Actually, it's just “Rachel’s” now, the company having dropped the organic word from its brand name in April 2009, apparently because of the difficulties faced by the organic sector.
The company has been put up for sale by American giant Dean Foods with a price tag said to be around £20million. Whatever the reasons, this is sad news, putting a respected brand into play, with all the uncertainty and worry this brings to the 125 strong workforce.
Rachel’s is a small company with a turnover of £20million and a profit before tax of £2.3million according to accounts for the year to December 2008. For comparison, nearest rival in the organic dairy sector, Yeo Valley, has a turnover of around £175million of which 40% is organic.
So who might buy Rachel's? And what might they do with it?
At the brutal end of the spectrum, any of the existing dairy companies could buy, paying back the acquisition price by taking a hatchet to costs. They could close the Aberystwyth plant and either make themselves or contract manufacture, and fold all the administrative functions into their existing structure. The current sales and marketing strategies would continue,with Rachel’s sold alongside all the other brands in the acquirer’s portfolio.
There is an alternative and much more attractive strategy, one which would carve out a highly distinctive position in the market. Keep the plant open, continue to buy milk from the dairy farmers who currently supply, and market the brand as 100% Welsh, drawing heavily on Rachel’s Welsh heritage and history. Keep it organic, for this is what the brand is known for, and there is a market there, albeit small and going through a rocky patch, but make the brand the focus, not the organic tag. Instead of getting the product stocked sporadically nationwide, make sure that it is in every food store the length and breadth of Wales. And cut the price. Currently it sells at too high a premium over Yeo Valley, much less supermarket’s own brands
Is this a good enough strategy to pay back the acquisition cost?
It is not without risk. A pessimist would look at Rachel's declining sales,and its number two position in the wobbly organic dairy market and walk away.
The optimist might say here is a brand with potential,and it could be a strong number one in its homeland.
They would think through how to manage the business. Possibly the marketing budget could offer savings and be more effective if put in the hands of a Welsh company who understands marketing on a shoestring, and how to promote through the internet and social media.
They would accept that costs will have to be looked at, but pruned rather than axed.
They would take a forensic look at where the cash in the business is going. Is there for example too much tied up in stock and would a reduction in number of different lines release money. Are haulage costs overly high because of shipping products nationwide.
They would take a cautious but sensible look at increasing sales.
And then they would negotiate an appropriate price for the business.
Any of the dairy companies could follow this strategy, but consumers might feel warmer towards Rachel's if it went back to its privately run roots, rather than be yet another small company involved in a huge conglomerate.
Is there an entrepreneurial Welsh wizard out there who could really make something of this rather special brand?
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