Jasper Wight, Chop’d14th October 2018
What’s it really like to start a business in hospitality?
We started an interview series to find out. This week, we talked with Jasper Wight, Founder of Chop’d, HiLo and TasteBed, about what it takes to start and scale a food business, how Brexit might change how we eat and who will win the delivery wars.
Let's start with an easy one. How do we make healthy food more democratic?
How is food undemocratic? We have a plethora of plates and platforms to provide anything from a fine dining dinner to a takeout to your door.
The crossover of food-to-go from restaurants, supermarkets and dark kitchens drives prices down, to the consumer’s supposed benefit.
In the case of Deliveroo, who posted annual losses of £185M for FY2017, and whose full accounts will be posted very shortly, a lot of that subsidy comes from its VC backers, so far on the hook for nearly £860M. Meanwhile, Britons spend less on food (at home or outside the home) than pretty much any other EU country. In order to be cheaper, food becomes more industrialised, and supply chains can become less sustainable, ethical or environmentally friendly.
So maybe the real question is not so much about how to make food cheaper, but how to make it better, more natural and more sustainable, while still keeping it everyday affordable. Maybe also part of the question, and hopefully answer, is about the value of real food to our health and to our busy real working lives.
Like everything in a democracy, it should all be about informed choice.
You’re a serial Founder. What does it take to start, run and develop a successful brand in food & drink now, and should the same person undertake these three tasks?
When I was founding Chop’d in 2003, I was told by a now well-known industry veteran that, under the law of sevens, it was harder to go from 0 to 1 than 1 to 7, which was easier than 7 to 17, which was easier than 17 to 70. I can’t yet confirm whether he was right, though I am still keen to build a 70 strong brand.
But his point was also that the different phases of start / run / develop need different skillsets.
In the less sequential, more multichannel world of 2018, the truth is that each channel might well need each of these skillsets at the same time - hunter-gatherer hybrids rather than just hunters or just gatherers. Some founders have successfully ridden each wave of channel growth. Others have stuck to what they know or enjoy best, or for other reasons not gone all the way.
As long as you are adding value, I’m not sure there is a single answer to this question.
You approach food in a data-led fashion. We read & hear about the pervasion of data across every industry, and yet food seems to lag behind. What can we do to change this? And do we need to?
It might seem a truism in amongst all the noise of foodservice - the staff banter, customer feedback, online reviews, customer focus groups and daily management discussion and debate - that the only signals to watch are the bottom line of the P&L and your cash life at bank.
While this may be true on a fundamental level, it should be a lot easier to deliver, and give you a lot earlier warning, if you can create relevant KPI from the host of other white noise that are maybe harder to turn into trackable indicators.
How do you turn customer facebook comments into a heat map chart? The truth is that nowadays big data and niche tech are increasingly available to foodservice operators of all sizes. The challenge as usual is more to agree what to watch than how to watch it. As ever, less is usually more.
"Ironically it might be Brexit that makes us eat up our greens, reduce our meat consumption and maybe even wean ourselves off our Deliveroo diet."
Once upon a time, lunch was a thing. People left the office. Deals were done. Meals were eaten. Will we ever get this back?
Back in the bad old days, lunch for office workers was more of a single channel, bricks and mortar business - think Pret 1990 compared to Itsu 2015.
Now that we live in a multichannel world, it is harder to know where to focus your firepower - own stores, third-party retail or delivery platforms. Of course, the answer is all three - again as per Itsu. Office workers will always need lunch. Being able to compete with their other options - from a packed lunch from home to a street food stall or a subsidised canteen - depends as ever on offering a delicious, quick and convenient set of options at the right price for both of you - delivered via all the relevant channels. But maybe this multichannel world is harder than its bricks and mortar predecessor.
In the FY ending 28/12/17 (since when things may potentially not have improved) Itsu lost -£9M PBT on £106M net turnover, of a total -£14M accumulated losses 22 years since incorporating in December 1996. Where previously foodservice was all about funding the capex to launch and gain scale, maybe now, in the more capex-lite world of third party retail and delivery, it is more about funding the ramp up losses until your thinner margin multichannel food business achieves its deeper and wider moat.
How detrimental, to the ambition of providing healthy, affordable food, are the rent and rate hikes on the high street? What more could be done to support the availability of ‘better’ food?
Most landlords are more motivated by better rents more than better food. It’s nothing personal.
Some landlords of estates - Howard de Walden, Canary Wharf Group, Grosvenor etc. - may seem more enlightened, and may discount certain uses to attract certain demographics, but their overall goal remains to maximise rent from the overall estate. So far, so normal.
