Cracking the US, whether as a popstar, actor or even a UK food and drink firm, many would argue, suggests you’re a success.
Graze’s chief executive Anthony Fletcher, however, won’t venture to claim the online snack manufacturer and distributor has conquered America. Yet, in a round-about-way, by pointing out the firm’s successes in the US so far, it would appear Graze is well and truly on its way to cracking the States.
“We launched in the US in December 2013 and doubled our subscriber base in the first three months. Within 12 months, we had reached 200,000 subscribers and we’re well beyond that figure now,” he says.
Graze achieved a run rate of £20M in its first year in the US and committed to spending £45M on facilities, promotional activity and other essential infrastructure. Now the UK start-up, which was founded by seven friends in 2009, has a US sales run rate of £22.5M and a total group turnover of £68M, according to its annual results for the year ending February 2015. Total sales have also been growing by 31% year-on-year.
And as well as spreading out across the Atlantic, Graze announced it would launch into 1,600 Boots and Sainsbury stores in July this year.
All of this Fletcher explains at the company’s UK headquarters, where a giant Graze snack box hangs outside on a wall to mark the firm’s home in Richmond upon Thames. The office has a relaxed atmosphere and most of the workers have meetings while sitting on beanbags and also walk around in jeans and t-shirts with no shoes on. Fletcher, however, is suited and booted and although he admits he has forgotten to iron his shirt, looks every part the boss of a £68M turnover snack firm should.
He may have polished the executive look, but Fletcher’s first steps towards running the country’s largest and most successful postal snack firm could be considered unorthodox.
The boss, who started his career in food and drink with Innocent Smoothies, explains: “I actually quit my job at Innocent the same day I saw one of Graze’s beta products,” he says. “I just thought, my God. This is a completely different way of selling food. You’re going directly to the consumer and it’s a bigger idea going beyond the box that’s sat in front of me.”
Within 48 hours of seeing one of Graze’s samples, Fletcher had quit his job at Innocent Smoothies – a UK start-up now worth in excess of £320M and owned by Coca-Cola – knocked on the door of the founders of Graze and landed himself a job as the company’s marketing manager.
“It was a bold move, but I think that’s the best way to get a job with a start-up. Entrepreneurs are so busy. I was really excited by Graze and that’s why I did it.”
Changing look of the business (Return to top)
The business now looks very different from when Fletcher joined as its third employee. For instance, it was the subject of a management buyout backed by the US-owned Carlyle Group in 2013, which Fletcher led.
It was with the support and influence of the Carlyle Group that Graze was able to make its US launch a success, he adds.
Yet, financial backing wasn’t the only driver of its Stateside victory, he explains. Graze needs a reliable postal system to send its products to consumers and the US’s almost prevented the firm’s plans from taking off, Fletcher reveals.
“What emerged from our research as a major issue was the mail network. What’s really unique about the success of Graze is that it doesn’t have its own fleet of trucks like, say, the online grocer Ocado. It relies on the postal network and in the UK that works great for us.”
However, the US’s postal system wasn’t as reliable as the UK’s, which prevented Graze from replicating its business model there, he says.
“What our trials told us was we were posting products in New Jersey, which is where our US distribution centre is, and they were taking 14 days to reach customers in Manhattan. But you could literally see the Manhattan skyline from where the boxes were being posted.”
It was impossible to find out why the boxes were taking so long to get to customers and where they had been, Fletcher admits. The US Postal Service (USPS) wasn’t giving away any data, which made it impossible for Graze to assess what it would do next.
Survival (Return to top)
The company’s survival depends on the data it receives from its ‘Grazers’, feedback from which comes to Graze at a rate of 15,000 product ratings an hour in the UK.
With no data available from the USPS, Fletcher and his team set out to capture their own. He explains: “The solution we came up with was: we had around 40,000 cardboard bunny rabbits left over in our factory from an Easter promotion and we put these in envelopes after attaching tracking barcodes and sent them to our current Grazers in the US as ‘a little gift’.”
The Grazers then had to scan the barcode and upload the data to Graze, which allowed Fletcher and his team to gather information about how quickly products were getting to various places in the States.
Graze’s data gathering plan led to conversations with the USPS, which wanted to learn about the flaws in its service, says Fletcher. “They loved the data and it paved the way for a really decent relationship with them and now we can make the logistics of it all work.”
Afterwards, Graze sent its products to the US subscriber base it had managed to build. It then launched fully and gathered its vital consumer data what they liked and disliked. More than 20M ratings were recorded within a year, which allowed Graze to redevelop 40% of its range to the US market. “This included tailored snacks like cinnamon rolls,” Fletcher adds.
“Also, America’s quite famous for having different views on portion sizes, but they liked our portion sizes and said they wanted portion controlled snacks, so that wasn’t an issue.”
With the problems of the US's postal service in mind, Fletcher says it was still important for the firm to break into the States. It was inevitable someone else would come onto the market with a similar business model and lock Graze out. He adds: “Now that we’ve gone to the US, we’ve learnt a lot to help us take our brand overseas. I’m sure at some time in the future we’ll look at other countries too.
“A lot of people were worried that they had seen many British businesses, especially food and drink manufacturing businesses like ours, founder whilst trying to expand into America.”
Yet, taking the brand to the US hasn't been Graze’s only big adventure. Earlier this year, it announced plans to launch into Sainsbury and Boots. But, launching into bricks and mortar retail was the opposite of what the brand was set up to do, Fletcher admits.
Bricks and mortar (Return to top)
“I’ve just spent time talking about the marvels of technology and how it’s a big part of our business. Now, I’m talking about taking the firm into a very traditional model,” he adds. Changing the business to deal with bricks and mortar trade wasn’t easy, he says. So why complicate a successful business model?
“The main reason is that snacking is quite impulsive and consumers want healthy snacks quickly, otherwise they’ll make bad choices. Positioning ourselves in stores helps us to help them eat healthier,” Fletcher claims. “Also, we’re doing it because we were asked to by some very prestigious retailers. For many years there has been interest from the retail trade, schools and airlines in Graze, but we chose to pursue America first and this opportunity came along after that.”
Interest from other retailers is now high, he adds, but won’t reveal whether Graze is close to signing deals with Tesco, Asda or Morrisons.
As for the future of Graze in bricks and mortar, he says: “Let’s wait for the data from Sainsbury and Boots. Although it’s not going to come in as fast and clean as we’re used to, we’ll be able to see what our customers want.
“My view on Graze and traditional retail has been the same for a while: I don’t really know what its future is.”
Fletcher is obviously someone who likes to take a risk in business. For the sake of his investors, he’ll be hoping the company can crack traditional retail the same way it’s cracking America.
Graze won the Star Performer Award in the 2014 Food Manufacture Excellence Awards. To find out more about this year’s awards, visit:www.foodmanawards.co.uk.
Listen to Fletcher explain why it wasn’t an easy process taking the snacks business from online ‘clicks’ to retail ‘bricks’ in this podcast.