Active Root Business Plan 2020

Active Root 2 Ltd - EIS Eligible Company

• Registered in Scotland company
• No. SC515550, VAT 248258972

W: www.activeroot.co.uk | Amazon: https://goo.gl/5w1pGJ

FB: @activeroot | IG: https://www.instagram.com/active_root/
1.0 Executive Summary - The Business Opportunity
for Active Root

The Problem and the Solution

1.1 The Problem

Thousands of sport and exercise enthusiasts experience stomach issues and nausea before,
during and after their activities. Studies show (1) this is very common and impacts between
30 and 90% of people and is a particular problem during endurance activities.

Active Root Co-Founder Will Townsend had some of these gastrointestinal (GI) issues during
a London Marathon. Despite making careful preparations he experienced gut issues and these
were made worse by normal sports drinks and gels.

1.2 The Solution

 Ginger is a traditional GI remedy, with prevalence in Chinese medicine. We believed

ginger could also help during exercise so conducted a university study in 2015.
 The results gave us the confidence to found Active Root
 Active Root is a natural ginger sports nutrition company and our products contain
root ginger extract that can help contribute towards a normally functioning
gastrointestinal tract. We deliver fuel and hydration for before, during and after
exercise through drinks and gels that are natural and great tasting.

1.3 Target Market

Our core market is endurance athletes, individuals who exercise intensively once or more
times per week and take their exercise and nutrition particularly seriously. We also appeal to
exercise and health food enthusiasts and environmentally conscious consumers. Our
customers are prepared to pay premium prices for a product that gives them performance
benefits.

Active Root is currently sold through our own website, Amazon, Wiggle, Holland and Barrett
– 450 stores and website, 120 other stores and at events. We have focused on the UK market
to date, however, for the last 9 months we have started working with a distributors in Hong
Kong and Germany, which shows significant potential in the Asian and European markets.
We see Active Root appealing to customers internationally and aim to become a global brand.

1.4 Competition

In the sports drinks arena our main competitors in terms of size are Science in Sport, High 5,
Torq, NUUN, GU Energy, OTE and Tailwind. In terms of direct specific competition to
Active Root, Tailwind has the most similar endurance sport following.

In gels, we believe Active Root Gel Mix is currently unique in the market and the closest
competition is GU nutrition selling a multi-serving pouch of gel similar to our reusable multi-
serving Gel Mix flask.

In terms of alternatives, customers have the option of GI remedies in the wider health and
wellness arena including rehydration remedies such as Dioralyte and ginger tablets; generic
energy and hydration drinks such as Red Bull or squash; or making their own.

While both the drinks and sports nutrition markets in general are competitive, and alternatives
are possible, we don’t believe that anything else offers the same convenient combination of
alleviating GI issues, tasting great and being natural and environmentally friendly.

1.5 Financial Summary

Shareholding

40% - James McKay – Principal Investor and Non-Executive Director

29.4% - Will Townsend – Co-founder and Managing Director
29.4% - George Ashley – Co-founder and Sales Director
1.2% - Huw Stradling – Co-founder (No function in the company)

The company was registered as a Scottish Limited Company in September 2017. Will
worked full time for no salary from 2017 to 2018, with George helping in the
evenings and weekends.

James McKay provided £100K investment in April 2018, enabling George to work
full time and one full time employee, James Waldie, to join the team. As of May
2020, the company has 3 FTES and one full time volunteer, John McKay.

1.5.1 - Margins
Margins: targeting 46% in 2020, increasing to 53% in 2022.

Year Revenue £ COGs £ GP £ GP % Expenses £ Marketing £ NP Margin

2020 241,240 124,228 111,189 46.1 93,130 45,599 (23,740)*
2021 806,600 441,666 364,934 45 174,257 86,034 104,644
2022 1,515,480 710,235 805,245 53.2 161,691 91,099 552,455
Margins are greatest through direct channels of events and the Active Root website, however,
are healthy across all channels.

Net profits: forecasting loss of £24k in 2020, profit of £105k in 2021 and £553k in 2022
(c.30% profit margin).

2020 targets reduced by c. £15-20K in March due to COVID disruption. Situation will
continue to be assessed and may impact short-term performance.

1.5.2 Profitability - COGS and Postage

As volume increases a gradual reduction in unit COGs will occur through economies of scale
i.e. more volume will reduce unit cost, particularly in packaging and postage. We have had
assurances of per unit reductions from our major suppliers and intend to continue to adapt our
product range to reduce postage costs. Amazon fee costs come down significantly with
increased volume.

1.5.3 Online spending habits of customers

Below are current website spending habits for 2019/2020 and our targets for 2021/22.

Av No
of Online Average Store Return
orders revenue Order Total conversio customer
Year pa (£) value (£) orders n rate % rate %*
2019 1.4 65,586 23.97 2736 No data 26.98
AUG 2018 – YTD 1.6 107,650 24.50 4392 No data 55
YTD 22/05/20 1.2 32,220 27.11 1188 6.11 45.64
2020 1.7 107,915 30 3597 7  30
2021 1.8 335,000 32 10469 8  25
2022 2 672,000 35 19200  9  23
*The percentage of customers that placed more than one order, out of the customers that placed an order within the selected
date range

As Active Root grows we will expand our product range, this will increase average number of
orders and order value pa. With improved online communications and website we will target
increased store conversion in 2021/22. In 21/22 we will target rapid increase in new
customers therefore in comparison we forecast a lowering of return customers, replaced by
new.

1.5.4 Stock, Process Control, Prices and Volumes

We own the IP of the recipes for all our products. Under contract we use Dalziel Group based
in Glasgow to blend our powders, Flexible Packing in the Wirral to fill sachets and Wasdell
Group in Northampton to fill tubs. We have worked closely with Dalziel Group on sourcing
the best ingredients. Stock is held at a warehouse in Glasgow and our fulfilment centre in
Edinburgh.
Price and Volumes

The prices we have negotiated with our suppliers are competitive for our current volumes.
Over the last 3 years we have worked with several powder blenders and packers, always
striving to negotiate as low as possible production costs whilst balancing quality, speed,
reliability and customer service. As our volumes increase and we have had assurances that
cost per kg will reduce significantly as well as lowered packaging unit costs.

In pricing our products, we take into account the cost to produce and fulfil orders as well as
our brand, cost per serve, competition and consistency across channels. We have found that
small increases in price have not impacted volumes, albeit we do see traction from deals. Our
pricing is largely in line with sports nutrition competitors and we believe this represents good
value for a quality product.

1.6 Funding Requirements

• Seeking £265,000 investment for 15% equity

• This will be used on marketing spend and additional infrastructure to increase the rate
of business growth and the extra working capital needed for higher volumes over the
next 2.5 years.

• Lean, measured approach consistent with business ethos to date - all costs kept to
absolute essentials

• Positive profit generating by end of Q2 2021

 To achieve our revenue goal in 2021, we will need significant working capital, circa
£265k. However, our payment terms are excellent due to the large online and event
revenues so the requirement is very low compared with other businesses with this
turnover.

• We forecast the beginnings of profits by March 2021 which we expect to reinvest in

the business alongside the capital investment. As well as managing fluctuating stock
ordering and cash flow, the investment will be an enabler for tapping into extra-
unforeseen opportunities for growth over 2021 and 2022. Liquidity will be vital for
purchasing new stock in order to seize additional sales and marketing opportunities.

1.7 Milestones and Traction

Since founding in 2017, we have built our following and a strong reputation as a unique and
innovative player in the sports nutrition market. We have focused resources on researching
and developing an excellent range of flavours, products and delivery systems.

In 2019 we turned over £125,000, an increase of 100% on 2018 revenue. In 2020 we are
forecasting £240,000, almost another 100% increase. With investment we forecast even more
rapid growth in 2021 and 2022. We have an ambitious, but lean and focussed sales, marketing
and logistics strategy ready for planning in Q3 2020 and full delivery and launch in the
winter/spring of 2021.
Increased investment will enable Active Root to cement current position and rapidly grow in
the UK and internationally. We are confident that the current management structure and with
new recruitment we will have the experience, innovation and energy to achieve the forecasted
growth.

2020 goals

 In light of the 2020 COVID19 crisis our main goal for Q2 & Q3 2020 is to weather
the storm and maximise our online revenues to continue to trade through 2020 and
beyond. Cancellation of sports events and exhibitions and retail closures has had an
impact on 2020 figures.
 Q4 2020 we plan to invest in scaling the business, building on the strength of our
existing product range and advertising to a larger market on a wider UK and
international scale.
 With scale we can decrease the unit cost of production across our range. This includes
raw ingredients, packaging, postage and transactional costs. This will increase profit
margin, giving opportunity to reinvest earnings into bigger marketing plans.
 Our central objective is to achieve another 100% growth in 2020, with revenue of
£240K. We will lay strong foundations that will act as a springboard for significant
further growth. Our revenue goal for 2021 is £800,000 plus and 2022 £1,510,000.
2021 and 2022 growth will be largely driven by increased online sales through our
website and Amazon. This will be achieved by investing aggressively in marketing
and advertising in Q4 2020 through to end of Q2 2022 (see marketing investment
plan).

