Hi everyone, and welcome to Cheffelo's capital markets event 2025. I'm Peter Bodor, and I look after Communications, IR, and Sustainability here at Cheffelo. I'll be your host today, guiding you through our menu, chatting with our presenters, and making sure that your questions are answered by the team during our Q&A a little bit later. It's almost hard to believe that our first Capital Markets Event was just two years ago in the autumn of 2023. Since then, a lot has happened. We've been busy cooking up new things and continue driving Cheffelo forward on its growth journey. Since we held our last Capital Markets Event, the number of investors in Cheffelo has roughly doubled, adding more than 2,000 new investors.
A big part of today is to follow up on the new financial targets that we announced in September and talk about where we are taking the business forward. This will also be a chance for us to highlight what makes Cheffelo special, as well as what an investor needs to think about when perhaps evaluating meal kits as an investment. Let's not forget, we're also really excited to have this opportunity to hear from you and answer your questions. On the topic of Q&A, if you have any questions, just pop them into the form on the right side of the broadcast. You can do this throughout the program, and we will address your questions towards the end of the session. We really look forward to hearing from you.
Our CEO, Walker Kinman, I know that he's eager to get started, but he will have to wait just another minute while I go through today's menu. Let's see what we have in store. Walker will kick things off with an update on the state of Cheffelo, where we are now, what's ahead, and a look at the meal kit market and our ambitions. Next, Adam Björklund, our Chief Growth Officer, will share how he's reshaping the growth team and why we're seeing more new customers joining us this year. We will then turn to our product in three sessions. Claes Steenfeldt, Chief Customer Officer, will talk about how we deliver unmatched personalization and solve dinner better than anyone else.
We'll then shift over to Oslo, where Anton Nytorp, our Chief Technology Officer, will explain the tech behind our personalized meal kits and how we make it work at a scale. After that, we'll head on over to our Norwegian production facility, where Chief Operating Officer Vibeke Amundsen will discuss how we're raising the bar on service reliability and operational efficiency. She'll also touch on sustainability and invite one of our team leaders to talk about leadership and employee engagement. I'm really looking forward to that. It is time for some number crunching with our CFO, Erik Bergman. He will walk us through Cheffelo 's financial performance, outlook, capital allocation policy, and our recently updated financial targets. After the presentations, all our speakers will join us for the Q&A session. Please send in your questions, and we'll do our best to answer them.
Finally, Walker will return to wrap up the event with some closing remarks. That is our agenda for today. Now, with that out of the way, I'd like to welcome Walker Kinman, CEO of Cheffelo . Hi, Walker.
Hi, Peter. Thanks.
I just mentioned that a lot has happened since we had our last Capital Markets Day, also when it comes to shareholder structure. For those joining us for the first time, could you please give like the elevator pitch of who we are and what we do?
The short answer to that, Peter, is that we solve dinner for tens of thousands of households around Scandinavia every week with our meal kits. We've been a pioneer in the meal kit business for close to two decades. We're profitable, and we own and operate local brands in Sweden, Norway, and in Denmark. Last year, we delivered around 16 million meals, and we generated about SEK 1.1 billion in net sales. We currently have around 85,000 active customers and can deliver to around 91% of Scandinavian households. We're a listed company. Our share is traded on the NASDAQ First North Premier in Stockholm. We have a convenient ticker that is the symbol CHEF. Since listing the company in 2021, we've returned a little over SEK 90 million in cash dividends to our shareholders.
Thanks, Walker. There are, of course, others who do meal kits as well. From your point of view, what sets Cheffelo apart?
We have a clear ambition to solve dinner better than anyone else. That means that in the space we choose to compete, we do a better job of it and are fulfilling our value proposition of delivering meals that unite families. This is a meal kit delivered directly to the customer doorstep once a week. It contains all of the fresh ingredients and simple instructions that are needed to prepare a delicious meal and well-balanced home-cooked meals. When we say meals that unite families, we're talking about simplifying planning and logistics and doing it in a way that removes many of these hurdles that come with cooking from scratch. We're also doing it so that families are eating what they want to eat. They're loving the food experience so much so that they can enjoy spending time on being together as a family.
That's even on the most hectic of days.
When you say that Cheffelo solves dinner better than anyone else, that's a pretty bold statement. You're sticking your neck out there. What do you mean by that?
Aside from the fact that I think there's a very driven team with a lot of talent working at Cheffelo , it also comes down to how we differentiate our service in the market. Personalization has long been a strategic capability we have developed throughout our value chain, and we will be quick to point out that we are winning through personalization so smart that it feels simple. We know that each of our customers has a unique set of likes and dislikes, and the size of households that we are targeting can vary from two people living together to a gaggle of children and adults sharing the same dinner table. In that environment, taste is one component, and we offer over 200 unique recipes every month with each brand. Our recipes can be ordered for two, three, four, five, and even six portions.
This is something that Claes will talk a little bit more about. Keep in mind that being so smart it feels simple also means not overwhelming the customer with configuration choices and being able to manage the service wherever and whenever it works for them. We're putting technology to work that aims high in anticipating what customers are looking for in a way that also makes having a meal kit subscription super easy.
For as long as we've known each other, I've always heard you talk a lot about operational excellence. Vibeke will address that later on today as well. From your point of view, what's the role of operational excellence for Cheffelo today?
We've been able to differentiate on operational excellence to a point that one of the things that stands out at Cheffelo is that we're nailing it on service reliability. This is operational excellence at its core, but also takes it one step further, giving the customer the confidence to depend on us to solve dinner. Probably everyone understands that when working with fresh produce, things are not going to always meet 100% of expectations once they've arrived in the kitchen. You know as well that this happens when you do your own grocery shopping, but expectation when you're paying for the service is even higher. Being dependable means that we're set up in a way that we quickly handle these deviations with the least amount of impact on preparing a meal that brings the family together.
I've also talked a lot about Cheffelo as a food tech company, and both of these differentiators of personalization and service reliability are heavily tech-enabled. This is something that Anton is going to talk a little bit about, but they are things that are very hard to reproduce profitably at scale. This is something that creates a significant barrier to entry in the space for new competitors.
Let's be honest, Cheffelo is not even the biggest player in the meal kit space in Scandinavia.
That's true. At the same time, we're seeing the competitive environment continue to evolve. With capital costs that have been rising, shareholders demanding profitability, we've even seen HelloFresh announce changes to their strategy, which is also reducing their size in the Scandinavian market. In 2024, Cheffelo grew in local currency by just over 7%. By our estimate, we increased market share by 2 percentage points, reaching a little over 21%. We think that the Scandinavian meal kit market reached around SEK 5.1 billion in 2024 and will likely grow at around 6% per year for the foreseeable future. Our new financial targets are aimed at 7% - 9% growth, and that means that we're also expecting to continue increasing our market share in the coming years.
Erik, of course, will give more flavor to our new financial targets later on today. You're painting a picture of growth for Cheffelo. Do you also foresee that the meal kit category will be growing?
In general terms, there are a lot of factors pointing in the right direction for continued growth in the meal kit space. For those of us that are delivering a clear value proposition and also have the business already tuned for profitable volume expansion, in the near term, on let's say the macro side, we're seeing our markets generally moving in the right direction, especially in the Norwegian market. It's most recently been waking up. Consumers are opening their wallets. Sweden is improving, but it's a little bit more in fits and starts, while Denmark may actually take a bit longer to stabilize on the consumer confidence side, given the current turbulence in the Danish pharmaceutical industry.
We basically invented the meal kit category more than 15 years ago. The whole concept builds on a couple of mega trends, which are just getting stronger and stronger day by day. Could you please take us through those?
Sure. While the pandemic might have artificially boosted short-term demand, the general trend of consumption behavior migrating into e-commerce continues. This is the first of these mega trends. There's a rising awareness of food as medicine, when ultra-processed food is being more often singled out as a major factor in chronic food-related illnesses. This awareness and connection between food and health continues to increase, which in turn supports home cooking, if it can be done easily. Doing things easily also leads us into the next mega trend, which is also where the new convenience plays an important role. Long working hours and active lifestyle are contributing to consumers feeling time pressure and being willing to pay for services that help spend more quality time with the family. Finally, when you look at the mega trends, the call for sustainability is still there. It remains loud and clear in Scandinavia.
You've always been quick to point that out, Peter. Meal kits, with their inherent reduction in food waste in both the supply chain and in the home, contribute to a more sustainable food system. Many consumers have indicated they definitely or probably would change their behavior if it reduces their impact on the planet.
Vibeke will talk later on about why and how meal kits actually are a quiet, resource-efficient way to get dinner on your table. You've been quite bullish about the prospect of meal kits, but it's not a kind of explosive development either that you're talking about. In practical terms, how will we grow over the next few years? Could it have anything to do with carrots, Walker?
