Amy Duff 5 Oct 2017 04:28pm

Don't Stop Believing

Richmond, south-west London: borough of the botanic gardens at Kew and Twickenham rugby stadium; a beautiful Royal Park and Hampton Court Palace; elegant pubs and cafes along the river Thames.

Caption: Photography by Matthew Joseph

A tourist haven for sure but perhaps not the type of location you’d expect to find the HQ of a rapidly expanding, data-driven British business with the sort of purposeful culture and work space many of us only see in films. Yet here is Graze, the healthy snack company founded as an online subscription service in 2007 but now selling in shops including Sainsbury’s and Walgreens, on the banks of the Thames in a Silicon Valley-style, high-spec office space where visitors sign-in to reception on an iPad and where the employees look, yes, happy to be there on a Monday morning.

Andy Gibbs, its CFO, is no exception. Fit and healthy-looking (he did his first half-Ironman this summer; he cycles to Richmond from Berkshire), with a lively attitude to match the spring in his step, he couldn’t be a better ambassador for the brand. And with a successful online expansion into the US in 2013 (and stores in 2016), 8% growth last year, and revenue of around £75m, he might well be happy.

The business has grown every year of its existence, says Gibbs, but it wasn’t until 2012 that he spotted the company’s potential while carrying out due diligence with PwC’s M&A team for Carlyle Group. The private equity house was looking to invest in the business and join Octopus, which had provided Graze with Series A funding in 2009, and DFJ Esprit.

Gibbs spent two months working with Graze and its management team, which included alumni from Innocent and Lovefilm, and clearly recalls the night he went home to his wife with a revelation.

“I suppose I had been looking for a business where I thought, ‘that’s the one’. I think it was day two on the project and I distinctly remember saying to my wife, ‘there’s a job here, I’m going for it’. I thought the business was incredible. Inspiring people, a culture and attitude of doing something completely different. A product and an idea I could get behind. It was a business that was really going places.”

By that point Gibbs had eight years’ experience working in PwC’s South-East M&A team, plus a further three from his consulting days at the technology-focused firm Diamond Management and Technology, which he joined in 2000 as a graduate from the University of Oxford. He witnessed the highs and lows of the market pre- and post-Lehman. In those heady years between 2004 and 2007 – “probably some of the most active times on the market in recent memory” – he says he was part of a high-performing team that worked and played hard. He got to run deals fairly early in his career, interacting with the CEO and CFO of a target company or vendor, and became a “bigger cog” than he might have been in the London office. And then came the financial crash, and everything changed. Gibbs says his ACA training had, among other things, given him a frame of reference – why some businesses are successful and others not.

“It was a real bedrock for me,” he explains. But his direct experience with companies that were struggling to pay their bills gave him a new skillset. “We’d had this period of three, four years of deal after deal, and then almost overnight the deals fell away. I got a different type of exposure: working capital reviews, business recovery and turnaround. It wasn’t as fun, but it was as interesting, challenging and necessary. You feel the real worth of what you’re doing when you know peoples’ jobs are on the line.”

Once at Graze, he experienced the sort of culture shock we often hear about from former Big Four employees: he had joined an entrepreneurial, fast-growing and fast-moving outfit with big ideas. And nothing like the resource he had been used to. Gibbs recalls:

“The biggest challenge I’ve had is developing the team. PwC is huge – it has brilliant processes, a defined training regime and, basically, expertise to cover all bases. Then you step into an environment where there is none of that support and you’ve got to work out the direction yourself. I’m proud of my team; I deliberately hire not in my image. All of my direct reports are individually better at what they do than I am. They’re brilliant. That’s absolutely key.”

From a starting point of two he now has 20 (he oversees finance, data and legal), which means he can divide his time between high-level items – strategy, compliance, managing stakeholders – as well as the day-to-day running of the business – financial control, management reporting, financial planning and analysis, and commercial.

But striking a balance isn’t easy. It’s the lot of a modern-day finance leader, he feels. “This is my first role out of practice so I haven’t got 20 years to base it on, but I have to say it’s tough. The role seems to have changed. You’re not the numbers guy who just produces the accounts each month; you’re more than that. You’re often seen as the deputy CEO; the custodian of the business but also the driver. You’re expected to be on every detail as well as seeing the big picture. That’s why you need a good team,” says Gibbs.

The CFO can often cut a lonely figure, even more so in private equity-backed businesses. But Gibbs doesn’t feel exposed: “My experience has been positive. We have a great board – Carlyle is our majority shareholder – and it’s always a discussion, very collaborative. You do hear some horror stories about PE but we haven’t seen that at all.”