 Q4 2020 – Q2 2021 our growth drivers are as follows:

Sales and marketing

o Specifically employing a marketing assistant to help us deliver our ambitious

revenue targets
o Working with an advertising agency to further improve our delivery of online
messaging through social media, website and email
o Invest in Informed Sport batch testing for our core products, through this
accreditation we will be able to partner up and establish sponsorship deals
with sporting bodies and professional athletes and teams.
o Use Informed Sport testing to partner and sponsor with larger events and
expos, including city centre marathons, sportives and triathlons.
 Deliver attractive Active Root product selection to races
o Free sample stock allocation for marketing
 Large targeted mail order free sachet campaign to new customers.
o Employing temporary reseller event employees and bringing Active Root to
larger mass participation events such as city marathons and cycling events.
o Tactical use of professional third parties to further improve the branding of
Active Root including videographers and photographers
 o With more resource across business Sales Director will focus more
specifically on expansion of target market retail sales channels.

New Product Development & Business development

o Already have a good product range and all the capital investment required to
develop this range has already been absorbed. Further products are
refinements and have low cost of development.
o Adding extra flavours of product to each of our lines. Including a lemonbalm
and ginger flavour low calorie and an extra Gel flavour.
o Further explore legislation and regulations to grow current exporting
channels.

Operations & Logistics to meet growing business

o As online sales increase we plan to meet the extra capacity by moving

postage fulfilment to a larger facility in Glasgow. Duncan Rogers
Engineering has been our established warehouse partner for last 3 years.
 Option 1 - As we grow they are ready to work with us to meet our
fulfilment needs. We already have provisional agreement in place
with the owner to fulfil 20,000 orders per year.
 Option 2 – Move away from contract tubs filling. Set up own refill,
tub and fulfilment preparation facility in Edinburgh. Create cost
saving efficiencies in operating dynamic powder preparation into
tubs and refills. Hold smaller inventory of specific product lines and
be reactive to demand.

 Q2 2021 – Q2 2022
o Continue to leverage all of the above proven marketing mechanisms and
operations and test and learn new approaches. Similar investment in online
and event marketing. New ambassadors, bigger relationships with sports
bodies and events. Take advantage of the momentum achieved in 2021 to
further grow in 2022.

2.0 Opportunity

2.1 GI problems in exercise – A Problem Worth Solving

Thousands of sport and exercise enthusiasts experience stomach issues, nausea and other GI
upsets before, during and after their activities. This included co-founder Will Townsend
during a London Marathon when he experienced gut issues despite careful preparation and
these were made worse by normal sports drinks and gels.
Gastrointestinal (GI) disturbances are very common among athletes, especially long distance
endurance athletes. One major study (1) stated that 30% to 50% of participants in exhausting
endurance events had symptoms of one or more GI disturbances. This bracket increases,
depending on the methodology used and the events studied, with up to an estimated 30% to
90% of distance runners experiencing GI problems related to exercise (2). An internet-based
study found that 45% of the 1281 participating athletes displayed at least one GI disturbance
(3).

2.2 Our Solution

 In 2015 we conducted a university study at Heriot Watt on the benefits of ginger on

athletes stomachs (click here) We gathered important data to support our belief that
ginger could reduce and prevent these common issues.
 With this evidence it gave us confidence to found Active Root.
 All Active Root products contain root ginger powder which can help contribute
towards a normally functioning stomach.
 As well as maintaining a balanced stomach our products deliver fuel and hydration.
Active Root is also a great tasting natural product that appeals to anyone involved in
sport and exercise.

2.3 Validation of Problem and Solution

The benefits of ginger

As well as our own study other important research has been carried out on ginger and its
benefits to athletes and more broad applications.

 Ginger has been used in ancient Chinese herbal medicine and other Asian medicine
for thousands of years to cure a range of diseases and protect GI function.
 Ginger has been shown to reduce motion sickness and nausea (4).
 Ginger decreases pressure low on the oesophagus which reduces intestinal cramping,
flatulence and bloating (5). Studies have shown that ginger lowers oesophageal
contraction velocity, relating to its anti-flatulence properties (6)
 Ginger also enhances gastric emptying, an issue common with athletes (7) In early
stages of pregnancy the use of ginger has been shown to ameliorate nausea and
vomiting as well as in post-operations (8)
 Ginger has also been the subject of an anti-emetic in cancer (9)
Active Root’s product range

Active Root has developed a loyal core customer base and we have numerous 5 star reviews
on both our own website and Amazon across the product range, many of which highlight the
significant positive impact that our products have had, including the alleviation of GI issues.

2.4 Roadmap/ Future Plans

The roadmap for the next five years is to grow Active Root into an established and profitable
international sports nutrition brand that is known for being the company that dominates ginger
GI health space. In the same vein as ‘BeetIt’ owns the Beetroot space.

Since founding in 2017 we are building our following and gaining a strong reputation. We
have already invested all the necessary research and development costs to produce and
excellent range of flavours, products and delivery systems. Increased investment will enable
Active Root to cement current position and rapidly grow in the UK and internationally. We
are confident that the current management structure and with new recruitment we will have
the experience, innovation and energy to achieve the forecasted growth.

In 2019 we turned over £125,000, an increase of 100% on 2018 revenue. In 2020 we are
forecasting £240,000, almost another 100% increase. With investment we forecast even more
rapid growth in 2021 and 2022. We have an ambitious, but lean and focussed sales, marketing
and logistics strategy ready for planning in Q3 2020 and full delivery and launch in the
winter/spring of 2021.

2.5 Founders’ Commitment to the Business

Founders William Townsend and George Ashley, and full time employee James Waldie are
fully committed to the business. Collectively we have over 25 years experience working in
sales, marketing, and project management, retail and product development. We are excited
and energised by the prospect of making Active Root a major player in the sports nutrition
market and beyond.

Salaries and Dividends

To show our commitment and determination to delivering our plans Will and George are
prepared to accept modest salaries as the business grows. We are keen to discuss levels and
find a mutually motivating calculation.

2.6 Enterprise Investment Scheme

Active Root is eligible for the EIS scheme where the investor will be able to claim 30% relief
on their investment.

3 year financial forecast

Net Profit Margins
 Year Revenue £ COGs £ GP £ Expenses £ Marketing costs £ NP Margin
             
2020 241,240 124,228 111,189 93,130 45,599 (23,740)*
2021 806,600 441,666 364,934 174,257 86,034 104,644
2022 1,515,480 710,235 805,245 161,691 91,099 552,455

2020 target reduced by c.15-20K due to COVID disruption.

Working capital calculation

We have used the operating cycle methodology to calculate working capital required for the
business:

Current payment Current assets

  terms     (stock)  
  Immediate 70%   2020 50,000
  30 days 30%   2021 240,000
Average payment
  terms 9 days 2022 348,000
Time stock held on
  average 60 days    
           
Working
    Revenue COGS Operating cycle Capital
2020 WC required = 241,240 124,228 69 23,484
2021 WC required = 806,600 441,666 69 83,493
2022 WC required = 1,515,480 710,235 69 134,264
           
        Investment Rq'd 241,241
        Expansion reserve 25,000
        Total required 266,241

3.0 Market Analysis Summary

3.1 Market Segmentation

We advertise, market and sell principally to the endurance sports athletes; this includes
runners, cyclists, triathletes and obstacle course adventure racers. Our range also attracts
people who live healthy environmentally conscious lifestyles. This demographic crosses over
with endurance athletes, the health food market, gym goers, yoga practitioners and those who
simply lead an active lifestyle. We know our customers through feedback on our website and
Amazon, interaction on social media and our attendance at events and exhibitions.

COVID, rise of lone exercising, purchasing online and mail order

The COVID crisis has shown evidence that people have extra free time so are exercising more
than ever. Despite the lack of events and races, people are using exercise as one of the few
outlets to get out of the house. In particular endurance exercise enthusiasts are not letting
COVID slow them down. As a consequence Active Root is continuing to enjoy steady
demand through online channels. Postage (Royal Mail & MyHermes) is running relatively
normally therefore mail order is fast becoming an essential lifeline for people self-isolating.
This has been evident in the third party online sales (Wiggle, Sigma Sports) Active Root has
made through Q2 2020. Bike shops are also doing better than ever as people are dusting off
their old bikes and getting them serviced therefore Active Root is continuing to see some
sales in high street retail.

Endurance Sport
In addition to the COVID exercise boom, the bigger picture shows endurance sport in
Western countries is growing rapidly and in the UK the sports nutrition market was worth
£800m in 2017. As with wider society, endurance athletes are becoming more discerning in
their nutritional needs demanding natural products free of chemical and artificial sweeteners.
Active Root is well positioned to tap into the growing number of athletes and their nutritional
needs.

Our products are well positioned to take a share in the growing sports and wellbeing nutrition
market. Research from Mintel –

There has been an uptick in the proportion of men exercising at the highest frequency (four
times a week or more). This indicates that messages around fitness are striking most of a
chord among those who are already converted, encouraging them to push themselves harder
in the fitness stakes.

o Wealthy demographic in cycling, triathlon, running and adventure racing.

▪ Demonstrated by healthy sales at Ride London Expo - July 2019 and National
Running Show - January 2020
o Untapped potential by delivering a product that solves a genuine problem with athletes
 o With investment there is a massive opportunity to build on first three years of growth
and capitalize on the trend.

Health, Leisure and Wellness Market

This market is not currently our core however we are gaining some traction by tapping into
the ideas and narrative of the following customer segments.

1. Health Food – Gut Health

“Gut health is widely seen as essential for overall health, however, few people have
knowingly eaten foods which support gut health. This points to a lack of awareness of which
foods provide this benefit. Products with EFSA-approved claims in this area should therefore
look to flag this up clearly on-pack, with plenty of scope for more innovation in this area.”

https://reports.mintel.com/display/920372/

Although we don’t yet have EFSA accreditation we see Active Root as part of this gut health
idea. With more resource there is an opportunity to tap into this angle in the sports nutrition
market and more broadly.

