Three years back Jonathan Ferrari and Neil Cuggy — two Montrealers and two former RBC bankers — launched the country’s first meal-kit company, Goodfood Market Corp.
The idea was that customers would select the food they required for the week based on recipes supplied by the company and within a short period the food and the cooking instructions would arrive in a box.
The two worked away at the concept — which was also starting to develop in other parts of the world — refined the menu, attracted customers and new sources of capital including some from edo Capital, a private equity firm. In June, it reached a major milestone when it went public via a transaction with a capital pool company and raised $21 million of equity.
One-week back the company — whose other milestone is that it now employs 400 people at its Montreal facility — released its first full-year financial results with all measures, gross merchandise sales, subscribers and profit margins showing very healthy gains. This week it said that on Nov. 30 it had 45,000 subscribers, all in Eastern Canada, up by 45 per cent from Aug. 31.
“The meal kit industry is exploding,” said Ferrari who was meeting investors this week in Toronto. “People are interested in cooking and want to make great healthy meals at home. Goodfood is an easy way to do that,” he said, adding the company’s “value proposition” is based on getting the same ingredients for about the same price, as they would cost from a major supermarket. A typical meal runs to about $10. But about half the customers don’t indicate a preference meaning they receive the “chef’s selection.”
An expansion to Western Canada is set for the first part of next year. Goodfood has signed a seven-year lease on a 43,000-square-foot facility and has hired a management team that will be run (it) “as an independent new division of the company (which means that it) can run more quickly and grow to the same quality standards we have in Eastern Canada,” said Ferrari, who was named in this year’s Top 40 Under 40.
And to show there’s brotherhood among RBC bankers, the senior staffer for the Western Canadian operation (which will either be in Vancouver or Calgary) also used to work with Royal.
Given Goodfood’s head start, Ferrari is not shy about the prospectus for the industry and for his company. “We think we have a clear path to becoming a billion-dollar company,” he said, a level that’s about 10 times its size as of Thursday.
While many entrepreneurs make a similar claim, Ferrari said, “Investors are starting to believe it. They see the shift to on-line,” he added, noting the Canadian grocery business generates about $130 billion in annual revenue.
For Ferrari, the biggest challenge or risk, is “managing the growth,” the overall process of ensuring the high standards are maintained as expansion becomes the norm. “We have a team of supply chain engineers that are continuously reworking everything we are doing. We have gone from zero three years ago to 100,000s of meals a month.”
As for competition from the bricks-and-mortar grocery chains and from other meal kit providers Ferrari has a different take, arguing consumers “aren’t looking to replicate the off-line experience. We are not trying to compete head on and think consumers want to buy their groceries through meal kits,” said Ferrari, adding while the industry has low barriers to entry “scaling it does. In a short time it becomes a complex operation.”