My Food Bag co-founder and shareholder Nadia Lim. Photo / File
Meal-kit company My Food Bag arrived in 2013, and has quickly grown to become one of New Zealand's biggest grocery operations. After talking about listing on the stock exchange for the past three years, the company is a step closer to that reality. Aimee Shaw reports
If you're a My Food Bag customer, chances are that you've had an email offering a chance to jump the queue to invest, if the company goes ahead with an initial public offering and lists on the stock exchange.
It's a tactic that has been used before. TradeMe, for example, offered its members priority allocation for its IPO in 2011. That offer ended up being well oversubscribed, and priced at the top end of the indicative range.
With the investment landscape having changed since then, thanks in part to the success of online trading platforms such as Sharesies, interest in My Food Bag is likely to be high.
The company says any sharemarket float would depend on the interest from customers and staff. And like any new investment offer, investors will have plenty of questions to ponder.
The meal-kit company began actively seeking expressions of interest from its 315,000 customers and its staff three weeks ago.
My Food Bag, 70 per cent owned by private investor Waterman Fund, has talked about an IPO and stock market listing for about three years.
Since launching in 2013, the business has delivered more than 84 million meals to Kiwis through its four brands: My Food Bag, Bargain Box, Fresh Start and MADE.
In recent weeks fund managers have had meetings with My Food Bag management, asking questions about the sustainability of Covid-boosted sales and the impact of increasing competition, as they seek to gauge what the company is worth.
The Herald understands that early impressions are in favour of a listing, based on the food delivery provider being an innovative business.
There is no word yet on the company's valuation, but it could be between $200 million and $400m, depending on how much debt it has.
Co-founder Cecilia Robinson had no comment to make when asked about the IPO and whether it was necessary to take the company to the next phase of its growth.
WILL AN IPO GO AHEAD?
Sources tell the Herald the process for a potential listing is progressing well and it is highly likely, at the very least. Lawyers are involved, as is the Financial Markets Authority, and the company is in a quiet period, unable to give interviews or share material information.
Kevin Bowler, chief executive of My Food Bag, has in the past said that if the company does decides to list on the stock exchange, it would expect to do so in the first half of this year.
WHAT'S THE ATTRACTION?
My Food Bag has become a household name. It was an early contender in the food delivery market and began sending out food boxes across Auckland in 2013 before expanding throughout New Zealand. It launched in the South Island in 2014.
The business was co-founded by Cecilia Robinson and her husband James Robinson, with celebrity chef and nutritionist Nadia Lim and her husband Carlos Bagrie, and former Telecom chief executive Theresa Gattung.
In 2016 the company expanded with its more affordable brand, Bargain Box, and later that year Waterman invested in the firm, slotting in alongside the Robinsons, who hold 10.8 per cent of the firm, Gattung (10.8 per cent) and Lim and Bagrie (5.4 per cent), among other shareholders.
In 2018 the company took on its first outside chief executive after the Robinsons moved into non-executive director roles.
Before Covid-19, My Food Bag was understood to have annual revenue of about $130m. This is now expected to be much higher, as the company experienced a boom last year as lockdown resulted in more people embracing home delivery.
HAS MY FOOD BAG BEEN DISRUPTED?
When it launched, My Food Bag was seen as having disrupted the supermarket sector, but has the pandemic and the subsequent trend towards online food shopping disrupted the market disruptor?
That's hard to know, as the company's financial results remain private for now, but throughout the industry, a bigger share of grocery spending is happening online. Supermarket chain Countdown says its online sales grew by more than 40 per cent in the first quarter of its current financial year.
Covid-19 and the first lockdown last year sent My Food Bag into overdrive. Its orders spiked in April and it moved to open another Auckland food boxing facility to keep up with demand.
At the time, chief executive Bowler said it had experienced growth of 10-20 per cent and that had lasted through to the end of the year. But has that growth been sustained into 2021 too? That's a question the Herald has been unable to answer.
WHAT ABOUT THE COMPETITION?
My Food Bag may have already lost the long-term battle to German rival HelloFresh, given how much that company is prepared to spend on advertising. It is the biggest meal-kit provider in the United States and seems to appear constantly on social media.
Since its New Zealand launch in 2018, its strategy has been to enlist Kiwi influencers to gets its brand top of mind for consumers.
Last year My Food Bag spent just over $5m on advertising, compared to the $11.6m forked out by HelloFresh, according to figures from Nielsen.
In addition to HelloFresh, there is WOOP and quite a few smaller outfits, as well as ready-made meal companies. Specialist supermarkets such as Farro also continue to develop their offering, with meal packs fast becoming a big part of their current and future growth strategies.
How big a threat other meal-kit companies represent to a successful My Food Bag listing is something fund managers are still getting their heads around.
HelloFresh is a global player operating in 11 markets, is well-funded, and is "a material competitor" for My Food Bag, says Milford Asset Management portfolio manager Sam Trethewey.
DO FUND MANAGERS APPROVE?
From talking to several fund managers, their verdict on My Food Bag going public is not yet in.
Trethewey says recent My Food Bag board change and work towards seeking interest from staff and customers signals that the company is progressing well down the path towards an IPO.
"The business itself has become a well-known brand in New Zealand over recent years and have had that already strong growth turbocharged by Covid.
"It's a company that has been going well, is well understood, a well-known business and brand and represents certainly one of the more interesting IPO prospects the NZX has seen for some time," Trethewey told the Herald.
"The valuation price is to be determined over the coming weeks, if they do go ahead with the IPO. The process is yet to reach that stage, but sharemarkets are strong at present and there is likely strong demand for a new listing on the market.
