After the Witch sends you to get potion ingredients from the islands, you will charter a boat at the lighthouse for 200 gold. Just head to the northwest to find an island with a big dock and building. Enter the building and talk to the woman by the fire to start the quest.
Then fight the man in the top left of the room. Use the switch once you've defeated him to open the kitchen under the stairs. Interact with the pot on the stove to reveal the secret ingredient. Then just talk to the woman by the fire again for the achievement!