Real-life tales of earning - Allergy UK

Earning from endorsements

Origins
Leadership
The Great Idea
Business Plan
Initial Funding
Three Different Endorsements
Competition
Managing Feedback
Earning
Structure
Funding
Future Developments
Defending Commerce

Origins

Allergy UK is a national medical charity established in 1991 to increase understanding and awareness of allergies, to help people manage their allergies, to raise funds for allergy research and to provide training in allergies for health care professionals.
The charity was founded by a group of doctors, mainly respiratory specialists, who found themselves unable to respond to the needs of all their patients.

In its early years, Allergy UK was a patients' organisation that concentrated on providing information to members via fact sheets. For income it relied on donations, membership and goodwill fundraising, with pharmaceutical companies heavily involved in the funding process.

By the mid-1990s, the charity realised that there was much more they could be doing to help sufferers, but they were hamstrung by their desire not to be beholden to pharmaceutical companies, deeming such links unsuitable for a patients' organisation.

(back to contents)

Leadership

Consequently, the trustees decided to run the charity along more commercial, income-generating lines, and they appointed Muriel Simmons as chief executive at the end of 1996. Muriel came from the NHS, where she had been successfully generating income for hospitals through both goodwill/donations and through commercial activities. She was asked to do the same at Allergy UK. -

(back to contents)

The Great Idea

The charity realised that an endorsement scheme would benefit three different groups. Firstly, it would provide a vital service to the public; secondly, it would revitalise their own turnover; and thirdly, with one in three members of the population suffering an allergy, an endorsement would supply an obvious marketing tool for manufacturers.

"I felt it would be a service to the public with allergies to say that we had tested the product and found that the criteria laid down by the experts (which were incredibly high) had been met." - Muriel Simmons

The idea evolved from the fact that sufferers were frequently contacting Allergy UK for advice on consumer decisions. They wanted to know which vacuum cleaners, cleaning products etc were most suitable, and Allergy UK realised they could turn this to their advantage.

"We were listening to people, listening to what they wanted. And having a naturally commercial brain... [we began the endorsement scheme]."

Some companies had approached Allergy UK about endorsements in the past, without seeing why they should have to pay. But the charity could not risk endorsing a product without scientific evidence, and they could not ask specialists to give their time free of charge to review commercial products. The process had to be treated in a commercial way.

(back to contents)

Business Plan

Muriel put together a basic business plan based on a very small number of endorsements. She expected steady income growth through annual renewals, as has happened, but the base number of endorsements has exceeded expectations.
The charity did all the financial planning themselves without recourse to external operators.

"We used all the expertise we had. Our chairman at the time was a venture capitalist who had always been a generous sponsor in the past and he got somebody to look over what we were doing, but it was very unofficial and informal. It was very much done on a shoestring."

(back to contents)

Initial funding

No external funding was required for the endorsement project. The first product tests were performed in-house at a laboratory at Allergy UK's former headquarters and they employed scientists on a consultancy basis to come in and do the tests.
Allergy UK funded the lab for between £5,000 and £7,000, thanks in part to a loan from the Charity Bank and equipment donated by commercial labs. The profits they made on the first endorsement (which was paid upfront) covered this outlay.

It quickly became obvious that the laboratory could not cope with the required range of tests so they went to Worcester University where Professor Jean Emberlin is a leading international expert in air quality. She looked into the testing protocols and the scheme took off from there.

(back to contents)

Three different endorsements

1) Seal of Approval

This is for products that either remove or significantly reduce allergens and people's contact with them, and which can be scientifically tested with measurable results.

It is by far the biggest of the endorsement schemes with 32 companies holding Seals. Allergy UK works with Seal partners on new projects and encourages them to submit new products for the Seal. Also, the charity will contact partners to see if they might be interested in supporting new initiatives.

The type of products that currently hold the Seal of Approval Award include vacuum cleaners, steam cleaners, bedding, flooring/carpets, air cleaners, filtration and ventilation systems and cars. Allergy UK is also looking at companies in the cosmetics industry.

For every product that is tested there is a specific protocol designed by leading allergy specialists, and Allergy UK own (and guard!) the rights to these protocols.

