Ladies and gentlemen, welcome to the LMK Group audio cast with teleconference Q3 2021. For the first part of this call, all participant will be in listen-only mode. Afterward, there will be a question and answer sections. Today, I'm pleased to present Walker Kinman, CEO, and Erik Bergman, CFO. Please begin.
Thank you, Aaron. Welcome everybody to this conference call where we report our results for the LMK Group for the third quarter. As you flip to slide two, a quick introduction. My name is Walker Kinman, I'm CEO of the LMK Group. Joined with me today is Erik Bergman, who is our CFO. Today, we're gonna talk about the LMK Group in brief. We'll do quick highlights on the third quarter. Erik will run us through some of the financials, we'll do some concluding remarks, and then take your questions. If we flip to slide three. First of all, the LMK Group in brief. We were founded in 2008. Today we're the largest supplier of meal kits in the Nordic region.
We're a leader in Scandinavian food tech. We have operations in Sweden, Norway, and Denmark, and operate four different brands in these markets. Our business model is demand-driven. We have quite high order visibility, and we have near zero inventory as well as minimal food waste. If you look at some of the dimensions in terms of size, in 2020 we delivered 20 million portions. Today we have around 110,000 active customers, and we reach around 80% of Scandinavian households. Let's turn to slide four. Here we have the highlights. I'm pleased to present what has been happening for the third quarter. First of all, we see continued growth in what is a dynamic post-COVID market.
Organic growth was at 8.4% compared to Q3 2020. In the first nine months of the year, we've grown by 20%. Even if you go back and look at what we've done since 2019, we've had a compounded annual growth rate for the first nine months since 2019 of 13% annually. Active customers growing by 4.1%. Deliveries grew in the quarter by 3.7%. Our contribution margin landed at 25.6%. This reflects annual seasonality that we see with the third quarter, where volumes are low, as well as the investments that we've been making in our flexibility, and I'll get back to that.
EBIT was also negative in the quarter, and this reflects annual seasonal profitability as well. We are on track to achieve 100% customer unique packing by year-end. During the quarter, we had production on customer unique packing lines at 71%. This is really important because customer unique packing lines is basically an underlying capability that allows us to increase flexibility. That gives control to the customers and allows the customers to have full control to be able to choose their recipes every week from a wide assortment of different recipes in all of our markets. It also allows the usage of advanced AI techniques that we can use to recommend and upsell recipes to the customer.
If we look at customer unique last quarter, that was 60%, and in last year it was at 39% in the third quarter, growing to 71% in this quarter. The final pick-to-light capacity in Norway came online last week, so we now have 100% customer unique, based on pick-to-light technologies in Norway. Sweden will follow in Q4, as well as RetNemt with pick-to-light lines coming online in Q4. In the quarter, we made significant advances in the RetNemt integration. I'll talk more about that. We also saw a return to normal purchasing patterns following the ease of restrictions. This is basically school holidays and vacation travel times, people doing a lot more traveling and in comparison to last year with restrictions where there was a lot less travel.
This creates year-over-year seasonality effects during specific weeks. In the third quarter, the general seasonal effect is that the volumes are lower during the summer period. This is combined with a period when we also spend a lot more on marketing, and this is connected to post-summer reactivations campaigns. The third quarter is the quarter during the year where we expect the least profitability because of these two effects. If we turn to the next page, we're the largest meal kit supplier in the Nordics and also Scandinavian food tech leader. I'd like to share a little bit of the insights on the different markets that we operate in. First of all, if you look at Norway, we do 51% of our revenue in the Norwegian market.
It grew by 17% in the quarter, and we operate the brands Godtlevert and Adams Matkasse in Norway. This is a market that's growing well, but the competitive environment is also changing. As a market, Norway is actually smaller than the other two markets, but has a higher relative growth potential in short term. If we turn to Sweden, we did 36% of revenue in the Swedish market, operating the Linas Matkasse brand in Sweden. This is a market where we saw a negative growth in the quarter of 4%. We continue to perform well relative to the broader meal kit market.
