Nature Delivered Ltd., also known as graze, is one of the U.K.’s leading healthy snacking brands and has gained a solid foothold in a highly competitive U.S. market. Differentiated by its innovative business model, the 10-year-old tech-enabled business sells its branded products directly to consumers online and through retail. Its products are present in over 30,000 stores across the U.K. and the U.S.
With graze recently acquired by Unilever, Managing Directors Will Bain and Glenn Gurtcheff and Directors Ryan Freeman and Andreas Poth, all members of the Harris Williams Consumer Group, discuss what made the company stand out in this crowded and competitive segment.
Differentiated by D2C
“The way that graze has combined multichannel distribution, strong direct-to-consumer (D2C) capabilities and highly sophisticated use of consumer data really sets it apart in the healthy snacks sector,” says Bain. “The company is able to innovate quickly and expand with fewer risks. It has seen strong growth as a result and delivers high margins.”
graze’s roots are in its subscription business, to which consumers subscribe online and then regularly receive a box of snacks in the mail. graze has evolved and now also sells products through e-commerce and the retail channel. “Consumers today are shopping across channels, so you need to be everywhere that those consumers are. graze recognized that early on,” says Bain.
graze’s D2C channel provides a unique consumer experience. “When you get this box, it generates excitement. It has different products that you may not have tried, and it's constantly changing and evolving,” says Freeman. “It also gives graze a direct and intimate relationship with its consumers, rather than being intermediated by a retailer.”
Bain sees this direct connection as highly valuable from multiple perspectives: “graze owns that consumer relationship. It talks directly to its consumers. Its consumers have a special affinity for the brand and want to talk to graze too. graze has hundreds of thousands of touchpoints with consumers, which provide insights into what consumers like to consume, and how those preferences continue to evolve over time. Many large corporations will spend millions of dollars trying to get access to this type of consumer insight.”
Rather than choosing the snacks during the subscription sign-up, consumers provide information about themselves. graze then uses a sophisticated algorithm to determine snack box assortment based on this profile information and consumer feedback. Poth sees this approach as a distinct advantage. “That allows graze to get a lot of information and data from its consumers, and it encourages consumers to talk to the company. The more they talk to graze, the more accurate graze can be with the types of products that it sends to its consumers. The direct and constant dialogue graze has with its consumers supports brand development. It also provides a wealth of data and consumer insights the company can leverage to support its R&D efforts.”
Armed with Advanced Insights
Beyond better serving the consumer with a best-fit product assortment, graze leverages its sophisticated consumer insights in multiple ways, including rapid innovation. “If you think about the healthy snacking world, there's been a tremendous amount of innovation over the last five years,” says Gurtcheff. “graze can launch a product each week and get rapid insights back from consumers, which continues to fuel its R&D machine. It is right at the forefront of innovation.”
graze’s direct consumer relationships also help the company to be “future-proof,” says Bain. As he explains, graze can flexibly shift with consumer tastes and preferences: “It can take 12 to 18 months for a consumer goods manufacturer to introduce new products or reset its assortment at retail, and the retailer is highly influential in the success of that strategy. graze completely controls new product introductions, and can shift its assortment week to week in its D2C channels. That agility is key to long-term success.”
“It is an incredible tool to enter new geographic markets as well,” Freeman adds. “Many consumer products companies spend years trying to determine product mix and refine brand messaging as they consider launching into a new geography. The D2C strategy is an inexpensive and effective way to penetrate new markets. graze launches, begins to collect consumer feedback and evolves the portfolio over time to make sure that it is taking into account local preferences.”
As Freeman says, “graze’s overall sophistication in the D2C business and its advanced consumer insights exceed the competition. This, paired with the surge in consumer interest in healthier snacks, made graze very appealing to Unilever.”
Bringing Buyers to the Table
Indeed, graze typifies the characteristics that many strategic buyers and private equity investors look for. The category itself is highly attractive. Consumer preferences are changing, and the way in which consumers eat is changing: They're snacking more frequently, and looking for healthier options.
“It doesn't matter if you're a protein company, an ingredients company, a shelf-stable products company or a dairy company; many buyers are interested in increasing their exposure to healthy snacking,” notes Freeman.
Poth adds that buyers are also seeking solutions to address changes in consumer shopping behavior. Consumers are increasingly shopping across channels, and growth in D2C is fast outpacing growth in retail, which is prompting large food companies to rethink their strategies. They understand the importance D2C will play in the changing consumer landscape and are aggressively seeking solutions. “graze’s D2C capabilities and the ways it uses its advanced consumer insights to fuel innovation and growth made it an attractive solution and M&A target,” Freeman says.
According to Bain, graze’s unrivalled ability to tailor its products to individual consumer preferences also makes it a standout. “Certainly, investors are looking for some point of differentiation from other products in the category, and for a strong brand that's a proven concept that resonates with consumers wanting healthy options,” he says.
“It’s also beneficial to have a brand that can extend across categories,” adds Gurtcheff. “graze established its presence as a cross-category consumer products company very early in its existence. Fundamentally, buyers and investors are looking for businesses that can scale. They want to be able to see a path to a very significant healthy snacking platform. And that’s exactly what graze brings to the table.”
Published March 2019