For example, the Ford Focus C-MAX recently became the first car to receive the Seal of Approval. Ford had approached Allergy UK because they were developing a car with an allergy-free interior and wanted to market it to sufferers.

The testing protocol involved (among other elements) dermatologists to assess fabrics, dyes and glues used in the car; and respiratory specialists to ensure the car's filters were not letting any pollen through.

2) Free From Award

This is given to products which are free from a particular ingredient that could cause an allergic reaction in an allergy sufferer, such as wheat-free bread. To receive the endorsement the product must be independently assessed by an expert (e.g. a dietician for food products or a dermatologist for skin-care products) who is appointed by Allergy UK. Only two companies had Free From Awards at June 2004.

3) Consumer Award

This is for products that are of benefit to the public but which do not actually reduce or remove allergens in the environment and cannot be tested scientifically. Alternatively, the company concerned may not be able to afford clinical trials. In these cases Allergy UK can confer the Consumer Award which relies on anecdotal rather than clinical evidence.

For example, a panel of 24 allergy-sufferers tested a product which, when wiped on animal fur, would 'denature' the allergen and make it more allergy-friendly. 23 out of the 24 reported 100% success, while the other got fed up with applying the substance! This anecdotal evidence was not enough to earn the product a Seal, but merited the Consumer Award. Three companies had Consumer Awards at June 2004.

[In May 2002, the charity's name was changed from the British Allergy Foundation to Allergy UK because it improved their ranking on internet search engines and because it was politically easier given that they were working throughout Ireland, Scotland and Wales. The Seal of Approval is still in the name of the British Allergy Foundation.]

(back to contents)

Competition

Other labs will perform similar allergen-related tests, but they do not have Allergy UK's endorsement power. A manufacturer might put a product forward for testing so that they can approach the market with confidence and market the item with phrasing along the lines of 'This product has been tested by Cambridge Entomology Centre...'

Many European companies come to Allergy UK for the Seal because there is no equivalent in their own country. The Seal is European-registered while the Free From and Consumer Awards are only British registered.

"A manufacturing company in Germany did a survey and found that our Seal of Approval was the most recognisable mark for allergy sufferers in all of Europe."

(back to contents)

Managing feedback

Allergy sufferers will report back to the charity on the products that they endorse.
"We get tremendous feedback. Occasionally someone will say, 'I didn't find that successful' or 'I didn't like the way that washed up'."
If this happens, Allergy will re-enact the sufferer's actions to assess whether their complaint is valid.

The charity has had a couple of problems with misuse of the Seal, but they come down very strongly on anyone who does this. Companies that have the Seal of Approval police it effectively themselves, and Allergy UK members act as unofficial monitors as well, contacting them if something is not right.

(back to contents)

Earning

"I've always believed that a charity should make money. You cannot run a project on the basis of relying on goodwill, donations, fundraising. To have a project that you can properly plan, you have to be able to plan your income as well."

1) Endorsements

Seal of Approval: Companies pay for the Seal. They meet the costs of clinical testing and pay a margin on top of that. Allergy UK will not give an endorsement just because they are paid; the product has to pass the test.

"I have to be able to stand up in court and swear that the product has met a sufficient standard."

Manufacturers pay upfront and they pay regardless of success. A pre-testing agreement makes all this clear. If the Seal is granted, a contract clarifies the wording that the manufacturers are allowed to use in conjunction with the Seal.

The Seal is renewed annually and - assuming they want to keep it - the company must sign a document declaring that nothing has changed in the product's make-up. (They can change irrelevant details, like colour, but still have to tell Allergy UK). The renewal rate is in the region of 98%.

The cost of the Seal depends on the type of testing done. The laboratory will estimate how long it will take to test the product and how much they will charge. Allergy UK then give a price to the company which includes the testing cost plus their own margin of between 75% and 80%.

Vacuum cleaner tests cost the manufacturer around £10,000.
Air-cleaner tests take longer and could cost between £10,000 and £13,000.
If a product has already had full-blown clinical trials, Allergy UK will simply get their own experts to review the relevant data. This reduces the cost of the Seal to £5,000.
Seal renewal costs £3,000 per year.

