The five:am story

two tubsThree-and-half years since its inception, five:am has been sold to an international food company for $80 million. It’s been an enviable meteoric rise to fame for this Australian company that until recently only sold yoghurt and told us simply to ‘Wake up and be amazing’.

five:am, which is certified by Australian Certified Organic, was bought by PZ Cussons, which also owns Morning Fresh, Radiant, Imperial Leather and Rafferty’s Garden.

Australian Organic caught up with the company before the announcement.

The business operates from an industrial estate in outer Melbourne suburb Carrum Downs, where it has its office and factory. On the day I arrive, staff members are sampling yoghurts and taking notes. It’s a Tuesday, tasting day, and staying ahead of competitor products by developing new flavours is one of the secrets to five:am’s success and award wins. It aims to develop a new flavour every six months. The company’s food technician, Stephanie Farley, says the company supports small, certified organic farmers and sources local ingredients as much as possible. It recently worked with Young Grower of the Year and certified organic farmer Nathan Free  to finesse a flavour combination.

Giving the market what it wants

According to founder, David Prior, five:am was developed to make certified organic food accessible to everyone. Distributing the yoghurts through the two main supermarket chains, at a lower price point, was crucial. Flavours can be mixed on site or other companies develop the new flavours for them. Offering what other yoghurt makers don’t is crucial to five:am’s advantage and positioning with supermarkets.

Stephanie says, “We need to stay on trend. We have a lot of followers on social media who are nutritional bloggers so we’re constantly getting their feedback and we get information sent to us from the dairy industry. There are a lot of issues we come up against when adding fruit to yoghurt. We need to keep it as fresh and clean as possible.”

The company’s Facebook following of 86,000 is a constant source of feedback, letting five:am know when it’s going right and wrong. Its foray into TV commercials at the beginning of the year exposed the yoghurt to even more fans – not too strong a word for the company’s loyal shoppers. It has created a brand, a personality that resonates with people – something staff attribute to David’s vision and hobbies as a surfer and yoga practitioner.

five:am’s dreamy commercial featuring surfer Laura Enever reciting a poem is another example of how this yoghurt company has nailed the concept of brand loyalty and image. five:am marketing coordinator, Lauren Kempler, says, “People wrote page-long messages to us saying how much they loved the ad. We had our creative agency put the ad together and they came up with the most beautiful poem that expressed exactly what we wanted in the brief. We had people writing in wanting the words. That was really special.”

20140708_110431Asia here we come

Having succeeded in Australia the company is now focused on Asia. David says, “It [Asia] has always been a really important market for us and now we’ve bedded down our business with both Coles and Woollies and have a big product range Australia wide, we’ve started concentrating on key markets Singapore, Hong Kong, Shanghai and Beijing. In Singapore we’re working with Cold Storage and now we’re looking at China. It’s starting to take shape and we’re starting to really understand what we’re doing in those markets and what the potential looks like.”

Without being physically located in the region, David doesn’t expect their business in Asia to be as big as it is in Australia but he still expects their market share to be potentially “huge”. “We could be in 1000 supermarkets with 10 SKUs, so that’s a pretty sizable business if you got that going.” Of course freight costs keeps a lid on the overwhelming possibilities of Asia because it makes the product more expensive than it is here.

Relying on supermarkets keeps five:am on its toes but David says as long as the company is innovative and doing new things, it will always have a place on the supermarket shelf. The trick is to come up with flavour ranges retailers can’t do themselves. The latest is honey and chia but with the scarcity of honey, organic or not, the product comes at an unlucky time for the manufacturer. David says, “We’re paying double what we were two months ago . It’s $11 a kilo. It’s just horrible.

“You can’t just change your pricing and we wouldn’t anyway because we believe you just have to ride out those things.” He’s frustrated about the price of organic ingredients in general and when you’re trying to keep the price difference between your product and that of the conventional product next to it on the shelf to a minimum you can understand why. David says, “We’ve done a lot of work to keep our price points close to conventional and that’s why our brand has grown so quickly but there’s a lot in the organic community who want to keep the pricing very high and it’s too expensive for the average Australian shopper. They can’t pay double or triple for their produce. You know if we want to get organic out there it has to be at a price point that’s relevant to most Australians. That’s the biggest challenge.”

(Others argue it is the price of conventional produce that’s unrealistic – that it’s too cheap – returning growers so little they’re going out of business.)

More than just yoghurt

five:am stepped away from yoghurt momentarily this year, releasing a granola cereal; however, at the time of talking with the company it wasn’t planning on releasing more products anytime soon. It wants to cement these products to the supermarket shelves first.

David says, “The five:am brand is all about early mornings and healthy living and getting the most out of your day, so granola fits really well with that. We want to get that space and offering right before we do anything else. It’s in Woollies at the moment. Once it’s in Coles and once we have a good spread of SKUs through the majors and into export we will see where we go next. But at the moment we’re focused on yoghurt and granola.”

Handing over the reins

Following the announcement of the acquisition, David was quoted in news source twst.com: “I am delighted that five:am has chosen a great home for the future. The cultural fit with PZ Cussons was apparent immediately and I am sure that the business will flourish under its ownership.

“I am very pleased to be maintaining an involvement in five:am for a post-completion period and am looking forward to working with Alex [Alex Kanellis, chief executive of PZ Cussons Plc] and his team over the coming months.”

The sale of five:am comes a month after Tasmanian baby food company Bellamy’s Organics, which uses ingredients certified to Australian Certified Organic, floated on the Australian sharemarket, returning the company over $95 million. The Australian Organic Market Report being released in November this year will give us further insight into these developments and trends as well as other organic company successes.

Chair of Australian Organic, Dr Andrew Monk, says the sale reflects the maturity of the organic industry. He says, “Congratulations are due to the five:am team for the hard work, dedication and significant risks they took on in building this business from zero, developing high-value-added products for our Australian organic farmers. It can all look so easy and simple to those looking on – but innovation, entrepreneurialism and investment, along with blood, sweat and tears along the way, are the hallmarks of many of the organic success stories of our industry.

“This development is testament to the organic marketplace in Australia now and its associated industry coming of age and hitting the big league. While big business interests are not welcomed by all, they are a critical component in delivering a growing volume of Australian Certified Organic products to an ever-expanding network of consumers across the country and the region.

“We look forward to seeing the results of the next investment phase of such companies as five:am and the consequent benefits to Australian organic farmers in turn.”

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