Graze.com (Graze) is an example of a Product business model in the food delivery industry: healthy, carefully proportioned snacks and meals are delivered in letter-box sized packages, through the post, to homes and offices in return for a per-box charge. In 2015, Graze has also launched a separate Product business model selling snacks to stores across the UK, which operates alongside the snack box delivery Product business model. This write-up will focus on the deliveries of snack boxes model. In this Product business model, users pay a subscription fee to get periodic deliveries, with a snack selection from over a hundred products. The business is driven by innovative technology, which it leverages to deliver, and constantly improve, its service in both the US and the UK.
Graze is a London-based company, led by chief executive Anthony Fletcher. It was set up in 2007/8 by seven friends, some of whom had formerly founded DVD delivery company Lovefilm. As of November 2015, graze was shipping more than 300,000 boxes a week, and had sold over 3 million snacks in over 4,000 retail stores across the UK. In 2012 The Carlyle Group acquired a majority stake in the company with an investment of approximately £50m and by 2013 they had expanded to the US where they signed up 20,000 customers during the first two weeks. Revenues reached £68m for the year ending 28 February 2015, up 29% from the previous year. Graze employ almost 500 people between their offices in Richmond and New York. The company has recently been running trials by selling its snack boxes in London taxis. Graze’s product business model is similar to that of other UK companies like Saviour Snacks and Snack I Love.
In the snack delivery business model, graze’s customers are the individuals who pay a subscription fee to get periodic food deliveries. They must have Internet access and be located in the UK or the US. Customers are mostly adults and families with limited time, who are looking for healthy snack options. Customers also include offices, which order large boxes for their employees or for especial events.
The customers for this business model are also typically environmentally conscious and are willing and able to pay the relatively high price for the convenience, sustainability and quality of the product on offer. Originally this meant office workers, however more recently graze has begun targeting families with products aimed at children (the “Kids Box”) as well as larger, sharing boxes. Busy, suburban mums who are looking for convenient and healthy snacks for their kids, are now graze’s largest customer group.
Learn more about the Product Business Model
A dyadic transactional relationship where your good or service can be designed and delivered without prior interactions with the customer.
Engagement — Value Creation Proposition
The value proposition of the snack delivery Product business model to customers is to provide a variety of better than average healthy snacks, in a convenient manner, offering in each box a mix of (usually four) different snacks based on the customer’s selected preferences. Customers can choose the snacks they like, love, want to try or don’t want at all, from a list of more than a 100 different choices. While the customer perceives his or her box to be customised, the items that can be selected for each order come from a limited selection, and so the offering can be considered to be one that is, strictly speaking, scale or “bus”.
Delivery — Value Chain
In the value chain for the snack delivery Product business model, Graze create their own recipes and prepare the snacks in their own kitchens. Users subscribe online and pick the snacks they like from the list. Graze employees place the customer’s selected items in the boxes and mails them according to the selected frequency. In the US graze’s kitchen and distribution hub are located in New Jersey, and they have partnered with FedEx and USPS to deliver the boxes around the country.
Graze employ their own team of product development specialists (and claim their lead taster has her taste buds insured for £3m), including chefs and nutritionists along with innovative technologists to gather data and subsequently satisfy customer needs relating to convenience, health and satisfaction/taste. Graze also strive to use suppliers consistent with their sustainability objectives. Boxes are usually delivered within five days of the customer placing the order.
Graze’s technology allows them to gather data on what their customers want or like/dislike and are able to adjust their offering very quickly to meet those needs. A new product can be go from development to delivery in as little as 24 hours.
Postage is always free (or, rather, included in the price). Orders are delivered in recycled and recyclable boxes which are made using a special folding technique to dispense with the need to use glue. The precise order is calculated using an algorithm (called Darwin) which formulates the perfect snack box based on a customers stated preferences, as well as popular products and past orders, as submitted via the website[i].
They also use technology and algorithms to continually improve their logistics and delivery capability. Deliveries are made on the days of the week selected upon sign up (but can be easily changed), and start 5-10 days from sign-up. Customers can submit feedback through a number of online, and offline, channels to make sure they only get delivered the items they like.
Graze uses a network marketing approach to attract customers. They offer not only a free trial, but also incentives to sign up friends (£1 off per box per friend recruited).
Monetisation — Value Capture
The graze model captures value by charging from £3.99 (for a standard box) or £15 per week for personal or family boxes, and from £70 to £240 for office boxes according to the selected size and frequency. Payment is made online via credit card, usually on a recurring basis (though one-off payment is possible).
Press Release: “graze snacks storm to store supremacy over chocolate bars” 30 November 2015
Fast Track Article: http://www.fasttrack.co.uk/fasttrack/leagues/dbfastDetails.asp?siteID=1&compID=3823&yr=2014
White.net Article: http://white.net/blog/graze-box-employees-survival-kit/
The Guardian Article: http://www.theguardian.com/small-business-network/2014/nov/22/in-the-spotlight-graze-anthony-fletcher
Company Website: https://www.graze.com/uk/faqs
Company Website: https://www.graze.com/uk/about
Telegraph Article: http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9484420/Carlyle-Group-eyes-50m-deal-for-snacks-by-post-company-Graze.html
Telegraph Article: http://www.telegraph.co.uk/finance/businessclub/10511807/Snack-maker-Graze.com-launches-in-US.html
Disclaimer — Written by Finan Letts and Alejandra Velez Ospina, and edited by James Knuckles, under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. © 2016 Published 20 April 2016