Category Archives: Diet Chef

2015 – A year in review

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2015 end of year review

It seems that the year has flown, so it’s worth looking back to see what was achieved in 2015.

Diet Chef

When we started Diet Chef we never thought it would get to the scale it has. It has massively out performed our expectations both from a customer perspective and financially. We were faced with a very tough decision in 2015 either to sell Diet Chef as we had a (great) private equity investor that required an exit or buy the company ourselves.

There were many hours of discussion on this, but standing back from things, most diet companies have been around for over 15 years and none of the macro economic factors would suggest that there is any likelihood of a company like Diet Chef disappearing overnight. So funded by a large chunk of debt we have bought out our existing investors and plan to keep Diet Chef for the longterm.

That doesn’t mean there hasn’t been changes, most of the infrastructure investments we have made (people, systems and geographic) have been reversed over the last 6 months. We are back to a controllable cost base and our plan for 2016 is about growth. This is coming from two areas – acquiring more customers and making the ones we have happier!

There was a drive for profitability over the last 12 months which was the right thing to do if we were seeking an exit with third party, but we lost a lot of our customer focus in this drive. This has been reversed and the customer has become king again within the organisation and our drive is all about making the customer experience better and allow our customers to self serve as much as possible.

In addition we have launched another brand (Diet Now) that allows customers who cannot afford Diet Chef to be able to buy a product from us. As we have grown our costs of marketing have grown, so getting more bang from the buck on our marketing spend is pretty important. Our market entry strategy for this is very much like Diet Chef in the early days. Test, learn, listen to customers, iterate!

So I am very excited to be hitting the 2016 diet season ahead of expectations and with most of the important infrastructure issues fixed.

Investments – Private

It’s been a bit of a rollercoaster of a year on this front. As you have followed I love investing in really early stage tech or consumer businesses. I was looking at a very health return on Fanduel based on they’re recently reported $1b valuation, but the power of TV (more on that later) has put them into the regulators crosshairs. I am sure this is nothing more than a blip, but pushes any return off for a bit (not that I am really worried about this, it’s a great business led by an outstanding team)

TVsquared continues to go from strength to strength. An amazing team with tons of experience are making it look easy to grow quarter on quarter (significantly!) with more depth into existing customers. I think this could be another significant investment but really the time to ramp up the sales organisation to cope with the demand. (see here)

Flavourly continues to grow and has significant cash resources following its successful crowdfunding last year. Like all businesses it is dealing with the growth factors in terms of physical space, staff and product. Looking very promising in 2016!

I am currently looking for one investment for 2017, same characteristics, ideally consumer focused with an international market opportunity.

Investments – Public

Have disposed of some of the investments in my portfolio in 2015. Mainly Lloyds Bank, Tesla & Nestle which I have reinvested fully in Amazon. I am currently sitting on a large position in Amazon and Alphabet (formerly Google) both have had exceptional performance (49% and 51% respectively). Electronic Arts is up 19% (thanks DJ for the tip), The only loss for the year is Jardine Matheson Holdings, down 14%, it’s a very long term hold so no plans to sell any of these stocks in 2016. Remember that this is not a short term investment strategy.

The outstanding investment for me this year is Amazon. They are growing both in terms of traditional retail, but also AWS (Amazon Web Services) is a significant growth driver. I love the fact that Bezos has a very long term view and is re-investing in the business for growth and efficiency (Amazon Logistics, Cargo Planes, Same Day Delivery) all to improve the customer experience.

Crowdfunding for Debt

I have been following the crowdfunding market very closely over the last 12-18 months.

One area that has fascinated me is the use of crowdfunding for debt products. Interest rates at 0.5% don’t really support the income requirements of lots of individuals in the UK. Crowdfunding (which I accept is more risky than bank deposits) is an interesting area for consumers who feel that they are willing to take a little more risk.

The size of business and the serviceability have been a big issue over the last 12 months, but we are seeing more mainstream businesses adopting crowdfunding for their needs. This is a classic example of disruption of financial services (traditionally people and infrastructure heavy) to marketplace models.

Although not for everyone we managed to complete a £1.5m debt finance with LendingCrowd recently that helped fund a management buyout. We were attracted by the ability to introduce funders that would normally have to provide the whole part of the debt to the deal.

You can read more about this at The Scotsman.

There is an excellent video about the future of crowdlending by Samir Desai

Trust

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Diet Chef has launched in the USA over the last month. It has been a huge task by all the team.

We will spend the next few months evaluating the opportunity, it’s a great market and consumer feedback has been fantastic so far.

The main challenge entering any market is Trust. We are not a well known brand. There are about a dozen ways to increase trust but for me reviews are the most powerful.

Here is a selection of our reviews from the recent launch

How do I put up with this sh*t…

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One really unsung hero in the 20 years of hard effort that gets you to where you are today is your partner.

I have to say that Claire, my wife and partner for over 25 years (note I don’t know the exact number and I will be in trouble) has been a superstar.

There are lots of people out there that will tell you that you are not successful, you will spend many hours doubting yourself and of course failing (lets skip over that for now).

