Meal kit services are great for people who just can’t be bothered to think up new recipes every day. However, for the average Joe, they can be too expensive. So, subscription-based meal kit provider Marley Spoon (ASX: MMM) beefed its services up with discounts. But that did little to help its financials.
Now, the Company has reimagined its strategy, focusing on richer customers and lower discounts, thus entering a positive earnings quarter.
Marley Spoon’s CEO, Fabian Siegel, commented, “After a challenging 2023, 2024 started with a stabilisation of our customer base, resulting in quarter-over-quarter net revenue growth. This improvement on our revenue dynamic is a result of adjustments to our marketing strategy made at the end of Q3 2023, including greater focus on higher-quality customer cohorts and lower discounts.
“It is great to see the benefits of these adjustments, such as improved customer retention, and materialising. Noticeably, consumer sentiment also stabilised.”
In Q1 CY24, the Company reported net revenue of $132.9 million, a decline of 9.5% on Q1 CY23 but up 10% on the previous quarter. The improved revenue trajectory was driven by Siegel’s adjusted customer acquisition and marketing strategy.
Also, Marley Spoon is seeing customer sentiment stabilise, leading to more orders. It saw a 14% uptick in average order value, primarily driven by customers opting for higher-priced recipes and incremental market items. Its pricing also accounted for the increase in AOV, though to a lower degree than in the previous corresponding period (PCP).
In the US, Marley Spoon transitioned to an asset-light manufacturing and fulfilment model. It effectively transferred all US meal-kit operations to its partner, FreshRealm. The transition was smooth, with its meal-kit business being transferred in early February. Since then, the first cost savings have been realised. Its US team has also been integrating its newly acquired diet meal plan company, bistroMD.
Siegel added, “The higher contribution margin paired with cost reductions as a result of last year’s restructuring programs led to the first ever profitable first quarter on an Operating EBITDA level, despite the seasonally higher marketing investments. Overall, we had a good start to the year with heavy lifting on the execution of two transformative strategic transactions and year-over-year improved financial performance.”
The improved marketing performance allowed the Company to reduce its marketing investments in Q1 CY24 to 17.1% of net revenue compared to 22.5% of net revenue in the PCP. However, due to its reviewed strategy of offering fewer discounts, the Company’s active subscribers declined by 23% on PCP to 194k.
Moreover, Marley Spoon is still struggling to get the numbers back up in Australia. Australia’s revenue saw a 17.8% decline, driven by lower marketing investment and the delayed impact of high inflation and interest rates on consumer sentiment, leading to lower order frequency.
In Europe, too, the Company faced stronger consumer headwinds than the other regions throughout CY23, resulting in the biggest revenue base decline due to rising inflation.
Whether this strategy of targeting higher-end customers would prove sustainable is yet to be seen. For CY24, it anticipates single-digit net revenue growth. Still, EBITDA is foreseen to be positive.
Alinda is a Business Reporter for The Sentiment
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1 Comment
Shraddha13
Thank you for sharing! To explore further
Replyhttps://www.360iresearch.com/library/intelligence/meal-kit