FLAXY FILLS FOOD NICHE
TWO DRAGONS STEP UP TO HELP IMMIGRANT GROW FLAXSEED BUSINESS ACROSS CANADA
Each week, Financial Post contributor Mary Teresa Bitti revisits the previous week’s episode of CBC’s Dragons’ Den. We capture what the cameras didn’t and in the process provide a case study for readers, zeroing in on what pitchers and dragons were thinking and what the challenges for the deal are going forward. THE PITCH
This episode of Dragons’ Den turned the spotlight on immigrant entrepreneurs l ooking to make their Canadian dreams come true. Praveen Udagani immigrated from India to Canada in 2004 to deliver on a promise he had made himself: to create his own life, to build something completely new in a new country.
He had considered Australia and New Zealand before settling on Canada. Armed with a master’s degree in pharmacy and one year of work experience in his field, Udagani, his wife and 21- month- old child made the move.
“I always read that North America was the land of opportunity and that Canada was creating more opportunities for immigrants.”
The couple’s first jobs were at Tim Hortons. They worked alternating shifts so someone was always home to care for their toddler.
“We had no extra money f or babysitting, so my wife worked during the day and I worked the night shift,” Udagani says.
It was at Tim Hortons that Udagani hit on the idea for Flaxy, the Mississauga, Ont.- based flavoured flaxseed business he would launch in 2014.
“That’s where I first saw flaxseed bagels. At that point, I thought only people in India ate flaxseed,” he says. “I started to see more and more flaxseed but it wasn’t tasty. There were no flavours.”
After seven months at Tim Hortons, Udagani landed a job at a pharmaceutical company. He worked there until 2013, when a merger led to manufacturing being outsourced to India
“At that time, there weren’t many opportunities in the job market,” Udagani says.
“The idea for Flaxy was always in my mind. I convinced my wife that we should start the business and she supported me.” It was also around this time that Health Canada approved a therapeutic claim that ground flaxseed can help lower blood cholesterol.
He developed 10 to 15 flavours based on his mom’s recipes, tested them with former colleagues of all demographics and pared his offerings down to three sweet flavours and two spicy flavours. Chili garlic remains the most popular. Flaxy can be sprinkled on cereals, yogurt or smoothies or on rice, mashed potato or pasta.
With limited capital of $ 28,000, he was resourceful. Udagani made the most of training offered by the Ministry of Agriculture Food and Rural Affairs. He learned how to create a business plan and about com- mercial kitchens, where he could rent space to make his product. “You can pay as you go, or buy so many hours in advance.”
By the time Udagani entered the Den, Flaxy was in 20 health food stores in the Toronto area. He landed that shelf space, in mostly independent stores, after going door to door armed with samples. Sales in year two of operations were about $28,000. A 170-gram package retails for $8.99.
THE DEAL
Udagani asked for $ 50,000 in exchange for a 20 per cent equity stake, with the money targeted largely to fund marketing and raising awareness. By that point, sales had grown about 30 per cent year over year for the previous two years. He received three offers and accepted an on- air joint deal from Manjit Minhas and Michele Romanow for $ 50,000 in exchange for just 15 per cent equity. Talks continue and both sides are hopeful it will close. In the meantime, Udagani has tapped into his retirement savings to fund organic certification, which he believes will happen this spring. He is also working with a distributor that plans to take Flaxy national once certification is in place.
A DRAGON’S POINT OF VIEW
Michele Romanow is excited about the product and the entrepreneur. “I love the product and eat it every day. The entrepreneur is a genuine, hardworking guy. Organic certification is a critical piece in the health food category. Flaxseed is so important for a variety of reasons, and this should be in mainstream grocery stores, too. Where I think we can help is in marketing and getting more retailers interested.”
AN EXPERT’S OPINION
John Cho, partner, KPMG Enterprise, agrees with Romanow that marketing and raising awareness will be key. “He has done really well building the business to this point on his own. The product is on trend. He needs to leverage social media to get people talking about Flaxy and recommending it.
“As he gets ready to go national, he has to think about building infrastructure that will allow him to service greater volumes. He should be honest about his skill sets, focus on what he does best and bring in people to help him grow the business.”