Sometimes it takes more than just a great product to succeed. It needs to fit with the spirit of the times to win hearts and minds - and sales.
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Entrepreneur: Marlene Sandberg, Managing Director
Company: Nature Babycare, (Naty brand)
Business type: Producer of disposable nappies and other products made mainly from renewable and biodegradable materials
Founded: 1999
Employees: 12 full-time staff based in Stockholm
Turnover: (2008 - 2009) €22-23M
Head office: Stockholm, Sweden
The Nature Babycare Story
"Someone should do something about that!" or "There's a business in that ..." are two common responses to social problems - usually followed by apathy and inaction. But not for Marlene Sandberg. In 1994 the young Swedish mother and lawyer was alarmed by a newspaper article about the problems of nappy disposal and landfill: each Swedish baby produces about 500 kilograms of dirty nappies every year. She says: "I thought, ‘This is sick. I need to do something'."
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Key learning points:
- Timing - Is your product right but your timing wrong? Sometimes a product can't succeed until the zeitgeist is right for it.
- Persistence - Sandberg sent samples to the giant French retailer Auchan for years before they saw the light. Remember that "No" only means "No" today; tomorrow is another sales day.
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But was this a social problem or a business opportunity or both? Marlene knew her own guilt about disposing of so many nappies as she raised her second child. The world needed an affordable, environmentally friendly, biodegradable nappy but none existed. She would have to invent her own.
Marlene spent five years researching and developing her nappy. She ended up with a product that ticked all the right environmental boxes: natural, largely biodegradable and with a special breathable film made completely from maize (non genetically modified, of course). In 1999, she began producing the nappies and launched the product in her home market.
Sandberg had high hopes for the product. She had sold her shares in the law firm where she had worked to help finance her dream. Additional funding was raised through venture capitalists (34%) and a private investor (4%).
But Sandberg's fledgling company faced big problems almost immediately. The nappies fared poorly in a product test done by a Swedish government-owned laboratory. Sandberg says the results were misleading because the test was designed for conventional nappies and failed to take into account her nappy's ability to absorb liquid by spreading it over a large surface area.
However, the results were highly publicised and the damage was done. Sales dropped dramatically in the summer of 1999, leaving Sandberg feeling devastated. "The board was saying it was better to close the company as Sweden was our only market."
The Challenge
To gain public recognition and distribution through big retailers.
The Solution
Sandberg persuaded her main Swedish customer - the diversified retailer Coop - that the government test had got it wrong. Coop backed her, agreeing to keep distributing the product but sales were still sluggish.
The entrepreneur in Sandberg wouldn't give up. She had been invited to exhibit at a trade fair in the UK, which gave her an even better idea: skip the trade show and send product samples direct to all the main UK retailers. The plan worked too well. Her samples attracted attention - more than she could cope with.
The giant UK retailer Sainsbury's responded by seeking to distribute Naty nappies in 400 of its stores. But the Naty factory's old machinery could produce only 200 nappies per minute. She simply didn't have the capacity to fulfil Sainsbury's requirements. Sandberg says: "It would have taken six months to fill the order."
Sandberg realized that to meet this company-making order she had to change the company's production model. Instead of investing in new machines - at €5 million each - to meet the contract she would need to outsource production.
But outsourcing proved difficult. Sandberg says: "It was quite challenging because I didn't have high volume. Also we needed various special features and materials, which commodity nappy producers don't like because they want to make the same kind of nappies all the time. I had bad days, felt depressed, and frequently thought ‘Will this really work?'."
Sandberg found a German manufacturer who was prepared to make nappies to her specifications. They signed an agreement in 2000 and within eight weeks Sainsbury's had its new nappies across the UK.
Sandberg believes that retailers and consumers were initially attracted to the product for reasons other than its green credentials. Parents who wished to minimize their baby's exposure to plastics and chemicals liked Naty nappies because they used natural ingredients and were chlorine-free. The packaging was cool too: its clean design used modern black-and-white imagery, providing an attractive alternative to the colourful child-centric packaging of other nappy brands. Sandberg says: "I think it was purely because of quality and that we were giving the market something different."
By 2004 the product was selling well at Sainsbury's, with turnover equivalent to about $16 million, but it was still hard to interest other retailers. Sandberg says: "Retailers were always saying, ‘Why should we offer consumers something that they don't ask for?'." But then Sandberg - an avid reader on environmental issues - saw an article about Australian consumers' rising interest in green products.
In 2005 Sandberg paid the Swedish Trade Council to approach Coles and Woolworths with her product. These two companies were attractive prospects: they could purchase the quantity of product required to ensure an economic return, taking into account shipping costs and the need to maintain a competitive price point. Coles expressed interest in Naty's green concept and began to distribute it in October 2005; Woolworths followed suit in February 2007. Naty's Australian turnover reached $8 million last year, with a 2% share of the nappy market at Coles and Woolworths.
Until 2008, Australia and the UK were Sandberg's main markets but world consciousness began to change that year. Sandberg traces the turning point for green products to the launch of Al Gore's phenomenally successful documentary An Inconvenient Truth in 2006. It made the world focus on environmental issues. From then on, Sandberg says, retailers grew more receptive to the green credentials of her product. For example, in 2008 an order was placed by one of France's leading supermarket chains, the Auchan Group; Sandberg had been sending them samples for years.
Wal-Mart, the world's biggest retailer, has agreed to distribute Sandberg's product commencing September 2009. Sandberg, who has visited the USA each quarter for the past two years and observed the rapid expansion in green products, says: "It's been like mushrooms growing overnight. Each time I'm over there there's another brand going green. I think the industry is deciding our future; it's not the political system. So when a big retailer as big as Wal-Mart decides to go green it changes the global scene."
The Results
In 1999, Sandberg was selling only into the Swedish market. Now the company's product is distributed in fifteen countries including the UK, France, Belgium, Holland and South Korea. The product range has expanded to include baby wet wipes, nappy bags, cotton buds, breast pads, disposable bibs, baby textiles and women's sanitary products.
In May Sandberg was awarded the 2009 Veuve Clicquot Business Woman Award. Her company's products have won numerous awards including the "Good Environmental Choice" Eco label from the Swedish Society for Nature Conservation. But Sandberg remains firmly grounded about her remarkable business success. She says: "If I was to give advice to younger people, I'd say ‘Learn the business first. Get an education in the industry'. I've done it the really hard way'."