62. How to stack revenue: The 3 levers that optimise growth of any local food business | Pete Russell

0:00Welcome to All About Business with me, James Reed, the podcast that covers everything about business, management and leadership. Every episode, I sit down with different guests who bootstrap companies, masterminded investment models or built a business empire. They're leaders in their field and they're here to give you top insights and actionable advice so that you can apply their ideas to your own career or business venture. Sometimes growth doesn't come from demand, it comes from rethinking the model beneath it. Today on All About Business, I'm joined by Pete Russell, founder of UBI, short for Out of Our Own Backyards.

0:39Pete has spent more than a decade building technology that helps small local food producers sell directly to their communities, challenging the ways food systems have been organized for the last 80 years. In this episode, we talk about the long road to finding the right business model, the pivotal decision that unlocked real growth, and why stepping back as CEO can sometimes be the most entrepreneurial move of all. Well, today on All About Business, I'm delighted to welcome Pete Russell. Pete is originally from Sydney, Australia, but today he's travelled from Totnes in Devon to talk to me. Thank you, Pete, for making the journey.

1:14Pete is the founder of a company called Ubi. He's going to explain why it's called Ubi in a moment. But Ubi is a global steward-owned platform designed to support small-scale producers by connecting them with consumers online. I think it's a wonderful concept, which is why I've invited you to talk about it, Pete. And I think it's got all sorts of potential opportunities to grow and evolve to the benefit of everyone. Food is very much on people's minds, especially at the moment with so much being asked about whether food is safe, whether processed food is good for us, and what's the future way we should be travelling forwards regarding food and food production consumption.

1:57And I know you're a person with lots of fresh thinking in this space. So thanks for coming in. And let's begin at the beginning. What is UBI? And why is it called that? Well, thank you for having me, James. It's a pleasure to be here. UBI, it's spelled with four O's, B-Y. So it stands for out of our own backyards. Its purpose is to help to put small scale back at the heart of the food system. We set Ubi up as an online platform for small scale producers to be able to represent themselves online and to be able to connect with their local communities and own their own supply chain from their gate to the customer's plate.

2:43And it started out as an idea back in 2008 when we had the global financial crisis. And you probably, I don't know if you remember, you know, what the type of mood there was around the GFC, but there was a lot of, you know, fear of like, wow, we've, our whole society is balancing on this fragile economic model. And food itself is at risk of the supply chains being disrupted because money was not moving because exchange rates were spiking and so on. So that was the catalyst of it. And so it's really been an endeavor to try to find a way to bring food back to a resilient state. If you think we've been eating food from sort of an agricultural model for 10 ,000 years, and so it's been resilient for a long time.

3:42It's got a good Lindy effect. But just in the last 80 years, which is less than 1 % of that time frame, we've completely changed the food system. and we centralize it massively. And that has come with challenges and with implications that I don't think we've really considered deeply enough. So UBI is all about considering that and coming up with ways of sort of re-decentralizing our food systems to make them more fair, to make them more ecologically sound, and to make them more resilient again. So if you go to Ubi, which is online, what will you find there? Right. Well, you'll find, if you go to ubi.com, you'll find a website where we are promoting our software to farmers and to sort of small scale food producers, where they can then create a shop online.

4:41So we are like a Shopify for small scale, artisan, ecologically sound food producers. The difference between Ubi and say Shopify is that we're specifically built for this type of business model, where it's highly recurring, fresh food, usually sort of harvest to order. And so it doesn't just satisfy the e-commerce sales part that you'd get from Shopify. It also manages all of the logistical fulfillment operations around coordinating a very high frequency aggregation of different types of food into a single bundle that can then land on the customer's doorstep. And I imagine you charge the small producers for this.

5:29We just charge 1.9 % of whatever they sell. So it's similar to Shopify in that it's a monthly fee. Shopify charged like a subscription fee. What we charge is a transaction fee. But then also we bundle into our service card transaction fees and so on. So 1.9 % is low, isn't it? Well, 1.9 % is our cut. And then you've got Stripe on top of that. It works out in total sort of around about the three, three and a half percent, depending on the tiers you're on. And what about the delivery of the price? Is that an additional charge? No, we don't touch the food at all. What we give the farms is all the digital - So they deliver it, do they?