However, if you look at the general food e-commerce market as measured by the food retail index, this has seen a rapid slowdown post-COVID, and that index would cover everything related to online groceries with free pickup for both home delivery and click and collect as well as meal kit operations. That whole market moved from 128% growth in the first quarter of this year to 3% in the third quarter. We feel we're tracking well relative to how the market is developing in Sweden. If we look at Denmark, in Denmark, we do about 14% of revenue. We saw a 10% growth during the quarter where we operate the RetNemt brand.
The Danish market shares a lot of characteristics with the Swedish market in the form of the breadth of competitors as well as the offerings that are available in the market, a degree of maturity that's higher than the Norwegian market today. As we wrote in the report, we expect that the underlying structural changes in consumer digital habits will continue to work in favor of our continued growth as we deliver on our strategy of fully flexible meal kits. Let's turn to page six and look a little bit closer at RetNemt. We've been advancing the integration during the course of the year. Q3 marks a period where we completed the organization integration as well as a platform integration. All of the systems that we operate on are now operating on a common platform for the group.
We will do a transfer of production technology, as I mentioned later in Q4, setting up pick-to-light production lines for the first time in Denmark. This really gives us the capability to deliver a significantly larger recipe variation and flexibility to our Danish customers. The shift to pick-to-light and the technology transfer enables higher productivity and more control of input costs over time as well as the commercial offering. In the short term, there is a temporary short-term reduction in production efficiency that we expect through to the beginning of 2022. In early January, we will launch into the market a new offering that's addressing the demand for increased flexibility. We turn to slide seven. We'll look a little bit at the organization.
We've continued to strengthen the organization. During the quarter, we announced the recruitment of Anton Nytorp as the new Chief Technology Officer. He will be starting on the first of January. He joins from CoopX in Norway, where he's been running that for the last several years. His focus is of course to further develop the meal experience with a very high pace on innovation. During the quarter, in line with pushing new growth, Klaus Toft Nørgaard was appointed as Chief Business Development Officer. Klaus co-founded RetNemt. In his new role here, he's gonna be focused on new business development activities at the group level. Finally, we also recruited Peter Bodor as Head of Corporate Communications. We'll be seeing more of him.
He has previously been with Coca-Cola and Carlsberg and is very much focused on developing and strengthening the LMK Group brand. Turning to slide eight, let's conclude my remarks with just some quick thoughts on sustainability. We continue to move forward on our sustainability journey here. The board adopted a new sustainability policy during the quarter, and this is based on the UN Sustainable Development Goals, also highlighting the impact areas that we've identified previously, food waste, food products, resource consumption, health, and social responsibility. This policy is posted on our website. If you're interested, you can dial in to lmkgroup.se and read more about that. During the quarter, we had several new initiatives. We, as mentioned previously, began reporting on food waste from our own operations.
We also had a collaboration with Urban Oasis, involved in hydroponic farming, using reclaimed industrial space in urban environments. We also announced our Plastic Promise, with the focus on the reduction of plastics in our meal kits by 25% by 2025. Moving forward with our ambitions and with definitions with regards to how LMK Group is working and has been working with sustainability. With that, let me leave it over to Erik with regards to our financials.
Thank you, Walker. We can move on to slide 10. I'm very glad and proud to present the report for the first nine months of 2021. As Walker mentioned, the third quarter are normally a quarter with lower volumes due to summer vacations. We are seeing less impact from COVID restriction as the purchasing behavior come back to pre-COVID levels, which is visible in that more customers passing their deliveries during summer periods. We are continuing to grow. Net sales is up 8.4% during the quarter. Look at the first nine months, we have a growth of 19.9%. Last year was impacted by COVID restriction. One way of comparing it would be to compare the first nine months versus the same period 2019, where we see a compound average growth rate of 13%.
