Babease was once seen as a rising star in the world of organic baby food. Their colourful pouches of healthy meals for babies were available in top UK supermarkets, including Tesco, Waitrose, and Boots, as well as online through Amazon and Ocado.
However, behind the scenes, things weren’t as healthy as the food they were selling. In 2019, after spending over £11 million of investors’ money, Babease went into administration. This blog examines what happened to Babease and what small business owners can learn from the Babease liquidation.
A promising start
Babease was launched in 2016 by founder Tom Redwood with the mission of offering nutritious, organic baby food. They teamed up with a sister company, Brecon Foods, which handled the manufacturing from a factory in Wales. Babease did everything from cooking the food to packing it and sending it out.
Everything seemed to be going well on the outside – they had staff in both London and Wales and were stocked by big-name retailers; however, problems were building fast.
Big spending, small returns
In just three years, Babease and Brecon Foods spent over £11 million. This money came mainly from investors, including Amitis Partners, who invested £5 million in August 2019. The spending covered expensive marketing campaigns, high wages for nearly 60 employees, top-quality ingredients, and supporting a major (but loss-making) contract with Lidl.
Despite all that money, the business only made £5.4 million in sales. In the first nine months of 2019 alone, they lost £2.8 million while bringing in only £1.4 million.
When the money ran out
By the end of October 2019, it was clear Babease couldn’t pay its bills. There wasn’t enough cash to pay staff wages, and suppliers were threatening legal action or stopping services, such as waste collection, or even cutting off power to the factory.
The company had just £100,000 left. So, the directors decided to file for administration, a legal process that helps a struggling business try to survive or sell in an organised way.
A quick sale, but not a clean break
In the end, investors bought the business back in a ‘pre-pack’ deal, where a buyer is found before the administration is officially announced. They paid £910,000 in November 2019.
This deal saved all the jobs, but it didn’t include ownership of the factory building. Instead, the new company agreed to rent the space for £10,000 a month for six months.
The Lidl problem
While Babease was known for its branded baby food, it also made baby food for Lidl under a separate deal. Lidl was the company’s biggest customer by value. But the contract was losing money. It involved 17 workers and required a significant amount of time and resources.
After the sale, the Lidl contract ended, and those jobs were expected to go. It shows that big deals with large retailers aren’t always a good thing, especially if they aren’t making a profit.
What can business owners learn?
The story of Babease has some key lessons for UK business owners, especially startups or growing brands:
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Don’t grow too fast
Early success can be exciting, but growing too fast without solid revenue to back it up is risky. Babease spent heavily on marketing, staff, and production without the income to sustain it. Growth must be steady and financially supported – rushing it can quickly lead to a cash crisis.
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Watch out for bad deals
Securing a contract with a major supermarket chain can seem like a win, but not all deals are profitable. Babease’s own-label deal with Lidl appeared to be a good investment on paper, but it was actually costing them money. Before agreeing to any major contract, run the numbers; if it doesn’t turn a profit after costs like production, labour, and delivery, it may do more harm than good.
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Know your numbers
You don’t need to be an accountant, but you do need to understand your finances. Babease had a flashy brand and strong presence, but behind the scenes, it was losing millions. Track your cash flow regularly. Know your break-even point, your overheads, and your profit margins. If the figures aren’t stacking up, don’t ignore them.
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Get help early
Many business owners wait too long to seek help, which limits their options. In Babease’s case, they had just £100,000 left and were facing legal threats when administrators were called in. If your business is starting to struggle, don’t delay – speak to a qualified insolvency expert early to understand your options and take control of the situation.
Why Babease’s closure is a warning for all business owners
Babease has now ceased trading. The Babease liquidation is a reminder that even popular and well-stocked brands can go under if their finances aren’t right. Strong sales and good visibility don’t guarantee success if costs spiral out of control. Careful financial management is crucial for maintaining a healthy and sustainable business.
Many businesses focus heavily on growth and marketing but overlook the importance of maintaining a balanced budget and positive cash flow. Without this foundation, even well-loved brands can struggle to survive. Babease’s story highlights the importance of regularly reviewing one’s financial health and being prepared to make tough decisions before problems become unmanageable.
Final thoughts
The Babease liquidation shows how easily a business can run into trouble, even with investment, retail listings, and a good product. For anyone running a company, especially in the food production or retail sector, it’s essential to balance passion with sound financial planning. If your business is under stress, you’re not alone. The sooner you get expert advice, the better your chances of finding the best outcome.
Need expert insolvency advice?
Whether you’re considering liquidation or exploring other options, our licensed Insolvency Practitioners offer free, confidential, and impartial advice. Contact us using the form below, start a live chat, email mail@Simpleliquidation.co.uk, or call 0800 246 5895 – we’re here when you need us.
