Frosta AG: Crafting a Moat Through Transparency and Product Purity

The Frosta AG was founded in 1961 by Dirk Ahlers as a frozen fish manufacturer. Over the following decades, the company acquired and merged several times to expand its frozen food portfolio by vegetables and expanded into Poland as a new market. Around the turn of the century, Frosta made a radical move: They listened to the customer and created their Frosta Reinheitsgebot (purity regulation). Starting in 2001 and fully rolled out through the product portfolio in 2003, Frosta now produced all its products without additives like flavor enhancers, flavorings and colorings. Even the additives not required to be labeled by law (i.e. too low of a concentration in the finished product). This, however, turned out to be a disaster in the short-term, seeing Frosta's sales plummet by 40% and finishing 2003 with an 8 million euro net loss, the worst year in its history. Frosta was ahead of its time, but luckily, it recovered and has grown its footprint nationally and internationally. Founder Dirk Ahlers still owns 10% of the business, while his Son Felix Ahlers owns 33.7% and is the CEO. When Felix joined the company, they didn’t dare to serve their own products in sales meetings because of the quality. Felix, previously star chef in Paris, saw this as alarming and established the Reinheitsgebot and started the turnaround. The company now has an enterprise value of around 400 million euros.

Business Model

The Frosta AG has two business segments. Frosta is the main brand that manufactures, markets and sells frozen food products under the Frosta Reinheitsgebot to European customers. The company also offers food services to supply catering chains and wholesalers. Frosta contributes 68% of revenue and grew 10% last year.

The smaller segment, Copack, manufactures private-label frozen food products for food retailers and wholesalers. Copack contributes 32% of revenue and also grew 10% in the last year.

Frosta AG generates 63% of sales in the German market and 37% in the rest of Europe, predominantly Poland and Italy, but also has a presence in Hungary, the Czech Republic and Romania. Most sales are from ready meals and other products at 47%, followed by Fish at 30% and vegetables & fruit at 22%.