Marty credits much of his success to the guidance of customers, but says that implementing a corporate social responsibility scheme within his business is a defining factor in establishing its overall identity.
“What we’ve done over that five or six years is we arranged for a food rescue program … However, we felt a little bit like an accidental tourist,” Marty explains, adding that the business’ need for refinement inspired The Fruit Box to do something meaningful.
“We felt that if we had a very strong CSR platform, not only would we improve our identity, [but] it walks hand-in-hand with improving the profile of our business.”
Speaking on the My Business Podcast, Marty outlines his journey of growth – from how he cracked the national market, to the techniques used to achieve repeat business – and explains why implementing a CSR scheme within your business could not only improve its public profile but boost team morale and, as a flow-on effect, the bottom line.
Enjoy the show!
Adam: Welcome to another instalment of My Business Podcast, it's Adam Zuchetti, the editor of My Business here. I've got two people in the studio here with me. Hello to my regular co-host Andy.
Andy: Hello Adam, how's things?
Adam: Good thank you. Our other guest is an interesting one. He bought a small fruit home delivery service that was based Melbourne, back in 2000, and grew it from its initial 300 customers to around 30,000 orders each week – with turnover in excess of $50 million. We've asked Marty Halphen, the CEO of The Fruit Box Group to come in and explain exactly how he's achieved those numbers. Marty, thanks for coming in.
Marty: Thanks for having me.
Adam: Just I suppose give us a bit of a background as to the business and how you came to acquire it in the first place.
Marty: Well, I'm a lawyer by profession, I started off as a solicitor in the mid-90s, which it seems a long time ago. I was a very poor commercial law solicitor. I did persevere with it for about three years. I took a sideways movement into industry late 90s and worked for a recycling company and I was very interested in logistics. I did that for four years. Then what happened is I was offered a very small equity and decided not to go ahead with that. As I said, I was interested in capturing the last mile in the suburbs. The first business I saw was a company called The Fruit Box, which delivered to about 300 households in southeast bayside suburbs of Melbourne. Had two vans, and I thought I'd have a crack at it, it was relatively cheap. I took it on and at the time, I was probably hoping to be the next, or the Aussie Farmers Direct, where I was delivering to a whole lot of homes nationally, but it didn't go that way, it went another direction.
Adam: That's something else that we wanted to pick your brains about, because you did take it in a different direction. You've gone from the suburbs of Melbourne to a national footprint. You've also changed the core business model itself. Can you talk us through that?
Marty: We're a business that I'd love to tell you that I crystal-balled what we've achieved today, but it's far from the truth. What we did or what I did is, it was very reactive, listening to customers, listening to the questions that they had. Yeah, what do they want? Our whole business over the last 16 or 17 years, has been modelled on the customer being our teacher. What happened in 2000, is I took over a home delivery business. In 2001, a customer asked me, do I deliver fruit to the workplace? So that's where I went. I thought there was an opportunity there. Then, what happened in 2004, 2005, is one of those customers asked me, do I deliver to Sydney? So I thought, geez, here's an opportunity, maybe become a national business. In 2008, 2009, a customer asked me, do we deliver milk? What's happened, I mean I've made it sort of a speed version, is that we've always been guided by what the customer wants. I've always said to all my staff and the people that I work with, is that, be directed by the customer, because they're the ones that are sort of guiding the ship.
Andy: I think it's really interesting that you had a business that was a certain model, and it's moved to something else. We have a lot of business owners talk to us about that, the drive, believing in your vision is important, keep going, keep going, you're going to get knockers, you're going to get push backs. Obviously, you didn't necessarily eventually do that, because you changed the business. At what point did you realise, hang on a minute, this is the switch that we need to make? Or did it just happen organically that you said yes to a lot of questions and that's how things changed?
Marty: Look, I think we've always said yes, and probably with us, is we've made a lot of mistakes. I don't think we've made the same mistake twice. What happens is that we say yes – if it has legs, we persevere with it. Then it goes, you go to another level. The analogy I always use is it's like a surfer; the hardest thing is to catch the wave in the first place. Once you've caught the wave, it's how you glide into shore. Yeah, with us, it's always been the customer question and then a hunch. What happened is, that when the customers asked us, do we deliver nationally? At that point in time, we started to think to ourselves, well traditionally fruit is a market type of business. It's not what you call a logistic-type business. We thought, well we're dealing with big corporate customers that have a national presence and we just felt that if we're able to have a national infrastructure, the business would fall our way and that the dialogue would go from somebody who was looking after a site, to national procurement. Now, that sounds all smart, but that was a journey, that took us three to four years to learn.
