March 29, 2024 7:14 AM

GoodFood reports strong financial results, continues solid history

GoodFood Market has partnered with GMP to expand its services into Western Canada.

/ Published 5 years ago

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With a fast-paced modern life, people are continuously looking for ways to maximize family mealtime. After all, one mealtime may be the one instance for the whole day where all family members can be together. This is why more families now prefer home delivery services.

One of the companies that responded to this trend is GoodFood Market Corporation (TSX: FOOD). GoodFood chefs prepare meal kits and have these delivered straight to home, so families can skip grocery shopping without missing out on the fun of cooking the meals together. The system was so well-received that by 2016, the company became recognized as a digital commerce innovator.

On April 4 this year, GoodFood Market reported strong financial results for its second quarter ended Feb 28. The leading home meal solutions in Canada reported revenue and gross merchandise sales of $36.6 million and $46.5 million respectively. The company had also acquired 159,000 active subscribers which were an increase of 33,000 or 26 percent compared to its first quarter.

The breakthrough financial achievement came after GoodFood completed a public offering and issued common shares for gross proceeds of $21.1 million on Feb 22. The public offering yielded $43.million at the end of the quarter.

After this achievement, it will be significant to look back on how today’s biggest Canadian subscription delivery services, with more than a million meals delivered monthly, has been doing through the past years.

The company’s noble cause

The company purchases from local producers. The chefs then measure and combine ingredients to form a meal kit. The firm gets the best quality/price ratio on the markets for ingredients listed as out of season or cannot be sourced from a local Canadian farm. Meat and fish suppliers must have eco-responsible policies in place in their business before the GoodFood Market will purchase.

For convenience, it only takes about 30 minutes to prepare each of GoodFood recipe. Even the elderly will find preparations easy. The food can even be delivered as a gift to friends and families during occasions.

The meal kit industry

Buying local produce makes the ingredients more fresh than the supermarkets. (Photo by Arina P Habich via Shutterstock)

A relatively new and growing sector, meal kits started about six years ago. In 2018, Canada had $120 million in sales from meal kits.

As an emerging market, it has yet to find a cost-effective way to balance operational issues, logistic issues and lower the cost of client retention or acquisition all at the same time. However, the industry has begun to explore partnering with grocery retailers and using their products. The local farm aspect, however, appealed more to the public.

In 2017, the Canadian market only saw four percent of households buying meal kits in a year, giving the industry plenty of room to grow. Nielsen studies showed consumers purchase meal kits for various reasons such as to save time on meal planning, meal prep, grocery shopping and the preference of personally cooking the meal than having it shipped. Companies that found innovative ways to address those reasons were the ones to make meal kits profitable.

The original business model initially involved delivering to the door, but now some meal kit services have branched out into having the kits available at a local grocer’s shelves. Other companies make the delivery spot the local grocery store, where the meal kits are now being picked up. Still, the industry grapples with ways to cut the price of the meals since the cost keeps consumers from becoming long term customers. GoodFood, however, may have found the answer.

GoodFood Market develops automation

One solution for controlling meal kit costs is automation. In February, GoodFood market partnered with GMP Securities L.P., is an independent investment dealer in Canada, to bring in significant investment in automation.

With the money, GoodFood will also expand into Western Canada and will begin with increasing production capacity, adding breakfast kits, creating more meal kits and developing packaging further. A portion of the investment will be reserved for working capital along with taking care of general corporate needs.

Overall, the partnership should put the company in a good position to be updated with developing market trends. GoodFood can now establish a national presence with its product and services and find a way to increase profit margins and to have long-term sustainability.

(Featured image by Nichakorn Theansem via Shutterstock)

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