From an idea that could make a difference in the world to a £20m Market Cap. business in 2 years. Here we share just some of the learnings from this fast-growing business, with aspirations to go global with their bamboo-based toilet paper.
Very few people can change the world, it’s usually the ones that are a little crazy that actually do.
Dakota Transformation: Tell us a bit about the background to Cheeky Panda and where the idea came from?
Chris Forbes: My partner Julie Chen, had identified that finding a green product that helped the environment would be important to her own personal principles and in turn would make good business sense. Julie is from China and had seen for herself the range of uses of bamboo and suggested that a toilet tissue that could be made from bamboo would help the environment compared with the existing brands which were paper-based and thus came from trees which took a lot longer to grow and harvest.
We decided to visit a manufacturing plant in China to see what could be possible. Off we went to central China and then what turned out to be a 6-hour trip from the airport to the factory. What was also important to me, was the conditions of the factory workers and the quality of the product they were going to be able to make. I was incredibly impressed when I visited the factory. Maybe I shouldn’t have been. With the growth in China, new factories are starting up all the time and as such, they are not held back by the legacies of the past. They design factories with closed-loop manufacturing, ensuring efficient workflow and utilisation of the natural resources (the water in the process was recycled and the steam produced is used in part to produce electricity to power the plant)
The environment in the manufacturing facility was great and though the salary levels were low compared to European standards, the relevant cost of living meant that the workers have more disposable income than their Western counterparts doing similar roles.
The other question I had about the facility was its ability to scale and maintain quality. With their focus on quality and continuous improvement, I was reassured that they could meet our own demands
So, we went back to the UK inspired and began to build a detailed 30-page business case so that we could test the idea in the marketplace. We decided to order a container of the toilet paper and began to promote what we had to offer.
Dakota Transformation: In this startup phase, what were some of the things that were going to turn out to be critical success factors in the longer-term success of your business?
Chris Forbes: Right up front we wanted to establish a strong brand, backed by a social media campaign to get our message out there. We decided upon the name Cheeky Panda and evolved the Branding Strategy to make sure it stood out from the competitors, who quite frankly hadn’t changed their proposition or brand for years and years.
Dakota Transformation: In these early days, who did you decide you would need to help you with the Start-up of your business?
Chris Forbes: I realised we needed to tap into the experience on distribution and on logistics of getting goods into the UK from China. Being from Essex, I reached out to the Head of Investment in the local area. I offered to take David Rooke out for a curry to ask for his advice. Halfway through the meal, I put a roll of our toilet paper on the table and asked if he could help us with a new business venture! He was a bit taken aback, explaining that normally he deals with the £100m turnover co.’s but he really liked the idea and was keen to see if he could help. The next day I received a 5-page email from him with a list of processes, considerations, recommendations and contacts that would be able to help out with the logistics via the docks.. Invest Essex also decided to back us with some help by giving us access to a PR expert and an expert in FMCG.
I also turned to a close friend Ed Smith. Ed is an experienced Non-Executive Director, with a very successful career in Commercial Banking.
Ed had been the Head of Global Transaction Banking at Lloyds and was experienced at leading large-scale procurement and operational teams in manufacturing and the financial services industry. He provided some very insightful help to shape our strategy, growth plans and distribution strategies.
Dakota Transformation: So, how did you test the market demand for your product?
Chris Forbes: We decided to put our proposition on a Crowd Funding Platform and raised £10,000 to pay for the first container. We were pleasantly surprised that we raised the funds far quicker than we thought and by the time the container arrived in the UK we had fully funded the goods and indeed had been able to pre-sell 50% of the contents.
With initial orders coming in, our business was valued in April 2016 at £1m and we received £100k from an angel investor.
Dakota Transformation: How did you begin to grow your market share?
Chris Forbes: We decided to target Ethical on-line businesses and via supermarkets. Early on we approached Amazon. They provided incubator support, as it was viewed as an innovative and new product. With sales increasing, in November 2016 our business was valued at £2m and went back to Crowd Funders for a further £100k as 5% of the business. Before we got to the Crowd Funding platform this time, another single investor committed to the full £100k
We also targeted the janitorial market and secured contracts with two of the largest businesses in the sector. Indeed, it became their innovation product that they proactively pitched to their clients to help them meet their own Corporate Social Responsibility targets. In June 2017 we engaged with bigger retail distribution channels. Planet Organic, Whole Foods Market and Ocado, that took our monthly sales to £30k
Dakota Transformation: That is significant growth, what were some of the challenges and when did you increase the size of the team?
