The Risk Taker

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Anthony Fletcher is a bit of a rebel. When he strides into the meeting room in Graze’s riverside headquarters in hot and leafy Richmond, my first impressions are of his firm handshake, a throaty chuckle redolent of Foreign Secretary Boris Johnson (the similarity stops there) and his bare feet. 

“I knew you were coming in, so I wanted to be smart, but I was in town yesterday in my shoes, in the heat, tramping around, and... I’m sorry, I just didn’t want to wear shoes today,” he laughs. 

“Years ago I got an award from Prince Charles and I wasn’t wearing a tie, and my mother has never forgiven me,” he confesses conspiratorially. 

At 34, and running one of Britain’s most successful and fastest-growing young companies, Fletcher clearly relishes taking on the Establishment, challenging the status quo, being an iconoclast. 

Educated at the universities of Oxford and Princeton, he decided he wanted to work in a fast-paced, entrepreneurial environment and nagged Innocent Drinks until he got a job. While his friends were stapling together documents in law firms, he was working out how to make thousands of litres of smoothies and building new factories. He spent five years progressing through the ranks – from production planner to innovation manager – before jumping ship. 

Deceptively simple

Fletcher had become fascinated by the potential of the fledgling Graze business, knocked on the factory door and asked for a job. He was appointed head of marketing, sales and innovation in November 2009, became chief marketing officer nine months later, UK managing director four months after that, and CEO in December 2012 – the same year he led the sale of a majority stake in the business to private equity company Carlyle Group for an estimated £50 million.

The Graze concept is deceptively simple: the company sends customers letter-box-sized, four-portion, healthy snack boxes tailored to their expressed tastes. While the original core market was office workers, the customer base now encompasses suburban housewives and children, and the original subscription model has been augmented by the online shop and a presence – since August 2015 – in more than 5,000 stores. 

In addition to trying to make Graze the No 1 healthy snack business in the UK, Fletcher and his team have also taken the concept to the US, the graveyard of many a blue-chip British business. It has not been an easy transition, but the early signs are highly encouraging: US sales were $34m in the first year of operation, making the company profitable within 12 to 14 months of launch, and figures for the second year – though not official yet – are much higher. 

Graze was founded in 2008 by a group of friends, including the co-founders of film rental company LoveFilm, which used to dispatch DVDs to customers through the post. While Fletcher judged the Graze concept “brilliant”, he thought the product was “terrible” – the early product was a box containing a few dried apple slices and a handful of salted cashews. “Originally, Graze was very focused on fresh fruit and on convenient delivery as the benefit to the customer,” he recalls. “That is definitely not the key to the business today.”

Graze’s unique selling point is getting people excited about making healthy choices – and that excitement extends beyond the vast, constantly changing, range of snacks on offer. It is about engaging customers in making the choice themselves, or enjoying the element of surprise when Graze chooses for them, and providing feedback to help inform new product development. Graze gets around 15,000 product ratings an hour, and most people respond within 24 hours of receiving their snack box.

Technology is at the heart of the business: it helps the direct relationship with consumers and provides a rich source of market data. Because the company has its own factory and an automated supply chain, it can innovate on a sixpence, launching new products within 48 hours and discontinuing unpopular ones even faster. 

Graze has invested in world-class automation, including: what it claims is the fastest and most accurate weighing machine in the world; a robot that can fold cardboard boxes in 16 different ways; and a unique taste algorithm that uses customer behaviour and feedback to determine the optimum type and portion of snacks to send to every individual.

Its business model means that if a new product fails it costs the company nothing. “We just don’t make it again, and there is no blame attached,” says Fletcher. Being data-led allows the business to see quickly what works and what doesn’t work, and why, and it unleashes creativity. “Data is crucial to us, but it’s not the be all and end all; you need intelligent people who can look at the trends and who are inspired to try out different ideas. You can delegate. You say, ‘as long as it fits within this model of fast innovation – as long as it’s not going to cost us a lot of money – if you’ve got a hunch, go and try it out’.” 

However data-led Graze is in its day-to-day operations and innovations, its approach is underpinned by a number of insights – not least consumers’ rational and emotional needs for healthy ‘treats’ and snacks that help bridge the gaps between irregular meals. 

“Can I tell you why we are really doing this?” asks Fletcher earnestly. “I love the food industry, but customers are moving faster, they are becoming more demanding, and social media means that messages and trends take hold quicker; and I think a lot of organisations are struggling to deal with this. Graze is an opportunity to explore a different way of thinking about these trends, a different way of using technology, which is incredibly relevant to running any consumer goods business.” 

