Parsley Box CEO: We aren’t a substitute for traditional retailers but D2C will become the dominant channel

Kevin Dorren on normalising customer acquisition efforts post-Covid-19 and why there is room for both traditional retailers and challenger delivery brands in the current market

Baby boomer ready-meal delivery service Parsley Box saw active customer numbers increase 76% year-on-year in H1, despite some restrictions easing and shopping and eating habits normalising.

Interestingly, average order value (AOV) for repeat customers increased while AOV for new customers dipped slightly during the six-month period.

Here, Parsley Box CEO Kevin Dorren breaks down the company’s recent customer acquisition efforts and highlights the extraordinary environment that 2020 brought about for businesses like Parsley Box.

He also considers the rising value of quick-delivery and meal-kit brands and discusses the inevitable shift in consumer behaviour to D2C online shopping habits.

In your recent H1 results you mentioned the shift in consumer shopping behaviour is likely to favour D2C going forward, what other market trends do you foresee in future?

We are typically operating in that older demographic where D2C brands don’t operate and I suppose [our consumers] are less likely to look at purchasing online on a smartphone. They’re looking at trust as the primary element of making their choices. But the fact of the matter is they’ve got high levels of disposable income and a lot of time on their hands and therefore are also looking for a bit of convenience as well.

What’s really a surprise to me is that there are very few brands that target this demographic. From an investment point of view, most brands start focusing on a Gen Z or a Millennial audience, and have forgotten about the this large and growing 60 plus demographic. So, our issues and our trends are slightly different from the those that you would see in some of the other meal kit businesses and our unit economics are also slightly different.

But I do think that we are going to see convenience drive a big part of purchase behaviour, whether that’s one-hour delivery slots in grocery or it’s trying to drive older customers to buy more online. We’ve had that accelerated by Covid-19 and I think those trends will stick around going forward, maybe not at the same level but they will definitely stick around.

What do you foresee in terms of consolidation in the meal-kit and fast-delivery sectors going forward?

I think that it’s likely that traditional grocers are going to think that adoption is not quick enough within their own organic growth and they are likely to look to accelerate that. This is probably the area that makes sense for them to invest in now. We forget that grocery specifically is such a big market so I think there’s plenty of room for new entrants and existing supermarket consolidation. But I do think no matter what we are going to see over the next five to 10 years is more of our purchase behaviours move online.

We’ve had a year of realising that buying online does save us time but nutrition is the one area that has still got very low penetration via ecommerce in comparison with other segments. Over the last 20 years, we’ve seen the convenience of the online channel eat away at other segments like books and furniture.

It doesn’t mean you can’t survive as a niche brand within those markets, but I do think that you are going to see this influx of capital in one-hour delivery businesses and speedier delivery continue. It’s such a big market that it is worth trying to get some level of adoption of new purchase behaviour within it.

In Parsley Box’s recent H1 earnings you reported solid revenue growth despite the relaxing of Covid-19 restrictions and the normalisation of shopping habits. Where do you foresee future growth for the business coming from?

To put it into perspective, we’re recruiting 200,000 to 300,000 customers a year. We had a lot of customers that found us in the March/April period last year that probably would have taken us five years to onboard. So that really helped us get to the next level. I do think that we will continue to see customers appreciate the value of delivery to their door.

One of the things that I don’t think most people understand is that our customers, and I think most of the grocery delivery and meal-kit businesses of this world also see their customers still going to the supermarket. The service it’s not substituting purchases within those retail environments, all it is doing is taking a couple of meal occasions out of that basket.

I do not believe that there will be a massive transition from our customers stopping going to Tesco or Sainsburys and buying exclusively from us, but I can see some of the convenient and high-value repeat purchase behaviours going into our basket.

How have you found customer acquisition efforts? Some advisors have suggested there is a low rate of acquisition and high costs in this market segment.

Firstly, I would caution you on the fact that we’re not recruiting via Instagram influencers, instead we’re using more traditional media channels like TV, newspaper advertising and referral. I think that’s always been up and down and now I’d say we’re back to 2019 levels, which is pretty healthy.

I think 2020 has to be taken out of context as it was an unusual environment to operate in, and many businesses benefited from it. A lot of businesses stopped marketing last years because stores or restaurants weren’t open and therefore marketing costs came down which meant cost of acquisition also came down. But there’s more money going back into marketing now.

What are you working on in terms of product innovation?

Our core range is ambient so it’s basically shelf-staples, but we also recognise that there are some of our customers who are looking for more of a premium tier of product. We’re imminently launching a premium tier which is chilled ready meals that are a bit more indulgent and slightly higher in cost. These offer more of a Thursday night eating out experience at home.

What we’re trying to do, as I mentioned earlier, is to try just extend into other meal occasions. We feel that giving customers products that they recognise delivered to their door at an affordable price will help with further adoption in the second half of the year. I think if you’re a food brand it’s all about innovation regardless of your distribution channel. You don’t really think about your specific channel but rather how to attract more meal occasions or different meal occasions through product innovation.

Is there room for geographical expansion outside of the UK in future?

Our view is that we won’t only operate in the UK forever, but our focus at the moment is the UK. Europe or the US are other interesting markets.