Speaking to FoodNavigator-USA after announcing a Series D financing round of $42.8m led by August Capital (which follows a $15m injection of debt financing from Trinity Capital Investment), Zbar said Sun Basket was now the fastest-growing healthy meal kit delivery service in the US, growing revenue by 280%+ in 2017 and hitting $275m in annual revenue run rate at the beginning of Q1 2018.
More importantly, the Sun Basket brand is sticky, with three times the customer retention rate of major competitors, claimed Zbar, who said the latest cash injection will support highly automated facilities in New Jersey and Missouri (in addition to the west coast operation) reaching 98% of the US population, creating enough capacity to build a $1bn revenue business.
80% of Americans are cooking dinner more than three times a week
As for the sustainability of the business model, meal kits are just designed to make life easier for people that enjoy cooking, but don’t always have the time and energy to find new recipes and shop for all the ingredients, which is arguably a pretty ‘mainstream’ proposition, he said.
“80% of Americans are cooking dinner more than three times a week and over 50% say they struggle to make something healthy easy and delicious. 50% of Americans also suffer from health issues tied to poor diet, so the need is there [Sun Basket offers tailored meal plans including Lean & Clean, Paleo, Gluten-Free, Vegan, Mediterranean, Vegetarian, Pescatarian, and Chef’s Choice].”
Despite the well-publicized issues at Blue Apron, which went public last year, he added: “Meal kits are actually growing like crazy; in the next year or so we’re looking at a $5-6bn business in the US, so business has never been better. The key is about creating an amazing experience for consumers and not trying to be all things to all people.”
A healthy level of skepticism
As for the capital expenditure involved in setting up a meal kit company, he said: “We are reaching 98% of US zip codes. The largest grocer in the US has maybe 3,000 stores each costing $20m so that’s $6bn of capex and they reach probably fewer than 50% of US zip codes. We have three facilities and we’re reaching almost everybody. It’s a more efficient and fresher business model, but it also allows a much more personalized experience.”
Tripp Jones, general partner of August Capital, who has joined the company’s board of directors, said he approached the meal kit category with a “healthy level of skepticism” but said that Sun Basket’s data had blown him away.
“I’ve looked at hundreds of subscription based ecommerce businesses over the past decade, but when I saw Sun Basket for the first time it had fundamentally different financials and underlying unit level economics… not 6% better or 15%, but an order of magnitude different. If you forget the words ‘meal kits’ and if I said I have a high value specialty consumer product company with this type of order frequency, growing this fast, you’d be like, that company is incredibly interesting.”
Asked about potential partnerships with grocery retailers, who have been struggling to address the problem that meal kit companies are attempting to solve (what’s for dinner tonight?), Zbar said: “Most people say it will be an omni-channel universe, and we’ll experiment with retail concepts and partnerships, but our business model does not necessitate that.
“Frankly the only reason we haven’t done that yet is because the volume [of meal kits] going through the grocery retail channel is still so small.”
Data… data… data…
A targeted offer with a focus on organic and ‘clean’ eating, premium pricing, and superior execution have helped Sun Basket raise the bar in the industry, said Zbar, who plans to add healthy snacks, salads, and desserts to the repertoire in late 2018/19.
But its ability to leverage data to create a personalized service is what will ultimately set it apart from its peers, added Zbar, who said Sun Basket is accumulating a wealth of data about its users’ cooking and eating habits that will help it create more personalized products and communications.
“As you pick movies on Netflix, it learns about you, and it sees the difference between stated and actual behavior. So people say they love watching documentaries, but Netflix knows they are actually watching Jim Carrey movies on a Friday night.
“It’s the same with Sun Basket. People are aspirational. But 50% of our Paleo customers order recipes containing gluten every week, and 60% of people on the vegetarian plan order recipes with fish.
"We have recipes organized by cuisine type, diet type, health issue, level of difficulty, time to cook, all recipes are tagged with metadata and over 50% of users are customizing recipes, so now, when we are serving 1.5 to 2million meals a month, we are getting a huge amount of information about what our customers like.”
*The round also included Sapphire Ventures, Accolade Partners, Founders Circle, Rembrandt Venture Partners, Vulcan Capital, Relevance Capital, Unilever Ventures, and Correlation Ventures.
Co-founded by Adam Zbar and Chef Justine Kelly in 2014, and launched in 2015, San Francisco-based organic meal kit brand Sun Basket enables consumers to cook restaurant-quality meals at home without having to do any of the legwork.
HOW SUN BASKET WORKS: You choose your meals from the website (the recipes are developed by Chef Justine Kelly, former head chef of the James Beard Award-winning The Slanted Door restaurant) and Sun Basket does the rest: collating and delivering the ingredients for three organic meals-for-two to your door once a week, so all you have to do is cook (that’s $11.49/meal/person or $68.94/week). There are vegetarian, gluten-free and paleo options and users can skip weeks as desired.
ZERO WASTE: As part of its mission to generate zero waste, Sun Basket now uses recyclable insulation liners from PET fiber, and fully compostable ice packs (from cotton and water rather than petroleum-based ingredients), ingredient bags and clear containers. While users have always had the option of returning their packaging, 90% of users were not doing so, prompting a new approach, says the company.