I think that probably in our cases, I've always been on the tools, I've always been on the factory floor, at least for the first 10 years of my business. And I've been very close to the customer. I felt that, that grounding, which happened because I wasn't making any money and I had no choice but to do that, has really kept us in good stead today.
Adam: I'm interested in how you actually find customers Marty, because particularly when, in the early point, you did change the business from going home based to corporate based. How do you really bring in new customers when you're dealing with big companies in particular?
Marty: Yeah, at the beginning – I'm not a marketing person, I came from an operations background – when we were asked the question, "Do we deliver to the workplace?" I had a bit of a hunch. I put together, at that stage, a brochure that cost me $800 and I circulated it through Australia Post to 1,500 businesses that were in the northwest quadrant of Melbourne CBD, and we picked up 30 customers straight away. Then, what happened after about two years, again, somebody who's a novice at marketing, I felt that maybe let's appeal to HR. We put together a marketing message of, Workplace Fruit, it's the cheapest HR initiative you'll put in place this year. Then the message changed because we started becoming a national business and our audience went from people that were looking at direct marketing through Australia Post, to a more sophisticated marketing activity.
At that point in time, we started approaching national procurement. So along the journey, what's happened is the marketing has had to adapt to the audience that we've been trying to engage. We are a marketing business, it's not a sales business, we put a lot of information out there. The customers that we deal with, they're not interested in people knocking on their door or ringing their interest. We deal in an industry or in a product line, which is probably a problem solving exercise. They only call you if they need something to fixed. So what we do with marketing is we just make our customers aware, or potential customers aware that we're out there, if they need us. When they need us, they know that they can come to -
Adam: How difficult is it to achieve repeat business then? If they are only contacting you, when they have a particular problem and that's the kind of methodology that's going on – you are trying to, as a business owner, keep them coming back and spending more money with you. How do you keep that going?
Marty: Well, with fruit and milk it’s subscription-type business. What you do is you engage a customer at first instance, and then you set them up on a week-to-week basis. What typically happens with us, is a customer will be set up and we're delivering – it's as if they turn on the tap and we deliver to them on a week-to-week basis. Unless there's a problem to address, but other than that, we hardly hear from our customers.
Adam: When you started doing the ... Because now home delivery's quite a thing right now, everyone expects, people are surprised if you don't get home delivery or the big super markets do it. 15 years ago, it wasn't really a thing at all, certainly not for produce. What sort of learnings did you take when you were doing that? How did you move? Have you learned as you've gone – do you feel that you've picked up other stuff or how did you sort of ... In effect, you've invented a system that never really happened, right? How did you learn to plan that space?
Marty: It's a great question, because when I started in home delivery, we couldn't properly crack that market for two reasons. One is that the average sales order per delivery didn't really justify the delivery cost in delivering it. So you could've had a $30 or $35 sale, and then you had to deliver that to the suburbs. The second reason is that most orders for the home delivery customer – there needed to be a customer service component. It wasn't as if, they were happy just to sit up on an ongoing basis. If one week you were giving them broccoli, and then the next week, you were giving them zucchini, well they might not like the zucchini, so the churn rate on that customer had a very short life. What I did is when the corporate customer came into play, I thought about those two areas that were restricting the commercial opportunity in home delivery. And with what we were doing at the time was just fruit, wasn't vegetables, and with our corporate customers, it was subscription-type business.
So they were just happy to get a box of fruit each week, and the customer service component was very small. We didn't hear from them. They just set it up on a Monday, Wednesday, and that's how it worked. The other thing is with the delivery component, is that we're delivering to buildings. We could be going to 30, 40 different customers per building and we're able to minimise the impact of distribution costs because we've got a such a high density. When I started the home delivery business, I wanted to capture the last mile in suburbs, but what we've been able to do with our fruit and now milk business is we've been able to capture the last mile in the corporate dense areas. So I think the learnings, my early learnings in home delivery have really helped us develop the model with offices and corporates.
Adam: It's an interesting space and it's one that's really taken off in recent years. I'm curious to hear your thoughts about dealing with competition. Because there must be such intense competition now, I mean particularly in the home delivery space, it's enormous. There are so many companies operating there. Is it the same in the corporate world?
