In this article
Food is more than a utility. It is social clay, memories, and emotions. We eat cake for our birthdays, treat ourselves with ice cream, and when we go on a date we “meet for coffee”. In some situations, convenience is more important than the social component of a meal. When you have no time to cook or are on a diet and don't want to prepare your meals, meal-delivery services come in.
From 2016 to 2022, the meal delivery market is expected to grow at 6% CGAR (compound annual growth rate) and reach a market volume of $140b. [5, 6] That's a pretty meaty market (pun intended) and, of course, many players want a piece of the cake (also intended). The list of companies that failed in the pursuit is long:
- Sprig (shut down 2017)
- Munchery (just shut down operations in NYC, Seattle and LA )
- Ola (India)
- Blue Apron (made it to IPO but has been a disappointment ever since)
Youfoodz is a contender that wants to come out on top. The ready-to-eat meal delivery company from Brisbane, Australian, started in 2012 and has shown tremendous growth with a creative and modern Growth Marketing strategy.
In this article, I'll show you how Youfoodz managed to grow sales 5-10% WoW and +3,846% over 14 months. 
How do you grow a food delivery service?
Youfoodz is not a bridge between restaurants and customers like GrubHub or Eat24, but delivers ready-to-eat meals that customers can pick from a menu. Youfoodz doesn't force users to subscribe to a weekly or monthly delivery and the meals don't have to be cooked. The business model looks much like a SaaS company, though, because even though customers don't have to subscribe, the money is in repeat orders.
To success with that business model, companies need to achieve four major goals to spur (sustainable) growth:
- Find and keep Product-market fit
- Build a strong brand
- Keeping churn under control and increasing retention (subscriptions/repeat orders)
- Reduce CAC as soon as possible
To understand why Youfoodz is growing so fast, we need to look at how Youfoodz tackles these four points.
Finding product-market fit
Product-market fit is the point at which a product overshoots customer expectations. It's not binary; you can have strong and weak PMF. To understand it better, we need to look at what the target audience wants and what the product offers.
The biggest consumer group nowadays are Millennials and their expectations are clear:
Food documentaries, studies and news coverage have pushed the awareness of a healthy lifestyle. Millennials want healthy, cheap and tasty meals delivered to their homes with the least friction possible. Take "price" with a grain of salt (again, pun intended) because Millennials are willing to pay a premium for healthy food. 
So, how does Youfoodz product find Product-Market fit here?
According to Youfoodz GM Kane Sala, Youfoodz saves its customers a lot of time: “The company has worked out that it saves the average person up to 15 hours a week. They [customers] care about their health but are very passionate about quality of life above most things.” That is a crucial component of convenience.
Reducing friction goes such a long way. Youfoodz goes the extra mile by lowering the barrier to entry: there's no delivery fee, customers can pay flexibly with zipPay and cancel at any time. That translates into results: “Youfoodz as a whole has increased weekly revenue and marketing spend by over 200 per cent since we started with zipPay.” 
Since I cannot look into Youfoodz' systems and see their retention, I have to judge product-market fit from the outside. However, there is one strong external indicator for PMF: ratings and reviews. Youfoodz has over 10,000 reviews, most of them excellent. 
Reviews also provide social proof, an important factor in the evaluation process, and help to monitor customer satisfaction. Both are crucial to keep customers ordering and make sure you have strong product-market fit.
Building a strong brand
Search interest over time for "Youfoodz" (on Google Trends, shown in the screenshot below) can a good indicator for brand awareness (and sometimes for product-market fit!). As we see, the number of people searching for the brand is increasing over time.
[ youfoodz google trend image ]
Paid and media campaigns have a large impact on search interest, so you can accelerate brand growth in a crowded market with money to a degree. It's not an optimal path to bank growth on, but it can kick-start brand awareness. Youfoodz ran campaigns on traditional mediums from the start: "For ready-to-eat meal delivery service, Youfoodz, strong growth through 2014 and 2015 had been achieved through use of traditional mediums such as radio and TV.“ 
Youfoodz spent millions of dollars into a media campaign last year that “extends across Instagram, Facebook and YouTube, as well as programmatic video and display advertising, with custom ad units such as 360-degree video and Facebook Canvas maximising the immersive experience.”  The expectations are high: "Last year’s Winter launch led to a 700 per cent revenue increase, and this year’s performance is expected to beat that by as much as 300 per cent.”