6:14They deliver it, but we provide them with the route optimization software. So the way it works is a farmer will create a shop on Ubi, which displays all the food they have available on a week to week basis. customers will sign up as a customer to either order a one-off order or they can subscribe to a regular delivery. The farm can see all the orders coming in. They can then close the orders and then they will pack those orders and the system will coordinate all of that for them. And then they load those orders into a farm vehicle or they can get a courier to come and collect them on their behalf.

6:51And the system will figure out the optimal order of deliveries. And then typically the farmer will drive around, knock on the door with their grubby mitts, hand the food over to the customer, take the old box, empty box away and go on to the next customer. So it's like a farmer's market on your doorstep. You still get to see the farmer if they're the one doing the delivery. That's great. It must be really good. It's a good neighborhood service. Indeed. It is a good neighborhood service. And the food is super fresh because oftentimes it's been harvested that morning and delivered to your doorstep that day.

7:30And the great thing about it is the farmer's getting a full retail value. So they're not selling at 20p in the pound or 30p in the pound. They do more work. They do pack the boxes and they do deliver the boxes, but they get paid a lot more for that than they would save for not doing it. They were selling it to a supermarket. Exactly. So I went on Ubi a little bit earlier. I was feeling hungry before lunch. And I was looking at a shop called the Walmer Court Farm Shop, which is in Deal, Kent. Yes. And I was really impressed. I mean, I thought it looked really appealing. And they had a fruit and veg box with enough fruit and veg to feed two people for a week.

8:13Yeah. So they said priced at 20 pounds. Right. Which I thought was pretty marvelous. Yep. And then I saw they had a juice box for the new year for all of us trying to detox a bit where you can get the right vegetables to juice up at home for just 10 pounds. So I thought, marvellous. I'm thinking, I want this. But then I realised that it was just the delivery area was local to deal. Right. So it is a local service. It really is. So you have to find the one local to you. Exactly. And set up a relationship. I thought, great. And the way you find it, so if you go to the Ubi website, there is a link there.

8:48Yes. Where you can click on that link and you just put your postcode in and it will tell you what's your local... Who are the people who are delivering your area. What's your local farm. So there's over 150 of these farm hubs or farm shops around the country and there's more being added all the time. So you think that from a small farmer's point of view, this is a must-do really. I mean, it's not a big cost and there's a lot of potential upside. Absolutely. In sales. Absolutely. So you need to make them aware that it's there. Exactly. It's about being aware and it's also about... Farmers are slow to change.

9:26I think a farmer mindset is a very seasonal, steady as you go mindset compared to the average day-to-day rush sort of lifestyle. And they're also probably typically more in the, especially small-scale, independent types of farms, they're slower to adopt new technologies and new things. So what we're seeing is that when we very first started out, it took a lot of convincing and it took a lot of explaining and showing how to do it. And there was a lot of head scratching and so on. Whereas now, because we've sort of hit, there's 150 of them operating, it's a business model that works for them. more and more farmers are realizing oh i i could do this this is actually a way of selling my product where i don't have to sell it at a really discounted gate price i don't have to turn up to a farmer's market with all my food and not know who's going to turn up and then have to bring it all back home again uh if you know if the weather's no good uh and i can i can add it alongside other things that I'm already doing.

10:36So I don't have to replace what I'm doing. It's an additional channel to market. And it allows me to look after and have direct relationship with a lot of customers, but very low touch. It's not like I'm taking phone calls all the time from Mary, who's wanting to ask about my courgettes or whatever it is. So your system will produce them a sort of list of orders and who to tell. That's right. So the customers... You've seen fulfillment. Yeah, the customer experience is just like any other e-commerce experience. They find the farm on their phone. They shop the way they would expect to be able to shop.

11:16They can see when their order is going to arrive. If they've got any problems, they can let the farmer know and get credits for if something is broken or whatever. so it effectively gives that farm the sort of the firepower the online firepower that you'd expect from say a river fed or something like that and then from the farmer's perspective it just gives them all the information they need at the time they need it to be able to just do their hands-on work to delivering it and what also happens is that you can imagine typically like the core our Our core customer type or farm type is a market garden where they're producing veg, fresh veg.

