Bristol-based Coconut Chilli produces fresh, premium meal pots delivered to homes and workplaces. Founder and IoD 99 member Navina Bartlett wants to grow the business without compromising quality to chase profit – is an angel investor the answer? Over to this month’s panel of experts…
Navina Bartlett’s interest in southern Indian cooking was stirred by long summer holidays at her aunt’s mountain coffee estate in the country’s Coorg region. She delighted in experimenting with the coconuts, bamboo, pumpkin, cardamom, oranges and chilli that grew among the coffee bushes.
Later, her passion became an enjoyable way to supplement her marketing career. In 2012 she was among the founders of Bristol’s StrEAT Food Collective, a season of night markets in the city. It was clear, however, that if she wanted her stall, Coconut Chilli, to become a sustainable business, selling a few salt-marsh lamb koftes on a charcoal grill during summer wasn’t the answer.
“We were too early to market to scale the business,” Bartlett admits. “There was a lot of excitement for street food in London, but not the footfall in the west country. But my customers did tell me they wanted food they could take home and to work. That’s when I hit on the idea of premium meal pots based on southern Indian dishes using only fresh, quality ingredients.”
Over summer 2014, she refined her range of four gluten-free ‘heat and eat’-inspired pots (such as shrimp and coconut milk korma) that can be microwaved in three minutes. “My previous venture provided invaluable experience of setting up a business and pricing,” she says. “I used my marketing experience to come up with some packaging ideas. Having a network of close agency and copywriting contacts helped to keep costs of conception work low.”
Bartlett initially used savings and credit cards but a £22,500 start-up loan facilitated by Virgin Start Up helped her rent a professional kitchen in Yate, outside of Bristol, to turn the concept into a reality. By the start of 2015 she was visiting local offices and business parks selling direct to hungry workers wanting an easy-to-prepare quality lunch.
Bartlett is also grateful to the IoD 99, the young entrepreneur’s network of the IoD. “It has opened my eyes to the support that is out there. In Bristol, while there’s a lot of noise about tech and scientific companies, I didn’t find much support here for what I was doing – so the networking element of IoD 99 has been great. It is dynamic, entrepreneurial and a real confidence boost. I’ve met people who’ve gone and done it, who’ve given advice and mentorship.”
While Bartlett initially thought she would get her product on to shop shelves, in hindsight she admits she was naive. “I thought I was being very brave to launch a range of fresh ready meals rather than ambient sauces or frozen curries,” she says. “I didn’t really understand the complexities of the supply chain. Once I’d started working out the numbers, it became really scary. I’d either have to start making a loss for one or two years or reduce the quality. I don’t want to do that – our customers love that we toast all our spices, use free-range British meats and fresh herbs.”
Issues of shelf life and price point hit home when Bartlett made the top 50 in Ocado’s Next Top Supplier competition in 2015 but not the pitching stage. Now she sells direct at farmers’ markets and on the Coconut Chilli website, but online customers are currently limited to placing orders by Tuesday evenings, with deliveries on the Thursday or Friday. It means instead of buying individual pots online, they must order a hamper of 10, 15 or 24 meals, packed into wool-insulated cardboard boxes and sent by overnight courier.
“The buyers loved the food but I didn’t have the funds to start distributing because we would have to deliver at least twice a week. We’ve got a six-day shelf life at the moment because we do not use preservatives.
“The next challenge is to be able to cover operating costs so we can manufacture five days a week,” says Bartlett, who has taken on a part-time employee and sub-contracted a part-time chef. “We are only doing that on Wednesdays to send out a delivery on Thursday or Friday. But it’s quite difficult for people to order online because we’ve got a cut-off point of 5pm, Tuesday, and if customers don’t meet it, it goes on to the next week.”
Having appointed a digital agency in India to drive e-commerce, Bartlett is looking to raise finance to manufacture five days a week. She has researched angel investor networks but is adamant she only wants one who shares her values. Friends in the business community are divided as to whether angel investment is the right route for Coconut Chilli.
“Although it’s really small and artisanal at the moment I do think there is big growth potential if we can overcome the challenge of increasing shelf life, which is possible. I don’t want investors who are purely chasing profit. It’s about finding the right fit so we can grow the company slowly and sustainably. I want to use Coconut Chilli as a vehicle for change – you can produce good food with quality ingredients without cutting corners.”
Bartlett wants investors who share her ethos of educating customers about creating high-quality food. “It’s going to take time to grow the company sustainably rather than going for massive amounts of VC funding, leveraging the brand and compromising quality, which I am not prepared to do,” she says. “We need to be quite visible about how we do things and get the customers to buy into that. When we do get the scale, and once we’ve cracked the shelf-life challenge, prices will come down naturally. The biggest challenge is the next 12–18 months where we’re very small and it’s costing a lot to produce each unit.”