2. Ginger for therapeutic remedies market

On some occasions we are selling our products as therapeutic remedies for people suffering
from travel /seasickness and morning sickness during pregnancy. We are getting sales in
pharmacies and direct through our website. Feedback from happy customers tells us that
people are benefiting from Active Root in these situations. It has stomach-settling ginger, and
as side benefits of being all natural and is suitable for vegans. In 2018 in response to this
demand we created our low calorie Electrolite product. It has all the ginger and electrolytes of
standard Active Root but with 25% of the calories.

We took Electrolite to a pregnancy expo in London to test the market and found some
interest. A challenge we experienced was that the branding of Active Root, although it’s toned
down in our Electrolite range, is quite sporty. We believe there is a potential future market for
Active Root in the therapeutic remedy space but our current focus is on sports.

3. Hot Beverages
Another market we are currently exploiting is hot beverages. We have found that our
customers enjoy Active Root as a hot post exercise beverage. We have sold Hot Active Root
in sachets and tubs for last 2 years. This isn’t a core product but it does have a following,
especially during the colder months when people like to take after exercise or during a long
walk in the hills. We also take a heated drinks urn to events during the winter and hand out
hot Active Root. Winter 2020 we are exploring the possibility of making a new version of Hot
Active Root with cinnamon.

3.2 Target Market Segment Strategy

Our target market is divided into 3 customer types. All of the types below take their sport and
exercise seriously and are prepared to pay premium prices for a product that gives them
performance benefits. This low price sensitivity makes our current COGs and profit margins
healthy.

Endurance athletes
Our core customers are endurance athletes of all disciplines who exercise intensively one or
more times per week. Examples include people training for marathons, cycle events and
triathlons. Active Root nutrition products cater for all hydration and fuelling needs during
exercise.

Health food, Leisure and Wellness

As the trend for wellness grows and people’s lifestyles become increasingly active our
products are gaining traction in the health food and lifestyle markets. The market is broad and
includes health conscious gym and exercise class goers.

Our Electrolite range products are a good fit as it is low calorie, provides hydration and
electrolytes and contain stomach-settling ginger. It also appeals to people looking for
therapeutic remedies for sickness. Coming in sachet form it is convenient and at £1.50 or less
per drink it is a cost effective price point. In sachet format it is easily portable and dissolves
rapidly.

Our standard sachets are selling well in Holland and Barrett and Electrolite, the lower calorie
product, is sold in health food shops through ‘The Health Food Store’ distributor.

Environmentally conscious
Many of our products have environmentally friendly, ‘green’ credentials. In particular, our
refill range sold in compostable bags and Gel Mix products are attractive for those trying to
avoid single use packaging. This demographic crosses over with endurance athletes, the
health food market, gym goers, yoga and those who simply lead an active lifestyle.

Our target market customer can overlap all types mentioned, for example an endurance athlete
can lead a healthy lifestyle and also be environmentally conscious. As a consequence we
position our marketing and branding to have universal appeal to the three types. E.g. refill
bags that are for endurance athletes, gym goers and are environmentally friendly.

3.2.1 Market Needs

The sports nutrition market is dominated by artificially sweetened nausea-inducing sports

drinks and gels. Companies including Lucozade, SiS, High5 and Torq bulk out their products
with cheap ingredients such as maltodextrin and aspartame. They rely on questionable science
to market their products, backed up by paid endorsements from professional athletes and
teams

This business strategy has been successful for many years; however, trends in consumer
habits are changing. There is a shift away from this type of cheap glossy product; customers
are becoming more discerning towards sports nutrition. Customers are demanding healthier
natural products, clear benefits and quality, simple ingredients that you don’t need a PhD in
chemistry to understand.

Other key industry trends demand products to be plant based, vegan and environmentally
friendly. Many of the current products are not effectively servicing these needs.

The Active Root product range exploits these trends. All our products contain ginger, a
beneficial ingredient that helps keep the gut settled during exercise. The hunger for ginger is
an international trend with particular historical interest China and Hong Kong. We are already
exploiting this market, partnering with an established sports nutrition distributor in Hong
Kong.

We have shipped several pallets of Active Root products to Hong Kong for sale across the
Australasia territories. Sales so far have been encouraging with our peppermint and ginger
sachets being a particular favourite. We are working to expand this market with new products
such as the Gel Mix and low calorie Electrolite. To protect our products we are in the process
of registering trademark for our name and brand design in Mainland China.

All our products are 100% natural and are made using high quality unrefined ingredients.
Ingredients such as unrefined cane sugar and sea salt are understood by our customers and are
healthier than the super refined ones typically used buy our competitors.

Our products are also environmentally conscious. In particular our tub refill scheme is the
most popular product on our website with people preferring it to our standard plastic tub. Also
our reusable Gel Mix range removes the need for single use plastic sachets.

3.2.2 Market Trends

Online purchasing habits

Active Root website

12 months to April 2020 – 2,573 customers, average spend per annum £32 inc VAT

Amazon Prime
12 months to April 2020 – 1,714 customers, average spend per annum £17 inc VAT

Gross Margins

Year Revenue £ GP £ GP Margin %

2019 118,444 31,415 27
 2020 241,000 111,189 46.1
2021 806,600 364,934 45
2022 1,515,480 805,245 53.2

New Customer Acquisition Costs

Assumptions based on Active Root website sales data and 1st order from new customer.

New revenue
Average
generated spend Cost to
compared to Marketin 70% spend new Total acquire
year before g spend allocated customer new cust new
Year (£) (£) new cust (£) (£) 2020 cust (£)
             
2020 122,556 45559.00 31891.30 19.50 6284.92 5.07
2021 565,600 86,034 60223.80 19.50 29005.13 2.08
2022 708,880 91,099 63769.30 19.50 36352.82 1.75

Existing Customer Retention Cost

Existing
revenue
Cost to
generated Average retain
compared 30% spend spend Total existing
year before Marketing allocated existing new cust cust PA
Year (£) spend (£) new cust (£) PA (£) 2020 (£)
             
2020 118,444 45559 13667.70 60.00 1974.07 6.92
2021 234,907 86,034 25810.20 65.00 3613.95 7.14
2022 806,600 91,099 27329.70 70.00 11522.86 2.37

New customer and existing - As a comparison competitor Science in Sport gross margins
were 60% in 2016 and customer acquisition costs are low (a few £).  The average customer
spends £60 per annum, in 1.5 orders. This puts Active Root on a similar trajectory to SIS,
which is now turning over £20m.

There are 3 main broader trends Active Root is currently exploiting: -

1. Exercise and mass participation growing - More and more people are exercising
across all ages and demographics. This diverse collection of individuals requires
sports nutrition to fuel their training and competition. Demand is evident as sports
nutrition products are on sale on the shelves of supermarkets and large non-sport
shops nationals such as Holland and Barrett.

2. Plant based, innovative, clean ingredients - We are moving towards more plant
based diets and are interested in clean ingredients that give an edge i.e. botanicals.

3. Environmental awareness – In the western world we are becoming increasingly

environmentally aware including being packaged, where possible preferring lower
 waste and avoidance of single use packaging.

1. Exercise and mass participation growing –

The market is growing at a high single digit rate. Within the exercise market there is a shift
towards less processed healthier more environmentally ethical green products. Vegan and a
plant based diets are also trending in the sports nutrition sector.

Mintel report on target market habits

Once the preserve of athletes and bodybuilders, Mintel’s Attitudes towards Sports Nutrition
2017 Report finds that many of the UK’s fitness lovers are using sports nutrition products.
Indeed, almost three in 10 Brits (27%) use sports nutrition products*, rising to two in five
(39%) Brits who exercise more than once a week.
Overall, it is the UK’s young men who show the strongest use of sports nutrition products,
with three in five (61%) men aged 16-34 saying they use these products. High usage among
this group comes at a time when many men are following bulky exercise regimes. Over one in
three (35%) men aged 16-34 say they exercise four times a week or more, compared to 26%
of women of the same age.

*Sports nutrition products include protein bars, protein powders for a drink, energy bars,
supplement capsules/tablets/sachets for sport sport/exercise, Ready-to-drink protein drinks,
Energy gels, or other sports/exercise nutrition food/drink

Example of a competitor operating in the endurance sport market

Science in Sport (SiS)

 They develop, manufacture and market nutritional products to endurance athletes.   The
product range is underpinned by sports and nutritional science.  All the ingredients are tested
for banned substances (setting them apart from much of the competition).

 They work closely with elite teams and scientific centres to develop products for which
there is demand. University collaborations include John Moores, Cardiff and at the leading
edge of Oxford's work on Ketones. The products are innovative in a sector which is highly
competitive. Probably the most differentiated product is the Istonic Go gel.  The next product
they are bringing out is a protein gel, which could start to open up the body building market to
them.  

 They don't have to pay for endorsements, athletes and teams want to work with them so
product allowances are enough.  The only person they pay is Chris Hoy. Brand ambassadors
include Andy Murray, Bradley Wiggins, Mark Cavendish and they have just announced that
they will be the official nutritional product of Team Sky. 

