Q3 2022 Goodfood Market Corp Earnings Call
Speaker 1: Ladies and gentlemen, Thank you for your patience. Please do not disconnect. The good food conference call will begin momentarily. Thank you for your patience.
Speaker 2: And one follow up. Instructions will be provided at that time for you to queue up for questions.
Speaker 2: Please note that questions will be taken from financial analysts only. If anyone has any difficulties hearing the conference, please press star, followed by zero, for operator assistance at any time. I would like to remind everyone that this conference call is being recorded today, July thirteenth 2022, at eight am Eastern time.
Speaker 2: Furthermore, I would like to remind you that today's presentation may contain forward-looking statements about good Foods, current and future plans, expectations and intentionsresults, level of activity performance, goals or achievements or other future events or developments.
Speaker 2: As such. Please take a moment to read a disclaimer on forward-looking statements on Slide two of the presentation.
Speaker 2: I would now like to turn the meeting over to your host for today's call, Jonathan Ferrari. Good food, Chief Executive Officer, Please go ahead, sir.
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Speaker 3: Good morning everyone and welcome to this call for good food market. Corp to present our financial results for the third quarter of fiscal 2022 ended this June fourth.
Speaker 3: I'm happy to be joined on the call today by Neil kuy, good food's President and Chief Operating Officer, and Jonathan writer, Chief Financial Officer.
Speaker 3: Our press release reporting our third quarter results was published earlier this morning. It can be found on our website that make good food ca and on SEDAR.
Speaker 3: Please be aware that we will refer to certain metrics and non-IFRS measures. Where possible, these measures are identified and reconciled to the most comparable IFRS measure in our mdna.
Speaker 3: Finally let me remind you that all figures expressed on today's call are in Canadian dollars, unless otherwise stated.
Speaker 3: I'll now turn to Slide 3, which outlines the progress and developments relative to good Foods: three key value-creating drivers.
Speaker 3: In recent calls we outlined the three key strategic initiatives. Our execution is focused on.
Speaker 3: And that will drive long-term shareholder value.
Speaker 3: one we are growing on-demand active customers. 2- we are expanding our on-demand coverage and density by launching microfulfillment centers to further our penetration and. 3- we are demonstrating our absolute commitment to profitable growth through the rigorous execution of project Blue oceans.
Speaker 3: Expanding on these priorities. Firstly, we continue to build momentum in on-demand active customer growth, as we observed these past three quarters. We now count 38 thousand on-demand active customers, up 41% from the 27 thousand at the end of the second quarter.
Speaker 3: As we continue to roll out our marketing initiatives and build coverage, we aim to increase both penetration of good food on demand and the frequency of orders placed by our shoppers.
Speaker 3: Moreover, our on-demand growth continues to be supported by a broader offering, as we increase the selection of our differentiated products and continue to rapidly deliver these delicious, good food products.
Speaker 3: Secondly, we continue to expand our footprint of on-demand microoffillment centers in the third quarter, reaching a total of nine currently.
Speaker 3: We launched. three new MFCS are low CapEx microfulfillment centers in Toronto and mtreal, all strategically located nearro custom' homes.
Speaker 3: These new centers allowed us to both increase the availability of good food on-demand delivery, as well as augment the density of our deliveries to further enhance their unit economics, which has allowed us to reach over three deliveries per hour in multiple MFCS and bring delivery costs $209 in these centers.
Speaker 3: Thirdly and most importantly, we continue to focus on setting up good food for profitable growth, with an absolute commitment to achieve consistent and significant profitability.
Speaker 3: To Char pass to profitability. We established project Blue ocean- a series of initiatives to return to profitability on an adjusted EBITDA basis in the first half of fiscal 2020 -th.ree.
Speaker 3: From that solid foundation.
Speaker 3: We will be set up to grow profitability for the years to come.
Speaker 3: Project Blue ocean is in full-swing and already yielding results.
Speaker 3: This quarter we've improved gross margin by 220 basis points and by 330 basis points since the fourth quarter of fiscal 2021.
Speaker 3: This improvement has translated into our adjusted EBITDA improving by nearly $3 million on an annualized basis since the fourth quarter of fiscal 2021.
