We fail fast, probably not fast enough in fact, but fast compared to most.
FMCG is all about a hypothesis, testing an idea and learning when to give up.
We have had a lot of failures and I am as proud of the failures as the successes. Here is why, you learn from them, and you don’t make the same mistakes again (you make new ones!)
Since we started in e-commerce in 2008 (11 years ago!) we have launched the following brands:
Diet Chef Diet Now Fine Coffee Club Brewhive Prana Protein Bean to Door Parsley Box
That is quite a lot – certainly around one a year since 2015. The jury is still out on a lot of them, but most have failed to meet their potential. Some have failed altogether, but who cares! I only care about the successes. My view is a success is born every 10 years, incubating some of these ideas might improve the odds, but we will have to wait to prove this, check back soon (well in 10 years!)
We are excited to have closed our a significant seed investment in Bella and Duke (www.bellaandduke.com) one of the UK’s leading raw pet nutrition businesses.
We have tracked pet nutrition as an interesting area for a number of years, but believe that Bella and Duke have some very interesting defensible qualities and fit with our focus areas of nutrition and food tech.
Bella and Duke (www.bellaandduke.com) founded by friend Mark Scott and Tony Ottley, who were frustrated at the lack of quality meals for their own pets.
We hope to help the team manage the growth by investing in logistics, web and customer recruitment.
We are also very excited to be supporting a business that has come through the Scottish EDGE program.
When we bought back Diet Chef from Piper Private Equity (who are a great investor!) in 2015 we did this to leverage the massive investment we had made in systems and infrastructure (see Andrew’s post on this).
It took us a little longer to move Diet Chef into a couple of adjacent categories and optimise our marketing but we are very pleased with the 2017 financial results which have exceeded our expectations and generated around £1m of EBITDA.
Our growth strategy wasn’t simply focused on generating cash from Diet Chef but more to invest this cash flow in adjacent categories that our infrastructure can serve.
In 2017 we invested and launched Parsley Box (www.parsleybox.com) a reimagined elderly nutrition brand that is growing very strongly against a stagnant revenue comparison of our two larger competitors.
We have achieved this by letting the management team focus almost 100% of their time on customer recruitment and building the team. Move Fresh has provided the logistics and supply chain to allow the scaling of the marketing at a rate most startups would fail to keep operational efficiency at.
So as we get into 2018 we plan to invest in other adjacent areas and to reach the consumer in different channels, one of the reasons we appointed Henrik Pade to our board of directors.
We will both look at doing this organically and through acquisitions if we can find the right ones. Let us know if you think you can help us on this journey, either as an experienced startup founder or if your company would be interested in joining our journey – its going to be fun!
We spend a lot of money every day on customer recruitment and marketing.
Sometimes I pinch myself and look at the marketing investment we are making and look at the amount we spend – then I think about mistakes we made over the year (quite a lot!).
Cost per thousand (CPT) is the single best way to evaluate the media investment. How much will it cost me to reach 1,000 consumers – something that we forget about.
So get an accurate number of the audience (readership, viewers, impressions) and then look at how much this costs. Don’t be fooled by online and offline – who cares – I want or reach an audience – how much?
We offer everyone that joins marketing this simple training and test:
Compare the following (real numbers!):
An exhibition visited by 1,000 people at £500 + 20% VAT
A TV advert reaching 10,000 people for £2.50 Cost per Thousand.
£10 CPM + VAT for a magazine with 20,000 readers.
30,000 PD inserts at £40 per thousand.
£1200 for online advertising at £6 CPM.
Calculate which would be the best and show workings.
Which would be the worst?
Answers on a postcard (it costs around 30p for a postcard delivered at volume) so what’s the CPT?
It is 10 years this month since we started Diet Chef with £100 of equity investment and some contacts in the food industry.
We have done quite a lot over the last 10 years and also spoken to a large number of other food tech businesses.
The history of why two guys from the technology industry got into food is a very interesting one (worth chatting over a beer about) but the seismic shift of the UK grocery retail landscape was pretty obvious to us 10 years ago.