12:03And so they will produce a range of fresh veg, but depending on the season will depend on how much of their range. Well, I think now until January, it must be a bit limited. Right, it's limited. But what they do is they then augment their range with food from other farms. So they might be getting eggs in. They might be getting meat in. They might be getting other crops in that they're not doing themselves from a variety from farms around them, as well as they will be working with some wholesalers to make sure that they don't run out of a decent selection. And so effectively what they're doing is they're kind of stacking their business model.

12:42They're being a farmer, they're being a producer, they're being paid the full retail price for their own food, but they're also becoming a conduit for other food in their local region to get out to the customers. What if doing good was the smartest business move you'll ever make? I'm James Reid, CEO of Reid. In my new book, Karma Capitalism, I reveal how being a Philco, that's a company where at least 10 % of shares are owned by a charitable foundation, has become our business superpower. Companies like Lego, Ikea and Novo Nordisk share the same Philco identity. These businesses last longer, inspire loyalty and make a bigger impact on society.

13:27This book is part manifesto, part practical guide. Karma Capitalism is available now at karmacapitalism.org. Being a good business is good business. I think something really good about meeting the person who's grown the food you're going to eat, or knowing the person, that's something quite, I don't know, that feels quite important to me as part of the appeal of this model. Because we're so detached, our society has become so urbanised and detached, and everything's sort of sealed up in plastic in supermarkets. Yeah. It's quite nice when a real person arrives with a box of vegetables and says hello.

14:05Exactly. It's a real person. And you can ask them about them. With a real story. Yeah, absolutely. And your customers like that? They love that. They love that. I mean, and that, I guess, is, you know, the interesting thing is there's a thread, you know, there's still a, I guess you could call it a niche, you know, now of customers that value that and recognize the difference between, you know, anonymous food in a supermarket with an obscured store. supply chain where they don't know where the foods come from, but they just trust the brand because the brand's been on the telly, versus really having an intimate understanding of where the foods come from, who grew it, how they grew it.

14:50And it's a more discerning type of customer that is buying typically from these farms. But they value, they just have more understanding of what goes into their food and how important it is for the health. It's important to get the message out because the price points that we just mentioned, 20 pounds for a box of vegetables in the last two people a week, is low. I mean, in a cost of living crisis, that seems to be a good deal. Exactly. I mean, I think I always talk about there's three main pillars to gaining market share. That's price, convenience, and awareness. and up until recently, food bought direct from farms or the farmers markets and so on was sort of perceived as a premium thing.

15:39You know, premium prices, inconvenient, you have to get up and get to the farmers market. But because you really were aligned with the values, people went out of their way to do it. But that was a small niche. Today, especially with inflation and food inflation in particular, farm produced, delivered to your door food is very price competitive, especially for the value, for the quality you get. A lot of times it's actually lower costs than you would pay for in a supermarket. Convenience is on your doorstep. So now we've hit the convenience parity, we've hit pricing parity. The only missing thing is awareness.

16:19Most people just do not know that that option's available to them. Well, that's why we're talking now. That's why we're talking now. To increase awareness. To increase the awareness because they don't have the marketing budget. Most of these farms know how to get their first 100 customers because they go to their local school and they say, can you put it in the newsletter? They'll put pinboards up on the local shop bulletin board. They might do some letterbox drops. then they'll get 100 customers and now they're too busy to go and find the next 100 customers or they don't know how to reach that next 100.

16:54They're not social media experts or anything like that. So there's this sort of threshold that is the challenge, is the awareness only gets so far before it abates. And that's what we're working on. So that's where we feel like we've now solved the price and convenience problem. Now, how do we make more people aware that you can actually shop direct from your local farms now? You get better pricing, better product, super convenient. That's so interesting. We had a recent guest, Sir Richard Harpin, who founded HomeServe. Yes. And he's very adept at building businesses. And his mantra was bricks, clicks and paper, as he put it.