 Along with SiS the competition in the UK is High5, Torq and Powerbar. In the US it is Gu,
Clif, Hammer and Scratchlabs. The mass market brands such as Lucozade, Powerade,
Gatorade are not competitors. The big players in nutritional products are the body builder
protein companies. SiS has an advantage based on innovation, testing programme,
manufacturing efficiency and focus.  
 SiS distribute through specialist retailers (Wiggle etc), Amazon and supermarkets.   In
Europe they have a distribution agreement with Shimano.  They are building the website
capability so that they can do more direct selling to consumers.  

 The sports nutrition market is growing at a high single digit rate. 

 SiS gross margins are 60% and customer acquisition costs are low (a few £).  The average
customer spends £60 per annum, in 1.5 orders.

Whole Sports Foods

There will be a strong move away from high-tech sports nutrition products such as gels,
bars, chews, and protein powders in favour of whole foods. Many active people and athletes
who previously favoured sports nutrition products will increasingly make whole food choices
such as peanut butter, flapjacks, honey and malt loaf as well as manufactured bars made
from ‘natural’ ingredients. This is likely because they no longer feel that sports nutrition
products fit their health beliefs, or simply because they dislike the taste and texture.

2. Plant based, innovative, clean ingredients

The sports nutrition market is going through a major transformation, muscling its way out of
its athlete-focused niche into the mainstream. Here, we highlight three trends emerging in
Europe, Asia and the Americas.

Europe: Further explore plant-powered sports nutrition

The Mintel Trend ‘Power to the Plants’ outlines how the desire for healthier and sustainable
lifestyles is motivating consumers to adopt a more plant-based diet. In response, more
manufacturers are basing their formulations around plant ingredients such as nuts,
seeds, grains and botanicals. This trend has made a great impact on mainstream food and
drink, including sports/performance nutrition. According to Mintel Global New Products
Database (GNPD), in the 12 months to July 2019, 14% of total European launches in
sports/performance and nutrition featured a vegan/no animal ingredients claim, a five-
percentage point increase since 2014. Active Root is well positioned in this market, as all our
products are natural, vegan friendly and minimally processed.

3. Environment
Consumers are demanding their products be delivered in recyclable, compostable and
reusable packaging. There is a focus on reducing the use of single use plastic packaging.
https://www.packaging-gateway.com/features/packaging-trends-2020/
Active Root has an established tub refill scheme where drink powders are sold in compostable
refill pouches.

“Corrugated packaging provider DS Smith head of marketing and innovation Teresa Del Re

said: “As we enter 2020 we expect to see real changes across the packaging spectrum,
whether for e-commerce, FMCG or point of sale materials. The focus on sustainability and
plastic replacement is increasingly at the forefront of packaging strategy for leading brands.

“Replacing single-use plastic with widely recycled material – such as corrugated – will go a
long way to enabling the UK to meet its recycling targets and reduce the amount of waste
produced.

“In addition, innovations such as reusable printed sleeves that sit over multiple-use
corrugated boxes will [trend] and help ensure that brands can meet consumer demands for
sustainable and more environmentally friendly packaging solutions.”

Mad Beauty head of new product development Lisa Dower said: “Clean packaging [and]
simplistic designs [will be a trend for 2020]. Focusing on product ingredients, this trend ties
in with the sustainability trend, as consumers believe less complex packaging is more
environmentally friendly than over-engineered packaging.”

“It is without question that the demand for recyclable materials in packaging and materials

that are actually recycled will grow and become higher than ever in 2020. Natural materials
may soon replace common plastics and help brands strengthen their environmentally-friendly
credentials.

3.2.3 Market Growth

The perceived potential increase or decrease in the size of your target market.

According to Euro Monitor the sports nutrition market has grown 7.9% YoY from 2004 –
2018.

Health and wellness market was worth 4.2 trillion dollars at end of 2019 and according to
reports is bleeding into mainstream consumer preferences

Plant based diets are on the increase year on year. Active Root is tapping into this trend
branding all products are vegetarian and vegan. Active Root is also gluten free which has
kudos with many of our health conscious audience.

3.3 Key Customers

Your ideal customer archetype that will be the main advocate for your business.

Endurance Club Athlete

Current and projected customer retention

Existing
revenue
Cost to
generated Average retain
compared 30% spend spend Total existing
year before Marketing allocated existing new cust cust PA
Year (£) spend (£) new cust (£) PA (£) 2020 (£)
              
2020 118,444 45559 13667.70 60.00 1974.07 6.92
2021 234,907 86,034 25810.20 65.00 3613.95 7.14
2022 806,600 91,099 27329.70 70.00 11522.86 2.37

Our core customer is a UK based endurance athlete who exercises 3+ times a week and
requires a significant volume of sports nutrition products to fuel their high activity levels.
They are loyal and supportive to smaller brands such as Active Root. They care about the
environment but to do their activities they require convenient products such as single use
sachets.

They are usually part of running, cycling and triathlon clubs and keen brand advocates
helping to fuel our growth. They may also do adventure obstacle course racing (OCR). OCR
cohort is less wealthy than runners and could be from B-D demographic however their
exercise is a major part of their lives therefore it is prioritised highly in terms of spending
money on products such as Active Root.

Our plan is to extend this B2C retention sales model into other countries, we are already
distributing in Hong Kong and Germany and have ambitions to cover all potentially profitable
markets.

Green, environmentally conscious athlete

Our other core customer is UK based, a more generalist sport enthusiast who is discerning
about the provenance of products, lives a healthy lifestyle and is environmentally conscious.
We are seeing this customer type repeatedly buying from the Active Root website and in
particular our refill pouches. This is a wealthier cohort predominantly A-C1.
3.4 Future Markets

A snapshot of the potential market based on the last few sections and how your business
strategy works within it

A major future market area we intend to grow our products into is the health, leisure and
wellness market. Long before we put ginger in our sports drinks it was used as a remedy to
solve nausea and stomach issues. Therefore it is our plan to position Active Root in the
wellness market as a natural remedy and a source of hydration.

The market trends mentioned below and in previous sections also apply to the health and
wellness market.

1. Exercise and mass participation growing

2. Plant based, innovative, clean ingredients
3. Environmental conscience

This strategy is already proving successful as we have stocked our core range of 3 flavours in
400+ Holland Barrett shops. We are also distributing our low calorie electrolyte drink to
distributor ‘The Health Store’. They are selling to UK based health food shops and
pharmacies. As mentioned we see part of the future of Active Root as product akin to
dioralyte which can be drank to help settle the stomach and rehydrate through natural
electrolytes. Our Electrolite range targets this market.

3.5 Competition

3.5.1 Competitors and Alternatives

In the sports drinks arena our main competitors are Science in Sport, Tailwind, High 5, Torq
and NUUN. Smaller competitors include GU Energy and OTE.

We believe Active Root Gel Mix is currently unique in the market and the closest competition
is GU nutrition selling a multi-serving pouch of gel similar to our reusable multi-serving Gel
Mix flask.
While both the drinks and sports nutrition markets in general are competitive, we don’t
believe that any of our competitors are offering the same combination of products that
alleviate GI issues, taste great and are natural and environmentally friendly.

No company has specifically replicated a sports drink that specifically contains ginger as its
principal point of innovation. However competitors such as High 5, Science in Sport and Torq
have all introduced ginger flavoured drinks and gels to their ranges. Their gels are often
mixed with other ingredients such as turmeric.

There has been a noticeable shift to combat our position in the market as the drink that is kind
on your GI system. Other competitors are trying to make similar claims and position their
products as GI friendly like ours. This gives us particular impetus to invest in the business and
make sure we capture this market.

In the context of GI remedies wider health and wellness arena, alternatives would include:

- Rehydration remedies including dioralyte and supermarket own brands.

- Ginger tablet remedies such as ‘Gin Gins’

Broadening our competition to all energy supplying drinks which are sometimes used during
sport:

- Any ready to drink beverages e.g. Lucozade, Red Bull, Coca Cola etc.
- Hydration drinks that require dilution from a concentrated state e.g. Ribena, fruit
squashes

Customers could also make their own sports drinks using kitchen ingredients, however, this
requires research into the levels of carbohydrates, electrolytes and gingerols, as well as
dilution mix.

3.5.2 Our Advantages (see an example) 

Our key advantages at the moment are:

- Ginger innovation - We are the only company to create an entire range centred on
ginger as an innovative ingredient. Like BeetIt that owns the beetroot space we are
driven to own the ginger space in sport nutrition. Whilst we may still be relatively
small we are have a growing hard core of users who believe Active Root ginger helps
their athletic performance. Our sales data show they have loyally used Active Root
for years to give them an edge.
- Green Credentials – it is our focus to develop products that are natural and good for
our customers, but also good for the environment with a low carbon footprint.
o Mail order tub refill service – none of our competitors are offering this
service. One of our biggest revenue channels.
o Reusable gels – Our Gel Mix products allow the user to mix up multiple
portions of gel in a soft flask. This simple method removes the need for
wasteful single use gels which contains lot of plastic packaging.
- Quality, simple ingredients - All our products contain a short list of quality natural
ingredients that you don’t need a chemistry degree to understand. This is a point of
difference as our natural and easy to understand ingredients are reassuring to the
 customer. Also because they don’t contain chemicals they produce a cleaner, better
flavour.

4.0 Execution
Future Fulfilment and Refill Preparation - Expansion plans

A current challenge we are experiencing is configuring our supply of powder into tubs and
refills. To save money and improve efficiency in 2021 we are considering creating different
sized tubs and refills to cater for the needs of different sales channels. I.e. making larger tubs
for 3rd party online retailers, smaller tubs for our own website sales (due to postage weights)
and adjusting the sizes of our high demand refill product line. With contract packers tub
filling MOQs are prohibitively high and order times are slow. As our business grows we
predict this will become more of an issue and operating risk.

