Goodfood is a Canadian online meal kit subscription service evolving into an online version of Aldi or Trader Joe’s. In 2025, the Canadian total grocery market is expected to grow to 130bn CAD. The pre-pandemic online grocery penetration was 3-4% which quickly jumped to 7-8% in 2020. If we assume online grocery penetration is 20% in 2025, the online market will be worth around 30bn CAD. This is a great opportunity for a cash breakeven DTC meal kit service to leverage existing infrastructure to enter the huge grocery market.
Goodfood runs a vertically integrated ecommerce model. Just as Carvana sources cars from auction, reconditions the vehicles in IRC’s, and ships them to vending machines or directly to customers, Goodfood has a similar strategy for groceries. The company sources fresh produce directly from farmers, stores products in refrigerated warehouses, and picks and packs the ingredients to ship directly to consumers. However, the big difference is that Goodfood requires just-in time sourcing and just-in-time delivery. Perishable inventory needs to be sourced, stored, and packed at the optimal time and temperature to ensure the customer receives the meal kit as expected. The time between sourcing produce and packing and shipping to customers is possibly the shortest in any business we’ve ever come across which makes this a huge execution challenge.
Goodfood has 320,000 meal kit subscribers and aims to offer 4,000 private label grocery SKU’s for same-day delivery. This is a fully vertically integrated private label grocer built on a base of recurring meal-kit subscription revenue. Goodfood already has the supply chain to source products and is building new facilities and a delivery fleet to reduce the picking and delivery cost per unit. As the business scales, all of these cost savings can be passed on to the customer. There are clear parallels between Goodfood, Carvana, and Naked Wines in that they all operate vertically integrated models online. Owning the full end-to-end customer process can build the foundation for a superior customer experience which drives volume and scale through the system. At scale, the best businesses pass the savings back to customers which creates a sustainable cost advantage in the market.
We interviewed the founder of MissFresh, an online meal kit subscriptions service that competes with Goodfood, to explore the operational challenges of selling perishable goods online directly to consumers. Given the evolution of Goodfood toward, the big questions we are exploring are:
If you have any thoughts then please reach out as we are studying online grocery very carefully and have some interesting interviews lined up for June!
This document may not be reproduced, distributed, or transmitted in any form or by any means including resale of any part, unauthorised distribution to a third party or other electronic methods, without the prior written permission of IP 1 Ltd.
IP 1 Ltd, trading as In Practise (herein referred to as "IP") is a company registered in England and Wales and is not a registered investment advisor or broker-dealer, and is not licensed nor qualified to provide investment advice.
In Practise reserves all copyright, intellectual and other property rights in the Content. The information published in this transcript (“Content”) is for information purposes only and should not be used as the sole basis for making any investment decision. Information provided by IP is to be used as an educational tool and nothing in this Content shall be construed as an offer, recommendation or solicitation regarding any financial product, service or management of investments or securities.
© 2023 IP 1 Ltd. All rights reserved.
Subscribe to access hundreds of interviews and primary research