My Food Bag market slide: Were the listings a mistake?

Tuesday, 23 May 2023

Mark Winter says My Food Bag is determined to grow its customer numbers.

Meal kit company My Food Bag is on a mission to regain customers and grow its sales.

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%. Its delivery numbers fell to 1.35 million from 1.53 million.

But My Food Bag chief executive Mark Winter says he is confident that the company’s plan to turn around the business will be fruitful.

On Friday, the Auckland business announced it would de-list from the Australian stock exchange as part of it cost-cutting efforts.

My Food Bag’s offer has failed to satisfy the market since it first listed on the New Zealand and Australian stock exchanges in March 2021.

Its stock has undergone a free fall in value since its IPO, from a list price of $1.74 per share to 19c by Monday afternoon.

But Winter said he did not believe it was a mistake to take the business public.

He would not say if it had achieved what it set out to do.

“From management’s perspective, I’m very comfortable that this is a business that is out there, it’s a brand that everybody knows about, and I’ve got a plan on FY24 to help contribute to growth as well as that focus on productivity,” said Winter.

He said there was no discussion that he was aware of about plans to de-list My Food Bag from the NZX.

“Being listed on the NZX provides My Food Bag with profile, it’s a consumer brand, from a talent perspective, a lot of people are interested in working in a listed company, getting listed company experience.

“As being part of a capital market, you also get access to analysts and other financial know-how, which can be really supportive as well.

“The New Zealand stock exchange is certainly My Food Bag’s primary home. My Food Bag listed on the New Zealand stock exchange over a couple of years ago and from our perspective it provides us with the opportunity to be visible and sit within the consumer retail segment of the market,” he said.

“We recognise that on balance, being listed on the Australian stock exchange wasn’t something that we were necessarily seeing things working as well so what we’ve decided to do is put forward an application to de-list.”

My Food Bag underwent a restructure at the end of March. Winter would not say how many staff had been laid off, but said the business had re-focused its efforts to regain customers.

“We’ve got a very clear plan and that plan is centred around growing our active customers, it is about become more relevant through increased flexibility, greater convenience and this piece around offering great value,” said Winter.

He said My Food Bag was doing work to overcome the perception that meal kits weare expensive and had committed to freezing its prices on some products “to give consumers certainty”.

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

“In the past week we have gone out with greater recipe choice, there are now over 60 recipes you can choose from across our portfolio at any given week, and that gives more customers more choice.”

My Food Bag said it recently undertook research that found its low cost bag Bargain Box was approximately 4% cheaper on average than shopping at New World and Countdown for home delivery.

Winter said the company would also re-focus its efforts on its Fresh Start box, designed for customers looking to lose weight and on growing its The Kitchen offering that allows it to up-sell pantry and grocery items.

Winter said My Food Bag’s $5m investment into its picking technology at its Auckland and Christchurch boxing facilities was expected to deliver financial benefits

“It moves it from what was quite a manual operation to a much more light-automated operation. That improves productivity and makes us a lot more efficient, but it also improves the customer experience because with that technology we are able to deliver better quality and less mis-picks or damaged items.”

My Food Bag said the current economic environment and inflationary pressures had presented challenges for the business, and it had adapted to ensure it would deliver during a tougher 2023 calendar year.

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.

He said the drop in deliver numbers had a disproportionate effect on the company’s earnings as it lost economies of scale.

My Food Bag’s Bargain Box business grew by 12% year-on-year in the period.

Hobson Wealth investment strategist Ed Glennie said My Food Bag had been a beneficiary of Covid-19, but demand and market conditions had since normalised, and a lot more people were eating out.

“With meal kit businesses, keeping recurring customers is a challenge. My Food Bag dipped last year, but the average order value is slightly higher, which is a positive. For order frequency, still My Food Bag ranks higher than Hello Fresh or Marley Spoons,” said Glennie.

He said My Food Bag was no longer the high-growth company it was during the height of the pandemic, but was still better off being listed on the sharemarket.

Despite the share price slide, Glennie said its sharemarket listing had been a success.

He called its move to de-list from the ASX “disheartening” as going public had enhanced its profile.

“With all eyes on it, it doesn’t necessarily need to be a listed business – it might be one of these companies that might be better private, but that’s still not much comfort if you bought your shares at the beginning.”