My Food Bag doubles down on Bargain Box offering in cost of living crisis

Friday, 19 May 2023

My Food Bag is doubling down on its more affordable Bargain Box meal kit during a cost of living crisis.

My Food Bag is reducing staff, suspending its dividend and stepping up promotion of its most affordable Bargain Box meal kit as a cost of living crisis dents demand, pushing down annual profit 61%.

The company’s profit fell to $7.9 million in the year to the end of March from $20m the previous year as meal kit deliveries dropped 12%.

“The current economic environment and inflationary pressures have presented challenges for the business and we have adapted to ensure we will deliver during a tougher 2023 calendar year,” chief executive Mark Winter told analysts on a conference call on Friday.

In March, the company reduced the number of staff in non-operational roles by 10%. Winter declined to provide details on total staff numbers.

Winter said the company increased its My Food Bag prices earlier in the year, which partially offset higher costs for raw materials, labour and fuel.

Its online meal deliveries fell to 1.35 million from 1.532 million, which Winter said had a disproportionate effect on the company’s earnings as it lost economies of scale.

The company’s flagship My Food Bag range and its Fresh Start weight loss range, its most profitable, were most impacted but its lower margin Bargain Box range increased deliveries 1.6%.

To drive more sales, the company increased its Bargain Box marketing through TV advertising and gave price conscious customers certainty over their spending by freezing the price of Bargain Box for six months.

The initiatives pushed up marketing spending 16% to $13.1m but Winter assured analysts it’s not expected to increase further this year.

Activist Kate Hall says Kiwi households throw away 86kg of food each year. (Video first published April 26, 2023)

“We're focused around Bargain Box affordability, and we've invested to promote Bargain Box, recognising it as well-placed to grow during the current economic conditions,” he said.

To save money, the company plans to delist by late June from Australia’s ASX market where its shares are little traded. It will continue to trade on the NZX.

The company’s board decided not to pay a final dividend to shareholders in order to preserve cash, having earlier paid an interim dividend of 3 cents a share. It paid a total dividend of 7c the previous year.

Chairperson Tony Carter said the business had navigated a challenging year driven by the changing economic environment, but the board expected to resume dividend payments this coming year.

My Food Bag shares rose 6.5% to 19.7c in mid-afternoon trading on the NZX. The stock has lost 72% of its value over the past year.