Western Grower & Shipper 2018 11Nov-Dec

produce buying operation in San Jose as well as two local buying offices in the Midwest and East. He said it operates a supply chain process that is far more efficient—and hence less costly—than that utilized by retailers or foodservice operators. He explained that produce typically goes through five to seven hands from field to fork: grower to the shipper to the distributor to the retail or foodservice distribution center to the store or restaurant to the consumer. And there can be a wholesaler or two in the mix as well. “We go from the grower to our D.C. to the consumer. That’s more efficient and less costly,” he said, noting that the mark-up along the way, including the 40-50 percent at retail, is eliminated. “This is a much better profit model. We are still figuring it out but it does allow us to pay more to the grower.” The technology company part of the organization has its own set of challenges to figure out, but Barnett indicates that is where the opportunity lies. “We are not selling to mega-customers; we are selling to individuals with a highly personalized product.” As such, each customers gets a menu page that lines up with their individual

buying habits. A vegetarian is going to see vegetarian meals, while a gluten- free customers is obviously going to be presented with meals that cater to that diet. It is this personalization and dive into the data that creates the value for Sun Basket. He noted that often a person who identifies as vegetarian will swap out vegetarian meals for those featuring fish. Sun Basket’s data captures this and offers that online shopper, fish dishes in the row right after the vegetarian dishes. Barnett explained that each customer has a particular value to Sun Basket. The company has ascertained this value through its collection of data. In the e-commerce world, he said these calculations are golden. Investors—via the stock market or the venture capitalist route—want to know how much it costs to get a customer and what that customer is worth. For example, if it costs $100 to acquire a customer and that customer spends $100 with you, that one-to-one ratio is not going to lead to big profits. But if that customers spends $200 or $300 creating a two to one or three to one ratio, black ink will appear on the bottom line. Currently Sun Basket is operating

between 6 to 1 and 12 to 1, which Barnett said is very good. The company is in a fast growth cycle (including about 100 ads on Facebook at all times), so that ratio has not yet created revenues above expenses but Barnett said the firm has sufficient venture capital money to get it through the growth period. “We could show a profit tomorrow if we adjusted our sights and shot for 30 percent growth rather than 75 percent growth, which is where we currently are.” Using hypothetical numbers, Barnett explained why the data it is collecting and the target marketing it is doing is so valuable. One of the company’s menu is a “Chef ’s Choice.” This is the menu that competes most directly with its competitors’ convenience play. It is not highly personalized but rather appeals to the price shopper who jumps from one meal kit company to the next. These people will stay with one company for a while then move to another. For the sake of example, this shopper might cost $100 to acquire and will be worth $500 in sales before moving on. For Sun Basket’s more personalized menus, a shopper is worth more. He said that person with a paleo diet might be worth $3,000 for that same $100 acquisition cost. “We also know that shoppers who get their meals delivered on Monday are worth more than shoppers who get a Wednesday delivery.” He explained that the prime nights for eating meal kits are Monday through Thursday. A Monday delivery allows for full consumption of the delivery over a few days with the shopper remaining excited about the purchase and more likely to continue using the service. A Wednesday delivery has the meals competing with weekend plans, which could mean lower utilization, less excitement and less chance for a long term customer. A new customer who identifies as wanting paleo dishes and wants delivery on Monday is a very desired customer, he said. Barnett said the average customer gets a delivery with three meals for two every other week. For each individual with an average of four eating occasions a day that means Sun Basket is talking care of six of their 120 eating occasions during the month. At the current time, those six are all dinners. Barnett said the company is exploring other avenues to interact with the shoppers including snacks, deserts and other main-meal eating occasions. For a grower-shipper, Sun Basket is an interesting customer. Barnett, who

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18   Western Grower & Shipper | www.wga.com   NOVEMBER | DECEMBER 2018

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