Marty: I think that what we've done over the last 15 or 16 years, is we've turned a product business, which is fruit and milk, into something, which I would like to think is a service. I don't think it's ... It's not about how fresh the fruit is or whether or not milk has shelf life, that's a given. I think it's all the service, which is attached to that fruit and milk. So prompt delivery, the breakup of delivery, having your drivers being all police checked, having a national presence, not just delivering to a site and I think that all of that padding, really sort of is what makes the product attractive to our potential customers. Look, I think competition's great, where there's competition, there's the ability to get more sales. The way in which we work in our business is we are always trying to better our own times. We're not trying to really run a race directly against competitors, we're just ... All we're trying to do is enhance the customer experience and not take anything for granted, and constantly improve our service.
Adam: How do you actually go about doing that, because it's quite easy for someone looking in on your business, to say, well you deliver X, Y, Z – it's quite standard, you can improve the times, you can improve the efficiency, you can improve the friendliness, but how do you actually drive innovation within the business?
Marty: Well, it's interesting, I mean people say that fruit and milk, it's not rocket science. It's not rocket science, but when we started delivering milk five or six years ago, the experience the customers had is that milk would be just be dropped off in loading zones. They could be dropped off at three in the morning, and it wasn't until eight or nine o'clock, when somebody came to work, went downstairs, picked up the warm milk, had to cart the milk over four, five, six different floors. Now, the opportunity there is that there's an Occupational Health and Safety issue. There's the issue of milk going off. There's the issue of not being able to break up the order and have that order delivered to each of your levels. That's the type of learnings that we have had by listening to the customer, which goes back. When a customer says, "You know, I don't like warm milk." Well, why don't like warm milk? Because warm milk's being delivered to the loading docks. What we do is we say, let's give you a fridge service, where we go to each of your floors. So that's how its evolved.
Adam: Yeah, so really trying to add value wherever you can possibly.
Marty: It's all about listening to the customer. Every complaint that we have about our service, we ask ourselves, when it sort of becomes quite a big complaint, we ask ourselves ... On one level, there's the complaint, but on another level is how can we turn this negative into a positive? I think that our business is all about turning negatives into positives. Because I didn't know anything about it, when I started and what we try to do amongst the key people in our business is have an open mind. Our service is not 100 per cent perfect and it can constantly evolve, so when I started, we were delivering a box of fruit to divisions in Melbourne CBD, and today we could be delivering fruit and milk to a hundred sites, for the one customer, a consolidated experience, broken up exactly the way they want – a completely seamless exercise and that's how it's evolved. It's 17 years with being reactive. I'd say, the thing I say to the people I know, is that we've been reactive for 17 years, but then when you look back and see what we've achieved, in now delivering 30,000 deliveries a week, it feels like you know, it's quite revolutionary. Well, it's hardly that, all we did, is we put ourselves in a position where we could respond to the customer. Listen to the customer and to respond to what they wanted and how to fill the gap.
Adam: How do you actually illicit that feedback from them though? It can be difficult to actually get people to commit even just five minutes to say, oh look, this was my experience, I'd improve it here, but I really liked this. In a time poor situation that everyone is in these days, ow do you really get that feedback to come through? From customers.
Marty: Well, I'll give you an example, probably five or six years ago, we had a customer that complained that they had someone on footage that was looking around desks. At that point of time, we thought to ourselves, geez, that's a serious situation. Then, we sat down and we obviously had to correct what had happened, put in an investigation to see what actually had happened. Then we thought to ourselves, this can't happen again. This is a bad situation. I mean, somebody feeling unconfident on the level of potential theft, where they've given us the keys or access to their office. We just can't let this happen again. So rather than hoping that it wouldn't come up again, what we did is introduced an initiative where all our drivers are police checked.
Look, there are a lot of issues that come up on a day to day basis, not all of them reach the senior management of the business. But some of them do. Some of them are repetitive. We look for trends and when you see enough trends, that's not just telling you, you need to do something about it. That means you need to do something proactive so it doesn't happen again. So I think we've got some very good information flow. We have a daily snapshot, which has visibility amongst all our staff, where we see exactly what the issues have been for the day – what new sales are, what cancellations are. I think that those trends that are constantly visible to us, they're there to prompt action and to continually improve what we do.