The increase in customer unique production has driven up production costs, although at a lower level than originally planned. As new production line will be implemented during Q4, achieving the 100% customer unique target, we anticipate that production efficiency will fall temporarily as these new lines are getting up to speed. Contribution margin for the third quarter achieved 25.6%. That is lower than last year, but that is mainly due to the increased production cost due to the increased flexibility. I would also like to highlight all the great work that has been done throughout the organization to be in control of the unit economics and which also has enabled us to do this transition. Looking on where we have been, for example, comparing versus 2019, the contribution margin for the same period was 22.1%.
During the quarter, we have seen some effect of inflation, which will likely continue for the near future. We are facing rising fuel prices, which are impacting transportation costs in both our inbound supply chain and with our outbound delivery partners. In addition, we see increase in packing material costs relating to both rising oil and pulp prices, which have impacted plastic and cardboard prices. During the quarter, we executed on our previously planned low single-digit price increase to help balance the inflation pressure of input goods. We are continuously working with our sourcing model. Year to date, our contribution margin is at 28.5%, and we will continue to push the contribution margin further, which in the medium term will approach 30%.
To conclude the slide, we do see that the third quarter is seasonally a lower quarter, but year- to- date, we see the profitable growth continues even though COVID influence recedes. Moving on to page 11. What is behind the continued growth of 8.4%? In this slide, we have highlighted two important factors that are growth in active customers and growth in average order value. The third quarter is a good quarter to acquire customers as there is longer time until the seasonal slowdown towards Christmas. That also means that the quarter is characterized by sales and marketing investments due to the post-summer campaigns, focusing on both new sales and to reactivate existing customers.
We have encountered that it is more expensive to acquire customers as the pandemic recedes, but the active customer base is still up 4.1% versus last year. Our flexible offering has also enabled a good trend when it comes to basket size and to add-on sales, such as groceries. This, in combination with price increases is what drove the growth in average order value that has increased by almost 4.6% adjusted for currency. All in all, our strong financial position and good control of unit economics has enabled us to invest more in customer acquisition and in our product offering, which is something we believe will drive growth also in the future. Let's move on to profitability on page 12.
As I previously mentioned, the third quarter is characterized by seasonally lower volumes while also containing a period of heavy sales and marketing investment. As such, the third quarter is, by season, our least profitable quarter. Adjusted EBITDA for the quarter amounted to SEK -9.1 million, which also then includes the SEK 10.8 million increase in sales and marketing spend versus previous year. Adjusted EBIT margin for the first nine months at 4.2%, we continue to be profitable. The 3.3% lower than last year are mostly related to increased investment in sales and marketing. During the first nine months, we have spent 14% on net sales and marketing versus 10.8% previous year.
That is in line with our growth strategy and something that we strongly believe will drive growth also in the coming periods. The increased spending in sales and marketing is enabled by the good control of our unit economics. Let's move on to balance sheet on page 13. We are looking at a strong balance sheet with non-current liabilities at a low level. End of the quarter, it consists mainly of leasing and tax liabilities as the corporate bond was repaid in full in previous periods. A lot has happened during the year as the company was listed the 29th of March. The third quarter was more back to normal business. Let's move on to the cash flow on page 14. With the subscription model, we do have strong cash flow conversion, and we are working with a negative working capital.
End of the quarter, cash position were at SEK 127.7 million compared to SEK 45.4 million last year. The increased cash position versus last year is driven by profit and to some extent the proceeds from the listing. Seasonality-wise, the third quarter is not the quarter generating cash due to the lower volumes and ramp up after summer. You could see the negative working capital in the model in the positive cash flow in the operating activities, where we have the increase in trade payables at the same time as revenue ramping up after lower volumes during summer. Cash flow from investment activities amounted to SEK 12 million. That includes investment in tangible assets that amounts to SEK 6 million and increase of SEK 4.8 million.