In order to meet our ambitious growth targets and to make our processes efficient and cost
effective we are considering finding a specific facility where we can prepare our refills and
fill our tubs. This facility could also potentially carry out fulfilment work and will require
investment in time and money Q4 2020.

Compared to contract tub filling, having this set up will give us an advantage as we will be
able to plan and react dynamically to multiple sales channel demand and rapidly fill tubs of
different sizes. We will also be able expand our online refill business. In the forecast we have
accounted for hiring a full time fulfilment assistant to help deliver this role alongside core
fulfilment staff member John McKay. We have also increased monthly rent cost of premises
to £1000 per month to account for this centre.

4.1 Marketing Plan
The overarching advertising and marketing strategy combines our 2 audiences, existing and
new customers. We market and advertise to these audiences through numerous methods and
tactics. These include a range from free taster sachet to new customers, reward scheme to
existing customers, combined new and existing (referral scheme), through paid events and
expos; online targeting using email; organic and paid social media and 3rd party agencies
such as ambassadors and event organisers. What unites all our strategy whether it is to new
or existing customers, online or direct is our devotion to customer service. We have found
that looking after customers engenders loyalty and helps us establish a growing and devoted
following which supports us by spending money with us year on year. We can see this is
working as our retention statistics are excellent and feedback mostly 5 star.

Advertising and marketing spend

Like the rest of the business we operate a lean approach towards all our advertising and
marketing. We invest in our team to ensure they are well positioned to provide excellent
customer service. This comes in the form of employing dedicated people who understand and
believe in our products. To support our customer focussed approach we invest in expos and
events. This is a big driver of attracting and selling to new customers.

Below is a short breakdown of advertising and marketing spend for Q4 2020 and all of 2021
   Q4 2020 2021
Staff    
Co Founder salary 7,500 30,000
Managing director salary 7,500 30,000
Marketing director 6,249 25,000
Marketing assistant 3,332 20,000
Fulfilment assistant 1,200 14,400
     
Marketing content and strategy    
Video / photography 4,500 1,000
Copy writing for marketing   2,000
Agency 4,000 9,000
Professional graphic designer /
photographer 2,000  
Website 150  
     
Advertising and media buying    
Retail campaign support 4,500 1,000
FB/Insta/Amazon 1,200 21,500
Analogue/Digital 3rd party media spend 1,000 12,000
Sponsorship - events 5,000 7,000
Sponsorship - professional athletes/teams 2,000 6,000
     
Events    
New kit for event managers 4,000  
Enhanced rig for expo 2,000  
Investment in attending expos 2,000 16,000
Van branding 500  
     
Accreditation    
Informed sports 5,000 9,000
  63,631 203,900
TOTAL
267,531

Existing Customers

According to our existing and projected sales data it is profitable to retain and grow existing
customers.

Existing Customer Retention Cost

Based on Active Root website sales data

 Existing Average Total Cost to
revenue 30% spend spend new retain
assumed from Marketing allocated existing cust existing
Year year before (£)spend (£) new cust (£) PA (£) 2020 cust PA (£)
             
2020 118,444 45559 13668 60.00 1974 6.92
2021 234,907 86,034 25810 65.00 3614 7.14
2022 806,600 91,099 27330 70.00 11523 2.37

The above table is based on existing 2020 data and measures customer that have ordered 2 or
more items per year. We forecast a small increase in number of orders per year per customer
and total amount spent per customer. This increase will occur as we diversify our product
range and the products become embedded in customers’ daily lives. Also retention cost
should decrease word of mouth increases.

Existing customers becoming brand advocates.

As mentioned, a central tenet of the strategy is to provide excellent tailored customer service.
Over the last 3 years we have dedicated ourselves to the needs of the customer and built a
loyal fan base of devoted brand advocates. We know our customers from meeting them at
events, we talk them over email and website messenger. We address questions, queries and
feedback and are approachable people who are passionate about endurance sport. Customers
appreciate this. This devotion to the customer and our sport helps keep retention high and
crucially energises our followers into spreading the word to new customers. This strategy
feeds into all our marketing and advertising work.

Below are examples of our main advertising strategies that yield the most revenue.

We market to our existing customers online through our growing email database of 8500
recipients and social media following on Facebook 3348 followers and Instagram 4560.

Regular activities

 Refill offer to existing customers

o Our most popular selling product with our existing customers is refill
pouches. The biodegradable pouches allow existing customers to refill
their tub rather than buying a new one and wasting plastic. Our profit
margin on the refill is also higher compared to the standard tub so it is
win-win all round.

 Online campaigns Bi-monthly

o These include reward points promotions
o Buy X and get Y for free.
o Virtual expos and themed seasonal deals such a Black Friday and Tour de
France special

 Weekly competitions
 o Shared through social media and email.
 Blog posts written by third parties and ourselves e.g.. tips and advice on hill running
from an elite athlete.

 Tasters included in orders – in order to promote new products we will include taster
sachets in orders for customer

 COVID free drink – during the lockdown we sent out 1000 free sachets to our most
loyal customers letting them have a drink on us to help them through isolation. This
was successful as it generated an extra 60 sales (c.£1250 revenue, 12% conversion
rate) during what would have been a very lean period for sales.

 Automated Email workflows. Several automated communications are sent to a

customer to encourage them to come back to the website
o Review your product and earn reward points
o If you’ve bought X we now recommend buying Y. e.g. bought a tub, buy a
refill next.
o Trying out new products, promoting gels to all existing customers.
o Abandoned cart emails – these achieve a 15% success rate.

New Customers
New Customer Acquisition Costs

New revenue
Average
generated spend Cost to
compared to Marketin 70% spend new total acquire
year before g spend allocated customer new cust new
Year (£) (£) new cust (£) (£) 2020 cust (£)
             
2020 122,556 45559.00 31891.30 19.50 6284.92 5.07
2021 565,600 86,034 60223.80 19.50 29005.13 2.08
2022 708,880 91,099 63769.30 19.50 36352.82 1.75

 Free sachet summer promotion - A central strategy to grow our email list and
customer base is a targeted online mail order free sachet campaign.
o We target sports clubs with an online form.
o Unique discount code with each sachet. Allows us to measure effectiveness
of campaign.
o Builds our email distribution list, allowing us to continue to communicate.

 Event promotion – to attract new customers we partner with events and expos to
promote our introductory taster packs.
o An example of this is a recent campaign with obstacle course event Total
Warrior.
  For several months leading up to their main summer event we
promoted a discounted introductory pack through their email
database and social media. This would attract hundreds of new
customers to our website
 We then provide free drinks throughout their event weekend. This
again increases awareness of the Active Root in the minds of our
target market.
 After the event we follow up with a promotion on the Total Warrior
email list and social media.
 This tactic brings many new relevant customers to our website
generating new sales.
o We apply this approach to all events we attend including expos, running and
cycle events and triathlons.

Most of our advertising campaigns combine all of the above tactics joined together into a
cohesive strategy.

New and Existing Customers Combined

We find one cost effective way of finding new customers is through our existing
customers.

 Refer and Earn – a cost effective way to win new customers is to get existing
customers to refer their friends.
o We promote this through our email list and social media followers.
o We us our website reward point mechanism ‘Smile’ within Shopify to
execute.

 Analogue direct
o Main Active Root team
 Sports expos, e.g London Bike Show, National Running Show
 Sports events – Total Warrior, Aberfeldy Half Ironman,
o Resellers of Active Root
 Sports events and expos marketing and selling Active Root e.g.
Mountain Biking World Championship in Fort William.

Professional athletes, teams, sporting governing bodies & Informed sports

A big part of our marketing strategy for 2021 onwards is to work with professional athlete
ambassadors, teams and sporting governing bodies. This will add extra kudos and credibility
to the brand. We already have had several offers to endorse Active Root from bodies
including Scottish Triathlon and swimming and also several professional athletes.

However to get these vital endorsements we need to have our core products batch tested to
prove they are free of drugs and good for professional athletes to use. Without this testing
approval pro athletes and bodies will not work with us. To do so we need to invest in getting
testing done with Informed Sport. This testing is relatively expensive per batch £1100,
however we believe the upsides of getting the accreditation are worth it and will help us
advertise more aggressively and grow the company dramatically.
4.2 Sales Plan
An estimate of the number of sales you anticipate based on market conditions, capacity,
pricing strategy, and other factors.

For full detail see attached sales cash flow forecast for 2020-2022.

Below are our sales projections. These figures are based on our current sales trends and
market conditions for 2020 and looking forward what we forecast for 2021-22.

Website sales – driver of growth

40-45% of our total sales will be from the Active Root website. We believe that this is the
best growth channel for Active Root and as a consequence it is here where we intend to invest
the most of our time and resources. Amazon is our second biggest sales channel and as we
grow will also account for 25-30% of our business.

Part of our online growth strategy is expanding our international online reach. We are
achieving this through large and local third party online stores. The main ones are Active
Root Asia https://activeroot.asia/ (far east), Wiggle / Chain Reaction (Global) and Bike
Components (main land Europe).

Wiggle is the biggest online sports shop in the world. The website offers attractive and
reliable customer postage rates which the Active Root website cannot compete with. However
we see this an advantage as the platform gives us global reach we need for growth. We direct
several requests per week from international customers to the Wiggle site because of the
conveniences for the customer and us.

