Thomas Edison claimed failure was “the condiment that gave success its flavour”. For John Stapleton, the failure of one food business certainly adds a twist to his more successful food startups.
“You can’t build a career on failure," he says, "but it helps to have experienced it. It makes you better and spurs you to work harder, if nothing else to make sure you never have to experience that feeling again.”
Stapleton is regarded as one of the UK’s great food entrepreneurs. He’s built two huge food businesses and is now an adviser and investor to startups. He’s applied new, innovative technology to revolutionise food retail for ever.
He recently spoke at a Helm special guest dinner. Helm is a members-only club for the founders of innovative, fast-growth scale-ups worth more than £1m.
Written in the soup
It’s tempting to see Stapleton’s success as inevitable. But it wasn’t. It all started in a food science laboratory at Reading University in 1987, where he was gradually – if reluctantly - heading towards a life in the lab as an industrial microbiologist. That was before he spent an afternoon in the pub with Andrew Palmer.
Palmer was an entrepreneur who came to the University, which is world-renowned for its food science research department, because he had an idea about selling chilled, fresh soup. At the time the options for soup at home came in a tin or you made it from scratch yourself. Palmer had confidence that a chilled, fresh middle ground would be popular, but he didn’t have a clue how to do it.
Enter the young, entrepreneurial food scientist. If it now seems inevitable Stapleton would solve this challenge, the problems and dangers at the time were very real. Supermarkets were concerned this new approach to soup could potentially poison or even kill customers. As Stapleton admits, he didn’t know what he didn’t know when he accepted the challenge to join Palmer.
“Ignorance is bliss when you’re innovating. You start to climb this mountain and you’re halfway up before you realise how steep it is.”
Having secured early funding, the nascent New Covent Garden Soup Company took it’s time and eventually discovered a winning formula for success, which involved developing an entirely new process for making chilled, fresh soup and then packaging it in the now-iconic cartons. They could then sell it at a price that represented a massive leap up on the existing tinned equivalent (£1.10 compared to 30p). This was partly because even at that price it compared well in convenience and nutrition to all other convenient meals.
The challenge, Stapleton told the group, was that while they found it relatively easy to convince investors to fund the business and a major supermarket (Waitrose) to stock the product, they were having to create both the product and brand at the same time
Ignorance is bliss when you’re innovating. You start to climb this mountain and you’re halfway up before you realise how steep it is
Enter the copycats
The product caught on and soon supermarkets everywhere were stocking this new type of fresh, chilled soup. Soup sold in a supermarket fridge was an extremely novel concept at this time. Better still, no-one died. Own-brand copycats and other established players soon arrived. But Stapleton says this merely validated their idea.
Despite setting up the business with a plan to exit in five years, it took 10 before they ended up selling. By this time Stapleton was in the US, trying to recreate his UK success.
But this adventure didn’t end as well. A mixture of cultural and geographical factors meant the model didn’t work the same way. After a successful launch and a good first 18 months, the business ran into trouble. It didn’t help that Stapleton admits he was distracted by an offer to buy the business, which collapsed at the last minute when the buyer themselves were acquired. The loss of his focus (away from the business and onto the deal) was fatal, and the business ran out of cash.
Stapleton returned to Europe to lick his wounds. But it wasn’t long before his determination and resilience, not least the determination not to “end on a failure” drove him back into the entrepreneurial life, this time as co-founder of Little Dish a company that offers chilled-but-nutritious ready meals for children.
He says that his need to create Little Dish came as much as anything from self-doubt. “I was full of self-doubt and kept asking whether the original soup business had been a success despite me. I needed to prove to myself that I could do it again.”
Little Dish was a success and was eventually sold to private equity. Now Stapleton specialises in investing and advising startups, unsurprising most of which are innovative food businesses. This is partly because it’s what he knows, but mostly because he says he likes to be an active investor “I like to be really involved in helping these businesses.”
Some key lessons from Stapleton's session:
Conviction comes through customer insight
While Stapleton admits that the initial soup business was not built off the back of huge amounts of robust market research, they spent a lot of time from the early stages onwards talking to potential customers. “To have conviction you have to have insights,” he says.
They also used tactics, such as introducing a “soup of the season” and later a “soup of the month” to test new flavours in-store. “While the retailers were initially doubtful – because no one else had done it – we pushed on and customers reacted really well. It was the best possible way to test new flavours.”
All boats rise with the tide
When it launched, the New Covent Garden Soup Company transformed soup forever. Its pioneering use of technology to create long-life fresh food, transformed supermarkets. In the wake of its success, lots of others jumped on board, from supermarkets with own-brand equivalents to established tinned soup brands.
“Initially we were worried, who wouldn’t be when you see that scale of competitor, with the budgets they had?" admits Stapleton. "But we soon realised they were doing us a favour. They brought credibility to the category and validated what we were doing. I’m a firm believer in the idea that all boats rise with a rising tide.”
Startups have to focus on building the brand and product at the same time
Early on Stapleton admits that one of the hardest things was to get the balance between investing in product and investing in the brand. He says the key is to keep focused on building ever-greater insights into who your target audience are and what they want from you. And to think especially hard about the things you offer that others can’t or don’t.
And from the man who brought us soup in a carton, there is the advice to invest more time than other people thinking about your packaging. It's a relatively quick-win to get standout.
But even more important than this is a ruthless focus on quality. “We had to be consistently excellent,” he says. “We were doing a lot of in-store sampling and this meant we had to entice new customers with a small taste of something new and different. We had to grab them quickly.”
Be aligned with your shareholders
Back in the late 1980s the food innovation business was very capital intensive. If technology has speeded up some of the research now, there is no easy way to launch into retail chains at scale without substantial investment. Stapleton says that making sure the founders and investors are on the same page and fully aligned on expectations is vital.
He explained that Covent Garden benefited from being something of a pet investment for a major investor who didn’t usually invest in consumer brands. “It was useful for us because he was a huge name in investment circles and a very experienced investor. He really liked that he had a brand he could talk about with friends at dinner parties.”
Try and be a price setter
Stapleton is clear that one of the major advantages of creating a new category is that without obvious direct competition you have a better chance to set the price, rather than take the price you are given. While that isn’t always easy when negotiating with major retailers, it is easier than where you are entering an established market that has clear expectations on upper and lower price points.
Three golden rules
Stapleton is reluctant to pick out simplistic tips or tricks, but when pushed offered a triumvirate of nuggets that all businesses need if they want to succeed:
1. Product – You have to have a bloody good product that meets the needs of the target audience and quickly becomes critical to their lives.
2. Scalability – In the world of consumer goods especially, retailers want to know before they list you that you can fulfil their orders on time. You need to be set up to gain from economies of scale, so you can build-in sufficient margins quickly to make enough profit to re-invest in the business. “This is a capital intensive business and you need to keep the wheels turning”.
3. Team – Build a team capable of delivering in bad times, as well as good. This resilience is critical, says Stapleton. He’s led businesses through several recessions in different markets. “Business resilience comes from having resilient teams right across the business. These teams will only be resilient if they’re made up of resilient people. So always try and recruit with that resilience in mind.”
Sell when it feels right
Having launched three startups and taken two to successful exits – one a strategic sale, the other private equity – Stapleton is clear there are no hard and fast rules about when to exit. As much as anything he says it boils down to when founders feel the time has come. But he suggests being ruthlessly focused on maximising value and not getting so distracted by the sale process that you crash the business in the meantime.
But, as he puts it "it is never too early to start a conversation with a corporate adviser who can help with the eventual sale process."