Overnight, meal-kit company Mindful Chef has gone from bringing in around 150 new customers a day to over 2,000. This colossal growth has been powered by the UK government’s response to the coronavirus pandemic and subsequent lag in supermarkets to stock shelves quickly. But it’s presented a unique challenge for these start-ups: how to scale quickly in a national lockdown.
“It’s a very scary time for the world, but it’s also propelled services like ours into the mainstream,” Giles Humphries, co-founder of Mindful Chef, tells The Drum.
Humphries set up the meal-kit company in Devon in 2015 alongside two friends with the aim of delivering healthy recipe boxes which are gluten-free, dairy-free and contain no refined carbs. It’s grown steadily in weekly subscribers since then and now operates from a factory in Birmingham. In the last few weeks, demand for its meals has soared.
A noticeable increase in traffic came on Sunday 15 March, says Humphries, the last ‘normal’ weekend for many Brits. Restaurants, bars and cafes still remained open but most mass events had been cancelled, headlines highlighted how panic-buying was decimating supermarket shelves and predictions of nationwide school-closures were beginning to surface. The country finally looked to Italy and Spain and realised what was in-store.
“We then saw a pronounced spike in terms of website traffic, conversions, and from then it built. Then, on Tuesday (17 March), orders doubled,” he said, recalling the day of prime minister Boris Johnson’s speech asking people to stop going to pubs, restaurants and shops. The formal order that all non-essential businesses close and that people's movements would be restricted came a few days later.
“We would normally on board around 150 new customers a day. On 22 March we saw 2,500 and it’s not showing any signs of slowing down, even as the supermarket shelves are stocked,” Humphries continues. “It’s mind-blowing levels."
The world's most popular meal-kit company HelloFresh – which pulls in half of its sales from the US – has told investors to expect a hike in first-quarter sales and profits due to increased demand as a result of the coronavirus lockdowns in Europe. Quarterly revenue will be up 69% from the same period last year, coming in at between €685m and €710m.
Despite shares having gained almost 40%, it’s being more cautious with any long-term projections and has kept its 2020 guidance for revenue growth at between 22% to 27%. It declined to comment to The Drum ahead of its 5 May financial update when it will give a full picture on the impact the coronavirus has had on its global business.
It’s a similar story for Pasta Evangelists, which has been delivering hand-made pasta and sauces through letterboxes in the UK since it was founded by Alessandro Savelli in 2015.
“We’ve seen a surge in orders. We’ve tripled sales, and some days it's quadrupled. Though it’s early days and probably just a spike,” Savelli says.
Finally Gousto, a meal-prep brand backed by ‘the nation’s PE instructor’ Joe Wicks, said it will deliver some four million meals to 380,000 households in the coming month.
How to scale in a lockdown
The rapid rate at which people have subscribed to meal-kit brands to see them through the lockdown period has presented an unusual problem for these companies – how to scale quickly and safely with minimal contact.
To meet demand in the UK, HelloFresh said it planned to expand its workforce by 50% at its Banbury factory, offering 400 people three-month contracts to pick and pack orders.
"At uncertain times like this, the community is of utmost importance and we want to encourage those in the local area whose working arrangements have been affected by recent events to get in touch,” said chief executive Laurent Guillemain. “We're taking all the necessary measures to ensure that the health and safety of our customers, employees and product is prioritised.”
For Pasta Evangelists, it’s established strict protocols for its current staff of 30 as well as the wave of new recruits it expects to onboard. When they can, people are being asked to work from home but there’s a kitchen team whose physical presence is vital to make and package its kits.
“Right now, I’m in the office which includes our warehouse kitchen,” says Savelli. “We’re here with masks on, we wash our hands regularly, stay two meters away from each other, and we’re measuring the temperature of everyone before they come in. We don’t have lunch together. We’re restructured packing operations to keep people away from each other. We’ve also divided into four teams so that should someone get ill we can still have the business moving forward.”
Savelli says Italians and Spaniards make up a large portion of its workforce and, having seen the “war” in their own countries, have taken the measures seriously while accepting that, though difficult, the company is making food for the general public to stop them leaving their homes. “We have a duty to our business to keep on trying,” he adds.
At Mindful Chef, its customer service team has doubled in the past week to manage the orders it’s processing. The need for staff on site is also desperate but with the closure of chains like Pret and Eat as well as the grounding of airlines, the company been able to recruit many workers facing the prospect of job loss.
“We’ve been able to do is help out really quickly the catering staff from airlines, in particularly, and other food industries such as sandwich packing companies which have suddenly seen a drop in volumes. So, suddenly there’s a load of people in need of work and we can provide it,” explains Humphries, adding that it already had strict food hygiene policies but with the lockdown he’s also established equally stringent social distancing measure in the warehouse.
Much like finding staff to fuel these booming businesses, it’s been surprisingly easy to find the food supply to keep up with demand.
“As a business prior to the crisis we would be seeing around 500,000 ingredients go through our warehouse every week. The biggest challenge in the supply chain is whether we have enough stock to fulfil orders,” Humphries continues.
“There is plenty of produce out there; restaurants and bars account for a huge amount of food eaten every week. So, there’s all of that food in the chain that needs to be redistributed. Right now the supply chain is backtracking and trying to serve companies like ours which has seen a massive surge in demand which just takes time.”
Attracting and retaining customers
Thoughts at these companies are squarely on managing the increased load and ensuring that customers get their food delivered in a timely manner. But slowly, as we move further into this crisis, thoughts will turn to how marketing will maintain levels of interest as well as retain the first time users flocking to their services.
For the time being, Mindful Chef has “switched off” all marketing activity to allow it to simply deal with the influx of orders it’s getting from word of mouth. Humphries has no prediction of when it might resume spend.
“We have come to the realisation in the past couple of days that any form of modelling is being blown out the water. We need to allow this time to keep delivering meals, and then we’ll see where the land lies in a few weeks before we start forecasting and making marketing plans,” he says.
“But as a business that’s essentially a subscription model, maintaining customers and increasing lifetime value is in our DNA. We have a CRM team dedicated to it, so we have robust systems in place that we’ll double down on so that in three months’ time customers still want to shop with Mindful Chef.”
Conversely, Savelli at Pasta Evangelists is not killing its marketing plans but has abandoned its push into TV, OOH and events-based marketing in favour of a tried and tested digital strategy.
“We’re increasing spend. It’s strange, on one hand, it’s Armageddon and companies are closing and it’s only going to get much worse very quickly so [I’m wondering] should we also go into preservation mode and limit spend and cut things? But in a completely fortuitous way our business is positioned to do well. So, at least in the short term, there’s an opportunity. It’s a bittersweet situation,” he laments.
Despite the “fortuitous” implications of Covid-19 on his business, Savelli has ensured one initiative has been pushed through at lightning speed in order to support those most vulnerable.
Coming from Italy and understanding the problems faced by an aging population, he had planned for some time to establish a way to ensure older people in the UK were able to access his service. With the coronavirus crisis acutely affecting those aged over 70 years old, Savelli forged a partnership with Age UK to allow people to “gift” pasta boxes to those unable to leave their homes.
“In a heartbeat we made that happen and it’s a noble cause, irrespective of coronavirus, that we’ll continue after this period has ended.”