“This is an amazing market, it’s going through rapid change, it’s becoming consumer focused, the technology is going to revolutionise it and we are going to cease being a driver of climate change and we’re going to be starting to fix it. If you’re a venture investor where else would you want to be?”
Greg Jackson is clearly a man passionate about the opportunities energy retail can bring for consumers and businesses. The Octopus Energy chief executive speaks about his field with unbridled enthusiasm when he sits down with Utility Week at the company’s vibrant Soho offices.
Octopus Energy, funded by Octopus Group, is one of the UK’s most recognisable challenger brands and currently serves 1.4 million customers.
A green energy provider, Octopus prides itself on innovative products such as its Agile tariff, which in 2018 saw customers paid to use energy – the first such case of its kind in the UK.
The company has lofty ambitions and Jackson has previously said by the end of the decade the company aims to have 100 million customers on its platform globally.
The office is filled with the noise of creative productivity and has the informal air of a start-up firm. A conspicuous sign of constant growth is the gigantic switch wedged into a corner, ready to be wheeled out at launch events – most recently that of council-backed London Power.
Jackson likens his team of bright young professionals, who he refers to as his “secret weapon”, with NASA mission control.
While Jackson might not quite share the austere air of fighter pilot turned flight director Gene Kranz who took the helm during the Apollo 11 mission, he certainly takes lessons from the first manned lunar landing.
“People forget that the average age of an engineer in the mission control room for Apollo 11 when it landed on the moon was 28. Actually, because a lot of them had been on since the beginning of the program, they were 22 when they began.
“The people who are building this business, most of our team are grads and then among our specialist function we have got a tremendous number of people with PhDs and degrees from the best universities around the world.
“This is a change in energy retail, it’s a talent and technology business now and that goes from the people looking after the customers through to the people building the machine learning models that replace entire departments with automation.”
He adds that the youthful representatives of his company at the Utility Week Awards prompted a caustic comment from one onlooker of “where are the grown-ups?”.
A move for the big six?
The market Octopus operates in is volatile and constantly evolving.
With fellow challenger supplier Ovo Energy now having completed a £500 million deal to take on SSE’s retail arm, the “big six” is a name which no longer applies in the traditional sense. Furthermore, Eon is currently going through the process of absorbing Npower.
There is a lot of movement among the large players. Could Octopus be the next challenger looking to acquire a former big six retail arm?
Jackson responds by saying the supplier is “absolutely focused” on being a disruptor.
He adds: “If we made an acquisition like that (the SSE/Ovo deal), chances are we would cease to be a disruptor, we would cease to be a consumer champion, and we can’t afford to do that.”
Octopus has made no less than six acquisitions in the past two years.
Speaking to us following the interview, Jackson said there was “no end in sight” for acquisitions as the challenger brand took on the 70,000 domestic customers of French firm Engie.
Other notable acquisitions include 300,000 customers from Co-op Energy, while the company recently began supplying customers via the council-backed London Power. In addition, Octopus also supplies customers via M and S Energy and Affect Energy.
Jackson himself gets very much involved with the work, personally receiving around 40-50 emails daily from customers.
Octopus prides itself on its technology platform Kraken – an in-house customer service and billing platform based on advanced data which automates much of the energy supply chain.
Jackson is passionate about the Kraken platform and is keen to talk through its merits.
“From the very beginning, we were bringing something special, which was building a technology platform that today means we are more efficient at providing better service and that enables us to relentlessly drive down prices”, he adds.
Kraken made headlines last October after it was announced that fellow challenger brand and rival Good Energy had struck a deal to use the service from 2020, the first time the platform has been adopted by a rival supplier in the UK.
But it is not just technology that the company relies on to provide customer service. Jackson describes his teams has being “grown” organically, like cells in the human body.
“As we grow, for example, every 70,000 customers or so, we just grow a new team. The way we grow the team is we split existing ones, it’s like cell division. Among our teams there are some all the time who are fattening up ready to split. The ones who have got the best metrics are the ones that are split.