Yeah, we love our carrots. First of all, those who have been following our business since the pandemic will know that our business and the market went through a period of normalization. We have been posting year-over-year quarterly growth since the third quarter of 2023. In the trading update that we recently published, we saw growth hit almost 27% on a local currency basis, and even the active customers increasing by 16%. We're also talking a lot about bumpy growth, as the year-over-year growth is not consistently running at a steady rate, but it's hopping up and down. Both Erik and I will try to explain that a bit more, but there are four areas that we go back to when describing growth that will continue to hold true in our core meal kit business. The first is price optimization.
Here we are perhaps less concerned these days with how we're going to upsell to customers as much as we are, but making sure that they are getting the personalized meal kit that fits their household. Recently, mixed shifts in the number of meals and portions sold have increased, which gives a boost to average order value. The predominant driver of optimized pricing is to make sure that we do not fall behind on inflation, and that means small adjustments at least once a year. We also expect add-ons and groceries to continue to grow as we strengthen our capabilities and develop the offering.
Even this area, while it can contribute to a higher average order value, is much more about driving loyalty. While pricing and A&G support a baseline value growth of around 3% annually, the core of the growth story is really about volume growth in acquisition, which also then includes the retention of subscribers. Acquisition and retention efforts both contribute to a further increase in active customers, while efforts on the retention side additionally contribute to increasing order frequency. On the volume side of the equation, we see 4% - 6% of annual growth.
Can you tell us more about new customer acquisition?
All right. Let's take a look first at new customer acquisition. Cheffelo has been very successful this year in attracting more customers. Adam will walk us through what's happening in that area and the changes that are going on. Excluding the pandemic, which boosted demand, this is the highest level of new customer acquisition in recent years. Acquisition also follows a very clear seasonal pattern. It peaks in the first and third quarters. This should help clarify why sales and marketing costs stand out in these quarters, and also why, when acquisition rates increase or decrease, it disproportionately affects the top line growth rate. The reason for this has to do with the high rate of customer churn in the early stages of the meal kit customer journey, with new customer additions in peak periods having a greater effect on net sales in the quarter they are acquired.
Taking the third quarter this year as an example, we increased customer acquisitions versus last year by 64%, which helped contribute to almost 27% growth year over year. It is also very important to keep in mind that within six months, only around 20% of these customers will take at least one delivery during a month. This highlights the other key area of development right now at Cheffelo: more successful customer onboarding and retention. Better retention boosts active customer numbers and order frequency rates over time. If we get these small changes in long-term retention rates, they have the potential to greatly increase growth rates. The good news is that we're getting better, and 2024 cohort tracking is set to be on an all-time high. We get a confirmation of this looking at cohorts on a monthly basis.
Not only are the averages tracking higher, but 75% of the monthly cohorts from 2024 are outperforming the top 25% from the four previous years, every month for the first nine months following the first delivery. If you look at it from a revenue retention perspective, it really is about the long-tail relationship. Meal kits are a bit like an annuity, where the initial investment in customer acquisition gives a payoff over a very long period of time. In this chart, you can see how customer cohorts acquired even five years ago are still generating around 5% of the revenue each quarter that they generated in the quarter when they were acquired. Here as well, you can see that our most recent cohorts outside of the pandemic are tracking very well on revenue retention.
The ability to demonstrate profitable growth in our business is important because it also means that our capabilities, which are generating value at this level, only get stronger as we grow. This economies of scale effect also is a factor in setting the new financial targets' ambition. With growth rates between 7% and 9% over time, we also expect to be able to deliver 7% and 9% EBIT profitability by 2028. Erik's going to walk us through a bit more of that when he comments on the financials.
Thanks, Walker, we certainly have our work cut out for us, and it's exciting to be part of this journey. You're going to come back later for the Q&A session, and you will also wrap the whole session up with some closing remarks, right?
I will. Thank you, Peter.
Now let's visit how the customer journey starts by customer acquisition. Please welcome Adam Björklund, our Chief Growth Officer. Adam came on board at the start of the year and has already brought tons of new energy to how we are growing Cheffelo's reach and digital growth. Welcome, Adam. Good to have you here. Today you'll be sharing how we're attracting new customers in new ways.
That's right. Thanks, Peter. Good morning, everyone. Today I want to explain how Cheffelo is changing the way we find new customers and grow our business. Our growth team is leading this work to make sure our company stays strong in the future and also, of course, continues to grow. We have already made a lot of progress. In 2025, we have improved how we attract and sign up new customers. We have updated our tools for measuring and understanding our business. Moreover, we're using successful marketing ideas and working with influencers and user-generated content and scaling that out across markets. We're also focusing on what has worked well for us in the past. Current status is that we're seeing more new customers joining us compared to last year and compared to our goals.
You saw some of these in Walker's material as well as in the trading update released a couple of weeks ago. Yet the way companies attract customers is changing quickly. People expect more from companies than ever before. At the same time, people are paying less attention to advertising. There is more online content than ever across an ever-growing number of channels, and it's always changing and improving. This means that we have to keep finding new ways to reach and interest our customers. We have also spent a lot of time improving our systems and tools behind the scenes. Now we are ready to focus more on what our customers actually see in front of them. This means we will reach more targeted people with what we offer, but also helping them to learn about us, making it easy for them to try our meal kits.
Our goal is to help people discover our personalized and reliable service and to make it simple for them to become customers.
You've also reorganized your growth team quite recently. What was the thinking behind that, and what are you hoping to accomplish with this new setup?
That's right, Peter. We have recently reorganized our growth team. We did this because customer expectations are changing quickly, and we need to keep up. Our goal is to build a team that can move faster, be more flexible, and focus on what really matters for our customers. We are actually changing our approach from the ground up. Instead of relying on outside agencies or trying to do a little bit of everything ourselves, we are investing in building our own strong team and capabilities inside of Cheffelo and we call this a capability-led approach.
I think I get it, but can you just explain a little bit more what a capability-led approach actually means?
Of course. We're building our team around specialists and not just generalists. The world is moving too fast for one person to know everything deeply. By bringing in experts in key areas like artificial intelligence, data analytics, media buying, and also automation, we can focus on actually doing slightly fewer things, but do them much better. This helps us to move faster, have more control, and take real responsibility for making things happen instead of simply relying on many different outside perspectives. It's basically all about investing in the right skills so we can grow in a smart and flexible way. Ultimately, this new setup will help us respond quickly to changes, use our custom technology better, and deliver better results for both our customers and our business.
Adam, I know you have a lot on your plate, but what would you say are the most important areas for us to win in the meal kit space?
I believe there are three main areas for how we can win in the meal kit space. First off, we need to amplify our digital flagship experience. This means making every step from the first time someone hears about us to when they sign up as seamless and compelling as possible. We want to define and own our customer journey by also talking slightly more about our superior product and service, making it easy and also enjoyable for people to become our customers. By doing this, people will see more value in what we offer, and they will also be willing to pay slightly more for our meal kits. At the same time, we'll continue to make sure that we attract high-quality customers. Second, as already will be a fundamental part of our new approach, this is about strengthening our execution muscle by bringing marketing operations in-house.
We're taking control by having specialists who work hands-on every day, constantly optimizing our efforts. This daily focus allows us to react quickly and make improvements where they matter the most. Thirdly, we have to energize our brands. In today's world, it's harder than ever to stand out. There's a real risk of becoming irrelevant, and that's not the place where you want to get trapped. Building stronger brands is a long-term effort. Instead of trying to do everything at once, we're breaking it down into smaller, more manageable steps. We want to be known for something unique, and with so much content out there, even at Hollywood-level quality, we want to make sure that we're noticed. That doesn't mean we need to change everything about our brands overnight.
Instead, we'll start by updating how we look, making it more energetic and playful, and we're doing that in a way that people also actually will remember. Lastly, as we move away from manual work and embrace AI-powered tools, our long-term goal is, of course, to become what I usually refer to as an AI-native acquisition engine. We will use advanced analytics and automation to improve every part of the acquisition funnel, and this means getting real-time insights, creating more, better, and relevant content more efficiently, and also closing any gaps in how we reach people online. By doing this, we can make every step of the customer journey smarter and more effective.
You've presented some bold tactical moves and some exciting initiatives. When you and your team discuss the picture of success or what you're looking to accomplish, what are the things you're talking about?
When my team and I talk about success, there are a few things that I usually come back to. First, the reason why we show up to work every day, we want to bring in even more high-value customers and do that in a way that is profitable for the business. That means we're always working to lower that cost of also acquiring each new customer, but while also making sure that people who join us stay with us longer. We also want to grow by attracting new customers throughout the whole year and not just during those busy sales periods. Meanwhile, we keep a close eye on our marketing spending, making sure that every krona we invest brings real results. Another important part of being successful is actually measuring our progress.
We're introducing a clear system how to track our results both over long term, but also we track how many experiments we run, like A/B tests, creative pilots, and how quickly we can turn those insights into action. The faster we learn and adapt, of course, the better we can serve our customers. Last but not least, using special methods to understand which marketing activities help us get new customers at each step of that customer journey. Maybe most importantly, we need to stay abreast of new technology changes happening in the market. We are very focused on using AI and automation in our customer acquisition and analytics. We monitor how well these new tools are working in practice, making sure that they really help us reach more people and also understand our business.