This is due to the investment in RetNemt integration and investments made in a customer unique production equipment in Norway. We are in a period where we are investing heavily in customer unique production. As such, the CapEx as percent of net sales amounts to 1.8% year- to- date, which could be compared to a 0.8% same period last year. The third quarter is impacted by seasonality, but look at the full year, we have a good cash generating business which enable us to invest in growth. With that, I would like to hand over to Walker for the conclusion.
All right. Thanks, Erik. We can turn to slide 16 here. Let's highlight the takeaways here. First of all, it's a solid result in a volatile market that we're operating in. We look at the business compared today compared to where it was two to three years ago. We have a strong balance sheet. We're growing well on a CAGR basis. We've got solid and strong unit economics profitable over the year and generating cash. A good result. If you look at the sales and marketing, we've been boosting that in line with our growth on focus or focus on growth. This is something that we'll continue to be working with in fine-tuning sales and marketing in the business and finding the right levels in the future.
If we look at the RetNemt business, we've made significant advances in integration. If we look at the seasonal purchasing behavior, it's returning to normal. Here we have the H1 of 2020 has benefited from restrictions. We're moving into a phase where restrictions will not give us the same type of tailwinds that they've had in the last quarters. We're on track for 100% customer unique packing lines, allowing for the personalizations that will drive improvements in average transaction values, purchase frequency, and churn reduction. We're delivering on our strategy of fully flexible meal kits and innovating the mealtime experiences as a leading Scandinavian food tech company. With that, I would like to turn it back to the operator, and we'll take your questions.
Thank you. Ladies and gentlemen, if you have a question for today's speaker, please press zero one on your telephone keypad. I remind you that if you want to ask any questions, you may press zero one on your telephone keypad now. Our first question is Kamal. Please go ahead.
Yeah, good morning, Erik.
I'm sorry. We can't hear the question. The audio on the caller is not clear.
Walker, do you hear me?
Yeah, now it's a little bit better. Please go ahead.
Oh, okay. Yeah, hi. I've got questions. The first one is on growth. From your side, were you negatively surprised by the extent of the deceleration and especially in Sweden? Because obviously investors will have some fears regarding the impact of inflation. Maybe every indication there will be useful. My second question is about on inflation and on margin. Do you expect inflation to continue to hold back on margin even in 2022 or despite of price increases? Thanks.
Yeah. I think when it comes to growth, and especially in the Swedish market, basically, you know, we see a development of our own position relative to the market, which appears to be quite good. I think there has been a broader question with regards to how consumer behavior has changed during post-COVID environment in the sense of, there's been a lot of pent-up activities that haven't taken place. We're seeing certainly from a travel perspective a lot of people traveling now that they have had the opportunity to do so. I think in the broader sense, and specifically looking at the Swedish market, you can see a very clear index like the Food Retail Index, which has developed in the third quarter at only 3%.
Going back, you know, two, three , four quarters, this is an index where the market was growing by triple digits. There's certainly been. I think from our perspective, we are satisfied with the development of the business in the market with the existing market conditions. We certainly, as I mentioned, I think, you know, we see the shift in terms of digitalization. We see the shift in terms of e-commerce food in the market continuing to be a growth factor driving long-term consumer behavior. I think short term, we do see that there's certainly going to be some impact of coming out of the restriction environment, and that has been an uncertainty for some time. I think for the inflation question, let me turn that over to Erik.
Yeah. The question was about the inflation and how we see it impacting the margins. Our pricing powers remains good. We don't expect that we need to increase our prices anymore as there's still room in our meals how they are composed. We do have good control over unit economics, and we are monitoring the costs closely. We have projects that are ongoing to reduce our cost in purchasing and fulfillment operations. There are still untapped synergies within the group that we are working on and expect to explore further. We'll continue to push our contribution margins towards 30%.
Do we have any further questions from listeners?
