Over the past 18 months, however, the brand has been steadily regaining traction, delivering “strong and accelerating growth on our core SKUs,” he tells FoodNavigator-USA.
The immediate priority, however, is finding a new CEO following the recent departure of CEO Brian McGuire, a CPG veteran who was recruited to turn the business around after the May 2020 sale, but left in September 2021 to become chief innovation officer at a firm in stealth mode.
Speaking to us after bringing back former CEO Jane Miller (who led Rudi’s from 2008 to 2014) as a non-executive member of the board, Karakas (who is based in the UK and “spending a lot of time on zoom”) says the search for a new CEO is progressing well.
“We have an extremely capable team on the ground and have a CEO search ongoing at the moment, which is very promising with quite interesting candidates, so I think right after Christmas, we will be able to announce somebody.”
Rudi's retail sales dropped from $85m to $35m under Hain Celestial's tenure
As for Rudi’s performance, he says: “Revenues had fallen significantly [during Hain’s tenure]. If you look at retail sales figures, at the time Hain bought Rudi’s, retail sales were probably hovering around $85m and by the time Promise bought it, retail sales value had gone down to $35m, pre-COVID, pre-acquisition.
“So, we have two businesses in the US, run by the same management team. One is Rudi’s, and the other is [gluten-free brand] Three Bakers in Pennsylvania, and when you combine those two businesses together, they come in at roughly $45m in retail sales value at this moment.
“So, when Jane Miller left the business, Rudi’s had 98% ACV in the natural channel, but that dropped to the 30s.”
'We have a very ambitious plan to grow this category, not just the company'
So what went wrong for Rudi’s after the sale to Hain Celestial? And can it be fixed?
As to the first question, Karakas says he doesn’t want to dwell on the past, beyond speculating about a “lack of focus” and that “arguably Rudi’s was a bit too small for Hain… and baking bread is a day in, day out, execution business, and running it as a division or as a unit might have made things a bit a bit difficult.”
As to whether things can be turned around, absolutely they can, he insists. “We have a very ambitious plan to grow this category, not just the company, and we have been starting to regain that distribution, and brought in a standalone [dedicated] management team, which Rudi’s didn’t have under Hain. And we have invested heavily in capex and invested in our distribution network in Colorado.
“Then, we started with a gradual brand relaunch, and despite the quite significant SKU rationalization that we’ve done, the business is still the same size and revenues haven’t dropped, because consumption is significantly increasing on our core SKUs, in the double digits – 15-20%, so on the core SKUs we are growing twice the growth of the market.”
Learnings from Promise Gluten Free
In the second stage of the transformation, he says, “we are in the process of moving some of the tried and tested product chassis of Promise Gluten Free to Rudi’s.
“Promise is a challenger brand that was founded just five or six years ago, and in every market it operates, it has a challenger mentality, and a key part of this toolkit is its proprietary gluten free vegan product chassi, which has been performing spectacularly in Canada. Since the launch there two years ago, it has already become the second largest brand in the gluten free space and it’s also in the UK, Germany, and Australia.
“A significant portion of Promise’s sales in Canada are also direct to consumer through e-commerce, so we have been transferring that knowledge base into the leadership team at Rudi’s.”
'I have two KPIs for this company...'
As for growth opportunities in the gluten-free space in the US, he says improved formulations can unlock new growth.
“If you look at households that buy gluten-free bread, they generally buy regular bread as well. Why? Because some of the members of the household simply don't want to consume what they see as an inferior kind of bread unless they have to. But if the [gluten-free] bread improves [such that everyone eats it], the consumption of the whole household increases.
“I have two KPIs for this company. One, making sure that our Net Promoter Score improves steadily. And two, our natural channel ACV progressively goes up to where it deserves, which is 100%.”
Supply chain challenges: 'These are things we are all as an industry having to learn to live with'
Asked about supply chain challenges, which are afflicting the whole industry, he says: “In the initial few months of the pandemic, really until May this year, there was increased absenteeism in the manufacturing facility, which had a significant impact on our output and efficiency, and with the socially distanced working practices that we put in place to make sure our colleagues are safe, it naturally impacted efficiencies and required additional colleagues to produce the same tonnage."
Domestic freight in North America has also been a problem, he says, "not only due to costs, yes, but also availability, so we have to keep extra inventory in the supply chain to prevents stockouts. We also had a number of key suppliers going into distress or going out of business.”
“In some cases, we had to airfreight some of our key raw materials from the Irish plants’ inventory to keep shelves stocked and customers properly served, and we don't see the situation easing anytime soon, but I guess these are things we are all as an industry having to learn to live with.”
*Promise Gluten Free is backed by Mayfair Equity Partners.