Meanwhile, considering we're also making sure that we take a very cautious, step-by-step approach to developing new ideas and tools, and this helps us avoid any disruptions, especially during important sales periods, as of course we want to keep things running smoothly while we improve. Yet, as always, the real proof is in what we deliver. Instead of just talking about our plans, I'd like to show you how we're growing by nudging modern families to solve dinner better than anyone else with a little show reel. Here we go.
That was really cool. Thanks for showing us that. Adam, I love our brands coming to life like that. Before I let you go, any last words or anything you would like to summarize?
To conclude, this transformation is about scaling smarter, moving slightly faster, and building a growth function ready for the future.
Short and efficient. Thank you very much, and I'll see you for the Q&A.
Thank you.
We will now shift gears slightly and zoom in on the product in three different segments, all from the focus of how we sold dinner better than anyone else and how we nailed it on service reliability. First out is Claes Steenfeldt, Chief Customer Officer. Claes and his team are responsible for customer experience and engagement. Hi Claes, welcome.
Thank you, Peter.
Great to have you here.
Great being here.
We often say that we sold dinner better than anyone else, and I said earlier to Walker that that's a pretty bold statement. What do you put into it, and how do you think the customer thinks about it?
Yeah, we offer an unmatched convenience and variation for busy families with the market's largest menu selection for weekday dinners. What's special about our service is that you can pick every meal yourself, or if you're short on time, you can let us recommend some options. Either way, you get great dinners that work for everyone in your family. Equally important is our commitment to deliver the best seasonal offering on the market. We don't just adapt ingredients to the season, we adapt a big part of the menus. For example, in the summer, we introduce barbecue themes, fresh summer salads, lighter, easy-to-prepare dishes, making it easy for our customers to enjoy the meal kit whenever at home or on holiday. This approach ensures that our offer always is relevant and inspiring, reducing the risk that customers take a pause or pause their subscription during seasonal shifting.
Instead, we encourage them to bring their meal kit with them throughout the whole year.
Yeah, because I don't think everybody knows that you can actually redirect your meal kit delivery and have it delivered to your summer cottage or wherever you might be. That's pretty cool. Delivery is one part, but also I guess our suppliers play a very important role when it comes to making us relevant throughout the year.
Yeah, that's right. Our suppliers are a big part of what makes this possible. We build strong, long-term relationships with our suppliers that we trust, and we work closely with them to get ingredients that really fit our meal kits, ensuring the ideal portion sizes, unique taste profiles, seasonal products, and, of course, efficient packing. By prioritizing local suppliers whenever possible, we also support regional producers, reduce transport time, and guarantee fresh ingredients. These partnerships are essential for secure, reliable deliveries to our production facilities and maintaining the high quality through the year as a part of solving dinner better than anyone else.
It's not one size fits all, so it's about personalization. Why?
All families are different, and we use individual customer preferences and behavior data, such as historic ratings and dish selections, to recommend meals that fit each household's tastes and dietary needs, and of course, their routines. Personalization is the key to making our offer and service valuable. We don't believe in, as you say, a one size fits all approach. Instead, we offer a wide range of options to a broader market that match the unique preferences for each family. Today, we offer 200 unique recipes every month that cover everything from classic comfort food to modern international dishes, as well as vegetarian and family-friendly meals. We also include fast and easy recipes, healthy, well-balanced choices, and seasonal specials, of course. This means that there is always something new to try and something every family will love.
By focusing on the personalization, we make the meal planning simpler, more enjoyable, and truly relevant for every household.
Yeah, gathering families around the dinner table, it's more than just the actual eating. There are so many studies showing that it has positive benefits for psychological health, cognitive learning, and relationships as well. What do you put into this definition, Claes?
Yeah, that's right, Peter. For us, the dinner table is where real connection happens. It's about giving families a reason to slow down and share stories and enjoy being together, even when life is busy. We want to make it easier for families to have those moments, not just by providing good food, but by helping create the right setting for that quality time. We design our service and meal kits to take the stress out of dinner so families can focus on what really matters, being with each other. When meals are easier to make and everyone finds something they like, it's just simpler to bring everyone together around the table.
I think I've lost track of how many times I've heard you say that we're never better than our latest delivery. I really like that mindset because it keeps you on your toes. Can you talk a little bit about how we collect feedback from our customers? How do we know what they like and how do we know what perhaps needs a little bit more seasoning?
Yeah, that's right, Peter. We should never relax and think we're done. We must always make sure that the next delivery is the best. That's what we mean by we're never better than our last delivery. We use our customer compass. It's a recurring in-depth customer survey to gather feedback on every aspect of our service and product, both the digital side and the physical. Each week, we collect insights into everything from the sign-up experience and recipe selection to meal quality, ingredient freshness, and delivery. That direct feedback on recipes and complaints about ingredients and/or deliveries are reviewed continuously. With this approach, we ensure that improvements are always based on real customer input and not assumption. By identifying gaps and opportunities across the entire customer journey, we can quickly adapt and enhance both the digital platform and our physical meal kits to stay relevant and meet our customer needs.
For us, we see each step of the customer journey as being very important. What's most important for our customers, and how do you and your team prioritize?
We prioritize what families value most. It's the convenience, the taste, variation, reliability. We choose not to invest in those areas that don't strengthen those core capabilities. Our resources are dedicated to reliable deliveries, a broad and relevant menu, and a seamless digital experience. By focusing only on what matters and always listening to our customers, we stay ahead of our competitors and build long-lasting loyalty. To further strengthen this, we are putting even more focus on CRM to drive personalized communication through the entire customer journey. We are developing a new loyalty program that will reward customers for ordering more often. We are continuously developing our add-ons and groceries selection to give families even more choices and enhance their meal kit experience. By prioritizing these areas and acting on customer feedback, we drive higher order frequency, we have greater retention, and we build a long-term loyalty with our customers.
You're saying that by adding more add-ons and groceries and those kinds of services surrounding the meal kit, the ambition is not to create a new order or market, but it's to strengthen loyalty, right?
Yeah, that's correct. It is a service that serves a purpose to build more around the meal kit loyalty.
Thanks a lot, Claes.
Yeah.
I think we're done there, and then you're going to come back and join us for the Q&A later.
That's right. See you then.
Thanks.
Thanks.
Let's now connect to Cheffelo 's Oslo office, where our Chief Technology Officer, Anton Nytorp, is getting ready to talk to us. Hi, Anton. Good to see you.
Good to see you, Peter.
When people hear Cheffelo, I would guess they probably picture our meal kits, the box on the doorstep, the fresh ingredients, the recipe cards. Behind the scenes, there's a whole lot of tech making all this possible, from how you order to how we deliver, to how every meal is tailored just for you and your family. Let's start with the basics, Anton. What's the secret tech sauce behind Cheffelo's tech platform?
Thank you, Peter. Our technology platform is completely custom-built and heavily optimized for what we do in Cheffelo . I think it's easy to get the impression that this is sort of just another e-commerce solution based on some off-the-shelf solution that we buy. It is indeed a very complex platform that underpins all of our different business activities and processes. Most of the things you see are developed by us in-house and tailored to Cheffelo . It is modern. It's built with cloud-native technology and sort of state-of-the-art. It's something we have perfected over many, many years. We have four different brands, but it's one common tech platform that gives us the scale and leverage we need. Some things are very country-specific, like I think payment options and so on. I dare to say that 95% of the rest is very similar, sort of based on one common platform.
Anton, you and I have shared a few dinners, so I know that we have slightly different preferences when it comes to food. Our customers are, of course, just as unique. That's why no two Cheffelo meal kits are ever quite the same. That's also why personalization is such a big deal for us. How does our tech help us serve up that kind of tailored experience? What's next for making it even better?
Yeah, I mean, this is an area we are investing heavily in. What it is, it's tailoring the customer experiences through both using customer preferences and AI to come up with sort of the perfect meal kit for you. This is evolving rapidly, and already today, what the customer sees is very, very different from what they experienced just a year ago. In the future, I mean, we're envisioning a completely new product experience that's much, much, much more personalized than anything we offered before. We're still trying to solve those key customer problems around dinner planning, with technology as an enabler, right? Also, like keeping it very simple on the customer-facing side. Our AI doesn't just sort of recommend recipes. It learns from customer behavior, preferences, dietary restrictions, recipe ratings, favorites. The idea is that taste buds and preferences, they are very, very individual and complex.
For us to offer this at scale, we need to deliver robust personalization tools with advanced technology on our end. The other big theme here is increased opportunities for customization. There's no one-size-fits-all out there. Every customer is unique, and tailoring recipes to unique customers, creating custom sizes within a week for different dishes, all of those different things. I think the key to get right here is that we're still all about simplicity, right? In theory, you could delete the app and just have really, really great meal experiences delivered to you week in and week out. We also need to cater to those customers who want a more, like, a little bit more custom experience, right? This must be very, very simple. We need to hide away the complexity for the customer. It should be really, really simple, and we take care of the complexity on our end.
