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Green Chef CEO: ‘The Amazon Whole Foods deal has absolutely rattled food retailing and CPG markets’

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By Elaine Watson+

12-Jul-2017
Last updated on 13-Jul-2017 at 19:07 GMT2017-07-13T19:07:38Z

Green Chef on meal kits, organics and the Amazon Whole Foods deal

The Amazon/Whole Foods deal has “absolutely rattled food retailing and CPG markets in a way I have never seen in my life,” says the founder of organic meal-kit company Green Chef, who says he has been approached by multiple ‘strategic’ suitors as the direct to consumer food landscape continues to evolve.

Boulder, CO-based Green Chef - which was launched in late 2014 and now reaches c.97% of the continental US population from facilities in Colorado and New Jersey -  has already raised $67m* and is currently "entertaining new capital raises."

“We’re in our third year of business expecting to do over $100m this calendar year… We’ve raised a very substantial amount of money and we’re entertaining new capital raises,” founder and CEO Michael Joseph told FoodNavigator-USA.

We’re continuously getting inbound interest from potential strategic partners.... CPG manufacturers, retailers, other meal kit companies and other related businesses too. These companies value that we've defined our market with the highest quality products, our certified organic model, our custom manufactured sauces, our dietary specialization, and the culinary design of our recipes. The market is very active right now looking for growth and margins, and we are leaders in those departments."

He added: "This Amazon Whole Foods announcement has absolutely rattled food retailing and CPG markets in a way I have never seen in my life. But I don’t think we’re going to be in an online-only world. If you want to get maximum share of stomach it’s about online and offline and how you integrate the two.

"We've already talked to some potential food partners that are already very aligned with what we're doing in the marketplace and I'd like to continue to talk to folks as there's so much strength in collaboration... We are looking for partners with strong expertise in different areas of food manufacturing, branding, and retailing."

We’re the first certified organic company in this space

So what makes Green Chef stand out in the increasingly crowded meal-kit delivery market, and are the costs of acquiring new customers destroying margins as players fall over themselves to attract new users with free meals?

According to Joseph - who founded the now defunct direct to consumer organic food delivery firm Mile High Organics before founding Green Chef, so knows a thing or two about the economics of B2C food delivery – it’s a combination of unique culinary-inspired recipes and the fact that Green Chef is organic.

We’re the first certified organic company in this space; we sell more organic food than any competitor. We also sell more fruits and vegetables in every single meal than our competitors and we’ve led the market in specialty areas such as vegan and Paleo in addition to offering healthy and organic food.

“We’re also a little bit different to our competitors as we’re also a food manufacturer, we decided to invest in highly specialized facilities and we custom make our organic sauces, for example."

Par-cooking reduces shelf-life

Green Chef is not, however, par-cooking meats or rice as a time-saver for its consumers, chiefly because this will increase the food safety risk, claimed Joseph. “You also reduce the shelf life. Sure it may save a few minutes but I don’t think it’s desirable. There are other ways we save people time. We chop onions. We make tiny cubed carrots; if you were to do this at home as a novice chef it would probably take you 30 minutes just do that.”

While some meal kit companies have teamed up with partners to reduce costs and maintain flexibility, meanwhile, he said, “We have no interest in having a third party handling our fresh food and handing over liability to us, and nor do we believe that a third party could handle the quality control standards that we have set. We also have very specific needs and want to maintain control over our operations.”

Who uses Green Chef?

So who are the heaviest users of Green Chef? According to Joseph: “It’s a pattern I’ve seen from my last companies. Organic appeals to people across the income spectrum, whether they are making as a couple $50,000 a year or $200,000 a year, how much money they contribute to the company in profit is remarkably similar.

“Geographically it is also interesting as they can be in the middle of a ranch in Montana or in downtown Manhattan.”

As for usage patterns, busy customers often use Green Chef in the middle of the week to save time, while others make it a weekend activity and turn it into an ‘event,’ he said. “There’s no one clear pattern.”

Customer acquisition

More importantly, how ‘sticky’ is the customer base? How many people just dabble with different meal kits for a couple of months and lose interest?

The whole industry has really been driven by persistent discounting but what we’ve actually found is that the higher than initial discount, the more free food is given away, the less sticky the customer is,” said Joseph, who said “customer acquisition costs can vary from zero to $150. It just depends. We get quite a bit of organic and friend referral traffic, at zero cost. But in Q1 we spent a lot on advertising to see what we could do and found that we could cost effectively acquire about 1,000 customers a day.

Green Chef founder Michael Joseph: 'We’ve helped people break long-term habits and create new ones.'

“When you offer big discounts, you get big results, but you also wind up bringing in people that are never going to be a good fit – they are just buying a discount, so you have to find a balance, and we’re learning constantly.”

Customer retention

If you can reach your target customers – in Green Chef’s case, people that are prepared to pay for high quality organic food – they do tend to stick with the service, he said.

“We’ve helped people break long-term habits and create new ones. A lot of people cook the same foods all the time and go to the same restaurants, but they are integrating Green Chef into their lives and creating a new habit of cooking restaurant quality meals together.

“We’re more expensive than our competitors, but we are continually rated higher than them because we lead on the culinary side and the product side.”

Secret sauce

The fact that Green Chef also makes its own sauces also means that customers that get familiar with a particular recipe can’t easily re-create it with items from the grocery store he said. “We don’t give you that sauce recipe. It’s our secret sauce. We’re also aggregating organic ingredients that you won’t be able to find at your local grocery store, so we're not hearing that people are learning how to cook with us and then doing it without us."

But even if you could easily recreate his dishes, this is not something keeping Joseph awake at night, he says, given that people use a meal kit delivery service in the first place in large part because they don't have the time or the energy for meal planning, shopping and preparation.

* from investors including New Enterprise Associates, Greenspring Associates and a division of the Future Fund, the sovereign wealth fund of Australia.

WHAT'S FOR DINNER TONIGHT?

Interested in learning more about meal-kit metrics? Join Sun Basket, Chef'd and Terra's Kitchen at FOOD VISION USA 2017  in Chicago on November 13-15 for our panel session: What's for dinner tonight?

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