He was the star of lockdown, helping millions of children stay fit with his daily, quirky exercise routines.
But Joe Wicks hasn’t just changed the way the nation exercises. As an investor in Gousto, the Surrey-born Body Coach is also transforming the way we shop for food.
"I believe in this business so much," he said in a video published earlier this year, holding one of his children as he sorted through books of Gousto recipes in his kitchen. "I actually invested in it because I think this is the future of home cooking and people not wanting to go to supermarkets."
He isn’t the only celebrity cashing in on the trend. Fearne Cotton has signed up as an ambassador to Mindful Chef, a meal kit start-up which has been backed by Sir Andy Murray and Victoria Pendleton.
With another a second national lockdown coming into effect this week, more Britons than ever before are paying to receive meal kit boxes in the post from start-ups which promise to make people healthier and to teach them how to cook.
On Sunday, Gousto announced that it had reached a relatively rare $1bn (£775m) “unicorn” valuation through a new £25m funding round, which saw an unprecedented rush of demand during the first lockdown earlier this year.
Why queue up outside supermarkets, uncertain whether you’ll be able to buy all the ingredients you need to cook a meal, when Gousto, HelloFresh and others send customers boxes featuring all of the ingredients for meals carefully packaged next to the recipe to prepare it?
Lockdown rush
“We saw a quite significant rise in demand,” says Timo Boldt, the chief executive of Gousto, in a phone call.
“We all rallied behind the idea of feeding the nation,” he adds. “March was quite grim from a grocery supply chain point of view, so we tried really, really hard to squeeze more capacity out of the existing facilities we have.”
Meal kit boxes start at around £25 for a typical two-recipe box for two people from Gousto, but customers can spend more than £50 building larger boxes with multiple portions.
Meal kit boxes include all of the ingredients needed to cook specific meals
Credit: Gousto
Allplants, a vegan meal kit start-up, sells boxes which can cost as much as £60 for 12 servings. Mindful Chef offers family boxes which can feed a family of four for three meals for £62.
Gousto had just become profitable for the first time at the end of 2019, but lockdown saw it challenged like never before. A rush of orders meant that the business scaled back its marketing, trying to prevent an influx of customers which it couldn’t handle.
“We reduced marketing quite significantly,” Boldt says, “this is one of the biggest crises we had ever seen in this country so it felt right to temporarily pause marketing to figure out how to deal with the situation.”
Gousto wasn’t alone in seeing customers ditch supermarkets for meal kit boxes. Rival start-up Mindful Chef saw a 424pc increase in sales of its meal kits, with sales doubling just 10 days into the first lockdown.
“When the pandemic hit, it took us three weeks to treble the size of the business,” says chief executive Tim Lee.
Four months into 2020, the start-up had already sold more meals than it had during the entirety of 2019.
And HelloFresh, a German publicly traded meal kit start-up which also operates in the UK, said in its latest set of results released on Tuesday that its revenues had risen 120pc in the third quarter of 2020 to €970.2m (£874.2m). The number of active customers in all regions other than the US jumped 122pc year-on-year.
Many customers have turned to meal kit apps to quickly order a week’s worth of food on their smartphone.
Data compiled by Sensor Tower shows repeated spikes in demand for these services, with Gousto seeing a 67pc rise in monthly downloads in June to 20,000 downloads. That’s a significant increase over reduced downloads of 7,400 in April as the business paused its marketing spending.
HelloFresh has grown to attract more than 64,000 monthly downloads of its app in September, up from monthly downloads around 30,000 earlier in the year.
Growing competition
Most start-up executives and investors claim to welcome competition like this, but it can make it more expensive for businesses to attract and keep customers.
Marley Spoon, the German meal kit business, hoped to rake in the cash when it launched its service in the UK in 2014. But the company pulled out of the market just two years later in 2016, blaming intense competition.
How Britain’s grocers rose to the challenge of feeding the nation
Even the start-ups benefitting from lockdown can encounter problems. Gousto had a “stunning” start to 2020, says investor Bruce Macfarlane from MMC Ventures, the company’s first major backer. But unprecedented demand caused logistical issues.
“During lockdown Gousto had capacity constraints. It was sending out as many meals as it produced,” Macfarlane says.
This caused the business to seek new funding to help it to pay for two new factories which are due to open within two years. Another automated factory is set to open within weeks.
Now, the biggest problem for the business is figuring out next-day delivery for its meal kit boxes. Macfarlane says it’s likely to be a “major logistical challenge” for Boldt. “But he’s overcome every challenge he’s ever had,” he adds.
Too little, too late?
But as meal kit start-ups are enjoying a rush of customers, there’s a possible threat emerging as traditional supermarkets seek to muscle into the field.
Waitrose has reportedly held talks to buy Mindful Chef for as much as £50m. And Morrisons began selling its own £30 meal kit boxes earlier this year.
“It took M&S, a food outlier, to invent recipe meals. And since then there hasn’t really been anything,” says retail analyst Richard Hyman, “so my reaction is what’s taken them so long?”
Coronavirus grocery industry key stats
“It’s taken supermarkets an awful long time to notice that under their noses was a significant market that people like Gousto are capitalising on,” he says. “They’ve belatedly started to take an interest in this market.”
But executives like Boldt aren’t concerned that giants like Waitrose are about to eat their lunch.
“We have 200 people in our data and technology team,” Gousto’s chief executive says when asked about supermarkets entering his field. “We have built algorithms for the last six years.”
“A lot of supermarkets have lost their licence to innovate and they’re shrinking their businesses to be profitable again… I think it’s unlikely for supermarkets to succeed in this space.”
Beyond the pandemic
Even if supermarkets don’t manage to gain a foothold in the field, there are still questions about the sustainability of this boom period for meal delivery kit start-ups. When the coronavirus pandemic eventually passes and lockdowns end, will customers remain subscribed?
“We see no signs of things going back to pre-Covid levels,” Lee says.
Boldt, too, is optimistic that the customers picked up during lockdown are here to stay. “We’re quite optimistic that the behaviour shift we’re seeing towards online convenience has sustainability,” he says, “I think today we’re scratching the surface of what’s possible.”
Industry experts see meal kit start-ups benefitting from an expected shift in people’s lives after lockdown as people gradually spend less time in the office.
“Post-lockdown, it’s clear that one of the legacies of all this is going to be without doubt that more people will work more from home,” Hyman says. “The demand [for meal kits] is going to grow. It’s a bit of a no brainer really.”
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