I guess that's really the thing, making it look easy for our customers while the backbone might be really complex and complicated. What role is tech playing when it comes to enhancing the overall customer experience, Anton?
Take a busy family with children, right? They are all very, very different, but most of them always have that same problem, like what's for dinner today, right? You can go to the grocery store, you can shop online at an online grocer, and there are multiple alternatives for that. You can do takeaway and so on. I think no one solves this as well as we do and as smoothly as we do. We're all about solving the dinner problem, right? Every step along the customer journey, from sign-up to meal selection to delivery and customer service and all of these things, we're using technology to remove friction and add value. We learn what you want. We offer personalized meals for you. You can easily manage your subscriptions, edit your weekly deliveries. You can track the delivery van with high precision.
If you want to pause for a few weeks, go ahead and do that. We don't have any dark UX patterns or stuff like that, making it impossible to cancel a subscription. That's not our ethos, if you will. We want to create a service that is so good that customers love it and just keep using it. They can't live without it. They tell all their friends that they need us as well, right? That's the goal. One big investment we have done in Cheffelo AB this year is to build an in-house UX design team. This isn't just about making things look prettier. It's not about that. It's about fundamentally improving how customers interact with our service at every touchpoint. Having the UX designers in-house means we can move faster, we can iterate quicker, and we can work hand in hand with our engineers and product managers.
More importantly, we now have people who live and breathe our brand and the customer challenges every day. They sweat the details. They care deeply about this. That type of ownership is really, really hard to get if you rely on external agencies and consultants, right? For us to succeed, I fundamentally believe that we have to be relentlessly customer-focused. We have to spend our scarce resources on solving the right problems. It's easy to come up with just solutions and solutions. As a tech team, we can't really do that by just sitting in an air-conditioned office and dreaming up new ideas. I think we need to get out there in the customer kitchens, right? We talk to real customers regularly. We get real input from them.
We test out new prototypes on them, try to really, really understand how our product can help them create a little bit more joy in their everyday life and a little bit more simplicity. I mean, yeah, we're selling meals, and that's our product, but it's not a software. I believe that the technology is what helps us deliver that really awesome customer experience.
We started off by talking about how tech enables everything we do. Can you give some more flavor to how tech enables Cheffelo to operate such a complex business at scale?
Yeah, I mean, this is crucial. In the tech team, we have this very important job of enabling this very complex process business to operate at scale in a profitable way, right? We're building tools and systems to manage thousands of recipes, millions of ingredient picks every year. I mean, complex supply chains, precise delivery windows, all of this, it's very, very complex. What's good about meal kits and consumer products in general is, of course, they are a high-volume business. This means that any process improvement, however small it may seem, is really valuable. If you do all of these micro-optimizations that compound over time, it can easily mean the difference of percentage points in contribution margin if we get that right. Efficiency, that's one side of the coin, right? The other side of the coin is to enable great customer experiences.
The customer expects a premium experience, which is reliable, should always get what you ordered, always get it in the right time, etc., etc., and good quality and also at a price point which makes us still relevant in the market, right? In essence, we're running a very sophisticated orchestration system that coordinates all of these different inputs to give a really good customer experience. Without this sophisticated technology foundation, we couldn't do this at our scale. It would be impossible.
OK, so my last question to you, Anton, if you look in your crystal ball, how can tech continue to be a competitive advantage for Cheffelo?
I mean, if you look at our technology platform, it is clearly built for scale. I think we can scale exponentially in volume and across geographies with a very limited effect on technology cost. I mean, we're more than ready to meet whatever the future holds for Cheffelo. Looking into the future, we're also excited about how can we use AI even more in our day-to-day operations. We already use it a lot to personalize the customer experience, but I think we also have so much more room to use it internally as well. Think about what it means if we can give each of our chefs a great assistant to help them with the perfect recipe creation, editing, and curation, and all of those things. The type of dynamism in the business that could be unleashed by that.
Beyond that, what if all of our employees can be empowered with agents and have all of our company knowledge at the fingertips and how powerful this future will be? I'm really excited about that. These are some of the themes. I'm very excited about the type of new customer experience we can build with the help of technology. I mean, we're all about solving dinner better than everyone else, and I firmly believe that technology is the key for that, right?
Thanks so much, Anton. Great talking to you, and I will see you for the Q&A later.
Thank you, Peter.
Now we're leaving the Oslo office and heading over to our production facility, which is just outside of Oslo. This is where the magic happens for our Norwegian meal kits. Here's a fun fact for you. Norway actually makes up about half of our net sales. I think I'm joined by Vibeke Amundsen, Cheffelo's Chief Operating Officer. Vibeke and her team are the ones making sure everything runs smoothly from packing ingredients to getting these boxes out the door. Hi, Vibeke. Great to see you. What's cooking in your world today?
Hi, and welcome to our production facility here in Norway. Today, I'm excited to give you a behind-the-scenes look at how we deliver our promise to customers every single week, no matter what. It's been a fantastic year, higher volumes, lower claim rates, and strong engagement across our teams with great leadership scores for our team leaders. What really sets us apart is our commitment to operational excellence, continuous improvement, and a culture where everyone is proud to deliver, challenges the status quo, and are better together.
Let's talk about one very important aspect of the customer experience, service reliability. What does that mean for Cheffelo, and in particular for you and your team in Operations, Vibeke?
Service reliability means that every customer receives their meal kit on time, in perfect condition every single week, regardless of holidays, weather, or supply chain hiccups. Our claim rates have dropped 12% from last year, and customer inquiries are at an all-time low. That is clear evidence that our service is more reliable than ever. How do we make this happen? We have very robust processes, cross-trained teams, and we have a culture of accountability. Even when something unexpected happens, the customer should not feel it. We deliver through red days, holiday periods, peaks, and any kind of challenges. Within our short lead times, we work closely with our suppliers to find good solutions so the customers can really rely on our services.
Yeah, we're always tweaking things in order to improve the delivery experience for our customers, right?
Yes, we've done great improvements in our delivery experience for customers. We've launched a new platform using Gordon's live tracking. Now our customers can follow their delivery in real time. It's been a fantastic service. Customers know exactly when the meal kits will arrive, which means they don't have to reach out to us for updates. It puts them in control and makes the whole process smoother. We have also made big strides on the logistics side. In both Norway and Sweden, we've expanded our delivery areas. Now about 5% of our weekly deliveries are going to places we couldn't reach a few years ago. That means more families can enjoy Cheffelo no matter where they live. In Denmark, we've added even more flexibility. On top of our traditional night deliveries, customers can now choose day or evening time slots.
More than 20% of our Danish customers now prefer to get their meal kits during the day. It's really rewarding to see how the customer appreciates the new options and how we make their lives easier.
We've heard Anton Nytorp and Claes touch on personalization so smart it feels simple. Producing this experience at scale, where all kits are unique, puts some tough demands on production. How do you handle this aspect in operations, Vibeke?
Yeah, that's right. Every box we send out is 100% personalized to the customer. The process is seamless and scalable. We make and deliver more than 30,000 personalized meal kits every week. Yet our customer experience is as effortless because our operations are big to handle complexity without compromise. Our tech platform, as outlined by Anton a nd the aligned teams, means that every ingredient, every box, and every delivery is tailored to each customer's need. The process for personalization should be so smart it feels simple. While others offer one size fits all, we deliver true personalization at scale.
I'll admit I'm a bit biased, but honestly, for me and my family, having a meal kit delivered is a real game changer for us. It takes the stress out of weekday dinners and keeps things running smoothly at home. From an operations point of view, how do you and your team make sure Cheffelo really does solve the dinner problem better than anyone else?
Our job in operation is to help make dinner the easiest part of our customer's day, from the moment they order to the moment they plate up. We listen to our customers, test new ideas, and rapidly implement what works. To improve the unboxing experience, we work hand in hand with real families to find the best solutions for improvement. No one solves the dinner problem like we do because no one else combines operational precision, personalization, and customer obsession the way we in Cheffelo do. We also explore new technology like machine learning, robots, and different kinds of optimization to further improve our productivity and customer experience.
Vibeke, you know that sustainability or ESG, as it's often referred to in these kinds of settings, is close to my heart. You and I discuss this topic a lot. Please tell us about some of the progress that you've made recently within this field.
Sustainability is at the center of our operations. Thanks to Gordon's wide use of cooled verticals, we can distribute more meal kits without adding ice, creating a smoother customer experience. In 2024, we used almost 20% less ice bags than we did two years ago. Cheffelo has cut the total plastic use in Norway, Sweden, and Denmark by 12 tons, a reduction of 42%. This is much thanks to fewer ice bags, but also working with our suppliers to optimize packaging of ingredients to minimize plastic while ensuring the quality remains great when it's time to make dinner. Our business model is unique. We help solve the dinner problem with almost no food waste. We only order what goes into the meal kits, and our suppliers don't have to overuse. Our customers use everything in the kit for their recipes.