"As a business it ticks a lot of boxes."
Trethewey says fund and asset managers would have to make a judgment call on whether to advise investors to put their cash into the company.
The timing of the IPO is interesting, says Trethewey, and Waterman will probably have to reduce its stake much faster than it may have originally anticipated.
He is unsure whether My Food Bag needs to go public to fund its next stage of growth. However, a listing would allow the business to raise capital and existing shareholders to take some money off the table after a strong period of growth, he says.
Shane Solly, portfolio manager at Harbour Asset Management, says My Food Bag is getting a lot of interest from a wide range of investors.
"It would be a good addition to the market on the basis it does come through. We don't have any other exposures to that food channel - there's no grocery stores or supermarkets listed so from that point of view it is a different offering for the market," says Solly, describing My Food Bag as "a sound business".
WHAT ARE SOME OF THE RISKS?
Looking at the performance of similar businesses listed on stock markets overseas, going public could go either way for My Food Bag.
Like My Food Bag, New York Stock Exchange-listed Blue Apron was helped immensely by the pandemic, as home food delivery moved from being something of a luxury to more of a necessity, with revenue jumping over 13 per cent to US$112.3m in the third quarter of last year.
But despite the pleasing revenue gains, the business has found itself in a downward spiral. Blue Apron customer numbers have fallen by 10 per cent, order numbers have fallen 11 per cent and the value of each order has declined. These were trends the company experienced before the pandemic, and the reason why its board decided to put the company up for sale in the first place.
Similar ASX-listed meal kit service Marley Spoon announced a A$70m IPO on the Australian Stock Exchange in 2018 with an indicative market capitalisation of A$200m.
Marley Spoon had a disappointing ASX debut - the company raised the A$70m, at a price of A$1.42, but opened on its first day at A$1.25 before closing at A$1.15 - 16 per cent below the issue price.
In recent weeks Marley Spoon's management has had to explain recent strong growth, saying it shouldn't be classified as just a Covid winner, and that it had undergone a structural shift before the pandemic that would improve its earnings.
WHAT ABOUT FUTURE GROWTH?
If an ASX listing was to go ahead as well as listing in New Zealand, it is likely that a launch across the Tasman would be imminent. At present, My Food Bag operates only in New Zealand, but Australia could be a growth option, although the company would certainly face increased competition in that market.
My Food Bag was unable to reveal its expansion plans when contacted by the Herald.
Fund managers are also looking at the company's potential for continued growth. It is not known if new capital raised by a listing is needed for expansion or is just part of an exit strategy.
Like other fund managers, Solly notes My Food Bag's impressive growth path but is exploring whether that growth can continue: "That's the multimillion-dollar question."
Solly's employer Harbour Asset Management is partly owned by Jarden, one of My Food Bag's organising brokers.
Retail analyst Chris Wilkinson says listing on the stock exchange is a good move as the brand has reached a new peak following intensified demand through 2020.
"When you're at the top of the category, that's a good time to look at realising value from the concept and business," says Wilkinson.
"The retail investor market has never been stronger, with people looking for better returns than what they would achieve in other investments. Many of this cohort will also be new to the sharemarket - driven by the likes of Sharesies. Brands like My Food Bag will be familiar and comfortable to them, creating confident demand, even before institutional investors are considered."
Wilkinson says My Food Bag's options for growth locally could include more brand partnerships, inclusion of more artisanal ranges or even regionally relevant offers, further extension of delivery areas (as Countdown had done into resort and holiday areas over the summer), and a further focus on health and wellness trends.
WHERE DOES NADIA LIM FIT IN?
If My Food Bag does decide to list on the stock exchange, Nadia Lim, who is often regarded as the face of the company, will remain involved, in a brand ambassador role at very least.
"Nadia's role is unchanged by any decisions being contemplated. Nadia's Nude Food philosophy is a part of My Food Bag's success in creating happier and healthier Kiwi families," Bowler told the Herald when questioned about the TV personality's future with the business.
Trethewey says: "Nadia Lim does bring that Kiwi [flair] and I'd expect her to be retained to ensure that association as a New Zealand company is something it can play on going forward."
SWITCH UP IN THE BOARD - DOES IT NEED TO RETAIN A FOUNDING PARTNER?
My Food Bag recently refreshed its board of directors, bringing in former Foodstuffs boss Tony Carter as chairman. Carter has beefed up the board, bringing on Jennifer Bunbury, Jon Macdonald and Sarah Hindle alongside Chris Marshall.
None of the original founding shareholders remain on the board. Is that a good thing?
Trethewey says perhaps one should have stayed on, other than Chris Marshall. But the women are now busy with other interests and may feel they have already added as much value as the could.
"The founding group have certainly done a very good job of growing the business, and it has grown really quickly since they launched."
HOW WILL IT BE PRICED?
For many would-be investors, the most pertinent question is: how much will you pay for a share of My Food Bag?
At this stage no money is being sought, although My Food Bag has appointed Jarden and Craigs Investment Partners as joint lead managers, with Forsyth Barr as the New Zealand lead broker. Other advisers have included law firm Chapman Tripp and accountancy firms KPMG and PwC.
The sponsors will be mindful of over-pricing this IPO.
The last IPO was online lender Harmoney, whose share price has failed to live up to expectations since it listed in November. Harmoney's IPO was priced at A$3.50 ($3.68) but the shares have fallen as low as A$2.51 on the ASX and $2.60 in New Zealand.
My Food Bag is a different proposition but investors will be paying close attention to the valuation and multiples used to determine pricing.
Answers to some of the big questions could be revealed when the company releases more information, possibly as soon as this month.
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