17:42And so, I mean, I asked him, what does that mean? And he's a big believer in direct mail, just posting things to people because he says so little now is done that way, but it works. So I'm thinking in this model, if these local farms were to mail their neighbourhoods saying this service is available through Ubi or direct from our shop, that might help. It might help. I agree. I think the good old letterbox drop can be very powerful for this type of message. I think especially when it's sort of targeted in a way that is really helpful to people rather than dreaded sort of junk mail. Exactly. No, I agree.

18:19I agree with that. This really is. I mean, you can order from a supermarket online or you can order from Ubi. Exactly. And meet the person who grew it. Yeah. Well, you won't order from Ubi. You order direct from that farm. Yeah. So we're just in the background. You're the platform. We're the platform in the background. Exactly. You're the marketplace. Yeah, exactly. What have you learned along the way to get UBI established so that it's now working, as you say, effectively? It's now a question of awareness. Yes. From the original idea, what were the sort of challenges and difficulties you faced?

18:52How did you go forward one step at a time? Right. Well, I mean, the journey's been a long journey. When we started in 2017 years ago, coming up to 18 years, we've had along that time quite a number of near-death experiences where we've had to continually adapt to the changing circumstances. So, you know, in the beginning in 2008, all we did, we set up was a social network online for food growers to talk to each other. And then we realized the problem was channel to market. So then we set up the model where farms could effectively sell to local customers, but we would do the hands-on work between the gate and the plate.

19:37We would collect the food from the farms, we would pack them into the boxes, and we would deliver them to the customers, and we would take our margin. So you were doing that. And we were doing that. And we built our software to facilitate our operation. And to begin with, the mood was high. You know, 2008, you know, the crisis and everything, people were like, I want access to my local food. I feel threatened with food security. And so it was easy. And we signed up customers quickly and we grew very quickly. We opened up, you know, hubs in other cities and it was going quite quick. But then what we found was that our sort of niche that had expanded in the wake of the financial crisis started to shrink and people started to sort of forget.

20:33And it was always it was more about, you know, just old habits. And so we had built sort of a physical infrastructure to enable us to serve a certain number of customers. But it became harder and harder to keep those customers and to get new customers to come on. So we really struggled. For years, we struggled. We had to keep on changing our model to try to keep the revenue above the cost. Ultimately, it got to 2019. And the other thing that we'd realized is that we were trying to do two things at once. We were trying to build software to make this business more efficient and stay relevant in changing times.

21:20And we were trying to run these operations where we had forklifts and cool rooms and staff and logistics and vans breaking down in the middle of the night. And we just didn't have bandwidth to do both of them well. And so it was in 2019 that I actually moved from Down Under here to the UK. My wife's from the UK. And that's when we completely shifted our model and we said, right, we're letting the hard logistics side go and handing those over to the local teams that are running them. And we're just going to focus purely on the software. And that gave us all of our headspace just to software only and then to adapt the software to become more of a SaaS product as opposed to our own in-house product.

22:11But it was built on the experience we'd had over the previous nine plus years of running that business model. And that pivot you feel was crucial to the current success and growth. Absolutely. It took us 10 years to get to three hubs. Right. And then in the last five years, it's over 150. So it completely changed the dynamics. There's an interesting lesson in that, I mean, for entrepreneurs listening. Right. What is it? I mean, don't try and do too much or pay close attention to what's working and what's not. I got it. It depends on so many things. You can't be good at two things to focus on one.

22:51Yeah, don't try and ride two horses. the sort of can't ride two horses yeah that's true yeah um i mean i don't think that there is a generic sort of lesson from it it always depends on your situation in our you know in this situation is definitely the thing of of of putting all your focus into one thing that definitely helped um But it's also a timing thing. I think that often what the right strategy in the beginning is not the right strategy for midway down the path, which is not the right strategy for later. And you can't take the midway strategy and apply it at the beginning. so as you go down your journey you've got to adapt to based on where you are now not where you were or where you want to be you got to say well where am I in this journey and is now the right time to make that switch and if I had if I hadn't done what I did and made the quote unquote mistakes that I made I wouldn't be in this unique position I'm in now to be able to do what I can do now and what no one else can do now because they're not in this position.