Chris Forbes: One of the biggest challenges was securing funding from banks. Despite a lot of commentary in the press that banks were open for business, we did not find that to be the case unless you were willing to pay prohibitive interest rates. As a result, we made the decision, as the two founders and directors, not take any income for the first 18 months and any money made we chose to re-invest back into the business to minimise our exposure to expensive lending. The challenge was that we had to pay for the goods, by the time it was shipped across and then sold via the distributors, we could be out of those funds for 5 months. Typically, banks were looking for 20% APR interest rate charges on the FMCG startup businesses.
However, we believed in what we were doing was going to make a difference – we were emotionally invested in the business as we genuinely felt it was something that could help the planet we live in, and that we could make a successful business. So, we took the step of building a team of people to help with our growth strategy. We went back to the Crowd Funding market to raise £350k for what would be 7% of our equity and we actually raised £500k for 10% of the business – we decided to close that funding round early as we did not want to give more equity away.
Dakota Transformation: So here we are May 2018, how is the business and the team doing now?
Chris Forbes: We have a team of 5 and we are operating via supermarkets in Dubai and Europe with a turnover of £1m / annum and a market cap of £20m.
Dakota Transformation: What do you think some of the critical success factors have been to get to where you are now and indeed act as the platform for future significant growth?
Chris Forbes: We firmly believed early on that we were going to be a disrupter to the market, which is dominated by very large and established brands. We certainly could not compete with their marketing budgets, but what we could do is create a very different social media presence and we felt that was going to give us the best leverage for the funds we had available. The name Cheeky Panda, the fresh branding and the fact we turned up at investor events and shows wearing Panda hats meant we were going to be remembered. We just had to make sure it was going to be for the right things! It felt like we were beginning to ride a wave, where the population and indeed businesses, were becoming more and more aware of the need to proactively do things that would help our planet. Something as simple as toilet paper made from bamboo, which was far less destructive to the environment than the need to plant and harvest trees really was a simple but powerful image and message to use. And the product was softer on your skin to!
Dakota Transformation: What are your plans for growth now?
Chris Forbes: We are currently looking to raise a further £1m possibly £2m and that will take us to £5m turnover, when the bank funding charges will not be as onerous. It feels like we are at a real Tipping Point in the business, the Brand is becoming established, our credibility is strong, and the number of enquiries is wide-ranging and growing each week. We have won numerous awards, so there is real media interest, I hope on us being successful. This is a very important question for us now, when and how to Scale Up. Our aim is to be signed up by 10 supermarkets, some on a global basis. Currently, we are signed up by 3. That level of growth through those channels would take us to £50m turnover by 2020.
Dakota Transformation: So, reflecting on your Transformation to date, what have some of your key decisions been?
Chris Forbes: I would summarise that as :
- Planning: we spent a lot of time creating a robust business plan and we have diligently focused on executing against that.
- Innovative and being a disrupter in the market: our use of social media and use of crowdfunding really shows the way to grow a business in this new technology age.
- Know what to say no to: we were asked to white label our products, but we said no – retaining control of the quality of the product we offered is important to the business we are building
- Values : within the team we have a strong set of values and desire to do ethically what is right, wither that is how the products are made in China and how it can help the environment – but also have fun along the way – we all have a great sense of humour and we have had to look out for each other during the many challenges along the way.
- A Winning Team– my partner Julie has been phenomenal at building our team, not just the team that works at Cheeky Panda, but in the collaboration, we have had with local agencies in Essex and across the supply chain.
- 1stMover Advantage– we realised we had a great product that was needed in the market, but we also knew we had to make the most of 1stmover advantage, by being flexible and able to respond and grow quickly so that competitors couldn't come in and out flanks us. The ground work we have done now, would cost a lot to replicate and take significant time to build the capabilities to deliver a product of similar quality.
Dakota Transformation: Would you have done anything differently knowing what you know now?
Chris Forbes: That’s a good question, the problem is knowing what I know now – maybe we wouldn’t have started the business! It has been far harder than we ever thought to get the required funding at the right time at a reasonable rate. And of course, Brexit has caused us exchange rate issues already. However, myself and Julie are loving every minute of this adventure, yes 12 months ago was a very tough period for the business, but now we know we have a great product, great team and we are developing a wider range of products, we know that we have built business processes that will enable us to internationalise our offering at scale. We are really looking forward to the next phase of Advanced Growth.
Dakota Transformation: Thanks for your time Chris and for sharing this fascinating story, I look forward to hearing about the next stage in your Growth Strategy.
The Business Transformation Network has posted this article in partnership with Dakota Transformation.
Bryan Robertson is a transformational leader who is passionate about helping individuals, teams and businesses achieve a potential they had never thought possible. He is focused on delivering sustainable commercial benefits, whilst improving the customer experience and developing the leadership capabilities of all involved in the transformation. Bryan has a wide range of experience in designing and delivering growth and transformation strategies in a wide range of business sectors and on a global basis.