We also sell all our products in mainland Europe through online bike retailer Bike
Components. They are akin to Wiggle in mainland Europe. And in Asia our distributor Value
Source sell through their website.

Holland and Barrett – retail growth

Although retail revenue is a small percentage of our total Holland and Barrett sales are
becoming a good addition to the sales mix. Recent order Q1 2020 was for £24,000 – c.40,000
sachets. We are keen to develop this relationship and sell more product lines to them. Also
being on the shelves of 450 shops across UK, Ireland and mainland Europe is a great
marketing tool for brand credibility and cross pollinating our other sales channels.

Sales breakdown 2020

% of
Sales channels Q1 Q2 Q3 Q4 Total total
Domestic Direct
Retail 727 22,500 5,333 2,001 30,561 13
Online 15,914 25,500 34,000 30,000 105,414 46
Amazon + Ebay 7,585 9,000 16,500 21,500 54,585 24
Export 3,393 - 4,500 4,500 12,393 5
Distributors 2,687 - 5,500 4,500 12,687 5
Events 5,533 - 9,000 900 15,433 7
231,073
Sales breakdown 2021

% of
Sales channels Q1 Q2 Q3 Q4 Total total
Domestic Direct Retail 21,000 26,000 13,000 26,000 86,000 11
Online 37,000 73,000 120,000 105,000 335,000 42
Amazon + Ebay 27,000 53,200 100,000 65,000 245,200 30
Export 10,500 5,500 11,000 5,500 32,500 4
Distributors 9,900 17,600 14,300 9,900 51,700 6
Events 22,400 14,500 17,500 1,800 56,200 7
806,600
Sales breakdown 2022

Sales channels Q1 Q2 Q3 Q4 Total % of total

Domestic Direct
Retail 30,600 46,800 46,800 46,800 171,000 11
Online 126,000 204,000 216,000 126,000 672,000 44
Amazon + Ebay 98,400 144,000 144,000 78,000 464,400 31
Export 19,200 19,800 19,800 19,800 78,600 5
Distributors 11,880 21,120 17,160 11,880 62,040 4
Events 26,880 17,400 21,000 2,160 67,440 4
1,515,480
Breakdown of % product type per sales channel 2020-2021

These figures apply to 2020 – Q1 2021. Does not include extent to which newly launched Gel
Mix range will be a growing revenue product line. Volume and revenue are still relatively
low. We anticipate that Gel Mix will be as popular as our core range sachets and tubs in
future.

Domestic % of
Direct Retail % of total   Online % of total   Amazon total
               
Sachets x 20 50   Refills 30   Standard tubs 45
Gel Mix 25   Standard tubs 25   Sachets x 20 25
6 pack sachet 15   Sachets x 20 15   6 pack sachet 15
Standard tubs 5   Bundles 10   Electro 10
Bottles +
sachet 5   Gel Mix 10   Gel Mix 5
  100   Electro 5     100
      Bottles / Apparel 5      
        100      

% of
Export % of total   Distributors % of total   Events total
               
Sachets x 20 50   Sachets x 20 35   Standard tubs 35
Tubs 35   6 pack sachet 20   6 pack sachet 20
Electrolite 10   Standard tubs 20   Sachets x 20 15
Bottles 5   Bottles + sachet 15   Bundles 10
  100   Gel Mix 10   Gel Mix 10
         100   Electro 5
            Bottles / Apparel 5
              100

Profit margins per channel

Below is a breakdown of all profit margins across a sample of our main products. Our website
and amazon are our most profitable channels. We also do most volume here too. The focus is
to grow these channels significantly in 2021, 2022.

EX Shopify fees
    Website MARGINS and postage  
Sample product GP %
from each range COGs (£) Website RRP EX VAT £ GP MARGIN MARGIN
Refill original 4.53 20.99 17.5 12.97 74.1%
Refill Electro 2.06 12.49 10.4 8.35 80.2%
Refill Gel 900 4.36 22.99 19.2 14.79 77.2%
Original tub 5.655 22.99 19.2 13.50 70.5%
Electro tub 400g 3.487 14.99 12.5 9.00 72.1%
300g Gel 3.432 11.99 10.0 6.56 65.7%
20 sachet box 4.65 20.99 17.5 12.84 73.4%
750ml bottle 1.31 5.99 5.0 3.68 73.8%
Electro 20 pack 3.39 11.99 10.0 6.60 66.1%
6 pack box 1.575 7.49 6.2 4.67 74.8%
Large Bundle (AB) 11.795 34.99 29.2 17.36 59.5%
Small bundle (TP) 2.05 7.99 6.7 4.61 69.2%

    Amazon Margins        
Sample product COGs Website Amazon Residue £ GP GP %
from each range (£) RRP EX VAT Fee 27% after fees MARGIN MARGIN
Original tub 5.655 25.99 21.66 7.02 14.64 8.99 61.4%
Electro tub 400g 3.487 14.99 12.49 4.50 7.99 4.51 56.4%
300g Gel 3.432 11.99 9.99 3.60 6.39 2.96 46.3%
20 sachet box 4.65 22.99 19.16 6.90 12.26 7.61 62.1%
750ml bottle 1.31 5.99 4.99 1.80 3.19 1.88 59.0%
Electro 20 pack 3.39 13.99 11.66 4.20 7.46 4.07 54.6%
6 pack box 1.575 7.99 6.66 2.40 4.26 2.69 63.0%

Retail and Export Sales 2020-2022

The table below summarises the projected revenue across all sales channels for the
next three years. The following section will outline how Active Root is planning to
achieve these revenue figures.

REVENUE 2020 £ 2021 £ 2022 £

Domestic Direct
30561 86000 171000
Retail
 Online 105414 335000 672000
Amazon + Ebay 54585 245200 464400
Export 12393 32500 78600
UK Distributors 12687 51700 62040
Events 15433 56200 67440
 
Domestic Direct Retail

Active Root has a proven track record of winning new direct retail accounts. Between
2017 and 2019, the company secured over 100 independent retail listings in the UK
and Ireland. These accounts include multi-door national sports retailers, such as Tiso
in Scotland and Moti in Wales. The rest consist of independent run, bike and outdoor
shops, as well as some pharmacies.

In 2020, Holland and Barrett have placed the core Active Root range (3 stock keeping
units) in over 400 UK shops. The £23,000 purchase order proves that Active Root has
the capability, and the products have the customer appeal, to win more national retail
accounts. The company has already secured an online listing with Halfords UK, with
a view to distribute to physical stores by 2021.

Other accounts to be targeted by the company include Evans Cycles and the
subsidiaries of the OCC group (Cotswolds, Runners Need, and Cycle Surgery). The
core range is present in multi-door bike retails chains already such as Edinburgh
Bicycle Co-Op and Alpine Bikes.

To grow our revenue we will be introducing the Gel Mix range to existing retailers.
This revolutionary product range is retail friendly, and has a number of USPs that are
attractive to physical retailers. If we can secure Gel Mix listings with even 50% of
current retailers, it massively expands the brands retail presence.

Additionally, the Taster Kit (a branded sports bottle bundle) represents a further way
to increase our retailer reach.

UK Retail Distributors
The key to huge retail volume in the UK lies with the success of our three UK
distributors.

1) UNNU
The Active Root core offering has been listed with UNNU since 2017. UNNU can
provide Active Root with a sales channel opportunity to the larger national chains
described above. Furthermore, UNNU can upsell the Gel Mix range to over 100
existing retailers as well as many more.

2) The Cycle Division

The Cycle Division will provide the most growth for Active Root via distribution in
the 2020-22 period. The distributor directly supplies over 1000 Independent Bike
Dealerships (IBD) in the UK through B2B sales and a 9 strong field sales team.
Active Root is their only nutrition and hydration brand.

In a 6-week period, in Q1 2020 the Cycle Division secured 15 new retail accounts.
This growth was only truncated by the COVID19 outbreak. Even with COVID19,
Active Root should establish a core presence in 100 and 150 new IBD retail accounts
in 2020.

There is no product in the cycle nutrition market like the Gel Mix range. The ‘first to
market’ status, combined with Gel Mix’s quality branding and USPs, should make up
a large portion of the Cycle Divisions sales in 2020-21. The IBD market is set to grow
with the government and societal promotion of cycling as well.

Active Root will be actively supporting The Cycle Division. For example, Active
Root plans to share a stand with the Cycle Division at the National Bike Show in
September 2020, in Birmingham. This will be the first trade show for Active Root to
work in conjunction with a major distributor in the UK cycle industry.

3) The Health Store

The Health Store supplies the ElectroLite range (2 stock keeping units) on a B2B
basis to Independent Health Stores. 2019 has seen disappointing sales so far. It is
anticipated that the Health Store will be responsible for a small % of growth in the
2020-22 period.

