Quorn is one of the most recognisable global meat-free brands. According to owner Monde Nissin, when it acquired the business in 2015 the group already had a ‘leading’ position in 15 markets. Over the last two years, Quorn has been working to expand further under Brennan’s leadership.
The global meat-free trend
This has meant increasing sales in established markets as well as entering emerging markets for the meat-free category, Brennan explained.
The “bulk” of Quorn sales are generated in the UK, the US, Australia, the Nordics, Switzerland, Germany, Belgium and Holland. “In the markets where the [meat-free] category is quite well established, we're seeing really strong growth, between 15% and 20%, so we are focused on continuing to build momentum there,” Brennan said.
“Emerging markets like Italy and Asia that we're now focused on are big prizes for us. We still think that ultimately we've got a potential to win in the US and that could become a very big prize,” he continued.
Markets like Italy, Singapore and the Philippines are delivering “very high growth rates”, albeit from a relatively low base, reflecting “a very strong potential in those markets”.
Brennan is relatively sanguine about the overall impact the UK’s withdrawal from the EU will have on his business.
“If [Brexit] leads to trade barriers or high tariffs, that would be problematic within our business in Europe. Equally, food is so central… it's hard to see that anyone's going to gain in Europe from a tariff war on food. The EU doesn't have free trade agreements with the US, Australia and many other markets, so we already have tariffs going into those markets. If we had a free trade agreement with Australia and the US, that would be as much a benefit as any impact of a tariff in the EU zone.
“Ther are markets we've not even entered and we could, so there's some reason why EU zone became less attractive, we'd just focused on growth elsewhere.”
Continued internationalisation is important for Quorn as the meat-free trend gains steam globally. “We're seeing the [meat-free] trend happening everywhere, from Sydney to Santiago. Markets that we're in and actually markets that we're not in. You'd be hard pressed to find anywhere where it's not starting to have some degree of traction… We've started to hear reports in South America of the category starting to gain momentum, even in big meat eating areas like Argentina.”
What is driving meat-free demand growth?
Brennan said health concerns are the “main driver” of meat-free sales.
Current levels of meat consumption in some countries are “unprecedented, unnecessary and not good for people's health”, Brennan argued. This has prompted “younger, more educated consumers” to reduce their meat intake. “They don't necessarily want to give up meat, but they want to have a diet that's more appropriate from a health point of view,” he observed.
While the environmental impact of meat consumption is getting increasing attention in the mainstream media, it remains a secondary concern, Brennan believes. “Clearly, there are major sustainability issues around meat production: Greenhouse gas emissions that are greater than cars, massive land and water usage and water pollution. I think the world is waking up to that as an issue. But today it is quite a minor driver of consumer behaviour.”
Growing demand in the meat-free category has resulted in a jump in competition, as companies increase investment in the space. Brennan confirmed that he has witnessed an uptick in competitive activity.
“There are more competitors… Most of them are making pretty lousy food, but there are a lot of them. Some of them are making good food. It is more competitive and there are some good, strong competitive brands out there.”
Focus on marketing, R&D
This overabundance of suppliers has made it tougher to secure shelf-space. But Brennan insists that Quorn’s strategy to invest behind the brand and the category make it an appealing supplier.
“We’re one of the few manufacturers that invest heavily in marketing and category management of the brand, rather than just trying to… make a lot of money quickly, which is I think what's happening with a lot of people in the category. We invest with a long term view. We're looking at the next ten or twenty years in this category, not how much we're going to sell next quarter or next year. That plays well when we go to the customers and they see that commitment to the category.”
Quorn invests around 15% of its net sales in marketing. On top of this, the group invests around £10m a year on R&D, Brennan noted.
The group’s R&D resource is based in the UK, with plans to establish capabilities in Singapore. Quorn’s innovation team is focused on renovating existing products to improve their taste and texture profile as well as extending the group’s product range. Current brand extension efforts include moving Quorn into breakfast options, developing a greater range of deli type products, different sausages, or pastry type products, Brennan said.
The company also innovates to reflect different taste preferences around the world. “We tend to strike the balance of selling a core range of products that's worked everywhere and then adapting to local flavours and product types.”
Underpinning Quorn’s R&D success is Mycoprotein, a proprietary ingredient developed by the brand. “Mycoprotein, which we uniquely produce, has the greatest ability to replicate the taste and texture of meat of anything that's currently been commercially developed and we still think we can enhance how that replicates meat,” Brennan said.
He downplayed the suggestion that there could be some difficulty communicating the properties of Mycoprotein to consumers, brushing off a class action lawsuit in the US that was settled earlier this year. The case had claimed Quorn “misled” consumers into buying products made from “fermented mold” and argued Quorn packaging suggested they were buying a mushroom based protein.
“[Mycoprotein] is not a sticking point. That's a case that goes back to when the brand was tiny [in the US] and we've had 4bn servings sold there now, so clearly there's no other problem.”
Quorn products are also well suited to the clean labelling trend, Brennan continued. “From a clean label point of view, our fermentation process is very simple. We feed the fungi with glucose and oxygen, you can't really make production simpler than that. We use natural flavours when we add them, so from a clean label point of view, it stacks up better than most foods.”
Higher investment, lower margins
Quorn invests more heavily behind its brand than many of its competitors, Brennan believes. But the company has decided that – rather than charge a higher price point – it will operate on a lower margin base to support growth.
“We've not put our prices up in the last six years,” Brennan noted. “During that period, a lot of companies put through pricing, particularly currently, where inflation is re-emerging in food. But it's challenging to put prices up, customers don't tend to like it. For the consumers, in many places we're still in the midst of a recession. We would rather maintain our pricing. Eventually we may have to put our prices up but we try to wait for as long as we can.”
Quorn’s investment approach reflects the group’s ambition to grow volumes, which will in itself have a positive impact on profitability. “We know that if keep making our business bigger in the long run it will be a very profitable business, so we're willing to invest for that long term potential.”
It is made possible by Monde Nissin’s investment philosophy. “Monde Nissin has given us access to more investment, hence the high marketing spend percentages,” Brennan, who headed up Quorn prior to its Monde Nissin takeover when it was under private equity ownership, observed.
“Their view is the decades of growth in this category and they're more interested in how we grow it in the long term, rather than the short term profitability. We clearly want to make a profit but they are willing to invest in that long term quote potential.
“We have to accept lower profitability in the short term, to have a bigger business in the long term.”