Last year, we had only 2.5 gm of food waste per portion, and we are ready to go even further.
I'm looking forward to that. Let me also take the opportunity to point to our sustainability reports, which are part of our annual reports. They're, of course, available from our website, cheffelo.com. Go check that out if you haven't already. Shifting gears slightly, Vibeke, let's talk about all us Cheffelonians who make everything happen.
Looking back over the last two years, I'm incredibly proud of the improvements we have achieved. None of this would be possible without our engaged teams and strong leadership. With 200 people involved in operations, many working part-time, success depends on everyone pulling in the same direction. Our team leaders are the secret ingredient. They create psychological safety, set clear goals, give feedback, and drive engagement every day.
You're actually joined now by a colleague of ours, Martina Czepkowska, who's a Team Leader in our production. Hi, Martina. Great to have you joining us.
Yeah, this is Martina, one of our great leaders in Production. Martina, what is important for you to make the team perform at its best?
For me, as a leader, the most important thing is to create a supportive and structured environment where everyone knows what's expected of them, they feel valued, and have an opportunity to grow. I believe that open communication, regular feedback, and clear expectations are essential to keep the team motivated and aligned.
Martina, many of the workers here in production work part-time. They study or have other jobs in addition to being in Cheffelo. How do you keep them motivated and engaged in our work?
We make sure that everyone feels included from day one. We celebrate small wins, we recognize the effort, and we make sure that everyone's voice is heard from day one.
Clarity and feedback, that's really important for me in my leadership. How do you make sure that our production workers also have clarity in what's expected of them?
We set up clear goals together, and we check in regularly. I give both team and individual feedback so everyone knows how they're doing and how we can improve together. We start every production cycle with stand-up meetings where we give an update on important KPIs from the previous week, and we share the highlights with the team. Together with many people in production, we put an extra effort into recruitment and onboarding so every new employee knows what's expected from us and also that the job is a good fit for them.
Yeah, that's a good point. In our latest employee survey, we had a great result on psychological safety, but also physical safety is important working in production. This year, we only had one accident with absence in Cheffelo . That's great work for our safety work and risk assessment. In a few weeks, we're going to have a safety week as well. Can you tell me a bit about what's going to happen?
We will have quizzes and competition in finding safety hazards in the production area. We have made some films on the focus on awareness, together with some cool posters and some other magic activities.
That's fantastic, Martina. Building a safety culture means always keeping it on top of your mind, never taking shortcuts, using the right equipment, and always thinking before acting. Thank you, Martina, for your dedication.
Thank you.
you for being such a valuable part of the team in Cheffelo . At Cheffelo, we take pride in what we do. We challenge the status quo, and we are better together. Thank you to everyone who makes this possible, to our teams, our leaders, our suppliers, our carriers, and of course, our dear customers.
Thanks a lot, Vibeke. We'll catch up with you again in the Q&A. Go ahead and find yourself a quiet spot for that. Also, Martina, really appreciate you joining us today as well. For those of you watching, don't forget, you can still send in your questions for the Q&A using the form to the right of the broadcast. Now, last but not least, before we open up for the Q&A, let's catch up with our CFO, Erik Bergman. If you follow our quarterly reports, you'll definitely recognize Erik's voice. Hi, Erik, and welcome.
Hi, Peter.
Just a few weeks ago, you and I sent out a press release where we communicated that Cheffelo has set new financial targets. Could you walk us through what's new and what's driving these updated ambitions?
Yes, sure. As we approach 2026, and we had already indicated in our Q1 report that we were on track to exceed the upper end of our previous target, it was about time. The new targets are an extension of our previous targets, which were already set through 2026. These updated targets do not reflect our third quarter performance specifically, but it's rather the continued momentum we have seen throughout the year. Our long-term growth target has been revised to a net sales CAGR of 79%, which does correspond to SEK 1.5 billion in 2028. Walker talked earlier on what he referred to, or what we refer to as the carrot, which is our way of illustrating where growth will come from. We have separated growth into four main growth factors: optimizing pricing, expanding add-ons and groceries, increasing the number of customers, and boosting our order frequency.
These are all very important areas, and we have discussed them all before. As you heard throughout today's presentations, they remain a key focus area.
We also recently actually sent out a trading update ahead of our Q3 results. What were the standout highlights according to you, and what's driving the momentum this Q3?
Yeah, I'm obviously very pleased to report a strong quarter. Net sales increased by around 23%, which is 26.6% when adjusting for currency. We are, of course, very glad to see such strong numbers. I would like to point out that a key driver behind this performance was a sharp increase in new customer acquisitions in the after-summer ramp-up, where we actually saw a 64% increase versus Q3 last year. We did reach acquisition levels that we haven't seen since the pandemic. This is a clear sign that our offer continues to resonate in the markets. It's also encouraging to see that this momentum is also reflected in our profitability. A higher customer acquisition does obviously also come with additional costs. As stated in the press release, we do expect EBIT to improve by about SEK 12 million compared to last year.
We will share the full details with you in the third quarter report, which will be released on November 5th. I would also like to point out that our updated target should be viewed as long-term ambitions and not the guidance for this year's growth. We will not provide any update for the full year expectation in this Capital Markets event, so you have to stay tuned for our third quarter report.
Yeah, of course, it's encouraging to see the momentum. Let's go back to the new financial targets. Could you talk a little bit more about the profitability side in the longer perspective?
Yeah, sure. Let me start with the basics in our profitability. I have prepared this slide to show you the three main factors that I would like to highlight when it comes to our profitability. First, control of unit economics. This reflects our ability to manage input costs, optimize pricing, and maintain value for customers, even when we are faced with inflation or pressure. A very important KPI in this area is our contribution margin. Second, our efficient customer acquisitions, and here, by focusing on marketing efficiency and what we refer to as a healthy customer acquisition cost, we are able to grow volumes in a way that supports profitability. Part of Cheffelo's profitability improvements that we have seen is the result of a deliberate shift towards higher value customers rather than the quantity of customers. Let's address a myth. Most of our customers do not use discounts.
They use the product because, as Walker would have put it, we sold dinner better than anyone else.
Yeah, that makes a lot of sense because you cannot create sustainable profitability through discounts, and you also cannot create meaningful relationships with customers through discounts. Something else, though, can you walk us through how you're managing OpEx and what that means for Cheffelo's scalability?
Sure. Our costs for central function are at around 10% of net sales for the last 12 reported months. The.
Includes tech, customer service, finance, HR, corporate communication, and other overhead expenses. These are costs that are not directly variable with volumes. Today's absolute cost level is reflecting a level where we can leverage increased volumes for further scale, and this also positions us well for continued improvements in profitability as we grow. Our ambition is to maintain a lean, scalable organization while continuing to invest in technology and innovation, which we believe will drive further growth. Together, a controlled contribution margin of 31.1%, managed sales and marketing expenses at 12.3%, and cost for central functions of 10.2% has resulted in an EBIT margin of 4.9% for the last 12 reported months.
EBIT of 4.9% for the last 12 months still leaves a bit of a leeway to 7%-9 % that we presented as financial targets. What gives you the conviction that Cheffelo can close this gap?
Yeah, we do expect a large increase, and although I do really like to keep a strict and controlled approach to cost, the main factor to the expected improvement in profitability is the economies of scale. You could see that quite clearly in the chart. The last 12 reported months' EBIT margin of 4.9% is an increase of 1.7 percentage points from one year earlier, which is to a large extent supported by economies of scale. As we continue to increase volumes, we will continue to benefit from spreading fixed costs over even more deliveries, both within our central function and within our contribution margin. We will also continue to see fulfillment costs become even more efficient, and we will continue to be able to secure better purchasing prices.
This has a positive effect on our EBIT margins, and it also means that each delivery becomes increasingly more profitable as we scale. Here is one really interesting KPI to look at: the EBIT per delivery, which could give you an indication of the effect from economies of scale in Cheffelo . Over the past year, our EBIT per delivery has increased by 55%, and that's a direct result of both scaling our business and optimizing every step of the value chain. We will continue to maintain strict cost discipline and focus on top-line growth to ensure long-term profitability. The main factor for the targeted improvements in the EBIT margin comes from economies of scale.
Let's talk about seasonality, because that plays a big role if you're into meal kits, especially in the Scandinavian markets where there are big changes in consumer behavior over the year. How should we think about this when looking at Cheffelo's results?
Seasonality is defining the future of our business. Every quarter is unique. Walker talked earlier about the customer acquisition cycles. On top of that, we also see customer behavior that is to a large extent affected by holidays. If you look at the volume trend on the slide, you will see pronounced peaks and dips throughout the year. For an example, in the first quarter, we typically see a volume peak as customers return after holidays, and the New Year's resolution drives engagement, which is further enhanced by us focusing more on marketing campaigns in this period to drive the additional customer acquisition. We see another strong period of the summer when acquisition campaigns ramp up and routines are reestablished. Here, it is important to be aware that approximately two-thirds of the quarter is a lower volume period.
