Marley Spoon’s Australian sales, customers soar after Woolworths deal

Sue Mitchell

Jan 30, 2020

AFR

Meal kit delivery company Marley Spoon’s Australian sales soared 50 per cent in the December quarter following a $30 million tie-up with supermarket chain Woolworths.

Customer numbers in Australia jumped 56 per cent to 68,000 in the quarter and the number of orders rose 54 per cent to 300,000 as more Australians switched from shopping in stores to having ingredients and recipes delivered to their doors.

Australia was by far Marley Spoon’s strongest market – active customers dropped 17 per cent to 35,000 in Europe in the quarter and fell 8 per cent to 80,000 in the US. Total active customer numbers in the quarter rose 6 per cent to 182,000 and Marley Spoon delivered about 22 million meals over the year.

Woolworths emerged with a 9 per cent stake in Marley Spoon in June as part of a $30 million five year strategic partnership aimed at accelerating its Australian expansion and taking share off rival Hello Fresh. Woolworths lent the company an extra $4 million through a convertible bond in September.

The strong performance from Australia helped Marley Spoon lift total revenues by 23 per cent in the December quarter and by 41 per cent to €129.6 million over the year, exceeding the company’s 35 to 40 per cent guidance.

Lower marketing and customer acquisition costs boosted contribution margins in Australia and the US, enabling Marley Spoon to reduce December quarter losses (before interest tax depreciation and amortisation) to €2.4 million ($A3.9 million) compared with a loss of €8.6 million ($14.03 million) in the previous fourth quarter.

Audited full year results will be released next month, with analysts forecasting an EBITDA loss of $A32.7 million (€20 million) and a net loss of $A39.2 million (€24 million).

Founder and chief executive Fabian Siegel said the December quarter results were encouraging and reaffirmed the company’s guidance to be EBITDA positive by the end of 2020.

“We believe that 2019 was an important year as the Australian business showed us what this business should look like,” Mr Siegel said on Thursday.

Fabian Siegel, CEO of recipe kit company Marley Spoon, which is aiming to disrupt the food and grocery market.  Louie Douvis

“We are in the early stages of a five year strategic partnership with Woolworths and the growth opportunities and operational synergies from this collaboration have only just begun,” he said.

Marley Spoon expected to see similar improvements in the US and Europe after investing in infrastructure including manufacturing facilities.

“As more and more consumers switch to online shopping for groceries we see Marley Spoon still at the very beginning of a path to building a direct consumer brand that provides an easier, more convenient and more sustainable and eventually cheaper way to provide a home-cooked meal for the people our customers care about,” he said.

The meal kit market is worth more than $300 million in Australia and grew about 40 per cent last year, according to Nielsen.

Meal kits currently account for less than 1 per cent of the food and grocery market but the sector is expected to continue to grow, according to a recent UBS report, taking fresh food sales and foot traffic away from supermarkets.

“Meal kits challenge the traditional supermarket model, with fresh ingredients for each night’s meal delivered weekly,” UBS said.

As a result, most major grocery retailers in Australia and overseas have announced partnerships with or have acquired meal kit businesses or have increased their range of

meal kits in-store.

Marley Spoon shares rose 22 per cent to 30.5¢ on Thursday but are trading well below their June high of 83¢ and their July 2018 issue price of $1.42.