This year has been less than ideal for the meal kit delivery service My Food Bag (ASX: MFB). Fewer deliveries, poor customer retention, Omicron, and more hampered its progress. Worst of all, its marketing activities backfired. Now, there’s one question on its mind: What do customers want?
Hopefully, they will figure it out soon. In H1FY23 (6 months ended 30 September 2022), My Food Bag reported net profit after tax of $5.9 million, down from the $9.4 million in H1FY22, from $94.4 million revenue which was down $4m.
Moreover, My Food Bag’s customers have been here and there through the first half of FY23. The Company rounded off the number of active customers to 69,091, up from 61,731 at the end of FY22. Still, deliveries have been falling year-on-year by about 10%.
Chairman of My Food Bag, Tony Carter, commented, “My Food Bag saw a slower start to trading in FY23 than expected, as the business navigated a challenging external environment. During the first half of the financial year, My Food Bag made 732,000 deliveries across its portfolio of brands, with an average order value of $129.00. This compares to 808,000 deliveries in H1FY22, with a lower average order value of $121.80.”
Despite the struggling financials, Carter and the Board remain confident in My Food Bag’s ability to bounce back.
My Food Bag is a New Zealand-based meal kit delivery service that equips customers with the ingredients and recipes to cook a meal. It’s a noble cause with few takers as of now. However, when put on par with other delivery services, the Company appears to be more profitable, with decently high customer adoption. To retain them, My Food Bag decided to offer discounts. Honestly, who doesn’t love discounts? Turns out, not everyone is a fan, depending on how they are delivered.
My Food Bag CEO, Mark Winter, says, “Across the whole meal kit category, discounts have played a heavy role in attracting new customers during the first half of the year. However, we’ve experienced higher-than-average churn from customers starting with us via discount deals. We have taken the learnings from this to optimise how we roll out discounts in this current economic environment.”
The Company expects profits and revenue to decline further in the coming months, citing a similar economic environment and customer trends. It guides that the full-year financial earnings will be lower than last year.
Still, Winter reassures, “Action is being taken to improve trading performance with a priority on growing active customer numbers and retention, and cost pressures continue to be managed and mitigated, where possible.”
One way the Company is mitigating cost pressures is by investing in an assembly pick technology that will reduce temporary labour costs and automate processes. Plus, the business has engaged a European vendor with extensive experience implementing ingredient-level pick technology in the global meal kit industry.
Winter feels that this technology will give the Company “the ability to vastly extend recipe choice, as well as offer greater personalisation and customisation benefits to customers.” He expects the gains of this technology investment to start being realised from FY24.
Winter is the new CEO replacing Kevin Bowler who resigned amid the Company’s poor performance. Winter’s focus with the My Food Bag team is “growing active customer numbers and retention, and maintaining gross margin levels though close management of ingredient costs.”
Is My Money-pit Bag about to get a makeover, or do more problems lie ahead?
Alinda is a Business Reporter for The Sentiment
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