In September 2014, Panoramic invested £1 million of growth capital in family-run premium sausage makers Heck Foods, which was founded by Yorkshire farmers Andrew and Debbie Keeble in 2012. Heck’s brands are sold throughout the UK in Tesco, ASDA, Morrisons, Booths and Waitrose, and via its own website.
1. What other funding options did you consider before accepting Panoramic’s offer?
We had recently received an approach from a large food business that was interested in investing in Heck but had taken this route with an earlier business that we had built and did not want to do so again. We recognised the benefits that external investment would bring and therefore started to look at the alternatives that might be available via the banks or private equity investors. I will admit to being initially apprehensive of the stereotype (a city financier just looking to make a quick buck) but this was far from the reality that we experienced.
We actually came across Panoramic via a Google search. We liked what we read on their website and felt encouraged that they looked like relatable people. This was the first step in getting to know them, which obviously developed over time. I think it helped that they had tasted our sausages and showed an appreciation for our products!
2. Why Panoramic’s offer?
At the end of the day people buy people and we got to know Stephen Campbell well in the run up to the investment. He now sits on our board. Was it the best deal that we could have achieved? Probably not in cash terms. But the fit was right for us and critically we saw it as a fair deal for both parties.
3. You have previously built a business and raised money from investors. Did those experiences influence your decisions this time?
In 1999, we created the sausage brand “Debbie and Andrew’s” and at its peak the business held about a quarter of the UK’s premium sausage market. In 2005, we sold a majority stake in the business to a large multinational food business but ultimately that wasn’t the right move for us. We felt that we became increasingly disenfranchised from the business and removed from doing what we do best, which is creating the highest quality products for our customers.
We didn’t know then what we know now. This time round we weren’t prepared to repeat that experience. Certainly we are ambitious and want to achieve commercial success, but it is critical for us that we retain the freedom to run the business our way. We offer our customers the highest quality hand-made produce and production methods – it is the essence of our brand – and it is something that we don’t ever wish to compromise. Panoramic brings a great deal of business experience, but we remain in total control of our production process and it was imperative that we were able to work with external investors in that spirit.
4. What experience does Panoramic bring to the table?
We do what we do best and that is making great sausages. Panoramic brings a different perspective, skill set and base of contacts.
For example, we had been finding it difficult to achieve attractive terms with our bank. Panoramic was able to guide us through this process, strengthening the financial information that supported our case and helping us to negotiate a good deal. I’m not sure we would have had the same confidence without them. Their guidance has also helped us to build relationships and trust with our suppliers, with whom we have now agreed more flexible credit lines. This makes a considerable difference to the bottom line when you are spending in the region of £50,000 every week on meat!
Panoramic has helped us to improve our financial information and controls and we have just put in a new accounting and stock taking system. Mundane as this may sound on the surface, it has had a hugely positive impact on the operational side of our business.
Lastly, I’ve valued being able to share experiences with other growth businesses. We’ve been able to do this at Panoramic events such as their annual stakeholders event or by capitalising on the insight that other Panoramic backed companies have in their own respective industries.
5. What is the investment going to be used for?
The investment will help us achieve one main objective – and this is raising awareness of our brand among consumers. We had previously relied on our profits to fund marketing but we felt that we needed to put some additional firepower behind getting our message out there and building a direct relationship with our customers. When you look at the supermarket shelves, there is so much choice. A brand needs to stand out to the customer. The sausage market is valued at about £850m, and we currently have an approximate £6m share of it. We’re doing well – ahead of budget – but there’s still long way to go and increased brand awareness will help us get there.
Big corporates have seemingly endless budgets for marketing. But we can’t afford to be reckless, every pound that we spend has to deliver. So we’re not looking at expensive TV campaigns. We do some selective advertising, but our main focus is on direct sampling with customers at shows and events and on making our own staff the best possible ambassadors for the brand. This approach may not be the quickest way to make an impact, but it is effective, sustainable and true to our brand ethos.
6. What have you achieved since the investment?
We have continued what we were doing before, but we are doing it better and faster. We’ve enhanced our customer service and marketing capabilities and can afford to be more visible at shows and events. We are engaging more with social media, helped by an introduction to award winning global digital agency Dog Digital, which is also backed by Panoramic.
In the first six months following Panoramic’s investment we were still loss making and that could be deflating. Now our sales are £1.5m ahead of budget – twice as far as where we expected to be when we started the business three years ago. The critical thing is that we are making great tasting products for customers who come back to us time and time again.
7. How does the relationship work with Panoramic in practice?
I wasn’t quite sure what to expect from private equity and was apprehensive at the outset. But in reality private equity investors will only invest if all parties are on the same page. Panoramic is helping us to build a great business and our interests are fully aligned. I think that makes me a convert!
We are a family business and that is important but it is not more important than anything else. You don’t let family decisions get in the way of sound commercial decisions. That was understood at the outset and we wouldn’t expect it any other way.
In practice, I speak to Stephen Campbell on the phone regularly and we meet at monthly board meetings and occasionally in between. We put a lot of work into ensuring that information is complete and shared ahead of board meetings so the time that we spend together is productive.
The mood in the boardroom is very positive. Of course it is inevitable that we will at some point face an issue or roadblock. I’m confident that we have the right relationship in place to deal with that situation robustly and effectively if and when it happens.
8. What are your long-term ambitions for the business?
We want to grow and create a business of scale; and, we want to do that without compromising our brand ethos or the quality of our products. The questions that we will have to answer in the future are whether or not to sell when the business gets to a certain size or whether we want to see it through the next stage of its development? In 5 years, we might be a £10m business but we’ll need to ask ourselves if we could grow to become a £30m business and how we might achieve that? It’s too early to predict the answers to those questions now but I feel confident that we’ll have reason and opportunity to ask them in the not too distant future.