There’s not much you can do with a half-finished yoghurt manufacturing plant. But that was what five:am founder David Prior was faced with when he ran out of money midway through development of a brand-new Carrum Downs-based facility.
The experienced entrepreneur had invested his life’s savings in getting the business underway, but construction almost ground to a halt due to lack of cashflow. He was forced to knock on the door of the bank manager.
“We had to put forward a big presentation pitching to them to get support, and you could have easily lost everything before you’ve even started, and you have half a yoghurt plant which is even more useless,” he says.
His team crunched numbers obsessively before presenting a 50-page pitch.
“We’d been over and over the scenarios, and of course now they are very comfortable with us as every projection we’ve put forward we’ve delivered on, but at the time it was a big leap of faith for the bank.”
He says “thank god” the bank came on board, but it was just one of many challenges faced in the fledgling stages.
“There are a lot of times when you think that you have gone a bit mad and think it was the wrong thing to do. It has all worked out and it is going really, really well.”
Prior isn’t exaggerating – five:am started production in March 2011 with the goal of providing affordable organic yoghurt products to mainstream supermarkets.
“The business has revenue of about $25 million and we are making around about 200 tonnes of yoghurt a week,” he says.
The goal is to hit revenue of $35 million for 2013-14. five:am now supplies to over 1000 stores nationally, with Woolworths and Coles its core clients. There are around 50 employees on board.
The Australian dairy industry has had a challenging run, with record numbers of dairy farms up for sale and the recent administration of prominent Launceston-based yoghurt brand Tamar Valley Dairy.
However Prior, who formerly ran food packaging business Baroda with his family before selling it to Visy in 2007, was confident organic yoghurt was an untapped opportunity.
“In Europe and the United States you can get all of your organic goods in the mainstream supermarkets. But here, because of the lack of supply continuity, the supermarkets had never really wanted to deal with organic guys, and the organic guys had never really wanted to deal with the supermarkets.
“I believe organic food is better for people, and the environment, so it should be available to the maximum number of people, not just to very few people at organic food stores at extremely high prices,” he says.
“Organic normally costs around 50% more, but ours is 5% more, it is really affordable and I think that is the reason we have grown so far.”
Despite belief in the venture, Prior didn’t take the leap without a vote of assurance that it could work.
“That is where ‘Mr Woolworths’ came into it. We identified Woolworths [supermarket] early on as being a leader in health and wellbeing.”
He set up a meeting with the Woolworth’s chief executive and outlined his vision.
“We had our milk lined up, and I went there and painted my background in packaging and having run pretty successful businesses in the past. I said I was putting my life’s savings into a yoghurt plant, and he said, I think in a nutshell: ‘If you are willing to put your life’s savings on the line you must be pretty confident it is going to work … If you can deliver it, we’ll back you.’”
Prior made the dream come to life.
“We kept in touch with them, and a year later we had built a plant, and we had our packaging done and recipes perfected, and we went back to them and said we are ready to go.”
Now the business uses Coles and Woolworths’ distribution operations to collect and deliver its products nationally.
“We’ve got trucks heading out of here [Carrum Downs] every couple of hours.”
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Melinda is a business writer and editor and helps companies to bring their brand stories to life through her small business, Oliver Content. Melinda was previously the content manager for KPMG Australia, an editor of SmartCompany, and spent many years as a journalist.