But really there is no one out there that values my input and commitment like my partner and wife – Claire

She has spent the last 20 years listening to utter bullshit from me! It is so close to being successful, next year I won’t work so hard and spend more time at home. Just to illustrate this I thought I would let you all know (as in Claire – no one else reads this!) my last 14 days.

I have spent a huge amount of time in the US, came home, flew to London for “leisure” which would have been fine if it hadn’t been on the only weekend that I was home and then get up this morning, go to work and then fly to London again!

It’s difficult to describe what Claire has to put up with, but a mixture of not being there and turning up for short periods of time to unload washing and then go to work again, gives you an insight.

But anyone that meets Claire will totally understand that she doesn’t put up with sh*t – let me tell you I have heard lots of customer service staff quake in terror of having her on the other end of the phone.

If you can have someone in your life as dedicated to your personal and family success as Claire – you are a very lucky person…

Let me give you a simple example:

Me: “We are moving to California”
Claire: “When?”
Me: “Next month” (I can’t add the exclamation mark otherwise it will looks set up!)
Claire: “What about my family, our 12 week old daughter Freyja and my life” (she didn’t say this but thought it!)
Claire: (real response): OK, where are we staying!
Me: In a nice district of Menlo Park (lets not mention we are staying in the best example of a Scottish Frat house!)
Claire: That sounds nice (not!)

But seriously, if you need to run a startup, you need to keep the faith, it’s incredibly hard, you may fail, you may not, but you will try. Trying with your partner and family on your side is much easier than without. So thanks to all the Claire’s out there – we need them – just as we need our own faith in what will happen in the future – sometimes we are right

Supper Club – Entrepreneurial Exchange

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I was speaking and participating in last night’s Supper Club in Glasgow on Sales & Revenue Growth.

I shared lots of experiences of how it is really hard to create a real “product” not just a service trying to pretend it’s a product. I also talked a lot about listening to customers. At Diet Chef we are founded on the principle of listening to customers (that doesn’t mean we don’t add our own opinion).

It reminded me of one of the very important aspects of Diet Chef’s principles – writing it down.

My co-founder Andrew wrote lots of the issues, challenges and successes down in a blog. It was only internally available and was very useful as I lived 150 miles away from the ‘action’ when Diet Chef was based.

This allowed me to read feedback, thought and challenges and for Andrew he was able to spent time distilling some of the issues onto a piece paper.

So, although a lot of the content that I write on this blog is read by others – it is really for me – not anyone else – sorry!

How do I scale?

So, you have your concept consumer tested – customers love it, but they are paying an introductory price or it’s your friends and family that are giving you the praise.

What next – well simple – more customers = more revenue = more profit.

If it was only that simple!

Typically decisions you made months ago come back to bite you – the biggest one in my industry is fresh versus ambient. It sounds simple – but when Diet Chef was purely a concept we spent a massive amount of time talking about how we would produce the product. We checked all market data and advice we could get and although I would love to have a freshly produced chilled supply chain – it was impossible to fund or scale.

Here are the problems:

  1. Margin – handling fresh ingredients requires you to buy daily and therefore you are linked to commodity price movements out with your control.
  2. Distribution – Moving the product from the producer to the end consumer is expensive. That’s why supermarkets are so successful. But you need their scale
  3. Price points – fresh has to be more expensive so will the customer pay this premium.

In the diet industry although consumers want fresh, they don’t want to pay the premium that it would require to make the same margin, so it fails.

This is the major challenge Hello Fresh, Gousto and Lifestyle larder face.

Crack it and you are onto a winner – but don’t use the “when we get scale” argument to show that your business model works – go back to the drawing board!

Most of these issues are linked to the fundamental margin you are making on the product – have a KPI and plan to show how you are going to fix this otherwise you are going to be a busy fool!

Malcolm Walker – you are my hero

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I have been watching the three part documentary about Iceland Foods on BBC2 recently. Having also lived through the horse meat crisis (again something we had nothing to do with and all our products were clear) it is very interesting TV to me!

I sense that Malcolm is intuitively a great retailer, he understands what customers want (even though many in the press turn their noses up at Iceland) and delivers it to his customers in a cost effective and efficient manner. There are many lessons from this for anyone starting a business and also for e-commerce companies in general.

Firstly be know for something – anything! and stick to the knitting – don’t confuse your customers – I especially liked the bit about naming products – why use fancy language when simple naming of your product makes things clearer. I see this again and again and it’s a pet hate of mine. Use simple English to describe the product not flowery language.

There are so many good lines in the program, I really feel I am part of the team. So watch it for yourself – and learn that sometimes retailing is about having great people, fantastic products and delivering a great service to your customers – it’s easy!

Diet Claims!

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While in Sharm El Sheikh, Egypt staying at the Reef Oasis Blue Bay Resort, we noticed the spice shop selling some miracle cures for weight loss!

In the UK you can only make weight loss claims based on safe weight loss. This is really tricky, as anyone who wants to start a diet wants to lose weight healthily but also quickly.

At Diet Chef we don’t recommend losing weight any quicker than 2lbs (1kg) per week. The Egypt diet above is slight quicker – but is it sustainable!