Gautam Gupta and his cofounder Ken Chen met during their time at Babson College and quickly became great friends. They bonded over everything related to entrepreneurship and decided to start a business together. In addition to their entrepreneurship obsession, they both had a passion for food. For Gautam, food was very personal. He struggled with obesity until he was 18 years old, when he started learning everything he could about diet and exercise. He eliminated all chips, candy, soda, and other junk food from his diet and started exercising regularly. His hard work resulted in a loss of 70 pounds before he started his first year at Babson College in August 2003.

Gautam’s weight loss journey introduced him to nutrition science. He quickly discovered that snacking was one of the leading causes of obesity and the single greatest source of empty calories. He also noticed that all snacks deemed “healthy” didn’t really taste very good. The market gap was clear—tasty healthy snacks. According to Gautam, “Snacking preferences differ from person to person, so we wanted to use technology to bring personalization to healthy snacking. We wanted to create a Netflix for food.”

Gautam and Ken graduated from Babson and both had jobs, but they reserved time over weekends to develop NatureBox, a subscription-based healthy snack box delivery service. The part-time work on the business idea was taking too long and they were waffling on the decision to actually start a business. Gautam recalls,

One weekend in 2011, we borrowed an office space from a friend from Babson and decided that we wouldn’t leave until they made a decision about whether or not to start NatureBox. We put a box of healthy snacks together. We shot a photo of it and then we put that photo on our website and we drove some traffic through Facebook to that website.

By the end of that fateful weekend, they had 100 customers that were more than just friends and family who had actually paid for a product that didn’t exist! They spent the rest of the weekend packing the 100 boxes of snacks for their first customers. When customers subscribed for more than 1 month, they knew that they were on to something.

NatureBox officially launched on January 1, 2012, providing monthly subscription boxes that included five snacks, such as nuts, trail mixes, and granola bars, under the NatureBox brand. During the early days of NatureBox, customers could not customize their snack boxes. Within the first year of operations, Gautam and Ken quickly learned that their “one size fits all” snack box did not provide a fully satisfying customer experience. When customers didn’t like a snack in the box they were unlikely to keep their subscription because customers didn’t want to pay for snacks that they wouldn’t eat. NatureBox quickly transitioned to a more personal snacking model allowing customers to choose and customize their boxes. Over time they also learned that snacking is an impulse purchase. In 2016, customers were encouraged to purchase single, à la carte snacks in addition to the subscription option.

Gautam and Ken believe that NatureBox’s most significant advantage has been their ability to understand and successfully adapt quickly to changing market conditions and customer needs. They make conscious effort to listen to the consumer and constantly gather feedback through customer reviews and online ratings. Rather than sourcing their products from other brands, their snack offerings are proprietary and developed in house. They have a membership model that allows members to subscribe to regular deliveries of snacks or make one-time purchases to try different products. They also offer a wide variety of quantities ranging from 1 ounce to 7 ounces for single serving items and bulk purchasing options of 70–80 ounces for the same snacks. Their offerings include a lot of interesting snacks such as popcorn and pretzels, cookies and bars, dried fruit, jerky, chips and crackers, trail mixes, breakfast snacks such as oatmeal and cereal, coffee, and a lot more. They also have a monthly “Discovery Box” that has a good mix of the snacks they have to offer. The January, 2019 Discovery Box, for instance, includes Crunchy BBQ Twists, Tropical Fruit Medley, Kettle Corn, Limited Edition Trail Mix Cookies, and Dark Chocolate Berry Trail Mix. Gautam and Ken want to build a brand around the healthy snacks they offer in addition to the actual box in which the snacks are contained. NatureBox links product development processes to customer feedback and their extensive network of natural product suppliers. This has helped them create more than 400 products that customers love!