Major holidays like Easter, Christmas, and the summer vacation period also do have a clear impact. Many customers pause their subscriptions or travel during these periods, which temporarily reduce volumes. We also see an effect in periods with many bank holidays, the month of May being a good example, which can create additional dips. Understanding these seasonal effects is key to interpreting our performance.
These seasonal swings don't just impact volumes, right? They also have an impact on profitability over the year. Can you explain a bit more about that?
EBIT and contribution margins are highest in quarters with higher volumes and lowest in the third quarter when fixed costs are spread over fewer deliveries and marketing spend increases with the post-summer ramp-up campaigns. As you could see in the chart with contribution margins, the lower volumes in the third quarter combined with a higher discount, as we onboard many customers during the period, result in a lower contribution margin. The timing of holidays like Easter can also shift between quarters. A good example of this is in 2025, when we saw relatively higher volumes from Easter moving into the first quarter, which then boosted margins, but the opposite effect in the second quarter with a lower contribution margin. If we look at the EBIT profitability, we also need to consider the effect from seasonal variation in spending, particularly due to the timing of marketing campaigns.
This is also a good opportunity for me to point out a common misunderstanding that we are faced with when we are releasing our Q3 report. Due to this seasonal effect that I just explained, we are historically not profitable in the third quarter. This is a normal part of every year's profitability, it is not a change in trend.
Thanks for explaining that, Erik. What about on the cash side? I think seasonality can also affect the cash side of things. Can you shed some light on how these cycles play out in your cash flow and what it means for our financial flexibility?
Sure. There are large fluctuations in cash flow from working capital, which can be difficult to understand for those new to our business. To simplify, the seasonality in our net working capital is mainly driven by two factors: the timing of accounts receivables and supplier payment cycles. To give you an example of what I mean by timing of customer payments, if a quarter ends on a Monday, most customer payments will not be received until the following quarter, which can temporarily shift the cash flow into the next period. A good example of this is the first quarter this year when the timing of customer payments shifted about SEK 18 million into the next quarter.
To give you an example of what I mean by supplier payment cycles, during the second quarter, as we see the seasonal decline in volumes, supplier payments are settled, and we see a negative cash flow effect from changes in net working capital, which you could see in the graph to the right. We usually see the opposite effect of this in the third quarter as volume increases yet again after the summer. This large fluctuation in net working capital also causes seasonal changes in Cheffelo's cash position. We do see a lowest cash position late July or in the beginning of August. This is also why we do need to ensure that we have a cash position that is sufficient to handle these seasonal changes. As a final comment, I would just want to add to say that our net working capital model is a structural change.
Growth of the business actually generates cash, but we do have these quarterly or seasonal swings, and they are normal and they are expected.
Thanks, Erik. We talked earlier about how we welcome a lot of new investors to Cheffelo, which is great. What would you say to them? What should they think about or focus on when thinking about these seasonal variances?
The most important thing is to look at the bigger picture and not over-interpret it in individual quarters. Our business model is designed to handle these swings, and we use them as an opportunity to optimize both our marketing investments to have them early in high-volume seasons. It's also a way for us to prepare our operation for both peak periods and low seasons. The underlying trend is what is important, and our ability to manage this seasonality is a key part of our long-term profitability and cash generation.
Now you like talking about cash, so let's talk a little bit more about cash. In 2024, we generated positive cash flow of almost SEK 47 million, with an EBIT of closer to SEK 42 million. What supports this strong cash conversion?
Here I would like to highlight three key factors when it comes to cash conversion in Cheffelo : the controlled unit economics, a capital-light model, and a negative working capital with no structural debt. First, if we have a favorable unit economics model, which gives that our margins are healthy, every order contributes directly to our cash flow. That is, again, why we control, or that is why the control of unit economics is so important. The second factor is our capital-light model. Our core focus is on our tech platform and investment into production efficiency and maintenance. Our logistics are outsourced, and we have a minimal inventory. Today, we only spend about 1.1% of net sales on core tech, which I believe is very low for a company our size. When we scale up, we could scale up without needing heavy investment in physical assets.
The third factor that I would like to highlight is our negative working capital. Although it has its swings, it means that we receive cash from customers before we need to pay our suppliers. This improves liquidity, it reduces the need for external financing, and it allows us to generate cash when we grow. Bringing it all together, these three factors—controlled unit economics, a capital-light model, and a negative working capital—result in a free cash flow of 3.6% of net sales over the last reported 12 months. Having this type of cash generation gives us both the flexibility to invest in growth, the support for a strong dividend, and maintain what we consider a healthy cash position.
With such robust cash generation, capital allocation becomes a strategic lever, I guess. How do you balance reinvesting for growth with rewarding shareholders? What's the philosophy on dividends going forward?
Our approach to capital allocation is disciplined and focused on creating long-term value for our shareholders. First, as just mentioned, our business model is capital-light, so we don't need to make large investments to support growth. Second, our negative working capital means we generate cash as we grow, so we are not tying up significant funds in inventory or receivables. Third, our ambition is to maintain what we consider a strong dividend yield while enabling the company to invest in strategic growth opportunities. Our policy is to pay out at least 50% of cash that we have generated as an annual dividend. The board has reaffirmed that a robust dividend remains a core part of our shareholder value. Unless there are capital-intensive growth opportunities, there is no reason for us to further increase our cash position, which means that we will continue to distribute additional cash generated to shareholders.
As I mentioned earlier, our cash position fluctuates significantly throughout the year, but we are confident that the current level is sufficient to manage these swings. Overall, our capital allocation is about balancing efficient reinvestment in the business with consistent and attractive returns to our shareholders.
Right, thanks, Erik. Any final thoughts for investors as you look ahead?
Thanks. I hope that you have all learned that seasonality and short-term fluctuations are a natural part of our business, but it is the underlying trends and long-term performance that is what is important. Hopefully, you have got some insights into how our profitability works, how the cash generation, as well as the capital allocation, is at Cheffelo . I'm confident that Cheffelo is well positioned for profitable growth and that confidence is reflected in our updated financial targets.
Thanks, Erik. That sounds good. Go and fire up your computer, and I'll see you in a few seconds for our Q&A session. That was our final prepared presentation for today, but don't go anywhere because, as I just mentioned, we'll go into Q&A where we will look at your questions and try to answer those. Afterwards, Walker will also wrap things up with some prepared remarks. See you in a second.
Remarks. See you in a second.
All right. I'd like to welcome all presenters back now. Some of them are here with me in a room, and the others, I hope you managed to find a quiet, cozy room for yourselves. We've already started receiving questions during the presentations, and you can still continue posting your questions to the right of the broadcast on the screens. Let's go to the first one. It says, "All of you talk about the importance of personalization." Sounds great. "Name a few numbers or key figures which you think prove that the personalization journey actually has had an impact on and shows that personalization is really important for the customers, not only a cliché." I think maybe Walker, you can grab that one.
Yeah, thanks, Peter. This is a good question. I think especially since, as we talk about personalization, it's so smart that it feels simple and having both strategic capabilities to deliver on that at scale. Let's go to proof points. Today, when we look across our business, about 60% or more, and it varies a little bit by brand, where it's almost 80% in Denmark, customers are choosing meals each week. It's important that customers have the ability to find something that suits their personal taste preferences. That's important, but it's also very important for a customer if they forget to change the meals for whatever reason, life's busy, or simply if they don't want to choose, they would like to leave that to us.
It's also important that those menus that they do receive match their preferences and their habits, because if it doesn't match what they want to eat in those times that they haven't chosen, then they're less likely to come back. Obviously, this is added strength to a subscription service. We launched three and five portions earlier this year in Sweden and Norway. We also expanded in Denmark to five portions towards the summer. Basically, we look across the businesses today, we see over 20% of sign-ups are coming in these different portion sizes. I think when we talk about personalization, we're also talking about making sure that it's the right amount of food for the household that's consuming it, an important dimension in terms of personalization as well. I think retention rates are higher. Our order frequency for the established customers, this is also increasing.
Companies that haven't adapted to more variation and a personalized meal kit experience, I think, are disappearing from the market or not succeeding well or not growing their businesses. Maybe that's even another proof point out there for the business. When we think about the variation component, having 200 unique recipes every week isn't just about giving people a lot of choice. It's actually about making the mechanics of customization and personalization work really well. The breadth of the menu gives us the ability to tap into the variation of all the different household differences that are out there. As Claes said, every family is different.
Thanks, Walker. We have the next question here. "Can you talk more about the results you released in your Q3 trading update?" Erik, you want to grab that?
Yes, I can, and thanks for the questions, but at this point, I can't share more than what we have already released and what I've just mentioned. We are obviously very proud of the performance, and we reported a growth of 23% and an EBIT improvement of SEK 12 million for the quarter, so very pleased with those numbers. We will be releasing the full report on November 5th, where we'll provide more details, so please stay tuned for that.
