Meet the entrepreneur who wants to break up the food chain

Ben Pugh's Farmdrop aims to help producers take back the power from supermarkets.

by Rebecca Smith
Last Updated: 18 Mar 2016

The hard-fought supermarket price war has claimed many victims, not least the suppliers who are often squeezed to the limit. Many small food producers have felt powerless to push back.

Ben Pugh’s Farmdrop wants to change that. The company aims to aims to cut out the middle man – customers order online as they would with a supermarket shop and prices are broadly comparable too, but the orders go directly to producers.

Pugh developed the idea for the business as ‘a disgruntled customer’ back in 2012, when he was living a busy life in London and struggling to get hold of fresh local produce. Farmdrop started with a click and collect model which involved an extra person, dubbed the ‘keeper’ who orchestrated the pickups, but it now delivers direct to customers’ homes. Before, producers took 80%, Farmdrop 10% and the keepers 10%, but now it’s a 75/25 split, still weighted towards the producers.

‘The cost of that home delivery model means that to be a sustainable and profitable business we (only) need to retain 25% of the retail price,’ Pugh tells MT. Producers would ‘be lucky to get around 40% from other conventional marketing channels’ he adds, which would mean the financial return from Farmdrop is about twice as good.

Pugh won’t be drawn on the firm’s most recent turnover figures, but he says revenue has gone up by an average of 230% each year. And it’s been winning over investors as well as customers – Farmdrop recently secured £3m in a funding round led by Skype founder Niklas Zennström’s investment firm Atomico.

‘I think Farmdrop is very fortunate to have such an important mission that everyone understands – that we’re there to fix the food chain,’ Pugh says. ‘And that really appeals to people. I think a company really has two things going for it – its people and its mission and we’re lucky to have great people and a powerful mission and that’s helped us appeal to high profile investors.’

Pugh’s background in equities at JP Morgan and Morgan Stanley has probably raised eyebrows among suppliers as he espouses the value of creating a more ethical system. ‘It might be a bit of a cliché, wanting to go on to do more meaningful things, but it was certainly something that did always hold true for me before I went to the City,’ Pugh says. ‘Before that I was also a professional sailor and I think that had a lot to do with me taking an interest in environmental issues.’

He admits there was a struggle to get suppliers to buy into the concept in the early days – many felt as if they had been burned too many times in the past. ‘There is some nervousness around disruption and I think the reason for that is we have a very centralised power base and certain companies that wield the power,’ he says. ‘There are a lot of producers out there who have really suffered because of that and building producer confidence that there was a really good opportunity here and we could make it so much better for them was tough at the start.’

Now customers can buy from over 50 producers, and Pugh says there are constantly new ones being added to the site. ‘When I first started – I cringe when I think about it now – it was veg boxes only,’ he explains. ‘I was so obsessed with fixing things from the producers’ side that I think I forgot about the importance of trying to solve consumers’ problems, and really that’s all you can afford to do think about in food retail.’ The range now covers eggs, meat, dairy and yes, vegetables aplenty.

Pugh says new producers are vetted thoroughly before joining the site. ‘They all go through a stringent due diligence process and we make sure they’re already professional food makers for a start,’ he says. ‘Our concept isn’t about the amateur allotment grower, it’s about the dedicated food producer who might be selling via their own box scheme or a farmers’ market and they’re looking for easier, better ways to get direct access to customers.’

His business pitch may seem a bit heavy on the evangelising, but his opinion on the current state of the UK’s supermarkets is one that's probably shared by many producers. ‘Six decades of supermarket dominance has persuaded all of us to become very accustomed to a very high level of convenience and we’ve forgotten about quality and provenance. It’s those drivers which people are waking up to and driving the popularity of Farmdrop,’ he says. ‘Our competitors, the incumbents, have really neglected those two important elements of the food supply chain.’

Still, there’s a reason supermarkets are the go-to option for many people and it’s not just because they don’t know any better. Farmdrop has a way to go before it’s biting a huge chunk out of the market - and it has plenty of competition from the likes of Abel & Cole too. It currently only delivers to London, but Pugh’s plans are to go UK-wide next year, while bringing on board new software engineers and product managers to bolster the 18-strong team.

In the meantime there are plans for more experimentation with the produce on offer. Growing Underground, which sells salad and micro greens grown beneath the city surface in London, has proved particularly popular. ‘We did have whole pig heads, but we’ve taken them off the site as they sold less well,’ Pugh admits. Who knows why...

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