Example Retailer Distributor Margins 40/20%

Trade
Margin UK Trade Dist Dist AR
Product
2020 UK Exc Percent Price ex Buy margi Margi
COG RRP VAT Ex. Vat VAT (£) n (£) Dist % n%
300 Gel 19.1
bundle 6.004 22.99 6 40% 11.495 9.2 2.295 20.0% 34.7%
900g 22.4
Gel tub 5.998 26.99 9 40% 13.495 10.8 2.695 20.0% 44.5%
Flask 2.569 11.99 9.99 40% 5.995 4.8 1.195 19.9% 46.5%
1.4kg 20.8
tub 5.63 24.99 3 40% 12.495 9.75 2.745 22.0% 42.3%
6 pack
box 1.7 7.49 6.24 40% 3.745 3.05 0.695 18.6% 44.3%
20 pack 25.0
box 4.7 30 0 40% 15 10.17 4.83 32.2% 53.8%
4+
bottle 2.13 8.99 7.49 40% 4.495 3.6 0.895 19.9% 40.8%
750ml
Bottle 1.31 5.99 4.99 40% 2.995 2.34 0.655 21.9% 44.0%
400g 12.4
Low Cal 3.257 14.99 9 40% 7.495 5.8 1.695 22.6% 43.8%
20 Low
cal 16.6
sachet 4.35 20 7 40% 10 7.8 2.2 22.0% 44.2%
Example direct to Retailer Margins 50%

RRP with RRP Ex Retailer UK Trade Price AR Margin

Product COG VAT (£) VAT 20% Margin ex VAT (£) %
1.4kg Tub 5.63 24.99 20.8 50% 10.41 45.9%
6 sachet box 1.70 7.5 6.3 50% 3.13 45.6%
20 pack box 4.70 30 25.0 50% 12.50 62.4%
750ml Bottle 1.31 5.99 5.0 50% 2.50 47.5%
400g Low Cal 3.26 14.99 12.5 50% 6.25 47.8%
20 Low cal sachet 4.35 20 16.7 50% 8.33 47.8%
Cycle Jersey 18.75 49.99 41.7 50% 20.83 10.0%
300 Gel bundle
(HW) 6.00 22.99 19.2 50% 9.58 37.3%
900g Gel Bundle
(HW) 8.56 35.99 30.0 50% 15.00 42.9%
300 Gel tub 3.43 13.99 11.7 50% 5.83 41.1%
900g Gel tub 6.00 26.99 22.5 50% 11.25 46.7%
Flask 2.57 11.99 10.0 50% 5.00 48.6%

Exporting

Through Q4 2019 and Q1 2020 with have exported 3 pallets of stock to Hong Kong
distributor Value Source Trading. They have access to the Hong Kong and Mainland China
markets. Also they are looking to export Active Root to countries across Australasia region.
We see this relationship as the start of a potentially significant growth area in the business
that we can build on in 2021 and beyond.

Value Source have had a tough time with rioting in Hong Kong at start of 2020 and now
COVID. Also margins are relatively low however we are confident we can improve this
through increased volumes and other efficiencies.

We are also in the process of registering a trademark on the Active Root name and imagery
in China in order to protect the brand. Once this has been completed the distributor will
work more aggressively to push the brand to Mainland China and beyond.

Export to HK - Ex factory price

RRP with RRP Ex VAT Retailer HK Trade AR Margin

Product VAT (£) 20% Margin Price (£) COG %
1.4kg Tub 24.99 20.83 64.0% 7.50 5.63 24.9%
20 pack box 30 25.00 70.0% 7.50 4.7 37.3%
750ml Bottle 5.99 4.99 60.0% 2.00 1.31 34.4%
400g Low Cal 14.99 12.49 64.0% 4.50 3.26 27.5%

We also export Active Root to large German online bicycle retailer Bike Components
https://www.bike-components.de/. They sell our products across all markets in main land
Europe. Sales so far have been reasonable. Over 1 year there have been one full pallet
delivered and 3 restocks of lines.
Direct sales at Events

Over the last 3 years events and expos have been a cost effective way of introducing Active
Root to new customers. We have negotiated FOC partnership deals with several races and
events, using them to supply free drinks to race entrants. These include triathlons, road and
trail races, cycle events and OCR. In Scotland we work with Durty Events and in England
Events of the North (Steve Cram’s company) and Tough Mudder. Although taxing on time
and resource we find the new customer base these events generate pays dividends.

We also sell and market Active Root at several large sport expos per year. These include
National Running Show, London Bike Show, National Cycle Show and Ride London. Again
these events are vital for winning new customers in different UK territories. As well as B2C
marketing and revenues the expos also help us with B2B. Most of the business relationships
we have built over the years have been through meeting people at events. Being visible at
these events brings extra credibility and visibility to the brand and helps perpetuate and
reinforce the message amongst the community.

    Expo Prices    
Sample product Event £ GP GP %
from each range COGs (£) RRP EX VAT MARGIN MARGIN
Refill original 4.53 15.00 12.50 7.98 63.8%
Original tub 5.655 20 16.67 11.01 66.1%
Electro tub 400g 3.487 12 10.00 6.51 65.1%
300g Gel 3.432 10 8.33 4.90 58.8%
20 sachet box 4.65 18 15.00 10.35 69.0%
750ml bottle 1.31 4 3.33 2.02 60.7%
Electro 20 pack 3.39 10 8.33 4.94 59.3%
6 pack box 1.575 6 5.00 3.43 68.5%
Large Bundle (AB) 11.795 30 25.00 13.21 52.8%
Small bundle (TP) 1.7 5 4.17 2.47 59.2%

4.3 Location and Facilities

Manufacturing

To create and blend our powders we have been working with Glasgow based manufacturer
Dalziel Group for last 3 years. We have a good relationship with them, they helped us with
R&D of several of our products and at end of 2019 I did a factory visit to inspect their
processes. They are a reliable, fully BRC accredited, large and professional operation with 5
sites around the UK. They work with small and large clients including Waitrose, Sainsbury’s
and Tesco.

Quality assurance is controlled through contamination tests of all raw ingredients before
blending and inspections after blending.

Turnaround for powder creation from ordering is between 3-6 weeks.

Below is a breakdown of current cost per kg of each of our 6 product lines.

Product Cost per kg

Electrolite (Low calorie) £3.96
Green Tea & Ginger (sports drink) £2.99
Ginger Blend (sports drink) £2.68
Mint & Ginger (sports drink) £2.59
Gel Original (Gel Mix) £3.99
Gel Cacao and Peppermint (Gel Mix) £3.99

These prices per kg are relatively high now however we have had assurances that when
volumes increase we will be able to get the cost per kg down significantly.

Contract packing –

Sachets

Our sachet filler is Flexible Packing Services based in the Wirral. We have been working with
them for last 2 years. They are fully BRC accredited and so far have been reliable and
accommodating. Quality assurance is controlled through batching from Dalziel and
certificates of product authenticity.

Turnaround for sachet filling is 1-2 weeks.

Product Cost per unit

Laminate per unit (36,000 sachet) £0.06
Sachet fill per unit (36,000 sachet) £0.048

Tubs

Our tub filler is Wasdell Group based in the Northampton. We have been working with them
for last 18 months. They are fully BRC accredited and so far have been reliable and
accommodating. Quality assurance is controlled through batching from Dalziel and
certificates of product authenticity.

Turnaround for sachet filling is 1-2 weeks.

Product Cost per unit

Tub fill per unit (1000+ order) £1.45

Working Premises

We are based in three locations, our office and fulfilment centre are both in Edinburgh and
our stock warehouse is in Glasgow.

Rent for our office is £415 per month, fulfilment is provided FOC by investor, and warehouse
in Glasgow £500

Office comfortable central Edinburgh location for office with room for increases team
members to 4 as we grow.
Fulfilment centre, central Edinburgh 2 miles from office.

- Fulfilment and preparation and collection of all mail order.

- Work space is council accredited for handing and preparation of our tub refill products.

Glasgow based warehouse is manned for goods in and out during office hours. The set up is
excellent and has an experience warehouse manager with fork lift truck.

Warehouse has capacity for significant storage expansion. Owners are also experienced in
packing and fulfilment. There is an option as we grow for them to carry out our mail order
fulfilment.

4.4 Technology
Refills – no one else in the sports nutrition space is selling refills like Active Root. We offer
all our product range as refills. This is a major point of difference for us and is reflected in the
high sales we make in this product line.

Refillable DIY gels – Our Gel Mix is another point of difference compared to the
competition. We sell soft flasks hardware Gel Mix bundles. This gel format removes the need
for wasteful single use gel sachet packaging. Since launch it has had a good take up with c.
500 units sold on the website.

4.5 Equipment and Tools

Any required production equipment or tools and the cost associated with purchasing or
renting them.

N/A

4.6 Milestones

A detailed roadmap of specific goals and objectives you plan to achieve that will help you
manage and steer your business.

2020 goals

 In light of the COVID19 crisis our main goal for Q2 & Q3 2020 is to weather the
storm and continue to trade through the summer and beyond.
 During the lockdown we are maximising on-line business and preparing the platform
for a rapid expansion when lockdown is lifted.
 Q4 2020 we plan to invest in scaling the business, building on our existing product
range and advertising to a larger market on a wider UK and international scale.
 With scale we can decrease the unit cost of production across our range. This includes
raw ingredients, packaging, postage and transactional costs. This will increase profit
margin, giving opportunity to reinvest earnings into bigger marketing plans.
 Our central objective is to achieve another 100% growth in 2020, with revenue of
250K. This will be achieved by investing aggressively in marketing and advertising in
Q4 2020 through to end of Q2 2021 (see above marketing investment plan). We will
 lay strong foundations that will act as a springboard for significant further growth.
Our revenue goal for 2021 is £800,000 plus and 2022 £1,500,000. 2021 and 2022
growth will be largely driven by increased online sales through our website and
amazon.
 Q4 2020 – Q2 2021 our goals are as follows:
o Specifically employing a marketing assistant to help us deliver our ambitious
revenue targets, investing in informed sport testing, through this accreditation
working with sporting bodies and professional athletes.
o Working with an advertising agency to further improve our delivery of online
messaging through social media, website and email.
o Employing temporary reseller event employees and bringing Active Root to
larger mass participation events such as city marathons and cycling events.
o Adding extra flavours of product to each of our lines. Including a lemon balm
and ginger flavour low calorie and an extra Gel flavour.
o Tactical use of professional agencies to further improve the branding of
Active Root. These include videographers, photographers
o Expand our fulfilment and refill + tub preparation operations through hiring a
third party contractor or setting up our own facility. Provision in forecast for
a fulltime fulfilment assistant.
 Q2 2021 – Q2 2022
o Continue to leverage all of the above marketing mechanisms. Similar
investment in online and event marketing. New ambassadors, bigger
relationships with sports bodies and events. Take advantage of the
momentum achieved in 2021 to further grow in 2022.

