Chef’d CEO: ‘Our customer acquisition costs are about a tenth of what the competitive set is paying’

Chef’d talks meal kits, customer acquisition costs and Campbell Soup

Thanks to its unique partnership model, wider selection, and no subscription fees, customer acquisition costs at meal-delivery firm Chef’d are significantly lower than rivals,’ claims founder and CEO Kyle Ransford, who says Chef’d has been “first order profitable on six out of the last seven months on a gross margin basis, and we’re growing at a super-fast clip.”

We have significant gross margin in our sales, but the other thing is that we don’t have the marketing expenses of competitors. We’re not giving it away. It’s all about customer acquisition costs versus lifetime value,” said Ransford. “We are building partnerships with brands and companies [Atkins, Hershey’s, Campbell Soup] that already have customers and we’re just introducing those customers to something new.

Speaking to FoodNavigator-USA after securing a $10m cash injection from Campbell Soup, Ransford claimed Chef’d is unique in the marketplace because it enables users to choose from hundreds of meals at any given time, without committing to subscriptions or membership fees, and partners with high-profile chefs, and over 125 brands in food, fitness, and health & wellness.

“Our customer acquisition costs are about a tenth of what the competitive set is paying. Most are running at around $100-200 costs whereas ours are in the teens. As for lifetime value, we’re more like an online grocery store where you’re not forced to use us every week. If you’re forced to buy every week or quit as you are in the subscription-based meal kit model, then people are going to quit.

“The opportunity that Chef’d gives you to order just one meal at a time, and to keep reordering it if you like it, is both more convenient and more compelling, and we’re seeing some incredible numbers because most households actually cook a very small number of meals in rotation.

“There is a perception it’s more expensive, but how many times have you gone to the grocery store and spent all this money and you still don’t have what you need for dinner, or you’ve gone in there to buy stuff for one dinner and spent way more than you want to because you can’t just buy what you need for that particular meal?

“If you’ve got a family of 10, and you’re shopping at Costco, it’s probably not cheaper to buy a meal kit, but if you’re a couple or a family of four, it’s different.”

If you don’t want a subscription to your bricks & mortar grocery store, why would you want a subscription to your online grocery store?

He added: “Our ambitions are big owing to the infrastructure and capability we have [orders are currently fulfilled from facilities in Brooklyn on the east coast and El Segundo on the west coast], as we’re built around choice, personalization and mass customization, and the ability to re-order. All the other meal kit companies are subscription-based with limited choice: 'We’re doing these nine meals this week, which ones do you want? But if you like something you can’t order it again.'

"Most people that are learning how to cook something want to learn how to cook it so they can make it again, if they like it. Who wants to make three new things for dinner every week for the rest of your life? If you don’t want a subscription to your grocery store, why would you want a subscription to your online grocery store?

“There are over 1,000 different items for sale on our website today spanning breakfast lunch, dinner and snacks. We’re an online grocery store that sells meal solutions, not a meal kit company.”

Does choice always add complexity and cost?

But don’t subscription-based services with limited assortments adopt this approach for good reason, in that it limits complexity, and manages costs, which are essential for commercial viability?

You’d think so, claimed Ransford. “But in reality, we’ve found it cheaper to operate the way that we do. If you are only serving three meals this week, but not next week, what do you do with the leftovers from this week? It’s like a catering operation, you always end up with extra as you have to make sure everyone gets fed and you’re reinventing the supply chain every week.”

Meal kits in stores

As for distribution channels, aside from selling meal kits via it’s own and partner websites, Chef’d is also having conversations with “nearly every major food retailer” about stocking them in bricks & mortar stores, he added.

“You’ll definitely be seeing Chef’d and other meal kits in stores soon and I think in the very near future you’ll see some announcements around pilot programs at retail.”

Campbell Soup brings cash, connections and credibility

Campbell Soup as a key investor brings “both credibility and the access to some significant budgets,” claimed Ransford.

From an advertising and a promotion perspective one of the big pieces for our company is to put buy buttons on recipes across the web. We already do this with Hershey’s and celebrity chef sites, and we’re working with scores of other partners such as Atkins and the New York Times. We don’t yet have buy buttons on the Campbell’s Kitchen recipe site but we think partnering with Campbell will help propel that initiative.”

Some of our best customers are rural customers

So who’s using Chef’d?

“The one thing we found interesting and surprising is that some of our best customers are rural customers,” said Ransford. “In some cases they have more disposable income because there is less competition for that income in those areas. You hear people say, 'I am 20 miles from Walmart and 200 miles from Whole Foods.'

“That’s been a strong cohort for us because once they have decided on a solution, they tend to use it a lot because they don’t have a whole lot of choices.”

In general, he said, while Chef’d (hence the name) has strong culinary credentials, it does offer something for everyone, from options “for supercooks” that take some skill and time to prepare, to a new range of 10-minute meals “which are converting at around four times the rate of other meals.

"No matter who you are, we have a solution for you. Maybe you just want to make dinner and don’t want to keep getting an unhealthy takeout as often.”

It’s premium, he insisted, “but that doesn’t have to mean complicated and fussy.”

Interested in learning more about meal-kit metrics? Join Sun Basket 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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