Gousto raised £18m (€20m) in a series E funding round, with investment from Instagram health and fitness influencer The Body Coach, Joe Wicks, as well as existing investors Unilever Bentures, Hargreave Hale, BGF Ventures, MMC Ventures and Angel CoFund.
Meanwhile, Mindful Chef closed a £6m (€6.7m) series A round, let by investment firm Piper.
Gousto’s ‘huge waves’
Gousto’s latest fundraising move brings total investment in the group to £75m (€83.8m). It follows hot on the heels of a £28.5m (€31.8m) investment round in March, proceeds from which are being used to double the firm’s production capacity.
Gousto said the fresh capital will be used to strengthen the company’s machine learning and automation capabilities.
The company is placing AI at the heart of its customer offer, recently having debuted an AI-based recipe recommendation service that directs customers to dishes that should interest them. Half of the group’s customer orders are now placed through its recipe-recommendation system.
“Our customer is at the heart of Gousto – every aspect of our business is about them. Our new funding enables us to do more for them: from developing leading AI technologies that improve their shopping experience, to launching new product ranges that appeal to their needs,” CEO and founder Timo Boldt said.
Increased automation could also potentially address one of the largest challenges facing meal kit services – high overheads and cost-base. Gousto will continue to prioritise the majority of its investment in technology to accelerate growth, the company revealed.
Gousto set itself the ambitious target to serve up 400m “balanced and nutritious” home-cooked meals by 2025. According to investors MMC Ventures, the company is “already ahead of its target”, achieving 170% year-on-year growth and delivering over 1.5 million meals a month to customers, two-thirds of which are families.
“In March, we said we’d win even more of the one billion meals eaten in the UK every week, by accelerating our proposition and giving customers the mealtimes they actually want. Nine months later and the proof is in the pudding – we’re making huge waves and delivering tremendous growth, by focusing on the areas the rest of the grocery market isn’t," Boldt said.
Mindful Chef’s ‘highly differentiated’ focus
Mindful Chef, which was launched in 2015, reports similarly dizzying growth figures, with a 178% rise in sales during the past year, delivering nearly 2m meals to UK consumers. The London-based group generates annualised sales of around £10m (€11.2m).
Announcing its investment, private equity group Piper framed it as a vote of confidence in what it described as Mindful Chef’s “highly differentiated” healthy offering.
“Mindful Chef is well placed to continue accelerating the growth of the recipe box market with its highly differentiated health focused positioning. We are backing a young, dynamic team who are passionate about making healthy eating easier for their customers,” Rory Gibbs, Piper’s Investment Director who led the deal, explained.
All Mindful Chef’s meals are healthy and nutritionally balanced, are gluten and dairy free and contain no refined carbs or sugars. All the ingredients are fresh and sustainably sourced (from local farmers where possible).
As well as its healthy eating mission the company, founded by school friends Rob Grieg-Gran, Giles Humphries and Myles Hopper, supports child poverty charity One Feeds 2.
Mindful Chef said Piper’s cash will enable the business to continue to grow and expand its customer base in the UK, helping it capitalise on the rapid growth of the recipe box market, which is forecast to double over the next 10 years.
“The investment and expertise that Piper bring to our business will help us to bring healthy eating to many more consumers in the UK and enable us to accelerate our growth ambitions for the brand next year and beyond,” Grieg-Gran said.
Continued investor confidence
These latest successful funding rounds demonstrate that there is still significant investor appetite for recipe box companies, who feed into consumer demand for convenience and fresh food.
Nevertheless, the sector faces a number of structural challenges. Attracting customers often relies on costly ‘free-trial’ strategies and retaining customers is sometimes easier said than done. The logistical challenge of delivering fresh food grows as companies scale up, while the associated cost-base can by high.
These issues can be seen in the performance of Blue Apron in the US. The group listed on the New York Stock Exchange at an IPO price of $10 per share last year. However, it has performed poorly since and its stock is currently trading at just over $1 per share.
The investment secured by Gousto should assist its scale-up plans, with automation driving down cost and AI delivering the personalised experience today’s consumer is increasingly coming to expect. Meanwhile, Mindful Chef’s unique selling points and keen focus on health and wellness mean it is well-positioned to meet the needs of a niche – but growing and high value – consumer group.
These points of difference will be important going forward because they are operating in an increasingly competitive and saturated space. Market leader HelloFresh is focused on expanding its presence in markets including the UK (like Gousto concentrating on attracting families in the market), take-out services such as UberEats are making it easier for people to get food delivered as and when they want it, while grocery stores have started experimenting in their own meal kit offerings.