Youfoodz also runs online co-marketing campaigns with publishers. One example is the cooperation with Urban List, an Australian food and travel magazine that has an audience of 2.4m readers/month (see screenshot).
I already mentioned that the (main) target audience is Millennials and when you think of Millennials and food, what comes to mind? Instagram! Youfoodz' Instagram account has over 100,000 followers and 17,000 users uploaded pictures and videos with the Hashtag #youfoodz.
So, of course, social media is a vital part of building and engaging an audience in the food space. Food pics is the most popular content on social networks and can trigger appetite like the smell of food.
The Facebook account has over 190,000 likes. “Overall, Facebook has been one of our biggest drivers of success [...] It’s a great platform to build brand awareness, encourage engagement, and drive sales.” (GM of Youfoodz, Kane Sala) 
How do you spur such growth? With Influencer Marketing!
One example is the 2017 winter menu Instagram campaign, which is directly connected to the TV campaign mentioned earlier. Here are the results :
- 81 influencers
- 167 pieces of content on Instagram
- 162+ Instagram Stories throughout the campaign period
- 69,938 direct engagements on campaign content
- 507,909 impressions on campaign content
- 1,457,142 social reach across Facebook & Instagram
Once again, social proof is a key driver behind the power of influencers.
Keeping churn under control and increasing retention
Churn is key in the food delivery business (well, for pretty much any subscription business). That seems to be the reason why Blue Apron and HelloFresh seem to struggle: as shown in the graph below, most customers aren't retained longer than 6 months at the two companies.
(Data from Second Measure)
Two things should be kept in mind for this comparison: first, the comparison with Netflix or Dollar Shave Club isn't completely fair, because the product usage frequencies are different. Second, Youfoodz (ready to eat meal delivery) doesn't have the same business model as Blue Apron (Meal Kit subscription).
Churn is a problem across the industry, as a research from Cardlytics shows. 50% of customers bounce after six months and only a third stays after a whole year.
For Youfoodz, that would mean that the LTV of a customer is almost $1,000, when using the $69 minimum order over 12 months. This is a simplified calculation, however, that doesn't take into accounts other products of Youfoodz (meal plans), discounts, and the actual retention rate.
Why retention rate/churn is key for subscription businesses
Retention is important for subscription businesses, but it's vital for meal-prep companies. It allows for better predictable cash flow and lower cost of re-activation/re-acquisition. There are many reasons for customers to cancel after a while: missing variety, inconvenient disposal of boxes, and cost.
When getting customers into the door, meal delivery companies often try to leverage long-term revenue with higher upfront user acquisition cost. The idea is to incentivize new customers to sign up - often with a free first delivery - in the hope to stay under LTV (lifetime value) and make more money from repeat orders. It's not as straightforward as in direct-to-consumer businesses, though. Meals are an unstable good because they are so social. So, incentives often drive customer acquisition cost up, which can be a dangerous spiral.
Youfoodz doesn't force customers to subscribe with automatic renewals, so it has to incentivize customers to order repeatedly even more. Acquiring new business is always costly in a highly competitive market and a market is only so big. Often, the company that comes out on top of the market takes it all.
So, how do you keep churn under control?
You have to stay "close" to the customer! Audience engagement is key and Social Media is the channel for that. 1on1 interaction is the way to build relationships, make your customers feel heard and understand what they care about.
Since it's such an important topic for subscription businesses and 1on1 interaction isn't scalable, an elegant approach is to pair social engagement with Email drip and reactivation campaigns. Educative and engaging drip campaigns can be a pillar of successful onboarding. It's easy to lose a customer between sign-up and first order, because she is still unfamiliar with the process. After onboarding, you should show customers that the product is continuously improved in quality and variety to keep them engaged. Don't forget, variety is important for meal delivery. Reactivation drip campaigns should be triggered when a customer hasn't ordered within a specific time, usually 1-2 months, and aim at winning her back.
