Why dairy-free ice-cream business Over The Moo rejected Shark Tank investment to become a $1 million business
Thursday, July 13, 2017/
For first-time business owner and entrepreneur Alex Houseman, the first year and a half of running his dairy-free ice-cream business Over The Moo involved “a lot of luck and chutzpah”.
But around July last year, the business owner found himself in need of “money, advice, and exposure”, despite having just landed a small-scale distribution deal with nationwide retailer Woolworths.
“I’m 28 years old and I have never run a business before. I had a well-timed product in the market and a bit of luck, but other than that I was learning on the fly,” Houseman told SmartCompany.
Faced with these challenges, Houseman signed up for the third season of Shark Tank, and landed the opportunity to pitch to the sharks. The episode aired earlier this week, and despite three sharks showing interest in the business, Houseman walked out without a deal, feeling the offers were too low in light of his company’s recent achievements.
When SmartCompany spoke to Houseman 12 months ago, the business had locked down a 100-store self-distribution arrangement with Woolworths, a deal which meant the business was actually losing money on each delivery. Despite this, Houseman says the deal was essential for business growth.
“That was the only way to prove to buyers that if our product’s on their shelf, it will move,” he says.
The success of this deal pushed Over The Moo into a 500-store centrally distributed deal with Woolworths, which Houseman says was a “game changer”, but sadly hadn’t fully come in at the time of the episode’s filming in late November last year.
Due to this, the offers on the show were lower than Houseman would have liked, choosing to go without investment and remain independent.
However the company’s Shark Tank appearance has been a “massive kick up the bum” for the ice-cream company, and Houseman says he would have never had the opportunity any other way.
“It’s an incredibly rare opportunity to get that kind of exposure to both investors and consumers. Despite their name, the sharks are very supportive and understanding, and the show had a real flow-on effect to the business,” he says.
In the days after the episode aired, the business has seen a 2500% jump in website traffic, and is expecting to see boosted sales numbers as the results filter through over the coming weeks.
The last year has also been a phase of massive growth for the business, with Houseman saying the company’s revenue grew 344% to exceed $1 million, a good deal more than the $500,000 he was predicting last July.
Although the company’s net profit is still zero, lower business costs and freighting costs have seen Over The Moo net a gross profit growth of 690%. The product is now stocked in around 1000 stores, with 50% of that attributable to Woolworths.
“In terms of actual tubs of ice-cream, we’ve sold over 350,000 in the last financial year,” Houseman says.
Australian retailers “live and die by the sword” of supermarket duopoly
Running an operation in the Australian retail space is a tough ask says Houseman, especially in the dairy goods landscape dominated by big players such as Bulla and Unilever.
“I’ve said from the start the space is a big bottleneck, one of category perception and awareness. A lot of consumers are not even aware there’s dairy-free ice-cream available, or if they are aware they think it generally tastes like cardboard,” he says.
“We’ve growing, but Over The Moo is tiptoeing around giants. The whole industry is dominated by two or three absolute megalith businesses, who in one fell swoop could step to one side and squash me pretty quickly.”
Houseman also notes with Coles and Woolworths controlling around 70% of the Australian retail markets, small suppliers like him are forced to “live and die by the sword” of the duopoly, noting the independent sector is an “unstructured and difficult” space to operate in.
Houseman says despite the Shark Tank experience, investment is still very much on the cards that the business will be looking at over the coming years. A capital injection of that nature is essential for “scaling up hard and fast” he says.
“The next real jump for us is to get out of Australia and start diversifying our income streams,” he says.