24:04So that I think has been our sort of way of navigating through challenging times. Yeah, and the other part of it is that Ubi was never set. The business I had before Ubi was a good, easy money, lucrative business, but it did not satisfy my soul. What was it out of interest? Some people might not want to know that. It was importing frozen pastries from Europe into Australia and selling them through all the supermarkets. So it was the other end of the spectrum. It really was. It was centralized food and it was easy. We could grow it quickly. We had the firepower of massive manufacturers behind us.

24:44You just had to sell and the apparatus was there to just build and grow. And we made a lot of money very quickly. But I didn't have relationships with people. I had transactional arrangements with people. People were no longer important in that scenario, really. And the food wasn't important. They were just widgets that we were moving. And for me personally, it was not satisfying as an entrepreneur. I wanted to be working on something that was meaningful. And so even though Ubi is probably one of the hardest ways to make money because you're dealing in a very low margin industry, you're dealing in a super competitive industry, you've got to work way harder to make it work even just a little bit than opportunities that open up amazing gaps, for example.

25:37But it's super fulfilling because you're doing something you know is worthwhile. And because of that, when you do come up against really challenging near-death experiences, there's this galvanizing element to it where he's like we're going to keep going we're going to find a way and and that's been a huge part as to how we've kind of been able to navigate the very rocky sort of terrain is there anything you'd wish you'd known when you started ubi that you know now that you could share with us interestingly like i i think that i would have a lot of advantages by knowing what I know now back when I started.

26:21But if I knew everything that I knew now, I probably wouldn't have started because it has been a very challenging journey. It's been tough. It's been a lot tougher than I thought it would be. Do you regret starting it? I don't regret starting it, but I don't think that if I knew... The person that I was back then wasn't as galvanized as I am now, and I don't think that he would have done it. I think the sacrifice would have been too much, and he probably would have gone, yeah, I'll leave it to someone else. Very interesting. Yeah. So your younger self saw it maybe as a quicker opportunity that would establish itself faster.

27:05My younger self was far more idealistic, had just come off the back of a very successful business. experience. The pastry business, yeah. Business was easy. He thought he had a natural knack and that this was an exciting new thing and it lined up with everything. And now we've got, you know, online commerce. The iPhone had just come out. This thing, in two or three years, it's going to be bigger than the supermarkets. It's going to be amazing. And we've just got to play our cards right. and if you told him that, you know, in 15 years you're going to be at the grindstone, you'll have made good progress but not as far as you think and it's still going to be hard, he'd have said, yeah, I'll give that a miss.

27:56I'll go do something that actually makes money. So it does as well you didn't know that. So it's a good thing I didn't know. All right, good to see. So you're a steward-owned business, Ubi, And I'm curious what that actually means because I've come across it a lot. Yeah. I thought you might be able to explain. So steward-owned, so we're a for-profit company, but we're purpose-driven, meaning our purpose is to put small scale back at the heart of the food system, or in other words, to decentralize the food system. But we need to be very commercially sound in order to do that properly. And so we are a for-profit company, but steward ownership sort of changes the nature of a for-profit business model in two key ways.

28:43What it does is it recognizes that shareholders have sort of two main entitlements to their shares. They have the right to profits and they have the right to control. control. What steward ownership does is it decouples those two rights and it puts them into two separate buckets. And so it says, okay, the right to control needs to be given and held by the people who are driven by the purpose of why this company exists. So they will have the ability to make the decisions as to the direction of the company and ensure that it's going in the direction that it was intended from the beginning. And the right to rewards is held by the people who have invested into the company, who believe in the purpose, who are aligned with the purpose, but they don't get to control it.

29:38They don't get to say, oh, there's an opportunity. Amazon wants to buy this company out. It's not aligned with our values, but we want the money. So they don't have the voting rights. They can't do that. They can't do that. And so it basically puts the voting rights into the stewards' hands and it puts the return rights into the investors' hands. The second aspect of the return rights is that the returns are typically a capped return. So it's saying, okay, there's a point at which you got enough back for the amount you put in. You just can't stay on the gravy train forever. So there's a point where we've paid you your multiple that is fair and reasonable for the risk that you've put in.