Capturing growth in ready-made meals

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Youfoodz is set to list on the ASX on Tuesday 8 December after successfully raising $70 million dollars which will imply a market capitalisation of $202 million dollar and a listing at 1.1x revenue. The company is a leader in high quality, affordable, ready-made meals, offering fresh food and convenience to customers.

Youfoodz has been voted the best food delivery service by ProductReview for three years running. Drawing on its marketing and brand reputation in the home delivery segment, the company is now pushing to expand its B2B offering, which is currently selling in major supermarkets, independent grocers and convenience stores such as Coles, 7 Eleven, IGA, BP and Caltex outlets. As businesses increasingly take catering offsite, this offers additional opportunities for expansion into new segments such as airlines, mine sites, gyms, and health food stores.

In this interview with Lance Giles, Founder and CEO of Youfoodz, we hear how ‘track and trace’ is helping to reduce food wastage, and why fresh ready-made meals are set for growth.

Image: Lance Giles, Chief Executive Officer, YouFoodz

Eat fresh

Taking its lead from the tech industry, Youfoodz initially focused on serving a small number of customers so they could deliver a great customer experience.

“We focus on the quality of the product and treating every customer like gold,” Giles said.

This meant providing fresh, healthy foods in a convenient manner. This approach has helped them grow the business to over 850,000 home delivery customers around Australia today.

Track and trace

The desire to bring fresh products to consumers presents some unique challenges. With fresh products, time is the enemy. Giles and the team have developed a sophisticated ‘track and trace’ system to manage inventories and ensure great food is always delivered to customers.

“We work closely with farmers and growers. Our produce is sourced from the farmers,” he explained.

This allows them to get produce into a container within 24 hours of receiving it and helps minimise food wastage.

From B2C to B2B

In the eight years it been in existence, Youfoodz has spent significant resources on marketing and built a recognised and sought-after brand. This profile with consumers is now opening the door to new opportunities in other segments. Youfoodz initially launched their B2B segment with a small number of IGA Supermarkets, but the success of this trial has seen them expand to Coles, 7 Eleven, BP and Caltex.

“Because we had the B2C side of the business and were doing a lot of marketing – TV advertising and outdoors, etc. – when consumers walked into a B2B store, an IGA for example, they were familiar with the brand and comfortable to purchase… They were walking out with upwards of seven to 10 meals at a time,” Giles said.

Retailers were particularly happy with this, as it drove new traffic to their stores, and those customers would spend large amounts. In future, Giles expects to see Youfoodz servicing mine sites, the airline industry, gyms, and health food stores.

One fund manager getting in on the float

Dean Price, who is a Portfolio Manager for Washington H. Soul Pattinson, is one of the institutional investors getting behind the IPO. The portfolio typically holds around 25 stocks and Price says the firm has been actively participating in new listings in 2020.

“We have participated in quite a few IPOs. Typically, they have been interesting businesses with a technology flavour and a good reason to be listing on the ASX,” said Price.

For Price, there are two primary attractions of the ready-made meals industry, being the behavioural shift of consumers moving towards the convenience of pre-made meals as opposed to buying groceries and the tailwinds that have been created from the recent pandemic.

In the domestic market it is estimated that there are about 20 players in the ready-made and meal kits space. Price has tested many of the offerings and believes YouFoodz is ‘right up there’ on quality and hits the market at a competitive price point.

“We’re looking for the next big thing. It has behavioural trends supporting it, the business is on track to go EBITDA positive in 2021 and we’re excited to see how they go about scaling their revenues," he said.

With $200 million in revenue and an 8-year track record YouFoodz is establishing itself as a significant player. And the sector is clearly on the radar for investors, with private equity outfit Quadrant recently taking a stake in My Muscle Chef and on a global scale Nestle stumped up $1.5bn to take ownership of Freshly, a provider of healthy pre-made meals while HelloFresh recently acquired Factor75, a US-based provider of fresh, healthy ready-made meals.

Listen to Chris Titley's full interview with Lance Giles as part of Morgan’s Conversations Series to hear how Youfoodz differentiates itself from competitors, how they develop new products, and how they adapted their processes to stay safe and ramp up business during lockdowns.

*Morgans is a joint lead manager and underwriter to the IPO of Youfoodz. 

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