“So there’s a real incentive on teams because it is going to create new leadership opportunities, everybody is going to get closer to the customer. It’s how you grow your career at Octopus. The best teams split the fastest. It naturally replicates that cultural autonomy.”
International expansion
Octopus is certainly an ambitious player and has already expanded overseas into Germany and Australia, with plans for further international expansion. Jackson admits he is often approached by global investors regarding potential business opportunities.
“Every week I’m approached by companies and investors from around the world to see if we’re interested in talking to them.
“Not only that, when we are expanding around the world we are talking to large companies both in energy and outside in various markets.
“And for a lot of that, they do talk about collaboration in the widest sense. It’s a question about whether we partner with them for expansion, including taking investment from them.”
While Jackson has appointed KPMG to advise on different growth models, including the potential for international investment, he does stress that the company’s ambitions can be realised under current backers Octopus Group.
He adds: “We appointed KPMG to help us think it through – do we carry on as we are, funded entirely through Octopus? That has got an incredible attraction, by the way. Or, as part of our international expansion, would we benefit from those international investors and their market knowledge?”
“We can expand to sort of another four to five countries and grow the UK business to five million customers funded by Octopus if we want.”
According to Octopus’ latest accounts, the company made a loss of £30 million in the year to 30 April 2019, off a revenue of £460 million. Does Jackson have concerns about how much longer Octopus Group, which manages £9 billion of investment, will continue funding its energy arm?
“The total investment in us is tiny compared to our scale and that underlying profitability. Any loss making from us is because we are investing in technology, global expansion and very rapid growth here in the UK. But the underlying business is rock solid.
“For a relatively modest investment of a few tens of millions in us, we have got a business that today that is twice the size of Barcelona Football Club in revenue – £1.5 billion of revenue and growing two or three times per year with underlying very strong economics that’s built globally unique technology, now that’s a modest investment and it’s the kind of thing that venture investors really understand well.
“And then you look at the incumbents who some of them are losing money, despite charging eyewatering prices and providing poor service. And having brought no innovation to the table for 20 years.”
Speaking following the publication of Octopus’ latest results, Jackson said the company expects to break even at the earnings before interest, tax, depreciation and amortisation (EBITDA) level year at ending April 2020.
Engaging with consumers
Jackson is an active voice on Twitter and is known for personally assisting his customers via the social media platform day and night. For him, consumer disengagement has suited the large suppliers for the last 20 years.
“I think fundamentally it has suited energy companies for the last two decades to ensure customers stay disengaged. If your business model is to win a customer on a low price and hike it to a high one a year later, it’s probably best your customer is not looking at your stuff.
“Our job is relentlessly to get customers to look at this stuff.”
Energy is exciting, is Jackson’s philosophy, and he is keen to share his enthusiasm with his customers.
He adds: “We use every opportunity we can to talk to customers about their energy use, about the great value they are getting from us. I think as a result of that customers who were previously disengaged have become really engaged with us.
“People say energy is boring and it’s just a commodity. I look at a bottle of Evian and I’m like that is a commodity. At least the stuff that we sell can turn your lights on and power your car. A bottle of Evian costs 600 times more per ml than tap water and yet people pay that.
“Anyone who looks at energy and says it’s fundamentally boring is someone who has failed to think hard about why that is.”
Price cap
Last year saw the introduction of the energy price cap, a cap which will undergo a review later this year.
As the law stands the cap will expire in 2023, but Jackson says he would urge the government to roll it over.
A staunch defender of the cap, which he likens to the minimum wage, Jackson adds he cannot envisage a transformed market where the cap will not be needed.
“We would urge the government to just roll it on because just like the minimum wage provided this fundamental improvement in the labour market, so the price cap has provided fundamental improvement in the energy market.”
Octopus remains proud of its identity as a challenger to the market and the company has clearly come of age in the past 12 months. The company’s success at the Utility Week Awards only goes to highlight how Octopus wants to keep the culture of a disruptor while gaining massive scale. With more acquisitions in its sights, there will certainly be a lot to look out for over the next year.