My Food Bag shareholders turned the heat on its chair and chief executive at its first annual general meeting, with questions over the company's culture, global expansion plans and share price fall.
Since listing on March 5, My Food Bag shares have declined from $1.74 to trade as low as $1.27 earlier this month - although they bounced up after its AGM which had to be held online only this morning because of alert level 4 restrictions.
In an attempt to head off frustrations from shareholders, chairman Tony Carter told attendees it was mindful of the performance of its share price over the first six months.
"However we would like to acknowledge those who have participated in the IPO, and have stuck with us and continue to recognise the value in this business. We assure you the board and management remain focused on executing on the business strategy and the performance of the business."
Carter said in the long run he was confident the market would judge the business on its performance and its true potential.
"On both counts our board remain firmly confident."
He also tried to get ahead of questions on the sell-down by management of shares in the company as part of the initial public offer.
"This was appropriate to allow management to fulfil their tax obligations arising from the shares they received when they converted from options at the IPO and also to help fund the exercise pipe of those options."
He said the board was comfortable management had earned the opportunity to realise some of the significant value they had created for My Food Bag over a long period including their commitment to grow and operate effectively through the pandemic.
But that didn't stop the questions coming about the company's share price.
One investor noted since the floatation the market had been significantly more pessimistic about the company's prospects than the promoters and asked the board's view on that disconnect.
Carter said directors were very conscious of the share price performance.
"We are going to focus on what we can control, which is the growth of the business. We are still very confident about the business and we believe as results are delivered shareholders will be rewarded."
He also pointed out that since the offer was priced in February, internationally meal kit companies similar to My Food Bag had seen their share price reduced on average by 21 per cent.
"I think the context and environment is important to understand as well."
Another shareholder asked if the company planned to expand internationally in the next two years.
Chief executive Kevin Bowler said it was confident there were enormous opportunities for the company in the New Zealand market.
"Whilst we wouldn't rule out inter-nationalisation in the long term, it's not part of our short or medium-term priorities."
One shareholder asked if there were issues with the company culture or between the board and CEO after the recent departure of three senior management.
Carter said there were no culture issues and the relationship between the board and CEO was a very strong one. "I own that relationship."
While there had been three senior resignations, none was unexpected in the circumstances, he added.
"You have got to remember this business is one that has gone from a founder-led business to private equity owned to a publicly listed business and sometimes people are suited to a particular stage of the development."
While another shareholder and customers said she had noticed the decline in the quality of produce of late and had received no response from the company when she complained about it.
Bowler said its intent was to deliver the highest possible quality ingredients, particularly produce every week. "We are delivering over 30,000 boxes a week and by and large are getting it right. But there will always be exceptions."
He said the produce sector had been hit with numerous climate events, affecting quality, and that had been hard for the company to navigate around.
"Our aspiration is to buy and ship the highest-quality meals. We apologise for the times we don't get that 100 per cent right."
Asked about the impact of the current level 4 lockdown, Bowler said it was a bit too early to say.
"We would anticipate some increase in demand and we are experiencing that presently, but I would caution to say we are also needing to incur extra expenses to operate safely at level 4."
Carter said the board had discussed this morning the key risks to its supply chain from the pandemic.
"The key risk is if there was an infection in one of our facilities, and the board and company have developed plans to mitigate that risk. We operate under level 4 protocols today. Then clearly there is further risks in terms of our suppliers."
Bowler said it was very much top of mind as it operated at the moment in these very difficult times.
"We are working through not just eliminating risk but also how would we navigate around some of the things that could occur and trying to get ahead of that."
He said the company was using temperature checking and ensuring, through social distancing and PPE and screens, that it did everything it could to keep its staff.
Carter said operating from three different facilities did give it some mitigation as well.
Despite the challenges, Bowler was upbeat about its 2022 financial year. It was on track to meet a revenue forecast of $186.4 million and an ebitda forecast of $34.2m.
"We are encouraged by recent months' trading which has been at similar levels to comparable periods last year following New Zealand moving back to alert level 1 in 2020. Compared to the same period last year, our high-value customer base has remained healthy.
"This provides us with a good basis for our confidence in achievement of the full-year revenue, which was down slightly on FY21."
He said, like a lot of Kiwi businesses, it was seeing some food commodity inflation pressure in areas like red meat and produce.
The company had offset this partly by improving supply chain terms across more categories and through a small price increase in July.
He said My Food Bag had moved into more customer personalisation to accommodate more recipe choice, introducing that feature into its Bargain Box range in April and extending that to its Fresh Start range earlier this month.
It had recently taken a small step into offering items for sale outside its meal kits.
Called My Food Bag kitchen, it allows customers to buy the products which its chefs use in the My Food Bag recipes including items like desserts, soups and bacon.
He said it would be watching closely the attachment rates and average order value as it scaled the offer up over the coming months by offering a wider range of products.
"We would expect to see the attachment rate continue to rise with the basket size lifting the average order value over time, taking a greater share of New Zealand's substantial grocery spend."
He said the new My Food Bag kitchen range would provide insight into how much Kiwis had willingness to buy a wider range of their household needs from the company and would help inform the pace and direction of future growth through new products or acquisition opportunities.
The company had also recently entered into an agreement to lease a new facility in Christchurch which was scheduled to be ready in early FY23 which would help with future growth in the South Island.