A relentless customer focus has helped them understand their core customer and attract new segments. For example, the initial customer focus of NatureBox at launch was mothers looking for healthy snacking options for their children. However, they soon realized that millennial women were apt to subscribe to NatureBox for both home and work consumption. Individual, direct sales was the primary focus at NatureBox from 2011 to 2015, yet in 2016 they began selling snacking services to corporate offices. Businesses pay $20 per month per employee for an unlimited supply of snacks. This has expanded their distribution and provided a welcome new revenue stream.

In the packaged food industry, consumer feedback takes time and this lack of readily available real-time information usually extends the product innovation cycle in the perishable food industry to a few years, making both product innovation and the struggle to profitability very hard. It’s not uncommon for food startups to burn through a lot of cash while channel distribution and retail partners take a huge part of the pie, making margins for food startups very thin. By successfully integrating real-time feedback into their supply chain, NatureBox has shortened the traditional multiyear product innovation roadmaps (from idea to product delivery) to 10 to 12 weeks and has constantly been adding new snacks to their product line based on consumer feedback (e.g., Sriracha Roasted Cashews, White Cheddar Caramel Popcorn, and Honey Dijon Pretzels). Developing these products in house not only enhances profitability, it also allows them to diversify the product line and therefore reach out to a broader consumer base.

Scaling NatureBox has required significant investment and most resources have come from within Gautam’s network. Neither Gautam nor Ken were familiar with food manufacturing. While talking to a few of his friends in investment banking, Gautam learned of a food conference happening in Chicago. This conference introduced them to suppliers and manufacturers in the industry. Gautam’s ex-employer and early-stage venture fund, General Catalyst Partners, was an early investor in NatureBox. That initial funding has led to other investors. NatureBox raised $58.5 million between 2012 and 2015. In addition to the funding, Gautam’s network has been very helpful in getting NatureBox with the right people at the right time. He has leveraged his deep network of mentors and advisors to learn from their experience and expertise in order to get the business moving faster. This network has helped him hire the right people, scale up, and guide the business in the right direction.

The journey of NatureBox has been both exciting and challenging. “Making the decision to move away from only a subscription model in 2013 into one that offers both à la carte and subscription options was one of the most challenging pivots for the business,” he recalls. “You can never be 100% sure as the data is never clear. It was a leap of faith!” That decision has helped the business greatly since then and has helped make the business a lot healthier. Additionally, the marketing mix has evolved over the years from only marketing on Facebook to being early adopters in channels such as podcasts. Today NatureBox is looking at narrowing down its marketing efforts back on Facebook where it has gathered over a million likes (). Gautam and his team believe that the dynamic and ever-changing nature of marketing platforms makes it difficult to keep up with the trends, and a more focused approach will help make marketing activities more effective.

Gautam feels that 6 years after launching NatureBox, they are now truly delivering on its promise of a completely customizable healthy snack experience for its customers. Growth has not come easily, but Gautam says it’s essential to stay calm and manage your mental state so as to not get caught up in the roller coaster ride called entrepreneurship! His advice to students and aspiring entrepreneurs is two-fold:

First is to focus on the quality of the team, from the first person you start working with and every hire that comes on board. It is very easy to regress the quality of the team and you can only keep the bar high on talent by being personally involved.

Secondly, as much fun as it is to execute the business, spend a lot of time, especially in the early stage of the business, thinking about the type of business you want to build and what it implies about the process that you need, the values of the organization. You should do as much planning on those things as much as executing, Often, entrepreneurs are quick to jump to action. The process of building a company is lot more than just offering a great product.

1. Describe the NatureBox business model. Could it be improved in some way?

2. There is a lot of competition for NatureBox today. How will the company compete in the future? Are there other directions in which the team could go?

3. Do you believe that Gautam and NatureBox are delivering on their customer value proposition of a customizable healthy snack experience? Why or why not?

Answer rating: 100% (QA)

1 The NatureBox business model is based on a monthly subscriptionbased delivery service of five snacks such as nuts trail mixes and granola bars under ... View the full answer