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How Marley Spoon reaps rewards through Woolworths partnership

In mid-2015, a meal kit start-up from Germany set up shop in Australia, providing some much needed competition in the local market.

Five years on, Marley Spoon has turned a profit and established itself as a key player in Australia’s $500 million meal-kit game.

Rolf Weber, Marley Spoon Australia’s managing director and co-founder, chatted to Inside FMCG about the journey to profitability and the decision to partner with Australia’s biggest supermarket chain.

Inside FMCG: How have Australians responded to Marley Spoon since its arrival in 2015?

RW: Australians actually responded really well, which took us a little bit by positive surprise. There’s some cultural differences. There are more Asian food influences than there are in Europe, for example. Australians are used to hot cooked dinners so they actually order more food, more often than other markets. So, we were able to have a really good return on investment in Australia. 

Inside FMCG: The business reached profitability for the first time in Australia in the second quarter of 2019. How important was that milestone to the business?

RW: Yes, that was a huge achievement for the Australian business. What that means is that we’re now at a scale where there is a huge operational leverage between the base cost that we have in order to operate the business, and the growth of the revenues are decoupled from the base cost. 

It was important to us that we could prove it in that quarter; that with reasonable growth, reasonable marketing spend, we have now reached a size where we have on an operational EBIDTA level, a profitable business.

Inside FMCG: To what extent has new manufacturing technology impacted the business?

RW: We are constantly looking at what is the right level of automation that we can bring into the business for the scale that we’re at. We are improving the machines that we use for repacking our dry goods according to the volume that we’re putting through, and that drives profitability because the cost per unit goes down.

We’ve talked a lot about implementation of a new way of picking, but this has many purposes, not just improving the cost per unit. It is also about being able to manage complexity significantly better and having an operational automation platform in place that allows us to increase the menu choices significantly. 

The data is another work stream that we can use to improve the pre-selection of the recipes that we put into boxes and how we actually develop recipes to meet our customers’ tastes. We get better and better at customising and personalising for each of our customers.

Inside FMCG: Can you tell me a bit more about the strategic partnership with Woolworths and what you’re hoping to achieve through that?

RW: Woolworths is the biggest grocery operator here in Australia, and through Woolworths Rewards they have a huge amount of customer data. So it’s about finding a way we can both profit serving the customers that actually want meal kits, because it’s a growing industry. We’re working closely with Woolworths to understand the best way to do this and then market the Marley Spoon meal kits to Woolworths’ customer base.

On the other hand, Woolworths is a $40+ billion grocery food business and with that scale they have a lot of services that we want to tap into such as logistics, sourcing, their media business, Cartology. There are many opportunities tapping into simply the scale and the various skills and experiences that Woolworths have built up over their 100-year history that we can profit from. And with Woolworths being a shareholder of Marley Spoon and having an attractive way of profiting from the growth of the Australian business, I think it’s also in their interest to participate in what the meal-kit industry is currently doing in Australia in a meaningful way and using their assets to actually support that growth.

Inside FMCG: Is reducing plastic and packaging part of your goals?

RW: Yes, That’s a continuous effort for ourselves here at Marley Spoon to look at every piece that we use and ask ourselves: do we need it? Is it the right material? Simple things like switching from plastic tubs to satchels. While it’s still plastic, the amount of plastic in a satchel is significantly less than in a tub. So it’s something we are constantly investigating. 

What we don’t do is greenwash. There’s a lot of talk about biodegradable plastics, but when you dig a bit deeper, they are only biodegradable in commercial applications, and only two exist in Australia so the plastic hardly ever gets there. That’s where we’re honest with ourselves and with our customers. Yes, [biodegradable] sounds great and our customers expect it because it’s the buzz word out there, but at the end of the day, it doesn’t serve a purpose. It is actually better to have recyclable plastic that goes into a recycling process, which doesn’t sound sexy, but it’s actually a better outcome for the environment. We would rather do the right thing than just sound as if we do the right thing.

An extended interview appeared in the October Issue of Inside FMCG magazine. Subscribe to the quarterly magazine here.

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