The manufacturer is not committed to a £10,000 outlay from the start. Allergy UK can perform a basic inspection of the information supplied and, if it is obvious that the product will not meet their requirements, it can be rejected outright. If they are not sure, Allergy will pass the product on to their scientists who will advise about pressing ahead with the full test.

Free From: The price charged depends on the number of products under consideration (usually it is an entire range that is seeking the endorsement) and on how much analysis the dietician has to do - they have to look at the entire manufacturing process as well as the ingredients. It is usually around £3,000 for the test and £1,500 for the annual renewal.

Consumer Awards: £3,000 for the review by the panel of sufferers and £1,500 for the annual renewal.

2) E-learning

Allergies are reaching epidemic proportions in the UK, but in the past their study has not been recognised as a speciality and has not been on the postgraduate medical school curriculum. As part of its mission, Allergy UK is undertaking various projects to train members of the medical profession in allergy.

The charity has developed a diploma in allergy accredited by the University of Greenwich and will launch an online European diploma in allergy which will be global in the next year.

The diploma is accredited for 60 points, a quarter of a Masters degree. Students pay Allergy UK £900 for the course (bursaries are available) with Allergy UK paying the tutors. The course is paperless and very cost-effective, with the main cost being the training of tutors in computer teaching.

These experts are part of Allergy UK's health advisory panel and are paid a set fee per term for teaching the diploma. The cost charged to the student includes a profit margin for the charity.

Sponsored Allergy UK put on a free series of masterclasses
"I got a range of companies who were attached to Allergy UK - diagnostics, pharmaceuticals, wet-wrappings for eczema etc - and got them to share sponsorship to put on massive masterclasses"

3) Charity shops

Allergy UK made a profit of £5,500 on its three charity shops for the year ending March 2004, on a turnover of £52,000.

4) Translation Cards

These enable allergy sufferers to travel confidently in non-English-speaking countries. Laminated sets of three cards cost £15 and include an Allergy Alert message, an Emergency message and a message to show in restaurants informing them of your allergy.

One side of the cards is printed in English, the other in the language of the country concerned. At the moment 14 languages are available. "We get a lot of people using the cards," says Muriel. "It doesn't bring in a huge amount of money, but it brings in some."

5) Membership

This does not make much money for Allergy UK. For £15 per year members receive lots of information tailored to their allergy and a quarterly magazine, and Allergy UK will put them in touch with the Support Contact Network. But when the paper, postage and human resources are factored in, the charity only makes about 60p per member per year.

6) Magazine

Allergy UK has an agreement with INK Publishers to produce their subscription magazine ('A' magazine). Allergy receives 50% of the subscription and after the first year gets 5% of advertising revenues. The publisher incurs all the publishing costs and Allergy UK has full editorial control.

This has been an excellent solution for Allergy UK because it was very expensive to produce their old magazine ('Allergy News') themselves: £25,000 per year plus a considerable Human Resources input.

(back to contents)

Structure

The Charity is managed by a Board of Trustees who deal with the business aspects of the organisation. The nine trustees have a heavy medical bias, but they also include sufferers and one businessman. The two joint chairpersons are a retired GP and an allergy specialists

All decisions on medical and scientific matters involving the charity are made by the Health Advisory Panel which has 37-38 members. Members of this panel include leading paediatricians, respiratory specialists, dermatologists, dieticians, immunologists, GPs and allergy nurses.

To manage the endorsement scheme, Allergy UK set up a separate trading company called Allergy Research Ltd (ARL).

ARL has a separate board of directors containing representatives from the charity's board. ARL is managed by that board and driven forward by Muriel and her deputy.
ARL is wholly owned by Allergy UK. Whatever profits it makes are given each year to Allergy UK as an unrestricted donation (£75,000 for the year ending March 2004). Since this is a donation, no corporation tax is payable. The directors of the trading company have no say in what that donation is used for.
The Charity Commission expects the board of the trading company to be separate from the board of trustees so that the trading company can operate free from the influences that affect the charitable side.
It is ARL who have registered the Seal of Approval trademark throughout Europe.