So is angel investment the right route for Coconut Chilli? Over to this month’s panel…
Should I find an angel investor for my business and how can I ensure they won’t insist on sacrificing quality for profit?
John Courtney NED, mentor at Microsoft Accelerator
Angels are certainly one possible route for funding, and quality and profit are not mutually exclusive – quite the opposite, as it sounds as if quality is what gives the business its USP. Another route to consider is crowdfunding and this can be done direct or through a support company like Crowd10, who helped my son’s business fund past its £80k target. But be aware that seeding crowdfunding with angels first is the best way to get the crowd to follow – just relying on the crowd is less likely to work.
Either of these routes is a long way from VC funding, which would normally come in for second or third-stage investment. Angels of course can also provide advice, which is invaluable. Another option is debt funding, particularly if the funds are needed to ramp up production as this can mean things such as asset finance of machinery or a term loan from a bank. Interest rates are at historically very low levels and repayments can be spread over a long period of time, so the cost can actually be quite small per annum. And as the funding is debt not equity, you still own all the shares – just be careful about signing a personal guarantee as then you are at risk. John Courtney is a member of IoD South West
Anna Sofat Managing director, Addidi Wealth
While I love the ethos and the approach being taken, from a business perspective, I don’t think angel investing would best service Coconut Chilli for a number of reasons. Attracting angel investing is time-consuming and almost a full-time job and taking you away from the core business could jeopardise its fragile cashflow. To appeal to angel investors, you need to demonstrate a business plan which shows that there is a market for your products and the business capacity to scale up, which will include your shelf life, manufacturing and delivering capability. Your business still has some way to go to tick all of these boxes.
Your best options for now are to borrow some from family and friends – this is probably the easiest option, depending on circumstances. Alternatively, you could get a further grant/business loan from a government-sponsored source or funding via a loan from your bank or crowdfunding platform such as Funding Circle. This might not be very cheap and could put cashflow pressure on the business, but it might serve a purpose if there is sufficient cashflow to fund the debt. My advice would be to focus on the shelf life and at the same time look for manufacturing partners while trying to improve cashflow from week to week. Anna Sofat is a member of IoD London
Anthony Harris Partner, Swiss Excellence
At this time you should concentrate on building your sales to local SMEs to establish a history of sales and margins – this will then form a basis to obtain future investment from angels, and a variety of financial institutions. Banks, for example, will provide short-term finance if the history is good, customers are paying and the flow of funds is managed well.
Next, target other nearby towns and industrial estates, while continuing to develop the menu. Consider taking on part-time staff who can be trained to prepare dishes to the standard you expect. A campaign of flyers and an incentive programme to encourage fidelity would help retain current customers as you concentrate on seeking new business. Encouraging companies to pay a retainer in return for an agreed menu choice for their staff could also provide an incentive.
As Coconut Chilli continues to develop, there is a good opportunity to provide evidence to angels that you have a niche market with your style and method of cooking. When working with an angel it will be a case of balancing an acceptance that their views may differ from your own with the positives of gaining an outside view and help with the growth of the business. Anthony Harris is a fellow of the IoD
Raj Dhonota CEO, Raj Dhonota Ltd
The short answer, Navina, is yes. Clearly your business’s growth is being held back by your lack of funds and the inability to provide your clients with the flexible, on-demand service that they desire, and that will take Coconut Chilli to the next level. An angel investor would be my recommended route because they will be able to cover the relatively modest amount of investment required, without taking huge equity as a VC firm might.
As for how to ensure they won’t insist on pursuing profit at the expense of quality, this is about finding the right investor for you. Having an angel investor will help here – because you’re dealing with an individual, you can look for someone with a background in the food industry.
With this background, they’ll quickly see that quality is your USP – and risking this would be disastrous for the entire business – and their investment. You could also negotiate an agreement whereby you retain control over major business decisions, and the investor simply becomes a source of funding.
In short, yes you should find an angel investor – just be sure to pick the right investor and negotiate control carefully. Raj Dhonota is a member of IoD Central London
Bartlett’s response Firstly, I would like to thank the panel for your valuable perspectives and useful advice. I like John’s idea about crowdfunding and this is also an avenue which I’ve been researching – and I agree that it’s a good idea to kickstart any crowdfunding campaign to gain traction. Friends and family could be a source too, but within my southern Indian community, the challenge is that most are fairly risk averse.
But I know that by selling direct and online we’re on the right track because we take payment upfront and keep the 40 per cent-odd margin that retailers would expect. And there are plenty of regional business parks where we can deliver all over the UK. As my team and I have already started selling at farmers’ markets and food festivals, we’ve been collecting data about our best-selling product – currently our lamb and black pepper keema meatballs in spicy coconut gravy – as well as profit margins. One way or another, we’ll get there… this is the exciting start of our scale-up story.
Navina Bartlett is a member of IoD 99
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