Motatos boss Karl Andersson is putting the fun in frugal

You know, we have sold the weirdest things,” chuckles Karl Andersson, co-CEO of Motatos. “Like blueberry cactus sparkling water. I’m not sure I would try it.”

Such oddities are all part of the Motatos experience. The online grocer – known as Matsmart in its native Sweden – specialises in products that have flopped in other retailers and are racing towards their sell-by date. Those unsold, anachronistic seasonal specials. Or those high-volume production errors or mislabellings.

“We are working in those pockets of hard to plan,” Andersson says. “Suppliers sometimes just need to get things out of their hands.” Motatos will be there to take on, say, “a gym hall full of weird flavoured cola”.

Crucially, these goods are sold cheaply to consumers. The company claims typical savings of 60% on a normal supermarket shop. The redistribution model – which is being followed by the likes of Company Shop and Approved Foods – also has significant environmental benefits. Motatos says it saved 25,642 tonnes of food from ending up in landfill last year alone.

“We view the world as having two sets of customers,” the cheery Swede explains. “The consumers and the producers. We are just the middlemen. It’s a win-win.”

The company was founded on that principle in 2014. Co-founder Erik Södergren ran a supermarket where food went to waste daily. “He was frustrated – if you have a grocery store, you want to sell the groceries,” Andersson says. “You don’t want to throw them away.”

But shifting items nearing their end of shelf life was hard. Customers would complain about short-dated products. “But when are you eating this? Tonight obviously? So I don’t understand this conversation,” Andersson recalls.

His solution came with a pallet of Julmust – a syrupy soft drink beloved by Swedes during the festive season. A supplier came in the middle of spring, “when no one wants to touch it any more”.

Södergren took all the stock for a third of the asking price. “Both sides were really happy,” Andersson says. “And the customers really liked it. The conversations flipped from ‘how can you sell this’ to ‘it’s amazing you’re doing something good for the environment’.”

Similar purchases gathered further positive responses and soon, the store was full. Enter Andersson, a serial entrepreneur excited about scaling the idea.

“We realised food waste was not a local Swedish, Stockholm issue, it’s a global problem, one of our times’ biggest issues. And everyone likes a bargain. Plus food online – Ocado and so on – were just getting going,” Andersson says. “If we can combine these things into one idea we’d have something really strong.”

Within eight months, a steady stream of orders was going out. Money was short, so angel investors and venture capital cash was secured.

“I was working on Matsmart at night time in the beginning,” Andersson says. “I was running a different business at that point. But during the summer there was no turning back. Although it was maybe two years before we got our first salary cheque.”

Space struggle

The biggest business risk for the burgeoning retailer in those early days was committing to warehouse space. “We borrowed, we begged, we did everything we could in the beginning and we had a few really odd warehouses, basically ones that were about to be torn down,” Andersson says.

Sales were rising beyond best predictions. “We thought if we could just get our hands on 200 square metres, then we could be there forever,” he says. “And that lasted for a month. Then it was if only we can get 1,500 square metres, we could be there for 10 years.”

Then came some luck. Telecoms giant Ericsson was terminating operations in a small town called Katrineholm, creating a sudden glut of space. Matsmart took advantage and is now the town’s biggest employer.

Matsmart later expanded into Denmark and Finland. It launched operations under the name Motatos in Germany in 2020, and in the UK in June last year. In September, it secured €38m in a fundraising round. Total funds raised – chiefly through Andersson’s persistent pitching – now amount to more than €130m.

“It’s a volume game,” Andersson says. “When we buy pasta, we buy four big lorries. Really, really big volumes, and to be able to shift that kind of volume we need a really big volume of customers.”

Expansion is getting the company ever closer to profitability. In Sweden, a profit is expected this year. “It’s been important to us to prove this is not just a model that works in the Nordics but all the way across Europe,” Andersson adds. “We believe it’s a global opportunity and are ready to prove that.”

Scaling a business like Motatos brings some unique challenges. “Producers these days are getting better at reducing wastage and planning their production better. They are so much better now than when we started,” Andersson explains.

Motatos has adapted, capitalising on unavoidable production line wastage. One rich source is when a line switches from making, for example, pasta to gluten-free pasta. Or milk chocolate to dark chocolate.

“You need to push the glutenous pasta through the system before you can start making the non-gluten pasta,” Andersson explains. “So you have this ‘semi gluten-ish’ pasta. Or ‘inbetween chocolate’. And that’s something they’d not be able to sell anywhere but us.”

Motatos uses this surplus in its Saved own-label range, expected to become available in the UK soon. Within the range are other nifty surplus savers – like bags of fusilli pasta made from the offcuts taken from machines that cut spaghetti strands to length.

It’s also using surplus ingredients where it can to produce pantry basics. So shoppers can do a full shop on its website (aside from fresh).

But ultimately Motatos is about saving, rather than fulfilling a shopping list, Andersson says. “It will be the case where you don’t find what you’re looking for,” he admits. “Every day in the UK we have around 500 to 600 SKUs and these constantly change, right? There’s this constantly shifting assortment.

“We are trying to fulfil your basic needs, so are adding those essentials,” Andersson says. “But really: we are in it to save it. So therefore, we have what’s for sale at this given point.”

The result might be a shopper gets a high-end product for pennies one day. Or obscure children’s book licensed chocolate bars another.

“We have a lot of window shoppers. They come in to see what’s for sale,” Andersson says. “Then if they see a few things they like, they start working their basket.”

The cost of living crisis is leading more shoppers to discover Motatos as matter of necessity. But, as Andersson emphasises, being frugal can still be fun.

“We have an exciting assortment,” he says. “It’s fun to shop at us. We bring the weird things. We bring difference. We bring some joy to food shopping.”