of the company’s revenue. Brennan reflects that, during his tenure, Quorn found growing its international business was “tougher than we had anticipated”.
In the US, Quorn had what Brennan calls “an up-and-down journey”, held back, he acknowledges, by “maybe hubris” after some early success in the country at the start of the last decade. The company, Brennan believes, was also in part hampered in the US by too broad a product range.
“Tactically we started to try to play the role of being the innovator to the retailer. They kind of liked that but what you ended up doing is providing the peripheral SKUs in the category – and then the rate of sales aren’t great,” he explains. “We actually just flipped it and went ‘Hang on: what sells? And where can we play a unique role in the market?'”
Quorn decided to focus on fewer products in the US – including on SKUs where it believed it had an edge on the competition such as in alternatives to chicken items – and opted to only invest in marketing in select cities where its distribution was strong enough.
“We really have broken through in the US,” Brennan says. “I’m pleased we’ve got to the point where there’s still colossal upside but we unquestionably work now. We have 90,000 distribution points and we’re getting distributor points off every retailer, every review. Where we have consumer activation in place, we’ve got some very exciting market shares in places like Portland and Seattle.”
While pointing to other “good results” in markets such as Australia and the Benelux, Brennan says it’s important Quorn remains selective about its investments outside the UK. “We’re not Nestle in terms of the resource. You’re better off being strong and building the brand in select markets.”
Building Quorn’s business in the foodservice channel (especially in recent years with notable deals with the likes of Greggs in the UK) was a feature of Brennan’s tenure and that will continue under the new CEO, he says.
But, asked where strategically Bertacca should be focusing his efforts in the years ahead, Brennan says the “starting point has to be capacity”. Quorn has its own manufacturing site in north-east England and outsources an undisclosed amount of production. Brennan believes the projections for the growth of the meat-alternatives market means working out Quorn’s production footprint will be critical for future trajectory of the business.
“We’re still very tight on capacity. This category over ten years, the business will way more than double and probably will triple. There’s an enormous amount of capital to be borne, building the right factories in the right place. What do you make yourself? What do you co-manufacture?” he says. “Marco’s tremendously experienced in supply chain. He’s got a very balanced background, very strong commercially, but it’s great to have somebody with that degree of supply knowledge because it’s going to be as much a supply as a demand game.”
But, to meet demand, Quorn will have to, Brennan says, continue to invest in its brand and in innovation. “Anyone can make a burger and a sausage and it’s hard to give yourself a long term advantage in that space. I mean, you’ve seen competitors to the Beyond Meat products materialise in a six-month window. We have to be at the forefront of innovation. We’ve got the resource.”
