A Gu-d business model

Tom Bordell and Mehdi Jaffer meet the founder of Gü Chocolate Puds and find out how he built his brand and why he eventually sold it.

James Averdieck is Britain's 21st century Willy Wonka. Having graduated with an economics degree from Durham University, this chocolate master began his journey at strategy consultancy Arthur D. Little, which gave him an invaluable international perspective on business. For the next nine years, James homed in on the food industry, taking jobs in management, sales and marketing at Safeway and St Ivel. And it was in a Belgian boutique chocolate patisserie to which James was sent while working on a St Ivel project that the idea for Gü was born.

Great expectations

Gü's first ever product was their chocolate soufflé, which James dreamt up to capitalise on a demand he spotted for premium products, which has grown rapidly in recent years. Quality has always been a high priority on the Gü founder's agenda, and the company's chic continental-style packaging also appeals to the ever-more sophisticated taste of the modern consumer. "The whole thing works because the product is reflected by the brand name - it looks the part. It creates an expectation that the product then meets," says James.

The indulgent puddings are calorie-loaded to say the least, and despite concerns over the healthiness of food products in the UK as obesity levels reach record highs, James doesn't see this aspect of his business as problematic. "My philosophy is that eating a small amount of something that's a bit naughty for you is fine". However, Augustus Gloops beware. James is happy to admit that "if you eat too many Gü puds, you're going to get fat".

A competitive edge

James is more concerned about his rivals than calories. The cutthroat nature of Britain's supermarket-dominated grocery industry means that avoiding fierce competition when starting a food business in the UK is virtually impossible. On the bright side, the centralised structure of the top six supermarkets in the UK also means that once head offices approve your product, large orders will be placed for your edible goodies and they'll be distributed throughout Britain. James refers to other small food-based businesses that for this reason have also been able to flourish in the UK - soup specialists Covent Garden Food Co., Green & Blacks, Innocent Drinks and Dorset Cereals among others. But, as he stresses, "it's difficult to get in unless you have a good product."

And the hard work doesn't stop once you're in the aisles. To stay well-placed on a supermarket shelf, a product needs to meet sales targets. James explains that Gü faces a variety of competitors as his products have to square up to a range of other brands - from Ben & Jerry's ice cream to Müller products and supermarket-branded desserts. "Knowing who your real competitors are is absolutely crucial - and their products might be on the other side of the store." He explains that only then can a business meaningfully evaluate its share of a particular market.

Competition might be stronger than ever, but James has achieved an incredible amount of exposure for Gü through some clever marketing techniques.

Flying high

A deal with Virgin Atlantic led to Gü desserts being served to over two million people per year. "A lot of marketing is subconscious", he says. "Through this deal, customers got to stare at our Gü packages for four hours on a flight. Visuals often have much more impact than words as they stay in our memories for much longer".

James has also used PR to increase Gü's profile. "If you've got a product worth shouting about, PR works", he admits. "In our first year we got approximately £2 million worth of media coverage via PR for around £40,000". As well as product familiarity, wide distribution is also key to success. "Volume allows you to become more efficient as it increases your gross margins, which allows you to pay for bigger marketing campaigns and driving the volume up again."

James sold a controlling share of his business in early 2010 - "all my wealth was tied up in the business and I didn't want to risk everything in Gü." But he still holds some equity and is spearheading Gü's expansion abroad. Armed with his delicious products, he's still as closely involved as ever: "Internationalising only really works when you have your own people working full time with your products in the new markets you are entering - you need to have a constant presence there and be able to move quickly with representatives on the ground handling business every day". Gü has an office in Paris, and bases in the US and Australia will open shortly. Gü's come a long way since its founding in 2003 with £100,000. The business turned over £22.5 million in 2009, and on its recent sale fetched a sweet £30 million.

Roald Dahl's chocolatier hid Golden Tickets in Wonka bars to find a junior partner for his confectionary business. James doesn't make quite the same offer to us but, as we say goodbye to him, we can't help wishing he had.

We ask James Averdieck: if you had to...

Recommend one business book to undergraduates: Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne. It's all about avoiding competition by reinventing a market, or establishing a new market altogether if you're starting up a new business.

Have dinner with the CEO of any company: The top dog at Mars.

Invest £100m in one company today: I would invest the money in a fund, not a company, that was focusing on entrepreneurial businesses in India and/or China, probably in the food industry.

Invest £100m in one individual today: James McMaster - he's at organic baby food company Ella's Kitchen at the moment.

Start all over again after graduating, would you do anything differently? Yes. I would have worked for a big food or alcohol manufacturer (like Mars or Diageo) after the few years I'd spent in consulting once I'd graduated.

*Enter into The Apprentice or Dragons' Den* as a contestant, which would you choose? **The Apprentice, because I think Dragons' Den is the bigger PR exercise of the two, and pretends to be totally about business investment when it's not. At least everyone knows The Apprentice is all about good TV.

Are you a spender or a saver? A spender.

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