Meal kit delivery service My Food Bag Group (ASX: MFB) is witnessing a slower than expected start to trading in FY23 with meal kit deliveries down 4% in July compared to last year.
At the same time, the number of customers have returned to similar levels to 73,145 (in line with the end of July 2021 of 72,105) after dropping at the beginning of this year. As of July 2022, My Food Bag’s revenue was up 2.5%, but EBITDA was down approximately – 8.5% when compared to the same time last year.
The revenue slump comes off the back of record revenue achieved in FY22 of $194 million, increasing from $7.6 million on their PFI forecast and up 1.7% as compared to their FY21 revenue. However, they were not exempt from the impact of the new Covid-19 outbreaks on businesses. As with nearly all New Zealand businesses, the second half of the financial year was marred by the Delta and Omicron viruses. As a ‘just-in-time’ food delivery business, My Food Bag was reliant on its partners and its own operations being able to function at full capacity throughout this period.
Omicron, particularly, had a significant effect on My Food Bag’s supply-side confidence in Q4 FY22 as the company and its suppliers encountered difficulties when it came to finding staff and addressing the flow-on problems of incomplete and late deliveries. The Company responded to these challenges at the time by making their product offerings simpler and reducing marketing activity, which is what led to a slower start in FY23.
Plus, trading has also been impacted by the uncertain economic environment and inflationary pressure on households as of last month. This has resulted in a relatively stronger Bargain Box performance within My Food Bag’s portfolio of brands and an overall pattern of customers trading down to smaller bags. These have had an unfavourable impact on the Company’s product mix, subsequently negatively impacting earnings.
In addition to that, Omicron led to a labour shortage and uncertainty for the Company. To combat that, My Food Bag decided to temporarily reduce the recipe choices offered to customers and to stop taking orders for the My Food Bag Kitchen—the company’s range of select products and offerings, such as recipes and gourmet ingredients—during March 2022. The cumulative result of a challenging period in Q4 FY22 dampened financial performance, offset by micro-management of largely cost and supply issues as the Company adapted its processes.
In the FY22 report, CEO, Kevin Bowler commented on the path ahead, “We have a strategy to continue taking a greater share of Aotearoa’s $37 billion retail food sector, via a pipeline of growth initiatives.”
In keeping with that, the Company recently launched a My Food Bag loyalty campaign that has seen strong uptake and is expected to increase order frequency and retention. There’s also a line-up of new products, including a new Fresh Start 3-night product offering, providing customers a further opportunity to achieve their health goals. They are also continuing to look for opportunities to grow the Kitchen and innovate their existing products. The Company has also introduced customisation initiatives, like gourmet meal upgrades, to grow average order value.
Over the past six months, the Company’s share price has dropped from $1.08 in February to 74 cents as on August 15, 2022.
Alinda is a Business Reporter for The Sentiment
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