Multichannel advantage

The direct relationship with consumers can, he says, “improve everything your business does, because the quality of the data it gives you affects all your decision-making. It lets you innovate quicker and in different ways; it means you have more products, you build your brand better, and you can create different experiences for your customers. In essence; it is about your organisation’s ability to adapt to your customer – and it makes your entire business stronger.”

The novelty of Graze’s approach was manifested in supermarkets’ bewilderment when the company told them it wanted to de-list one-third of its range six weeks after launch. “But we said, ‘we have 400 products in our online range and, after six weeks, we understand more about your different stores and your customers, and what they want, so we can propose a better range and we can bring those to market very quickly’.”

Being able to refine the range in supermarkets as a result of data gathered online is an example of what Fletcher calls “the multichannel advantage”. Other examples include being able to build the brand more effectively, and affording customers a choice. “Customers want it their way, and if you’ve gone to the trouble of building a brand and coming up with relevant products, why would you not want to explore how to give it to them in all the ways they might want?” 

The way British customers want it is not the same as the way American ones do. “We launched the business in the US with the UK range, not because we thought it was the right set of products but because we wanted feedback from our customers about what they wanted. That approach allows you to move faster and, I think, be more correct in the long run. It is very hard to work out what customers actually want, and rapid prototyping of your customer experience and your product – and getting rich data back – is what we try to do.” 

To ‘de-risk’ the move into the US, Graze began an eight-month trial in January 2013 to identify the main challenges of a full launch, test its hypotheses, and get answers to some of its main questions. “We could have spent six months debating whether Americans wanted a larger portion size than British people, but we felt the best way to find out was to test it,” Fletcher says. 

Graze launched its test in every state at the same time; within 24 hours it had a customer in every state and, within three weeks, had so many orders – 30,000 – that it had to limit sales on its website. “We had marketed ourselves as a beta deliberately, so our customers would understand that they were part of something new and exciting, and their expectations would be set at the right level,” says Fletcher.  

“Oddly, the scarcity pushed up demand. We didn’t actually shut the website – we just made it incredibly hard to order.” He guffaws. “People clamoured and colluded on social media, and we became the hot ticket in town. But we certainly didn’t plan it that way.”

Had the same thing happened in a larger organisation, Fletcher admits, someone might have lost their job over it. “But they shouldn’t; within eight weeks of launching we were getting valuable data on the US market.”

A far bigger challenge than the different US food preferences (see box) was the US postal system. The trial had shown that it was far slower and less reliable than the UK’s: a box could take two weeks to get from the distribution centre in New Jersey to an address in Manhattan. 

So Graze developed a ‘Postal Brain’ algorithm to help it navigate the problem. It sent 30,000 dummy packages, with tracking barcodes, across the US, to work out how and when to post its boxes. The data it collected helped establish a strong working relationship with the US Postal Service and premium carriers such as FedEx, and ensured that its direct-to-consumer business model was viable.

Unknown unknowns

Fletcher admits that, although it makes “a really good story”, the postal system issue was highly stressful. “If we couldn’t post our boxes cost effectively and at high quality, the entire business model would have crumbled.” As, presumably, would the business’s American dream. 

“One of the biggest problems with going overseas as a consumer goods company is that you often don’t realise what the real issue is – the unknown unknown – and it takes you so long to diagnose why something isn’t going quite right, and then change your strategy and respond, that you can lose a lot of money or momentum,” says Fletcher. “Our trial meant that at least we knew this was the major issue in going into America.”

The trial ran in parallel with getting the US business up and running, so Graze was trying to solve the postal problem while buying warehouses, spending millions on capital and hiring a team. It was a risky strategy, Fletcher admits – “but far less risky than the strategy most people use when entering a market like the US; certainly the polar opposite of what Tesco did.”

Tesco spent 20 years considering the move, and did two years intensive on-the-ground research. It built secret test stores and even investigated the contents of American fridges – but ultimately ignored much of what the research told it.

Over the moon

Fletcher wants Graze to be the No 1 healthy snack brand in the world, but admits that the US – where it is working to move the business offline too – is still “an all-consuming challenge”. “The financial numbers are exciting, but you would need to come back to me in five years for a definitive answer as to whether or not we have cracked the US. If we can, the opportunity is on a completely different level.”

Graze is a work in progress, and Fletcher admits he would enjoy it far less if it was “all worked out”. What’s more, he says: “I’m over the moon that we have investors who are excited by the fact this is all a bit experimental, a bit different, and are not scared that occasionally we get burned.”