The Covid-19 pandemic has had a negative impact on many industries, such as tourism and hospitality, but various recipe box companies saw a boost in sales during lockdown, as more people wanted to make restaurant-quality food at home.
Almost all of the major recipe box brands benefited and saw a rise in sales, but UK-based company Gousto stood out as a frontrunner, managing to maximise profits effectively through their ability to scale effectively and by using cutting-edge AI technology.
A Game-Changing Moment
When the first lockdown restrictions were imposed in the UK back in March, Gousto said that they saw an immediate increase in sign-ups. Their CEO and Founder Timo Boldt said that they saw an “enormous spike in orders” and “are now growing way over 100% year-on-year in sales terms.”
Other competing brands saw a boost in sales too. Pasta recipe box brand Pasta Evangelists Founder Alessandro Savelli said that the company saw a “huge surge in orders” and that sales had “quadrupled”. Giles Humphries, Co-Founder of rival recipe box company Mindful Chef, said in an interview that “we would normally on board 150 new customers a day. On 22 March, we saw 2500 and it’s not showing any sign of slowing down… it’s mind-blowing levels.” In 2020, his company saw demand rise by a staggering 452%.
In April, Giles said that the company “wasn’t focusing on marketing right now”, as they shifted their attention to delivering meals to the high influx of new customers. But Gousto had a longer-term strategy in mind and decided to place all new customers on a waiting list and then sent them a weekly newsletter to keep them engaged. Gousto was determined not to lower the standards expected from their current customers to take on new ones. Although they saw a significant increase in deliveries, they waited until they were confident of their ability to scale effectively before taking on thousands of new customers.
To prevent their distribution operations from being overwhelmed, they introduced the supplementary, slimmed down “Chosen by Gousto” service within two weeks of the lockdown being announced. They were quickly able to deal with a doubling of demand at their fulfilment centre, successfully delivering 5 million meals in June. They now have plans to open another centre by the end of the year.
It’s no surprise that Gousto decided to put customer satisfaction first by not immediately taking on new sign-ups, as the company has always put customer personalisation and quality before anything else.
Using AI To Generate Profits
Since starting in 2012, the company has seen itself as a tech company as well as a food company. Using AI to study users' shopping habits and delivering the best recipe suggestions possible has been a critical element of their success. Their CMO Tom Wallis spoke at The Drum’s Festival of Marketing about how data is at the heart of everything they do: “(Data) needs to be trusted and accurate, in the sense that, everyone who’s using it knows that it’s reliable and can be confident in acting upon the insights it’s giving them.”
He went on to describe how everyone in the company has access to the same sets of data, meaning that all of Gousto’s employees are constantly aware of wider shifts in customer tastes. “A really important point we’ve learnt is making it (data) open to everybody who needs access.. One of the things that’s given us is a real feel among the team that they understand exactly what customers are doing and why they’re doing it. It builds up a knowledge of behaviour over time that is much more than people can get from monthly presentations,” he said.
Their dedication to data and machine learning techniques has delivered solid results. They have been able to halve the number of recipes that they need a customer to order to understand their preferences down from 16 recipes to just 8. Gousto’s AI-powered, Netflix-style “recommended for you” feature helps them to predict buying behaviours accurately. Getting this bit of tech right has been vital, as they’ve said that accurate prediction models have allowed them to organise their warehouses and shipments more efficiently. This has allowed them to cut lead times, meaning that customers can receive a Gousto box within 72 hours, the shortest lead time of any recipe box brand in the UK.
Their desire to accurately predict recipe choices is also powered by a need to reduce waste. Gousto says that their accurate prediction algorithms mean that they can base orders and packaging on predicted outcomes, significantly reducing the risk of food and packaging waste.
Before the pandemic, Gousto was already seeing 70% year on year growth, and now the recipe box market is expected to be worth close to $9 billion by 2025. With that in mind, more investors are looking at how they can pick the right business that will allow them to tap into this fast-growing industry.
In October 2020, Gousto was able to raise an additional £25 million from investors Perwyn and BGF, giving them a valuation of over $1 billion. The investors around Gousto singled out their approach to combining innovative technology with solid logistical strategies as the key reasons for investment. Andrew Wynn, Founder and Managing Partner at Perwyn, spoke about the appeal that the company has: “Gousto’s superior technology and scale underpin its winning customer proposition and support its continued leadership of this fast-growing and profitable sector” he said. And Gousto is looking to drive innovation further and have set out plans to add 100 new tech jobs to their workforce in the next two years.
Key lessons can be learnt from Gousto’s approach, most notably that the power of fostering strong customer relationships should never be underestimated. Furthemore, they demonstrate that astute data collection could allow companies from all sectors to create forward-thinking strategies to help generate greater personalisation, revenues and profits. Gousto’s early-adoption of AI and use of data has allowed them to surge forward ahead of the pack in a competitive new market.