Business in Vancouver profiles SFU Business alumnus Charles Chang, CEO of Sequel Natural Foods
Jul 27, 2010
Growing functional-food demand yielding healthy bottom lines for local companies
Port Coquitlam’s Sequel Naturals posting steady 50% annual revenue increase
By Glen Korstrom
Stricter government regulation of natural health products is about the only thing likely to keep Port Coquitlam-based Sequel Naturals from continuing its 50% annual growth rate.
CEO Charles Chang expects revenue to top $21 million for the year that will end July 31. That compares with $14 million last year.
“We want to continue at 50% growth for the next few years,” he told Business in Vancouver. “Our revenue goal next year is about $30 million.”
Sequel Naturals produces “functional foods” – mostly powders that become nutritional smoothies when mixed with water or added to a fruit blend.
Functional foods have higher levels of antioxidants, vitamins or other nutritional supplements.
It’s a hot sector.
Canada’s nutrition industry generated $6.6 billion in 2008 and grew at an 8% clip, said Fenton Fong, who is a director at Vancouver’s Western Canadian Functional Food and Natural Health Product Network.
He estimated that about $1.12 billion of that $6.6 billion is functional foods.
B.C. had 94 functional food or natural health food companies in 2007, according to Fong.
That grew 99% to 187 companies in 2010.
“There’s a growing trend of understanding and acceptance by society that better nutrition, or lack of nutrition, has a direct correlation with health and chronic diseases,” he said.
Increasingly foods are falling into a grey area between being pure foods and being supplements.
Fong pointed to Vitamin C-fortified Tropicana orange juice as an example of how Pepsico Inc. (NYSE:PEP) is broadening its functional beverage line. It and competitor Coca-Cola Co. (NYSE:KO) are similarly expanding energy drink offerings.
“Our products are more like foods, but they’re being regulated and treated like natural health products. So, it’s very challenging for us,” Chang said.
His products tend to be regulated by Health Canada’s natural health products directorate not the Canadian Food Inspection Agency.
“With foods, you can sell anything you want. As long as nobody dies, you’re good. With food, it’s extremely liberal in how you can operate.”
Regulations and heightened scrutiny from federal inspectors have thus far failed to slow the rapid growth of Chang’s company.
The Simon Fraser University business graduate launched a failed venture with friends in 1995, worked for several years at the fast- growing Great Little Box Co. and then launched Sequel Naturals in his basement in 2001.
The company generated $140,000 that first year.
Now with 150-times those sales, Sequel Naturals is a shoo-in to be on BIV’s 2010 list of B.C.’s fastest-growing companies, which is scheduled to be published in issue 1090 (September 14-20). In 2009, it ranked No. 23 on the list.
Chang employs 50 full-time and 150 part-time staff. Production is outsourced, and he splits the staff in his 16,000-square-foot Port Coquitlam office into four divisions:
•sales;
•marketing;
•finance; and
•operations.
Each area is run like a separate company, and the four department heads report directly to Chang.
“We’re super-anal about statistics and what statistics deliver value,” he said.
“We’re really, really big on performance. We have a whole bunch of key indicators.”
He sets numerical targets for everyone.
The receptionist, for example, is assessed on what percentage of calls is answered before the fourth ring. Sales employees have more obvious targets.
Employees who meet targets are eligible to earn bonuses of up to 20% of their salary, which Chang said is on par with others in similarly sized operations.
In addition, Chang splits 10% of his company’s net profit equally among all employees.
Another of Chang’s key early decisions was to eliminate distributors and do all sales in-house.
“We noticed a big improvement when we went to our own direct sales force in that we could have a tighter relationship with retailers,” he said.
About 20% of his sales are in B.C., 50% are in the rest of Canada and the remaining 30% are in the U.S.
“In three more years, we’ll be bigger in the U.S. than in Canada.” •
This article from Business in Vancouver July 27-August 2, 2010; issue 1083
Business in Vancouver (www.biv.com) has been publishing in-depth local business news, analysis and commentary since 1989. The newspaper also produces a weekly ranked list of the biggest companies and players in a wide range of B.C. industries and commercial sectors, monthly features and industry-focused sections that arm its subscribers with a complete package of local business intelligence each week.