Improved sales in its rapidly expanding market led to a 90.1% jump in revenue for this company during the most-recent quarter.
The firm continues to lose money as it invests to expand its business and its 45% market share.
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GOODFOOD MARKET CORP. (Toronto symbol FOOD; www.makegoodfood.ca) exposes investors to Canada’s growing meal-kit business. The company aims to deliver fresh ingredients and recipes that make it easy for subscribers to prepare meals at home every week.
Goodfood’s subscribers select their favourite recipes online from a variety of original dishes. The company then prepares a box of fresh ingredients and delivers it to the subscriber’s doorstep with easy cooking instructions.
That model appeals to subscribers as well as investors. Headquartered in Montreal, Goodfood had 200,000 active subscribers as of August 31, 2019—up 124.7% from 89,000 a year earlier. That increase was driven by the company’s marketing efforts, its expansion into Western Canada and its new menu options. They include breakfast and ready-to-eat meals as well as smoothies.
In the three months ended November 30, 2019, revenue rose 90.1%, to $56.3 million from $29.6 million a year earlier. The company lost $5.2 million, or $0.09 a share, compared to a loss of $4.9 million, or $0.09. Increased marketing costs to support subscriber growth widened this quarter’s loss.
Growth Stocks: Company prepares for oncoming competition
While Goodfood currently has an estimated 45% share of Canada’s meal-kit market, it will likely face more and more competitors as demand catches up to the U.S. Already the company has competitors within Canada, including grocery chain Metro Inc. In August 2017, it bought a majority stake in meal-kit provider MissFresh for an undisclosed amount. Other competitors now in place include Chef’s Plate, founded in 2014, Germany’s HelloFresh, and so on.
To stay ahead of the competition, Goodfood leased a new 20,000-square-foot facility in Montreal to help in the expansion of its breakfast offerings. It also leased a new 84,000-square-foot production facility in Vancouver as part of its move into Western Canada. That plant is expected to start up early next year.
At the same time, the company needs to keep up its marketing spending to win new customers, hold onto existing ones, and drive investor gains. Meanwhile, delivery is a huge expense, and even with an added processing facility, Goodfood will struggle to serve customer cost-effectively.
Still, the company’s headstart—and success so far in the Canadian meal-kit market—is a big plus for investors. While it’s not without risks, we think the stock offers an attractive entry point into a rapidly expanding market.
There is no barrier to entry for such a service. All of the grocery chains (Loblaws, Sobeys, etc.) already sell all the ingredients for a meal. All they have to do is a hire a chef and have someone at each store put together the kits.
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There is no barrier to entry for such a service. All of the grocery chains (Loblaws, Sobeys, etc.) already sell all the ingredients for a meal. All they have to do is a hire a chef and have someone at each store put together the kits.