Yep. Thanks, Erik. We have a question here. "Glad you started with the possibility to order six portions. Love it as a customer." Thank you. "How many customers are choosing five or six portions, and is it having an impact on growth?" Claes, would you mind?
Yeah, as Walker said, first of the three and five, and looking on the figures of the larger sizes, we can see coming out after the summer, it's approximately 10% of our customers choosing five and six portion sizes.
Thanks. Next question here. "Good morning. What is your playbook to recover the Danish business? Do you see further opportunities of..." There are several questions, it seems like. "Do you see further opportunities of consolidation in the meal kit or e-grocery space in Sweden?" The third question here is, "Can you help us understand what is your current preparation center's utilization rate?" Let's start with the first one, our playbook to recover the Danish business. Walker, do you want to take that?
Sure. As we look at the Danish business, I think first of all, bear in mind, as we've talked about, from a consumer confidence perspective, we're seeing something in Denmark, which is quite soft at a macro level. What we're very happy to see is the business is 40% and above what it was two years ago. It's stable today. It's growing based on value, so average order values are going up. Part of this is also due back to the question, is five and six growing the business? It's allowing even higher portion sizes in the Danish market. I think from that perspective, we have a stable business in Denmark. The big question is, if we're growing so fast in Norway and Sweden, how can we get Denmark back to growth?
We've got some things up our sleeve when it comes to how we look at next year and how we're thinking about acquiring customers in the market. Obviously, this is a big part of the question. How can we acquire more in the Danish market? I think the key piece at this point is customer acquisition and focusing on changes of how we're approaching the market.
The next part of the question was, "Do you see further opportunities of consolidation in the meal kit or e-grocery space in Sweden?
Yeah. I think when you look across the space in Sweden, what is basically there today is HelloFresh and Cheffelo, or Linas Matkasse in the Swedish market, playing a very big role in the pure-play meal kit business. When it comes to others that are performing in meal kits that are beyond sort of niche players, they're often embedded with large distributors or offline sales. You would see those in other businesses like ICA. I would say I wouldn't expect ICA to sell their meal kit business or to somehow sell their customer base, but I think the limited consolidation in Sweden specifically.
The last part of the question, maybe Vibeke, you can take that. "Can you help us understand what is your current preparation center's utilization rate?" Our production center's utilization rate, Vibeke.
We are producing in Norway, Sweden, and Denmark, in Helsingör and Göteborg. We have lots of capacity. I think we easily can double the production every week. In Norway, we are a bit more hitting the peak, but there's still possibilities to grow in Norway as well. Different ways of doing it, both increasing productivity per hour, but also, of course, increasing the number of hours that we are working. Yeah, still opportunity to grow.
Thanks, Vibeke. We have a question for Claes here.
Yep.
A new loyalty program that rewards customers for order frequency. Can we get some more flavor on this?
You can. Seeing the program that we have today is focusing on the average transaction value of the order instead of focusing on the frequency. By adding, as we have done now, the different sizes, it's more important to secure that the customer stays with us and perhaps go down in size and adjust the subscription from the family view of seeing the family needs shifting. Seeing that behavior changing, we want to focus instead on not what they are buying, more that they are staying with us. That will be the focus within the new loyalty program that we are looking at for the time being.
Thanks, Claes. Next question, I think, will be for Anton. "How large is the tech team now in terms of employees, and how has that developed over the past few years? How is it expected to develop over the coming years?" Anton?
Yes, we are around 40 people in the tech team today. It hasn't necessarily grown in size, but we have centralized some product management functions that used to be in the commercial setup, so they have sort of moved in here. Other than that, we haven't really expanded the size of the team, and we don't really foresee that we should do that anytime soon. I think we have a great team now. We have the capabilities that we have. We can build on that a lot more. We can use AI to be much more productive in coding, in design, in product management. I expect us to be able to do much, much more with the same team we have also going into the future.
Thanks. Actually, there's another question which could be seen as a follow-up question to you, Anton. "Can you share more about how your investments in AI and tech are translating into tangible business results, such as high order frequency or improved customer satisfaction?
I think it's hard to put a tangible proof point on, okay, we're doing this. We're doing a sorting of your dishes based on a recommender engine approach, as an example. We can look at that. We can analyze a lot of the micro details. We can see that, okay, people have to scroll less. They choose more from the dishes that we have recommended. That should translate to an easier experience. That should translate to a better order frequency, a more happy customer. I think there's a lot of that. It's a little bit difficult to say that, okay, we move one thing here, and then it translates all the way to an order frequency improvement, as an example. We're still very confident that this is the way to go. We need to make it easier for the customer to shop with us as we expand the selection.
We need to help customers solve their dinner problem. We believe that AI, both sort of new generative AI approaches and more traditional machine learning approaches, is a key part of that.
Great. Thanks, Anton. Walker, it's another question for you here. "Platform enabling geographical expansion," within quotation marks. "Any new developments on the geographical expansion front?
The short answer to that is no, no new developments on the geographical expansion front. I think back to Anton 's comment, the platform is a multi-currency, multi-country, multi-production center dealing with the complexity of managing meal kits and all of the recipes and operational elements in multiple different environments. I think the point is well taken here that it is not a hindrance for us to look at geographic expansion as a growth trajectory, but we don't have anything to offer in that front today.
Thanks, Walker. Anton, here's a question that I would direct to you. "You've managed to achieve a tremendous increase in the number of new users in Q3. Congratulations." Thank you. "Could you elaborate on what you've done differently from a user acquisition standpoint?
Yeah, for sure. Thanks for the question, Anders. In the prep work for Q3, we already actually knew that from Q1 outputs we actually observed a generally good traction from an acquisition point of view. I would say that the team focused on surfacing those insights on basically doubling down in terms of the campaign structure, setup, on the things that actually showcased the best effect, but also efficiency for Q3 with some usual channel and market deviations. More importantly, focusing on customer and marketing activities in quality context, which notably has had a positive impact of not only getting the customers through the door, but also translating those sign-ups of becoming customers into also quality of active customers, increasing orders, etc. This was supplemented also by positive impact from commercial partnerships.
Thanks for that. Walker, back to you with strong customer intake in one quarter. Can you talk a little about the mechanics of how that spills over during the remainder of the year or coming years? Question from the Redeye.
Yeah, I think this is an important point. Hopefully, the material in the presentation helps understand the dynamic of very high customer acquisition because customer acquisition, high customer acquisition, growing customer acquisition is good for our business. It drives the underlying mechanics of the long-tail portfolio cohorts that we're looking for. What can happen is if we get one specific quarter that is very high, you also need to take into account that in the customer acquisition cohort tail here, we will see that having a very big impact in the immediate quarter. As we move forward quarter by quarter by quarter, obviously the retention rates, as they fall, will have less and less impact in additional quarters. We will see some of this bumpiness if we get a really good acquisition quarter.
You could also see the same effect if for whatever reason, if the macro environment changes, if something changes in terms of the customer acquisition rate and it falls, you would see a dampening effect on growth, but it would also not be a distinct dampening effect perpetually over time. It would have less of an effect in previous quarters. It's good that we continue to acquire at a healthy level, that we acquire the right type of customers so that the customers that we're taking in are actually customers that have a good fit for the product at the right acquisition cost.
Thanks, Walker. Erik, this next one's for you. "Is there a path to break even or even positive EBIT in Q3 in future years?
Good questions. I would say the short answer is yes, there is a path to break even and a positive EBIT also in the third quarter in future years, but I will not comment on when. It is about increasing volumes and also growing the top line. As we achieve more scale, our structured costs will grow more slowly than our contribution margins. Yes, there is definitely a potential to be profitable also in the third quarter. It is also to a large extent driven by economies of scale and us being able to achieve those volumes also during the third quarter.
Thanks, Erik. Thanks for keeping the questions coming. You can still post them to the right of the screen if you want to. Here's one question that I will direct to you, Claes. "You mentioned scale effects on bargaining power against suppliers. Can you give some indication about the size or impact of this? Any concrete examples?
Yeah, this is always leveraging what we feel is really important for our customers, being local and where we source local ingredients, as in proteins, for an example, that is highly a local category that is important for our customers. All other categories where we see we can have a common tender going out, as we say, a Nordic tender, we are increasing that. We're seeing that also by working closely to our suppliers, even if the supplier itself is a local supplier, we are collaborating between those suppliers to give them some increased power of negotiating contracts with their sub-suppliers. We're doing this in a different way, depending on how the local market is, where we see we have a possibility to source Nordic and also semi-source Nordic, as we say, where we use local suppliers and getting them together to do tenders for us.
I can't say that exactly a percentage, but of course, by aligning our physical product also, that makes it easier for us to secure that we increase our power of negotiating good contracts. With that power, it's not always decreasing the cost. It's just also mitigating risk of cost increases. That is also a big part of that team's contribution of going forward. That's what I can.
