Knook #15: Appleby Farms
Kiwis are the highest consumers of ice cream per capita, ahead of the US and Aussie, at an average of 23 litres each per year. Fair to say we love our ice cream. But with the rise of more awareness about gut health and taking notice of how things affect our bodies, one Nelson company has taken that a step further by making their ice cream from A2 milk. Mike Brown has been CEO of Appleby Farms since late 2018, and I caught up with him to learn more about their premium product and what they’ve got planned. “Appleby Farms has two unique propositions - we’re a farmer owned ice cream company, and we’re made from A2 protein milk,” says Mike. “A2 protein is just entering the consumer consciousness here in New Zealand, but A2 milk is now 10% of Australian consumption, and as the big companies market their milk, they’re breaking ground on product recognition for the little guys like us.”
I asked Mike how Appleby Farms got their start. “In 2016, our two farming founders, Murray King and Julian Raine, started talking about moving down the value chain with their product, which was milk from their A2-producing herds. They started talking to Kristy Giles who at that point was looking after risk management for their milking sheds, but had previously been an ice cream maker at Tip Top. “Together, they hatched a bold plan to build an ice cream factory, which they did in 2017. “The company was founded with this real sense of ambition for its size. While it was a huge investment, the factory is important for future-proofing growth, controlling IP, owning the supply chain, meeting customer needs … and telling a complete provenance story. “We started selling the ice cream itself on Boxing Day 2017, selling out of an Airstream caravan at Tahunanui Beach here in Nelson. We started with five flavours in the retail format and released into grocery during 2018. “I joined in October 2018 to drive growth, especially on the export side. The premium ice cream market in New Zealand is quite small so Appleby Farms has really been aiming for export from the get-go.”
I asked Mike how his previous career experience has been useful in building this business. “My background has really been focused on wine production, and through that I saw the stresses and strains of managing a business, maintaining supply, scaling up, building a brand, and distribution. Because of that background I’ve also got a strong read on the provenance story of Appleby Farms,” says Mike. “I also did a stint at NZTE, and saw multiple businesses there. It was a real privilege to see lots of business and how they’re dealing with common pitfalls. There was also lots of stimulus thinking about what makes a successful business: that mindset of careful validation, failing fast, focusing on the white space where you can win with your unique value propositions and the resources available to you.”
The business has been firmly focused on the fact it is building to export. I asked Mike how they’ve gone about that process. “With my background, I had a good understanding of the steps to export. I’ve seen that there’s a bit of a penchant for Kiwi businesses to run from one shiny thing to the next, so I was firm on having a plan and sticking to it. “We started working with NZTE to identify 16 markets that may work for us, and getting a read on the fundamentals of those markets. We reduced that number to 9 and with an investment in quantitative market research, mapped out the market attractiveness for our unique offering. We then overlapped that with anecdotal experience from other ice cream exporters. We have ended up with 6 markets of interest and we’re rolling our strategy out across phases. “As part of our 6 markets of interest, I’ve spent time ‘walking the shop floor’ in each of them and they all come with their own challenges. But ultimately, we need to get the product in people’s mouths, and then tell the story about why it’s such high quality. “We’ve picked Australia to start with because there’s great recognition of A2 milk and a warm feeling towards NZ. Australian ice cream quality overall is patchy and the competitors in the premium space are much smaller. “There’s a few options when you enter a new market. Either set up your own sales arm - but that comes with high cost and its high risk - or you work through a distributor. As a startup we just can’t afford to go it alone, so we’ve signed with Botany Group who have a specialty in distributing food with functional benefit and they’re obviously excited about the A2 protein story. We launch nationwide into independent grocery in April, with a view to selling through one of the majors come summer. “We’re also having to change our pitch a bit. In New Zealand, our story is very focused on the farmers, but in Australia, the focus is on the A2 protein benefit. When we get to it, Asia will be different again, because they love the traceability element of products from New Zealand. “Now we’ve got some product on the shelves in Australia and Singapore, we’re the only company in the world exporting A2 protein ice cream as far as we know.”
The ice cream category in New Zealand is quite crowded. I asked Mike how they’ve approached that competition and what advice he’d give to companies looking to push into a crowded category. “The New Zealand ice cream space is very fragmented. The big players are mainly foreign-owned with a long tail of small, boutique NZ-owned brands. But the big guys need the small guys for colour and innovation, and the small guys need the big guys because they’re the market leaders. We all need to accept we need each other. It’s especially gratifying to see NZ-owned brands of ice cream, both large and small, promote together through initiatives such as NZ Ice Cream Week in November. “Being small, it’s also tough to play in a centralised buying environment that is inevitably geared to bigger brands, but we’ve found many supportive operators to work with, like Moore Wilson’s, Farro Fresh and indeed individual supermarket owners and buyers." I ask Mike what’s next for Appleby Farms. “From a startup perspective we’ve got a finite amount of dollars so we’re very deliberate about how we approach opportunities,” says Mike. “We’re clear on our value propositions and who we’re selling to, we’ve got a good governance focus and bring people on board where we can integrate their valuable experience into the company. Next steps in terms of the structure will be bringing on investment. We’re not about building for an exit - we want shareholders who bring something to the party and are in it for the long-term. “In terms of sales, we’re going after cementing our position in the premium market in NZ and owning at least 5% market share here. Alongside this, will be building up our presence in Australia, followed by developing an aggregation of East Asian markets. Finally, we’ll have a tilt at China or the US - it’ll most likely be one, not both, as they are big plays. “And in the meantime, we have capacity for contract manufacturing so that helps with the overall business’ cashflow and spreading overheads too. We’re very much looking forward to seeing the company grow and taking A2 protein ice cream to the world.”
To learn more about Appleby Farms, and where to purchase, visit: https://www.applebyfarms.co.nz/.