There was a flurry of speculation in the national press in August about Carlyle possibly planning an exit. So is there an exit date? “There’s no exit date. We’re four and a half years in, they’re a financial backer looking for a return so it’s inevitable it will happen but there are no current plans. We feel there are still some big things to go for. We’re the number one healthy snack brand. The US retail business is in its infancy but is gaining momentum. Succeeding in the US retail arena would be a great step.”

It would. The US market is a notoriously difficult market to crack but Graze went for it anyway. When it did a beta launch, it attracted 30,000 customers “in about three weeks… by the end of the first full year of trading we were on something like a $30m run rate”.

Two million Americans have since tried Graze through the online business. And its snacks, which include anything from hickory smoked almonds, BBQ flavoured peas and roasted corn (“Hickory Smoked BBQ”) to sweet mustard breadsticks, smoked almonds and cheese croutons (“Graze’s Smoky Hot Dog”), are stocked in stores including 7-Eleven and CVS.

To understand this expansion into what Gibbs describes as an “incredibly competitive and cluttered landscape” is to understand the company – it was this sense of purpose he identified when he was analysing the firm for PwC: “Graze approaches business differently, it’s not cowed by people saying, ‘that’s not the best way’. We’re our harshest critics – we don’t look outside and think we’re better than everyone else. We look outside and think, ‘wow, look at what they’re doing, how can we do that?’ It’s a culture of believing.”

So when Graze cast its gaze across the Atlantic, it didn’t see risk, it saw “huge opportunity”. And when it dipped its toe into the market online there it did so without hesitation. “I think people call it the fail fast mentality. We launched in about eight weeks. We had a team of developers in a room, they built a website and launched. You’ve got to work out what is going to work and not work incredibly quickly so you can make changes as you need to,” explains Gibbs.

They like to fly by the seat of their pants but, like any smart business, they have the data to back their decisions, to help build a meaningful connection with consumers, and, crucially, to learn from their mistakes. The US expansion is a case in point. When Graze did its beta launch it closed the website shortly after so it could analyse the data and learn from it.

“We discovered postage in America is not as reliable as it is in the UK. Customers getting their boxes when they want to get them is important. So we created our own data set by mailing 20,000 cardboard bunny rabbits to different parts of the US through every conceivable route and we built a model called ‘the brain’. It’s a bit of technology that works out the most effective way to route postage. Four months later we had a way of posting boxes that meant we could deliver a reliable weekly service in the US."

Graze also uses technology to help it understand what the customer wants. If a typical customer used to be a health-conscious female, the profile has broadened since Graze moved from solely online into stores, so it uses algorithms to curate products as well as more traditional offline processes to understand what’s selling.

Gibbs adds: “We continually invest in our data scientists. It’s incredibly powerful for us to tell retailers, ‘this is going to sell, and it’s going to sell better than that on your shelf, here’s all the data to prove it’. It’s not a shot in the dark for them then. We bring the winners from online into retail.”

Graze’s narrative certainly plays on products being customer-led. But is there a danger that could dilute Graze’s proposition? Can the customer be trusted? “Having a direct consumer relationship makes a difference,” insists Gibbs.

“When we produce new products we almost co-create with customers, we have live feedback, we innovate quickly.” The consistency comes from Graze’s own guidelines: “It’s not hardcore health, it’s sensible. We want our snacks to be nutritious, no empty calories, artificial flavours, preservatives, trans fats… Our snacks are sensible portions, when people pick one up they’re not eating something they’ll later come to regret.”

All this responsibility must come at a cost though. The company places sustainability high on its agenda. As the CFO, is there a conflict between committing to, say, recycled and recyclable packaging and keeping the shareholders happy?

Gibbs says the integrity of the brand always comes first: “We make those trade-offs all the time. That’s the difference between being the kind of finance person who just looks at a set of numbers and one that’s looking at the long-term health of the business and the brand. Since leaving practice I’ve got closer to the product and to the customers. Yes, we can’t let every piece of innovation happen that isn’t going to deliver results, but you cannot get away from what your purpose and brand is. It’s essential."

He mentions a couple of times that this is his first and only board role. Almost like he feels he lacks the credentials to be sharing tips with this readership. But he’s put his ACA to good use, he’s helping to build a business of scale, he’s part of an ambitious, risk-taking management team. And he cares. At the end of the interview he stresses how important flexible working is to him. As a father of three, soon to be four, he thinks business leaders need to do more to promote it.

“I think it’s totally under-exploited. It’s a way of people doing really worthwhile jobs that bring their personal strengths to bear without having to sacrifice life. You get the best out of people if you have balance,” he says.

You see, Andy Gibbs is here for good reason.