How an ex-lawyer turned a $100k business into a national delivery service with $50m in sales
Martin Halphen, founder and CEO of The Fruit Box Group
Fri 2 June 2017 - 9:30 amEntrepreneur | Featured | Profiles
Daunted by the prospect of a life spent working for others, one-time lawyer Martin Halphen quit a stable job to become the master of his own fate. Propelled by ‘blind courage’, he purchased a modest fruit delivery business for $100,000, believing, hoping, it would play to his strengths.
Despite some ‘hairy moments’, including a seven-year cash flow struggle that saw Halphen sell his family home, his investment in the business has more than paid off. Fulfilling around 30,000 orders, per week, from workplaces wanting fresh produce, The Fruit Box Group now boasts an annual turnover of more than $50 million.
Dynamic Business had the opportunity to speak with Halphen about the idea that ‘redefined’ The Fruit Box Group, the importance of being genuine about corporate social responsibility, why he doesn’t ‘crystal ball’ the business and his awareness that in order to achieve future growth, the business will need to be more than just a ‘two-trick pony’.
DB: How did you shift from law to entrepreneurship?
Halphen: I don’t like referring to myself as an entrepreneur. For one thing, you should never use a word you can’t spell! Anyway, I started my working career as a commercial lawyer but, after three years , realised it wasn’t for me. I then took the first job that came my way. Working in operations at VISY Recycling in Melbourne, I was exposed to warehousing, fulfilment, logistics and systems. It was far removed from the corporate world I’d known but I found that refreshing – it felt right. I enjoyed four good years with the company before moving on.
Before I left, they had mapped out a five- to ten-year career path for me, including a relocation to Sydney where I’d previously worked. While I appreciated this, the realisation that this commitment would take me into my late thirties was quite confronting. I wanted freedom and the energy to be creative and I didn’t feel I was going to get that working for other people. Having always had a strong drive to run a business, I knew it was time to back myself. The problem was, I wasn’t exactly sure of the ‘what’ or the ‘how’.
When I checked the local paper, the first ‘business for sale’ ad I saw was for a fresh fruit home delivery business called The Fruit Box. It had one and a half employees, two vans and serviced 280 residential customers in Melbourne’s south-eastern bayside suburbs. I thought the business was a good fit with my knowledge of distribution and logistics. Driven by a lot of blind courage and having little sense, I believe it had potential, so I purchased it for $100,000. That was in early 2000.
DB: What decisions have driven business growth?
Halphen: When a customer asked if we could deliver fruit to her office, that sparked the idea that really redefined the business. I thought if one company is interested in workplace deliveries, others would be too. In 2001, we launched our office delivery service. Although we mailed out a fairly amateurish brochure, 20 to 30 companies signed-up straight away! We were fortunate with our timing as corporations were really starting to enhance their employee wellness offerings. We really rode that wave!
After we expanded into Sydney in 2005, growth really exploded, and by 2008, we’d become a truly national organisation with warehouses in every state capital. We added corporate milk deliveries in 2009 to combat the potential effects of the GFC and a global downturn in demand for fruit at work. Milk now accounts for over 40% of the business (and growing). At various stages, we have added other adjunct products like dried fruit and nuts, bread, fresh juices, snacking vegetables, coffee beans and gift hampers. Whilst these other products are not subscription type offerings, they still add up and contribute approximately 5% to sales. There have been some hairy moments and missteps along the way. But we’ve had more success than we ever expected.
DB: What is needed to fulfill 30,000 orders per week?
Halphen: We have more than 250 staff plus a fleet of nearly 90 vans. I think it is fundamental to our service that we control the total supply chain. Probably no more than 5% of our deliveries are outsourced. Technology plays a very important part in enhancing the customer experience. Our systems are designed to make what we do as seamless as possible and at the same time give our customers total visibility and transparency. Our entire infrastructure and our people are geared towards providing a comprehensive delivery service as opposed to just the simple delivery of a product.
DB: What keeps you motivated to run The Fruit Box Group?
Halphen: Generally speaking, I’m motivated by opportunities to progress forward and reinvent our game plan, which also provides new experiences and fuels personal growth. That said, motivations, along with personal circumstances, change over time. In the beginning, I was focused solely on generating positive cash flow so I could sustain a family-oriented lifestyle.
Fortunately, as things have played out in the company’s favour, we’ve had the opportunity to positively impact the wider community, including through food rescue programs. We currently donate 3 tonnes of fruit per week to Fareshare, Oz Harvest and other organisations. As part of our latest corporate social responsibility (CSR) initiative, The One Box, we’re providing 1,000 disadvantaged young families a weekly box of fresh food basics for 25 consecutive weeks. In a plentiful country like Australia, it’s disturbing that so many young families are going without fresh produce.
The pilot program, which launched in May, represents a $400,000 investment and we’re working with La Trobe University’s sustainability team to assess the initiative’s impact. With compelling results, our aim is to at least meet our commitment of providing 25,000 boxes, before rolling-out a national program and establishing a public charity as early as 2018. We’re motivated to make a real difference to families in need. Hopefully, with The One Box, we’re providing a healthy foundation for children that will have a lifetime influence.
DB: How important a role does CSR play in your company?
Halphen: In the beginning, we were so busy growing the business that social responsibility wasn’t on the radar. Once we had the means to do good in a considered way, we began to cement our legacy as an organisation that cares about more than just a healthy bottom line. We pride ourselves on our core values of humility and empathy, which is why being connected with our immediate community – and having an awareness of what’s going on – plays a very important part in our business. We’re also learned that corporate social responsibility isn’t just good for the community, it’s also valued by customers and staff. As our business grows, so does our corporate social responsibility.
DB: What can SMEs take to boost their social component?
Halphen: I am hesitant to tell people what they should do. Unless you’re doing something like this for the right reasons, you should not do it. Our social initiative is gaining momentum because it is coming from a genuine place, not only throughout our organisation but also our other stakeholders who are with us on the journey.
DB: What have been the key challenges you’ve faced?
Halphen: The challenges have been different at each stage of our growth journey. A major one, from the outset, was getting the business into a cash flow positive state – that took seven years. In our industry, you typically pay market suppliers within a seven- to ten-day timeframe; however, our corporate customer’s standard terms meant it would take up to 40 days to receive payment. At one stage, my wife and I sold our family home to fund the growth and provide a buffer. It was a risk, but it bought us some time to make the business work.
With exponential growth, we’ve been able to close the gap. Nevertheless, we still face challenges. Essentially, we’re a two-trick pony – there is only so much fruit and milk that you can sell to offices and workplaces. For us to maintain a growth curve, we need to develop our product range capability beyond fruit and milk. If not, our relevance in the marketplace will become outdated and we will not set ourselves up for future growth.
DB: What key lesson have you learned in business?
Halphen: When I started, I was in a rush to make something happen straight away. What I learned over time is that while it is good to be restless, it is just as important to be patient in your execution. As the business has grown, this realisation has really kept me in good stead.
Today, the key challenge is to constantly be brutally honest with ourselves and re-evaluate our limitations. Unless you have total accountability in your culture, it is very hard to progress and get better.
DB: What’s next for The Fruit Box Group?
Halphen: We’ve never ‘crystal balled’ the business; instead, we’ve been reactive. By that, I mean that every good idea we’ve had has evolved from a customer enquiry or question. So, where to next? We’ll keep listening to our customers as they offer the best guidance as to where to take our business. In the immediate future, our range will expand to give smaller customers, in particular, a supermarket type of experience. That is where we see the opportunity.