A separate Chemical Sensitivity Division has been set up within Allergy UK to deal with chemical sensitivity. This is a tricky issue for the charity because, as with food intolerance, there is a debate as to whether this strictly constitutes an allergy.

This division will develop its own endorsement scheme, with separate protocols, to guide the increasing number of people who suffer after contact with chemicals in everyday products. The endorsement will be aimed at cosmetics, paint and cleaning products and will be much cheaper than the Seal of Approval.

Allergy UK hopes that such endorsements will encourage larger manufacturers to leave these harmful chemicals out of their products. Companies who do so at present are generally very small.

(back to contents)

Funding

In 1996, strings-attached grants from pharmaceuticals probably accounted for 90% of the charity's £80,000 turnover.

By 2004, restricted grants received from the Tubney Trust, Department of Health and Community Fund (grant now ended) totalled £155,000 out of Allergy UK's annual turnover of £440,000, or just 35%.

Funds come from the following sources:

Allergy UK has a three-year Section 64 grant from the Department of Health to improve their IT systems, enabling them to co-ordinate the support network they offer members.
The Chemical Sensitivity Division is being funded for three years by the Tubney Trust while Allergy UK pursues ways to make it self-sufficient.
Individual donations and legacies
Corporate support: Pharmaceutical companies give a lot of support. The support has fewer (if any) strings attached than pre-1996. "Within the first year I went and told them (pharmaceuticals) that I intended to move us away from dependency, but that I wanted to still work with them."
Donations from Seal holders which may be linked to specific events, e.g. 'Indoor Allergy Week'. Allergy UK might want T-shirts and would work with a Seal holder to tailor their marketing accordingly. "If a pharmaceutical company is revamping its computer systems, they will come along to us and see if we want the old ones."

Allergy UK does not receive any European grants because the effort to obtain them was considered too great.

(back to contents)

Future developments

Allergy UK is working with an inventor to produce a scanner which would scan the bar code of a given product and tell whether it contained any pre-programmed allergens.

At the moment ARL cannot go into partnerships with third parties because it is part of Allergy UK. If Allergy UK established a stand-alone subsidiary, however, with a representative sitting on the board, they could then enter partnerships. Allergy UK's share of any profits would go straight back to their own funds.

(back to contents)

Defending commerce

Muriel firmly believes that the commercial route makes sense for a charity like Allergy UK.

"It is by producing money in this way that we have been able to expand our helplines and move into a lot of service areas. We are training nurses. We want to start a mobile allergy service. Pharmacists are crying out for it. We should meet that need."

"Allergy UK is renowned for its information and the services it provides. And the money Allergy Research is bringing in means the charity can go from strength to strength. Staff will go the extra mile: that's what makes Allergy UK the way it is. But we couldn't have done that, and put the amount into training that we have if it hadn't been for Allergy Research Ltd."

Muriel strongly refutes the idea that involvement in commercial activities somehow sullies a charity's image. Allergy UK struggled to convince some members of their Advisory Panel that it was suitable for a charity to raise money and some experts left as a result. Their expertise on the patient side was invaluable, but Muriel was not prepared to run an organisation that relied on public goodwill.

"If you're sure of what you are doing and you cannot be attacked on an ethical basis then the trustees have to say, 'This is what we want, this is what we have given the go-ahead to our senior management team to do.' You've got to have a strong board, a board with guts."

Similarly, Muriel disagrees with the non-commercial approach taken by other charities' executives. "It's as if they don't want to dirty their fingers. I want to get hold of them and say, 'Look at what you could do.'"

"I spent a complete day with one charity, asking them where they wanted to be in five years' time and how were they going to get there. Then you start talking, and they say, 'We're patient services, we really don't want to do that.' They can't see that one is dependent on the other."

Muriel is nothing if not pragmatic about what she needs to do to keep the money coming in to Allergy UK so that they can continue to provide relevant services. And this does not leave a whole lot of time for nicety.

"I would love to spend my days talking to sufferers," she says, "but it doesn't work like that."

(back to contents)