Our next question is, Frederick Molga. Please go ahead.
Thank you, operator. Good morning, Walker. Good morning, Eric. First off, a question on marketing spend. I think you previously said that you aim to spend around 13% of sales and marketing. You're running at 13.1% on a rolling 12-month basis. Should we expect the ratio to level off from here or are we seeing higher customer acquisition costs forcing you to increase marketing spend to drive continued growth?
I think when it comes to the sales and marketing spend, yes, we had aimed to spend roughly around 13%, and we had seen 13% as sort of the high end of that threshold. I think where we're at today, it's if you look at it on an annualized basis, or on a rolling 12-month basis, it's slightly higher than 13%. We do expect that to come down here over time. We've been driving new campaigns in three different brands in Norway and Sweden over the last 12 months, and there are incremental additional costs that come in relation to that. We expect those types of incremental costs to taper off going forward. I think, you know, from our perspective, we don't adjust as fast immediately. It'll take a quarter or so before we see that our 12 number begins to move in the other direction as well.
All right. Thank you. Sort of tied to that, to the marketing investments that you made during the quarter, you spoke to some extent in the report on the reactivation campaigns that you were running during the third quarter. Could you perhaps tell us something more about what you've been able to achieve with the reactivation campaign? Have you been able to meet sort of the targets that you set out for yourselves in terms of reactivating customers?
I think on the reactivation side, when it comes to the normal flow of our business activities, we always have reactivation events that are happening throughout the year as part of our normal CRM activities. These tend to be higher after periods where people go on seasonal vacations. We go through a very high period of reactivation after summer because of the extended length of holidays in the Nordics and people that will pause their service while they go on vacation. Those campaigns to reactivate to get them and remind them to reactivate their services.
We also have a period where we do higher levels of reactivations in January, after the winter holidays for much the same reason, but they're shorter holidays, so they tend to be smaller. These are also periods where people come back, they get back into school, they come back to work, and life tends to be fairly hectic. When it comes to the activities and our performance in the third quarter, I would say that this is very difficult to gauge based on the turbulence in terms of coming out of COVID restrictions. What's, you know, what's normal behavior, what's not. I think we had higher expectations, but at the same time, we had good reactivations if we look at it from a historical perspective.
All right. That's helpful. A final question on my side, when it comes to cohorts. You're saying that new cohorts have very solid retention rates. If you could perhaps elaborate on what you're seeing with new cohorts, perhaps those who have come on board over the past year, and tell us something more about how they differ in terms of average order values, purchasing behavior, order frequency compared to your sort of legacy base of customers that you had coming into the pandemic.
When it comes to new customer cohorts coming in, we've seen a good trend in terms of both increased purchase frequency, churn rates, and even average order values. Those from a cohort's perspective for new customers coming in. I think we saw a sort of a peak in cohort behavior in the middle of the pandemic. You know, 2020 cohorts have been very strong cohorts and continue to perform well. I think what we see affecting cohorts acquired this year and in recent months is sort of a transition from a phase of restrictions to non-restrictions.
I think in general, we're very satisfied with how the impact of increased flexibility is having on customer behavior, both driving ATVs and impacting how what purchase frequency and churn rates look like. It's difficult to gauge it given that it's, you know, looking at a cohort is looking at a time dimension over many, many months to assess if it's good, if it's been good enough.
All right. Thank you very much, Walker and Erik.
Yeah. Thank you, Fredrik.
As a reminder, please press zero one for questions. Currently, no more questions on audio. Thank you.
Okay. We don't see any other questions that have come in through our investor relations mail account. No write-in questions either. With that, I think, let me just conclude by thanking our hardworking employees, our partners, our suppliers, and even our customers. The business continues to perform well in a volatile market, and this is due to all of their efforts on behalf of the business. Thank you for tuning in to the call today. Look forward to speaking to you again, when we announce our fourth quarter results, in February. Have a good day.