Interaction on social media is hard to scale; it's a lot of manual work. But you can support it with Look-a-like ad campaigns on Facebook, Instagram and Adwords. Using look-a-like audience based on your email list or website traffic improves targeting and helps addressing existing users. All together, these tactics form what we know as "Customer Lifecycle Marketing".
Customer acquisition cost is the expense from sales & marketing divided by the number of new customers in a given period. So, if you spend $1,000 on Facebook ads in May and got 20 new customers, your CAC = $50.
There are many ways to drive down CAC and it's vital because it increases your gross margin. I already hinted at customer acquisition cost in the brand chapter. Building a strong brand has the benefit of increasing direct traffic to your site and trust, which improves conversion rates. Brand recognition can even go as far as increasing click-through rates in Organic Search, which compounds upwards. So, build a strong brand!
Humans are social animals and a referral from someone we trust or look up to is worth gold. Hence, referrals are a great way to build a brand and increase trust. A Nielsen survey from 2009 shows that referrals or recommendations are the most powerful form of advertising - more powerful than content, ads, media, and organic search! 
Another study revealed that referred customers are 18% more likely to stay with a business than non-referred customers (retention!) and add a revenue margin of 15-25%. 
Si Quan of ReferralCandy was so kind to give me a peak behind the stats of Youfoodz' referral program and the numbers are strong: Youfoodz made millions of Australian Dollars only from referrals and has a referral rate that is 100% over the industry standard!
[Editor: Psst, check out our Epic List of Referral Programs, with examples from every industry including eCommerce, services and digital goods!]
Referrals don't come without an incentive. Youfoodz is offering a free meal for a referral, which is a cheap price for a new customer. Other companies offer users credit for referrals, such as Home Chef ($30). It depends on the retention rate and LTV, but with a minimum order of $69 a free meal makes sense.
Customer acquisition cost should decrease over time due to increasing efficiency. In concrete terms, this means that your paid and media campaigns become cheaper over time because you better understand the market. Ad copy gets better by monitoring what works and what doesn't, targeting becomes more efficient because you have more data and you can retarget more users the more you grow. Those are soft network effects.
SEO is another major channel to lower CAC, since it brings in business without direct cost. Traffic from organic search takes time to grow but is highly scalable and efficient. Users coming through organic search are pre-qualified: they already have a need or problem they want to solve. The challenge is to create content that satisfies their user intent. Youfoodz ranks for strategically important generic keywords, such as "meal delivery", "healthy meals delivered", and "weight loss meals".
Those keywords have high search volume and indicate that users a looking for a solution for their problems: weight loss, meal preparation, meal delivery, and healthy meals. SEMrush indicates that youfoodz.com gets good traffic from ranking for those keywords.
Imagine getting value of up to $58,000 in paid ads - for free! (source: Ahrefs)
An important piece of content are Youfoodz meal plans. Good content is not always text. It can also be part of the product. In this case, meal plans are exactly what helps people when they look for "meal plans" on Google, because it's not an explanation of how to write a meal plan - it's the solution right there.
Searching for weight loss meal plans? Why not just order from YouFoodz?
The four horsemen of meal delivery: PMF, brand, churn, and CAC
To recap, Youfoodz has basically four levers to pull to be successful: PMF, brand, churn, and CAC. New customers are acquired because the meals are convenient and fit their dietary preferences. A strong brand creates the necessary trust that gets people over the $69 minimum order barrier. Meal variety, personalization and engagement keeps customers ordering. The business can only work if getting new customers has a big enough ROI.
Part of keeping users close is to understand their preferences beyond needs. In food, it comes down to diets and there's no shortage of them: paleo, gluten-free, vegan, etc.
The verdict on Youfoodz market dominance is still out but the signals look good from outside. It will be exciting to see how Youfoodz keeps customers engaged, extends its product portfolio and addresses new markets. Value proposition comes from satisfying the need. Differentiation comes from exceeding the want.
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