UK shopping habits in grocery have changed dramatically in that period. We have moved away from “multiple” large box retailers (Tesco and Sainsbury’s) into buying from discounters (Aldi & Lidl) and convenience stores (Sainsbury’s local & Tesco Metro).
This is partly driven by convenience – a large number of smaller stores have popped up in every town in the UK. We therefore don’t tend to do a “weekly shop” (if we do it tends to come by Tesco.com) and pick some items up locally and more often.
Diet Chef was born pretty much out of this phenomenon – it just happened in diet earlier. We used to buy specialist diet products in store, but multiple retailers couldn’t stock over 100 items in 300-400 stores they could stock 5-10 perhaps.
Consumers have therefore used online to fill this gap, and in speciality grocery it’s a great place to do it.
There are lots of great successes over the last 10 years in FMCG direct to consumer but they all tend to be in own brand speciality grocery – definitely where we are focusing.
We have had a pretty busy year at Move Fresh, our latest brand to launch is Bean to Door (www.beantodoor.co.uk), a subscription fresh coffee company.
Fine Coffee Club has gone from strength to strength over the last few years but customers have kept asking us about ground and bean coffee. Bean to Door is a separate brand (due to the subscription requirements) and offers freshly roasted coffee directly to your door from £3.95.
In FMCG we believe that price elasticity of demand is clear within all sectors – so we are positioning ourselves closer to supermarket coffee prices with the freshness that only e-commerce can give you.
We soft launched this weekend and already the response has been great. Get your first bag for 50% off using our Move Fresh Discount Code
You might not have noticed but our shopping habits in the UK have changed quite a bit recently.
We used to go to superstores (large stores with lots of choice and SKUs) usually once per week, usually at the weekend and “did the weekly shop”.
This was a major innovation over our parents and grandparents who used to shop in their local community and make frequent trips to shop.
We have now seen our shopping habits further change with the introduction of the discounters (Aldi & Lidl) who have a limited selection of SKUs and a large percentage of own-label items. We are both shopping more frequently in these locations and they are also enticing new customers (Aldi wine is acceptable at dinner parties!) to this retail category.
This means that emerging FMCG brands have limited ability to gain consumer trial due to limited space within discount retailers (frequently using short-term promotional space). So how do you launch a challenger brand in this landscape?
We strongly believe that direct to consumer can fill this gap, building strong consumer relationships on lower cost models, encouraging trial and investing marketing spend directly in customer recruitment rather than “brand marketing”
Perhaps use online to test product/market fit and look at retail to deliver the mass market consumer once your brand is well established.
As 2017 draws to a close and we wait for 2018, I think it’s a great time to reflect on our performance and goals in 2017.
When we bought Diet Chef back in 2015 we planned to make it more of a lifestyle business, but we have really grown to appreciate the expertise, infrastructure and knowledge we have within the group.
We have accelerated the brand creation in 2017 and we are particularly excited about partnering with entrepreneurs at an early stage to provide our infrastructure, knowledge and technology platform to remove some of the hurdles in the early stages of business.
We would love to do more of this in 2018, along with equity investment in FMCG related ideas that have a strong direct to consumer model.
So in 2018, we are considering launching a more formal program for this if this would be of interest to you let us know.
Over the last week or so Hello Fresh became a public company on the Frankfurt stock exchange. This follows Blue Apron listing on Nasdaq earlier in the summer. Both companies (along with Gousto in the UK) have raised many. many millions of investment, mainly pumped into customer recruitment.
I do agree that FMCG will move – more and more online – as consumer habits change from large central supermarket purchases to more local smaller retailers (such as Sainsbury’s Local or Tesco Metro) but I don’t agree that any of these companies have yet grown into their current (and sagging) valuations.
Customer recruitment costs continue to increase with stiff competition and poor retention and margin statistics does not suggest that growth will continue.
There is a business here, but I think trying to force growth with more discounted offers and higher recruitment cost is only good for new customers – not for shareholders.
Some consolidation may well happen to remove duplication over geographies and headcount – but until then I will stick to shopping for myself either online or at my local store.
If you need to know more check this video out on marketing as a percentage of sales