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Q&A: Paul Oberschneider of the £5m Vital Ingredient food chain

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The CEO on his drive to triple turnover in a year

In a grab-and-go food sector dominated by giants like Pret and EAT, scooter-bound entrepreneur Alex Heynes has built a collection of outlets around London.

Heynes’ idea was simple: to go beyond the humble sandwich a Londoner might wolf down over a hectic 15-minute lunch break. Instead, as an alternative to the “bread-based” options, Heynes started up outlets offering create-your-own salads, noodles and soups.

Pootling around London on his scooter, Heynes built up five Vital Ingredient stores, then attracted the interest of an investor. With extensive experience in property and hospitality, Paul Oberschneider came in as an investor in 2010, then became CEO in 2011. Vital Ingredient now has 12 stores.

Vital Ingredient Alex Heynes and Paul Oberschneider

Vital Ingredient’s Alex Heynes and Paul Oberschneider

Vital is looking to grow further, thanks to a £2.75m investment from Santander. The chain plans to increase its reach and is aiming to more than triple turnover to £17m next year.

I caught up with Oberschneider to find out what attracted him to Vital Ingredient, and how the chain is aiming to carve out its niche in London.

Hi Paul, what is the mission behind Vital Ingredient?

The business was started by my partner Alex Heynes after a trip to New York where he saw something very similar going on.

He started with his first store on Berwick Street in Soho, and I was a customer at that store for many years and worked around the corner. Alex grew that business to five stores before I came in as an investor in 2010. He was basically running a couple of stores off a scooter and didn’t have any infrastructure in place.

I had just divested myself of a lot of assets that I had built up over time throughout eastern and central Europe and I was looking for a new opportunity. I told Alex I was happy to put in some capital and offer operational expertise. In the last year and a half, we’ve grown from five stores to 12.

By the end of September of this year, we will be up to 17, with a few more in the pipeline. The idea is to finish the first quarter of next year with 25.

How has Vital been able to grow so quickly?

I’ve never been in the restaurant business, but tangentially I’ve owned and operated seven hotels I’ve developed in Europe.

Like any business, once you’ve formulated the plan, it’s really about execution. Eating has changed over the last few years; everyone is becoming far more conscious of what they’re eating and where their ingredients are coming from.

I love a heavy lunch once in a while but most of the time I want something fresh and made-to-order, which is what we offer.

How are you facing potential competitors, like Pret?

The Pret model, which is very bread-based in its originality, is something that has been around for 18 to 20 years now. People’s diets have changed. I hardly ever want to eat a sandwich these days. I thought we should build up on the freshness and the ability to create your own way.

We have wraps, artisan rolls, hot food, toasty loaves and street food coming out in the Fall. We’re offering a lot more seating now – originally our stores were like bowling alleys where you came and you went out. The older stores are like that but the new stores are different, because we’re trying to build on those two busy periods of the morning and the afternoon.

A year ago we introduced a create-your-own-breakfast option, which was a slow starter, but has really taken off now as customers know what they’re coming for with their breakfast. Hopefully a lot more of the grab-and-go products will be able to build on the afternoon period and keep people coming in, be it for a snack or on their way home.

How does your product range split in terms of revenue?

I’d say our new products are about 20% of our sales, so like-for-like sales on salads probably hasn’t gone up but the introduction of toasty locos and our hot offers are about 20% to our sales and that should continue to grow.

I put my original chunk of equity in and then the question was: was that enough to get us to a certain level of store? It was always my intention to find further funding.

I’m historically a real estate developer and I’ve run other businesses as well, so I’m a big believer in the use of leverage, and we were completely underleveraged here. So there was an opportunity to look at using our bank funding to get us to the next stage as opposed to pumping in another chunk of equity.

Liquidity is very dear and bank debt these days is rather inexpensive by comparison, so it just made sense to do that.

The difficulty for small businesses like ours is convincing a lender that you’re credit-worthy and you have the sustainability to cover your debt service.

Did you go for any extra funding?

We got £2.75m in funding from Santander last month, as part of their Breakthrough programme, including £1.25m in growth capital investment.

Our turnover was about £5m before going to Santander. After a year, it will be around £12m. Next year it should be £17m. With the stores we’re opening, we’d be on track to hit £20m.

How do you attract new customers?

A lot of it is word of mouth. A lot of our customers come down with their friends, so we try to capture people’s emails, their contact details.

We don’t go spending a lot of money, we hardly ever approach our limit on the money invested in marketing.

What about the future?

After getting up to 20 stores in London, we’ll need to have a breather and revisit where we’re going to be going, as we’ll have an opportunity at least in London to open another 20.

We haven’t even begun to think about some of the outlying areas like Birmingham and Manchester – that all has to do with the supply chain of our product.

We’re in the process of consolidating that so we can send a single truck out from Bicester, so once we get to stage two on the consolidation phase, we’ll be able to do that – but we’re just not there yet.

Good luck with your plans and thanks for your time Paul.




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