4.7 Key Metrics

Performance measurements that help you gauge the overall performance and health of your
business.

See cash flow forecast with monthly sale channel revenue breakdown for 2021 and 2022

Year Revenue £ COGs £ GP £ Expenses £ Marketing costs £ NP Margin

             
2020 241,240 124,228 111,189 93,130 45,599 (23,740)*
2021 806,600 441,666 364,934 174,257 86,034 104,644
2022 1,515,480 710,235 805,245 161,691 91,099 552,455

Over the last 2 years the Active Root team has developed a strong track record of delivering
growth across all our sales channels especially online and at direct event sales.

Much of future investment will be centred on growing online sales. From our experience this
is where the best return on investment and margin is. We forecast that by 2022/23 70%+ of
our sales will be generated through our website and Amazon. Refills, tubs and Gel Mix are
already our biggest sellers online. These products along with new flavours will be the driving
force for future growth.
5.0 Company and Management Summary

5.1 Organizational Structure

There are 2 directors and, one FTE and one full time volunteer. Will Townsend is
Managing Director and co-founder. James Waldie is operations and marketing
manager. James reports directly to Will. George Ashley is Sales Director and co-
founder. George reports to Will, and is responsible to for all UK/EU retail and
distribution, as well as miscellaneous functions within in the business.

George and James also work together horizontally on marketing campaigns and
weekend retail events. John McKay is a full-time volunteer for the business, and is
responsible for order fulfilment and inventory management. John works horizontally
with both directors and James to ensure smooth operation of all orders, stock levels
and other miscellaneous functions e.g. helping at weekend events.

5.2 Management Team

Will Townsend – Managing Director and Co-founder

Will has Masters in Design and 8 years of professional web and multimedia design
experience. He also has significant managerial experience with Baillie Gifford. He has
been a full-time director of Active Root since April 2017. Since then, he has led the
company to a doubling of revenue year on year (2017-2019), helped design and
launch over 10 different products and has established a brand with sales in 8 countries
(UK, Ireland, Germany, Austria, Switzerland, Spain, Hong Kong, and Malaysia). Will
has overseen, and has had an active role in the development of every aspect of Active
Root.

George Ashley – Sales Director and Co-founder

George holds a PhD in molecular biology and has 8 years of experience in business
development within the life science and biotech industries. He has been a full-time
director of Active Root since June 2018. George has been responsible for securing
over 100 independent retail accounts, including brick and mortar chains, for Active
Root in the UK and Ireland between in 2018 and 2019. The company has secured 3
UK distributors, one EU distributor and one Asian distributor and is in talk with
others. In April 2020, the 3 core Active Root products were listed in over 450 Holland
and Barrett stores UK wide. George’s focus has been on retail and distributor
development, as well as supporting Will with broader operational and business growth
responsibilities.

James Waldie – Operations and Marketing Manager

James has a degree in History from Edinburgh University and significant retail
management experience with the running retail company Run4It. James also has run a
successful independent Personal Training business. James is responsible for general
operations and online marketing campaigns through the website and social media.
Day to day duties include liaising with ambassadors and event organiser, and working
closely with Will on digital marketing campaigns and product launches. Since
working with Active Root, James has developed considerable website development
skill and is a proven project manager.

5.3 Management Team Gaps

George has no official managerial experience, which as a director, represent a skills

gap. However, as Active Root grows, we do not anticipate any kind of direct sales
force or agents. One of our UK distributors has a field sales team, and the others
operate with internal sales teams.

As Active Root grows, weekend retail will play a significant role in growing B2C
revenue and B2B opportunities. The company will staff events with a mixture of part
time event managers and temporary agency sales staff. The management of these staff
should be easy to handle due the part time nature of the work. Direct management
responsibilities for these individuals can be allocated at the later date.

New personnel

Active Root will require expertise in social media to continue to attract new customers
and to reach a broader audience. Digital marketing is a significant tool that Active
Root can benefit from a dedicated employee with the right skill set. This individual
can also assist in operations.

We have several people in mind who, if available, could be good candidates for this
role.

5.4 New Personnel Plan

Social Media and Digital Marketing Manager – Responsible for all social media,
email and website communication media. Day to day duties would focus on
designing, planning and executing digital marketing campaigns. These would be done
in conjunction with the MD and other team members, where necessary. The
individual would also be responsible for assisting in operational duties.

Fulfilment Assistant – Assist with preparing and fulfilment of online orders. Also
working in the warehouse helping manage stock and preparing refills and tubs. Based
in Edinburgh, working alongside John McKay.
Temporary Event Manager (South of the UK) – Responsible for liaising with and
attending appropriate weekend events (Races and Expos) in the south of the UK, often
with one of the two directors and some weekend part time help. The individual would
be provided with all necessary retail and race hydration materials i.e. gazebo, flags,
coolers etc. to store at their home office. Liaising with the digital marketing manager
would be a key element to maximise awareness pre-event and sales post-event.

5.5 Company History and Ownership

Shareholding

40% - James McKay – Principal Investor and Non-Executive Director

29.4% - Will Townsend – Co-founder and Managing Director
29.4% - George Ashley – Co-founder and Sales Director
1.2% - Huw Stradling – Co-founder (No function in the company)

The company was registered as a Scottish Limited Company in September 2017. Will
worked full time for no salary from 2017 to 2018, with George helping in the
evenings and weekends.

James McKay provided £100K investment in April 2018, enabling George to work
full time and one full time employee, James Waldie, to join the team. As of May
2020, the company has 3 FTES and one full time volunteer, John McKay.

Active Root has grown significantly since 2017. This has been accomplished by
different, but complementary methods. By attending weekend events, around the UK
and Ireland, the company has hydrated tens of thousands of racers at the point of need,
which leads to successful retail. These efforts have been supported by creative retail
and online marketing to grow the brand and drive sales. By co-ordinating physical
events with online marketing, the Active Root name has developed into a challenger
brand in the UK sports nutrition market.

Product development has been key to our growth, from one flavour in 2017, to 3
flavours in 2019 and 3 full product ranges in 2020. By meeting consumer needs, such
as a low calorie version, and launching the Gel Mix range in an effort to replace single
use gels, Active Root has adapted to meet market demands.

6.0 Financial Plan
See attached cash flow forecast data for sections below.

6.1 Revenue/Sales Forecast

6.2 Expenses

6.3 Projected Profit and Loss

6.4 Projected Cash Flow

6.5 Projected Balance Sheet

6.7 Business Ratios

Standard statistical indicators that showcase the current and projected health of your business.

7.0 Appendix references

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Sports Medicine, 15(4), 242-257.

2. de Oliveira, E. P., & Jeukendrup, A. (2013). NUTRITIONAL RECOMMENDATIONS TO

AVOID GASTROINTESTINAL COMPLAINTS DURING EXERCISE. Sports Science,
26(114), 1- 4.

3. Ter Steege, R. W., Van Der Palen, J., & Kolkman, J. J. (2008). Prevalence of gastrointestinal
complaints in runners competing in a long-distance run: an internet-based observational study
in 1281 subjects. Scandinavian journal of gastroenterology, 43(12), 1477- 1482.

4. Lien, Y. H. H., Lai, L. W., & Silva, A. L. (2003). Pathogenesis of renal ischemia/reperfusion
injury: lessons from knockout mice. Life sciences, 74(5), 543-552.

5. Ali, B. H., Blunden, G., Tanira, M. O., & Nemmar, A. (2008). Some phytochemical,
pharmacological and toxicological properties of ginger (< i> Zingiber officinale Roscoe): A
review of recent research. Food and chemical Toxicology, 46(2), 409-420.

6. Lohsiriwat, S., Rukkiat, M., Chaikomin, R., & Leelakusolvong, S. (2010). Effect of ginger on
lower esophageal sphincter pressure. Medical journal of the Medical Association of Thailand,
93(3), 366.

7. Hu, M. L., Rayner, C. K., Wu, K. L., Chuah, S. K., Tai, W. C., Chou, Y. P., ... & Hu, T. H.
(2011). Effect of ginger on gastric motility and symptoms of functional dyspepsia. World
journal of gastroenterology: WJG, 17(1), 105.

8. Willetts, K. E., Ekangaki, A., & Eden, J. A. (2003). Effect of a ginger extract on pregnancy‐
induced nausea: A randomised controlled trial. Australian and New Zealand journal of
obstetrics and gynaecology, 43(2), 139-144.

9. Sontakke, S., Thawani, V., & Naik, M. S. (2003). Ginger as an antiemetic in nausea and
vomiting induced by chemotherapy: a randomized, cross-over, double blind study. Indian
journal of pharmacology, 35(1), 32-36.