Asking how to get landlords to give better food more of a chance is to ask the wrong question. It’s just not what they are out to achieve. And to ask how to get to better food more generally turns into a chicken and egg question - should consumers be demanding better food or should pioneers be offering it ahead of the curve?
The answer is that you need both, but in particular snowballing consumer demand. Even with veganism and vegetarianism allegedly booming in 2018, it is still tough going to scale up a business plan that does not feature meat far outside of the M25, even with a few notable pockets of exceptions, usually around student campuses.
A fair bit of cash has been burned trying to crank the sustainable food engine, which is still puttering more than roaring, despite growing media nudging towards flexitarian, pescetarian, veggie and vegan eating.
Ironically it might be Brexit that makes us eat up our greens, reduce our meat consumption and maybe even wean ourselves off our Deliveroo diet. Apparently Britain’s national health peaked in 1948 when rationing also peaked and everyone still had to dig for Britain. Raise your own rabbits, anyone?
"While Deliveroo and UberEats grab more column inches and screen centimetres, the fact remains they are surviving on considerable investor largesse. "
Not many brands make it to 70. And those that do tend to be run by accountants when they do. How has ‘chain’ culture changed how we eat?
There’s a big difference between creation and optimisation.
A lot of ventures never make it out of the creation phase. Those that do have most likely already become at least nascent brands - it’s part of the start-up process. A brand is simply a shorthand for a value proposition, a combination of physical and non-physical elements that together make up a customer offer.
The brand name, logo and other signifiers help customers and potential customers understand what the are buying. Even single store independents still have a brand, whether they like to think so or not. They are still signaling even if they don’t want to admit it. Online and offline it can be hard for fledgling brands to cut through, and a lot of start-up runway can be burned essentially trying to gain digital eyeballs and real-world first tastes from target customers.
It can also be challenging to integrate evolving brand propositions across different channels, from instore to Instagram. But chain look does not have to mean chain think or chain do. Your business can still be heterogenous, can still run bottom-up, can still seek diversity and inclusivity and can still reward risk-taking and innovation. In fact, in a more brand-heavy world, more than ever the challenge is to look big but act small.
Just Eat vs. Uber Eats: Who is still supporting food delivery in 10 years?
It’s a bit of a fools errand to try and predict any future, in particular this one. Right now Just Eat is the only profitable major in this space, yet gets continually treated as the poor relation.
While Deliveroo and UberEats grab more column inches and screen centimetres, the fact remains they are surviving on considerable investor largesse. By some estimates Deliveroo is burning £200-300M per annum against a cash pile of maybe £400-500M, having already burned a similar sized pile prior to this one. That is not such a long runway to bring this global jumbo into meaningful profitability.
A lot of people are betting that they will, at least one of Deliveroo and Uber Eats. And it’s certainly a big bet, but the economics are certainly challenging, both for the market makers and the market participants.
The market makers need to run a just-in-time delivery fleet on a relatively low ATV and relatively short delivery window across increasingly extended distances as they grow out from their initial CBDs. The market participants, the restaurants and takeaways, need to somehow accommodate the market makers 25-30% commission into their previously 10% or so bottom line. Which to some extent forces a parallel delivery business model and operating model to co-habit alongside the previous brick-and-mortar models.
Being an integrated offline and online player is a bigger ask than the old days of eat-in or takeaway but so far this trend does not look like reversing. Let me ask you a question: What would you price a 2021 Deliveroo share option at?
We responded. Because we’re like that:
See, I don’t think there even is a Deliveroo in 2021. It strikes me as a company taking steps to sell and, by all accounts, they’re a little short on cash. I’d bet that the recent purchase rumours were spread by Deliveroo themselves to open a bidding war.
For all the smart decision they make – they’re a very well run business – they’re running the wrong race. The model relies on efficiencies that are gained at massive scale and control of inventory – restaurants, drivers and data – to deliver the best possible user experience. It’s one of the few industries where consolidation could be deemed in the customer’s best interest, considering the eventual savings that control over all that inventory would enable, and that’s before we even consider the potential effect of government regulation in the sector. Terrible for restaurants, of course, but great for the end user.
Uber and Amazon will fight it out to own delivery & logistics. One has Softbank, the other has, well, Amazon. One day, Uber investors will demand the business veers into profitability, leading to a cull of any arm that isn’t performing. Amazon simply doesn’t need food delivery to be profitable in isolation, nor are they beholden to shareholders in the way other companies are.
My money’s on the one that can rely on AWS, has redefined logistical efficiency and already owns online buying discovery, and all the behavioural data that goes along with it. They’re also ahead in drone tech, which will render drivers & traditional delivery mechanisms obsolete in the not-too-distant-future. So take your money out of Deliveroo, put it in Amazon and thank me later.