National Post (National Edition)
Frozen veggies need lots of green
What she’s offering — convenient, healthy food — makes a lot of sense
Can’t get enough of CBC’s Dragons’ Den? Financial Post contributor Mary Teresa Bitti examines a deal done on last night’s show. She captures what the cameras didn’t and in the process provides 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 Toby Davidson has always been a behind-the-scenes, underthe-radar innovator. She knows what sells and has built her business, Concept to Shelf, helping companies find innovation in their businesses. She credits her late father, Brian Davidson, with instilling in her the skills to make innovation happen. Mr. Davidson started his career in the food business at the age of 13.
“He went from working in a deli to executive vice-president of Loblaw Cos. He helped create the President’s Choice Brand with Dave Nichol, Don Watt and Richard Currie. I grew up surrounded by visionary thinkers and doers who were focused on the mass market consumer. I listened and learned a lot,” she says.
When her father passed away suddenly 21 years ago, Ms. Davidson began working for Loblaw, where she learned all she could about the grocery industry including how to be a buyer and how to source products, which led to her becoming a category manager before moving to a role as product brand manager for President’s Choice. “That’s where I really fell in love with product and consumers. It was a way for me to launch products, just as my father had, within an infrastructure that guaranteed me 1,000 stores in which I could put my ideas to work and track my results,” she says. “I was an intra-preneur before I became an entrepreneur but it wasn’t part of any plan. It just evolved.”
After 10 years at Loblaw, she started Concept to Shelf in 2003 and signed the company on as her first client. The model was simple: no staff, instead she outsourced any capabilities she needed for a given project and she would be the pro- ject manager. “While I was working for one particular client that is now defunct I came across flash-frozen dark, leafy green product. I’d never seen anything like it. The contract ended but three years later this product was still on my mind.”
She launched Cookin’ Greens in March 2009 in 14 Sobey’s stores. “I believed they would be the future of a new segment of the vegetable category, just as frozen peas, corn and broccoli florets were innovative 30 years ago.”
Ms. Davidson set about making frozen Kale, collards and rapini sexy in North America. The dark leafy greens are picked fresh and within six hours washed, blanched, chopped and individually quick frozen locking in all the flavour and nutritional benefits. “I was first to market globally for blended leafy greens. The hard part has been educating people,” she says. “Sales haven’t been hitting the targets.” The deal Ms. Davidson asked for $175,000 for a 20% equity stake valuing the company at $875,000. The product was retailing for $4.99 per 500 gram bag. It was being carried in 600 stores across Canada and at the time of the pitch annual sales were $500,000.
The dragons wondered why sales weren’t greater, considering the strength of the distribution. Part of the problem, she explained, was the packaging. She needed to convert to stand-up packaging to gain more visibility on store shelves. The dragons agreed.
Jim Treliving offered $175,000 for a 50% equity stake on air, but the deal didn’t make it through due diligence.
“Since we’ve been on the Den, things began to click,” Ms. Davidson said. After losing $100,000 in 2011, the business was profitable in 2012 and sales were up 137% in January 2013 from a year earlier. “We’re in 100 more stores than when we taped the episode and we are in the process of moving to the stand-up packaging. We expect to see a 20% lift in sales when the new packaging is on store shelves,” she said. The plan is to expand into the U.S. and to launch new all-natural healthy products. A dragons’ point of view Mr. Treliving likes the entrepreneur and respects her experience in the grocery industry. “She has all the right ingredients. The biggest reason we didn’t go forward is because she’s going to need a lot more than the $175,000 she asked for. As well, there’s not a big markup in this business and it would take us a long time to recoup our investment and start making money as an investor.” An expert’s opinion The key is to make sure she is planning for growth and all that entails, says John Cho, partner with KPMG Enterprise. “Word is getting out. She is in 100 more stores. What’s she’s offering — convenient, healthy food — makes a lot of sense. People have less time to spend in the kitchen and it’s all about quick, healthy meals.
But he says there are some questions: What will the impact of the new packaging be on distribution? Will it drive up costs? Will she be able to forecast when she will need financing to support growth? Is she able to accurately forecast how much financing she will need, when and why? Can the current supplier meet additional volume levels, or will she need new suppliers?
She seems to be doing all the right things today but is she keeping her eye on tomorrow so she can continue the growth trajectory?
As for adding product lines, Mr. Cho suggests focusing on the core, building a good following and then growing from there. “Think of the success of Tropicana. The company stayed focused on orange juice before it started offering other drinks.”