Three opportunities in Food Box delivery

Looking back at 2020 and we can clearly see that some sectors experienced a lot of pain while others have thrived and grew hugely in demand. A black swan event like a pandemic could not have been predicted, but even before that a shift to online shopping was gaining momentum for years. Last year businesses that were digitally native have fared a lot better than those that relied purely on the physical presence in neighbourhoods and high streets. In Grocery we have seen propped up demand across the board with the unfortunate shut down of the leisure sector, but online delivery and local convenience channels have done especially well.

Food box delivery concept is driven by three big trends in grocery sector, a demand for convenient solutions, personalisation and being able to transact online. This offering has been a part of the grocery channel for a while but has really showed how uniquely valuable it is in 2020. Our recent consumer survey suggests that in 2020 16.5% of respondents ordered a food delivery box and 56% of those who use food boxes order at least fortnightly. Operators that were able to scale up the delivery infrastructure won big in 2020, gaining that initial share of the market. We can now see how the competition in the space is intensifying, food box delivery operators are working hard on differentiating the offer and capturing the desired section of the market. Food box delivery services are now serving a variety of consumer needs, from routine grocery top ups, to value boxes, to unique dining in experiences. 2021 has already seen Morrison’s move into this space with £30 food box offer targeting families, Booths launching its ‘Let’s Cook’ boxes and Parsley Box securing over £5.2m to expand and target baby boomers (The Grocer).

It is clear that food box delivery services will keep growing in importance in 2021. from our recent shopper survey, we know that 18% of customers plan to use food delivery boxes more in the next 12 months with this jumping to a quite extraordinary 31% in London showing the regional variation in demand for food boxes.

It should be acknowledged that different shopper types have different demands and criteria of choice when it comes to choosing whether to use a food box and who to purchase from. For example, the grocery shopper type Families on a Budget who are larger families with multiple, often younger, children living at home plan to use more delivery boxes going forward than the UK average. They typically shop at retailers such as Morrison’s, Asda and Iceland so Morrison’s new family food box offering will have great appeal to these shopper types. In contrast younger, affluent shoppers are seeking health-conscious choices and inspiration in their decision to purchase a food box leaning to brands such as Mindful Chef to fulfil this mission.

THREE CHALLENGES FOR THE FOOD BOX DELIVERY SECTOR TO SOLVE IN 2021

The pandemic has undoubtedly caused a surge in demand as we seek alternative ways of both treating ourselves whilst restaurants are closed and getting our groceries whilst supermarket visits are kept to a minimum. In fact, 38% of those ordering food delivery boxes said one of the main reasons for doing so was to avoid going to the supermarket. The next 6-12 months will be crucial for companies looking to grow a loyal customer base to emerge as a larger sector at the end of the pandemic. As the risk factors of supermarkets begin to decrease food box delivery companies will need to tackle a number of obstacles to remain successful. Here are the three main areas to focus on to drive further growth in the sector in 2021:

• Laser focus on customers. Customers desire personalisation and food box delivery companies are in a unique position where they can engage with customers and really understand what ingredients they like or dislike and manage the future interactions better. Real brand growth happens when new customers are added to the brand. Finding new customers and knowing how to tailor your communications will be the winning recipe. But before finding new customers it is important to understand who exactly your current customers are, where else they shop, what brands they like and what is important to them.

• Utilising the right technology to stand out and deliver intuitive customer experience. The world of customer data platforms and CRM systems is ever changing and to be at the top, companies need to upgrade and stay relevant. Modern solutions allow you to manage the customer data in real time, analyse campaign impact and code up new customers as soon as they have made a first purchase or inquiry. Customers stumble across different parts of the journey, for example not checking out at the last moment or not finding the right product or promotion. It is important to have a tailored communication stream with those customers to convert them in to the first sale while keeping the acquisition costs low and to ensure the repeat purchase happens.

• A successful food box delivery business needs to keep the delivery costs low and serve customers in the most effective manner. Saving money and time on the very expensive logistics side of the business will allow for great ROI and ability to direct funds to customer acquisition and loyalty building. Effective route planning, holding the best-in-class datasets on addresses and providing precise instructions to delivery drivers will be one of the factors that differentiate the market leaders with runner ups.

Food box delivery is an extremely exciting space to be in and the market cap of this sector is expected to grow, however, like in any growing sector it attracts new entrants and the attention of large retailers and FMCG players. Competition intensifies and with more than 20 players in the market some consolidation is imminent. At CACI we can help tackle the big three challenges that are now in front of the sector, building a strong customer understanding and growing organically through customer acquisition, getting the most out of complex data platforms and saving time and costs on logistics.

If you are interested in tackling the above challenges and outcompeting in the crowded space, please get in touch as we have developed unique solutions to unlock growth in the sector.

Please contact Val Kirillovs at vkirillovs@caci.co.uk or Charlotte King at cking@caci.co.uk