Adam: Marty, I wanted to take a bit of a different tack, and I know that you're really big on the Corporate Social Responsibility side, CSR. You've got a new initiative going on that. I suppose two things, one just tell us a little bit about it, but also, why do you think it's so important to be active in CSR?
Marty: Yeah, it's a very interesting question. It probably leads back to probably the big theme that I've been talking about is listening to the customer. Again, CSR, it's a reactive thing. So what's happened is that over the last two or three years, we've been increasingly asked, what's our Corporate Social Responsibility platform? About five, six, seven years ago, we sold about 150 tonne of fruit a week nationally. There's about two or three percent, that doesn't make the aesthetic rate – so perfectly good to eat, but doesn't ... It's not appropriate to deliver to our corporate customers. What we've done over that five or six years is we arranged for food rescue program, such as FISH here in Melbourne and OzHarvest in Sydney, where they collect that fruit and they deliver it to agencies and to places like food bank. When customers ask us what our platform was, and we felt that it was important that we did have a platform, we looked back at what we were doing and we could've easily said that we have a food rescue program. However, we felt a little bit like an accidental tourist. Now, what I'm trying to say is that, the food rescue program actually helped us and saved us money from throwing out that fruit and veg and then there was hygienic issue. So we actually had no CSR platform at all.
It all sounds good that we're delivering a tonne of fruit a week to food rescue programs, but we thought that we're not properly walking the walk. So we got together as a senior group and felt like, rather than just look at this as a situation where we just have to put our hands in our pocket and donate money … This is actually part of our identity, and we felt that if we had a very strong CSR platform, not only would we improve our identity, it walks hand-in-hand with improving the profile of our business. If you improve the profile of the business, it's what I call good business. We've gone through a journey where, when somebody asks us what was our CSR platform, instead of shying away from it and think to ourselves, geez, do we have to do something here, we've actually 12 to 18 months later, actually looking at it as a good business. Once the penny dropped and we thought, and we could see that good CSR walks hand-in-hand with good business. It's inspired us as an organisation to really, and incentivised us, to really do something that's meaningful – leverages off our infrastructure, leverages off the smarts, or the IP that we've developed over 15 or 16 years, and do something that we feel as an organisation we believe in.
Andy: With something like CSR, it's easy after you've learned it, I supposed those lessons to sit there and go, it's good business – which sounds a bit sort of cynical – but is it a lesson you wish you had learned earlier and do you think it would've helped learn earlier? And I guess for a lot of our businesses owners listening, do you think it's important for every business, whatever their size, to have some sort of CSR? Obviously it came to you through a lot of customer feedback, but is it important for every business to have it?
Marty: Absolutely, and I understand what you're saying about cynical, and that's why we're so open about the message that we feel like it's good capitalism. So we're here to do good, we're here to do good in our core business and we’re here to do good for the community. If it fits in to what we can do, and I've been quite humbled by the fact that a few years ago, I was looking at CSR as mutually exclusive to running a business. It's actually far from it. I think that it's very much about who you are and it's very much about the people in your organisation. So what's happened is that, once we had that awareness that this is really ... You know, what does our company represent and we all want to be good citizens.
It's just been amazing, the support that we've had within the organisation. So we've had nobody that's been cynical, everybody walks a bit taller, because they're part of an organisation that is doing something that's a bit bigger than what our core business is about. I feel that, that that energy sort of creates more energy. It's good for everybody, it's good for the community, it's good for our customers, and it has to be good for business as a result. For my peers, I would say look, everybody's experience is different; I'm not here to be self-righteous and say that what's happened to us is going to happen to you, but if we do talk about it, it might resonate with some people and they might say, "Well, actually that's an opportunity for us as well." As I said, you can be cynical about it, but in the end, if you look at the outcomes, it's just good for everybody.
Adam: Yeah, okay. I think that's a really positive note to finish up on, isn't it Andy?
Andy: I believe so.
Adam: Yeah, it's nice to finish on a happy note. Thank you so much Marty for coming in and sharing your insights with us. It'll be interesting to actually get you back and explore some of the more logistical sides of the business I think. If you're happy to, we'll get you back again at some point.
Marty: Absolutely, thanks for having me.
Adam: If anyone wants to find out more about The Fruit Box, The Fruit Box Group, where can they go?
Marty: Our website's have a very good summary of what we do, www.thefruitbox.com.au and you can also look at our milk business at themilkbox.com.au as well.