Thanks, Claes. Here's a question for you, Walker. "Is there any underlying structural factors that make Scandinavia a better or worse meal kit market versus European peers?
I think we probably have some structural factors. Of course, I live in Scandinavia, so I can speak more about what we do have in Scandinavia that contributes to meal kits. That is active lifestyles and also a cultural norm where, say, both parents in a family or the adults in a home are all working, which contributes then to significantly more sort of this stress moment and sometimes a lot of friction around traditional roles versus everybody contributing to the meal and to the process of getting food on the table.
In that context, we add a lot of value to customers when we can take the friction out of being able to quickly decide what's going to be made for dinner, having instructions that even teenagers are able to contribute to cooking, and obviously both adults or if it's a household with multiple adults, everybody can contribute in the meal kit space. I think that's a good part of it. I do know that we have in some of our markets, I think you can look at Norway specifically, the structural setup of food drives a very, very high cost of food in the grocery space, which means that the gap between what you would see paying for a meal kit versus buying it off the grocery shelf is significantly smaller. We do have a great way to make the service very value attractive to customers in our markets.
Thanks. I have one more for you, Walker. In the slide of net sales retention, you show that after between eight to 12 quarters, the curve flattens, and you state that long-term customer relationships play an important role in current revenue generation and profitability. Can you say something about how large a share of your net sales derives from these long-term relationships?
The key here is how do acquisitions, how do they go up and down in any given period? I think sort of a rule of thumb has been that about 60% of our revenue will come from customers that were acquired over a year previous to the period that we're in. Obviously, if we're acquiring a lot more customers, then that ratio of new acquisitions to long-tail customers will change and vice versa. I think that's about all I can offer in terms of getting a sense for how much is a loyal customer base, how much is a new customer base. If we look across all of our cohorts and our long-term portfolios, we see over two years in terms of the average lifetime for customers, and it's been growing in the last year.
Thanks, Walker. Now, this question I really like. "What is stopping Cheffelo to double or even triple active customers? Is it market size, business model, brand awareness, organization, etc.?" Maybe several of you want to chip in, and Walker, do you want to start on this one?
Yeah, I mean, obviously, we have a quarter here with a very high rate of acquisition, and the active customer number as it's measured spikes, right? This measure is a delivery in the last 90 days with a high rate of acquisition. We saw, I think it was 16% on active customer increases. Clearly, it's very tightly correlated to customer acquisition. I want to be really careful about saying that that's the most important metric because basically you can also get into an unstructured or loose control of what you're actually trying to accomplish. We're trying to accomplish long-term value. I can drive up active customer numbers by just going out and acquiring anybody and everybody and spreading a very wide net.
I think Adam's mandate here is to not do that, to actually find good customers, and Claes and his team and Vibeke and her team all working to make sure that they stay with the company and get a great customer experience.
I think, Adam, you want to add to this question?
It's following the lines of how we want to approach the market, so nothing in relation to specifics on that one.
Right. Okay, thanks. Vibeke, I think this one's for you. "You mentioned that operational excellence and service reliability are key differentiators for Cheffelo . What specific initiatives are you prioritizing to further improve efficiency and reduce costs in your production and logistics operations?
Of course, we're looking into different ways of automating our production to make it better. We're testing out some robots, and there are other manual processes that we can look into getting done in a more efficient way. We also talked about our ambition for growth in add-ons. We're looking into ways of integrating the add-on production to the meal kit production in a better way. On the logistics side, I think we're optimizing the time slots that we're offering to make sure that we have the right density. We're using geofencing to get high density in the areas where we deliver to keep the cost down, just to mention a few.
Thanks, Vibeke. Next question, Walker, back to you again, I think. "In your financial goals, you're aiming for 7%- 9% long-term growth when the current year's growth is already higher. Can you clarify the rationale behind the targets and are they too modest?
I don't think I would classify them as too modest. This is also a question of risk, right? I think where we're at right now is as we increase our ambition over the next three years, 7%- 9% is quite a large bump in terms of where we have been, but it's not necessarily where we wanted to limit ourselves. I think, yes, absolutely, this year has been very good. We've seen a lot of that driven by clearly higher acquisition numbers. As we explain a bit here in the comments, high acquisition will drive high growth in the near term. We would have to sustain acquisition levels and increase acquisition levels to continue to drive a higher growth rate. I think that the key here is the balance.
How do we maximize return on investment of marketing spend rather than maximize a sort of unsustainable growth on the top line? What I can say is this: if we can grow faster and we can do it profitably, we will.
Thanks. Adam, this one's for you. "What is your strategy for optimizing sales and marketing expenses, especially in seasonally weaker quarters?
Yeah, this is an interesting one. We strived to expand customer acquisition beyond those peak sales periods, just slightly and a little bit longer into slower periods, like Q4 coming up now, despite having a rigid and, yeah, cost-controlled but still flexible approach. When we actually see some quality demand out there, we can throttle up. Similarly, we're able to mitigate slower periods cost-efficiently by that daily optimization. Moreover, also applicable for weaker quarters, I would like to stress also revisiting our approach, working smarter with discounts in the same flexible way, as this is also fundamentally cost for the business to make sure that we attract the right customers with the right discount at the right time. That will ultimately help us along the way.
Thanks for that. We still have a few more minutes for questions. If you want to post them, you know by now how to do it. We have here a question to Claes . "How much of your current sales or margin contribution comes from add-ons and groceries, and what is your strategy for expanding it further?
Yeah, thanks. Add-ons and groceries are an important part of our loyalty, and the purpose of having add-ons and groceries is to boost the customer loyalty. Our data that we have shows that those customers choosing add-ons and groceries have a higher order frequency. We have seen in this past year an increase of over 30% of customers that take an add-on and grocery in their meal kit delivery. A number this year, I can say it's slightly over 2% of the revenue now, and we have a clear target of growing this. Again, as I said, it's not to be selling a lot of add-ons and groceries. The purpose is to increase the loyalty within the meal kit service as we have.
Thanks, Claes. One more for Walker. "From a unit economics perspective, it may be better to get an active customer to buy additional two dishes per delivery, but from a brand awareness and long-term growth perspective, it may be better to get a new customer to start buying two dishes. If you had to prioritize between these two types of growth, which one would you choose and why?
I think the key question is if I had to prioritize. That's the nuance in this question. The reality is that when we talk about personalization, it's actually the customer that prioritizes what's important for them. I think for us, it comes down to making sure that we're not limiting. Obviously, we have some influence on what customers will choose and how do we make sure we put the right things in front of them. I think the key part is how do we make sure that whatever we put in front of the customer, whatever the customer chooses, fits them and fits them in a way that they keep coming back. I will be completely agnostic to both of these approaches as long as it drives customer loyalty. That is a question for data.
It's a question for the teams to work and get good customer feedback to understand where we need to be stronger and where do we need to work.
Great. One more for you, Walker. "Your new financial targets, what are the main risks or headwinds to achieving these, and how are you mitigating those?
I think the key comes back to the fact that the top line is everything, right? When we talk about the targets on profitability, we're talking about realizing economies of scale based on growth. If there's any risk to the sort of the financial targets, it lies in the top line in the sense that factors that we can't control, such as macroeconomic changes, we've had a lot of conflict in Europe recently. There's wars. These types of things that affect consumer sentiments, that affect the demand by the customer base, are all risks to the top line. Obviously, changes in the competitive environment. I think we're benefiting from a normalization of the competitive environment to rational choices and more logical choices with regards to business. I think that is something we're benefiting from in the short term.
Again, anything that would affect us from a growth rate perspective or would reduce the top line, not reduce the top line, but reduce the growth rate on the top line, is something that would make it more difficult to achieve profitability due to the way we work with economies of scale.
Thanks. I don't see any more questions coming in now. I think we have gone through all of those that we have received. Thank you very much. With that, we will wrap up the Q&A session. Thanks for all the interesting and challenging questions and comments. Walker, back to you to wrap up today's event with your closing remarks. Please go ahead.
Yes, thanks, Peter. I'll keep it short. Thank you, Peter, for helping us shine today. Thank you also for all of you that are interested in Cheffelo, that have taken the time to tune in to this capital market event. We do hope that you've come away with a better understanding of how our business works. Hopefully, there's also some shared conviction that we're on a good pathway to win in the market and also to continue to generate good shareholder value. Don't forget that you've only met eight of us today. There are almost 400 Cheffelonians that are skilled, engaged, and very proud to work knowing that they're helping families get together around the dinner table.
Thanks. Thanks to everyone in the Cheffelo management team who've been presenting today. Of course, a huge thank you to everyone who joined us for this session today. We're grateful for your interest in Cheffelo and for the confidence that you have in us. You can sign up for our press releases on cheffelo.com, and you can also follow us on LinkedIn to get updates and insights into our day-to-day business. Finally, we hope you continue enjoying our meal kits. We've been talking for almost two hours now about how we sell dinner better than anyone else. If you haven't tried them yet, I think it's about time that you put us to the test. With that, take care and bye for now. Thanks.