Speaker 3: While we are very pleased with, that resullt particularly in the current difficult operating conditions and extraordinary inflation environment. We are extremely focused on executing project blueocean with a clear path to profitable- profitable growth in the quarters to come.
Speaker 3: On that note, I'll turn it over to Jonathan writer to review our financial performance in detail.
Speaker 4: Thank you Jonathan, and good morning everyone.
Speaker 5: I will now turn to Slide 4, which provides details on our top line perforce.
Speaker 5: Quarterly asset customers during the third quarter were 211 thousand, compared to 246 thousand in the second quarter of fiscal 2020 -two.
Speaker 5: Net sales were $67 million for the quarter, an 8% decline compared to last quarter.
Speaker 5: As we embarked on executing project Blue ocean, our focused on achieving profitable growth in the near term.
Speaker 5: Led us to focus on our most profitable customer segments, as well as our most profitable product lines, while enabling us to optimize our customerincenter structure.
Speaker 5: As such, our active customer count declined.
Speaker 5: Partially offset by 7% increase in net sales per active customer versus Q2 and entirely offset by higher margins per customer per quarter.
Speaker 5: 'return to top one growth is also a key component of project blueocean, as expected in the first quarter of fiscal 2023, with our initial focus being on our highest-value existing customers.
Speaker 5: Supporting our commitment to achieving profitable growth faster.
Speaker 5: As mentioned, we also reached three thousand households using good food on demand, a 41% growth since the second quarter and 192% growth since the January disclosure.
Speaker 5: As more and more customers discovever the joy and flexibility of good food on-demand, combined with a seasonally strong back-to-school period of our weekly subcreption offering.
Speaker 5: We expect active customers and orders to return to sequential growth in the fall quarter.
Speaker 5: Please now turn to Slide 5, which looks our profitability levels.
Speaker 5: Our profitability indicators improved on all levels this quarter, with gross margin reaching 26%, a 220 basis point improvement compared to the second quarter.
Speaker 5: This improvement in gross margins was driven in large part by lower credit centensive as a result of our targeted customer addition strategy about operating efficiencies, in part resulting from project GA.
Speaker 5: These improvements, when combined with continued reduction in sscna, excluding depreciation amortization, resulting a $3 million adjusted EBITDA improvement, or a 260 basis point adjusted EBITDA margin enhckman versus the previous quarter, cementing our commitment to profitability.
Speaker 5: I will now move to Slide six for aview our cash flows and capital expenditures.
Speaker 5: As cash flows used in operating activity totaled $14 million, remaining stable compared to the second quarter of fiscal 2020 -two.
Speaker 5: A slightly larger net loss and lower contribution from net working capital were offset by higher depreciation.
Speaker 5: Capital expenditures came in $7 million, mainly investing in finalizing the build-up of our fulfillment network and technology.
Speaker 5: This represents a substantial and important reduction in capital intensity against CapEx is more than 50% lower than in the third quarter.
Speaker 5: It's.
Speaker 6: As we now have completed the vast majority of our infrastructure buildup to support good food on thedemand.
Speaker 6: As I outline the bottom of our slide on cash use.
Speaker 6: De fine. Here is the additional as the addition of cash flow from operating activities and cash F from invest activities.
Speaker 6: Has decreased by $11 million since the fourth quarter.
Speaker 6: This positive performance has been resuved.
Speaker 6: Had been the result of improved profitability, better working capital management, as well as lower capital investment.
Speaker 6: As we continue to execute on project Blue ocean, we would expect to continue reducing our cash used in the coming quarters.
Speaker 6: Lastly, we ended the quarter of cash and cash quivalance of $99 million.
Speaker 6: Which continues to provide significant balance sheet flexibility to execute on our growth strategy.
Speaker 6: Before turning it back to John , who will provide additional details on project oceion.
Speaker 6: I thought would be helpful take a step back and summarize the significant progs we've made in improving our key probability indicators since the fourth quarter of 2021, the first quarter- I began to see the volume leverage driven by the relaxation of covidt instructions and the reopening of the Canadian economy.
Speaker 6: Since then we have grown a gross margin by 330 basis points.
Speaker 6: From an OpEx perspective, our sscna of $29 million in the current quarter is over $8 million lower than the fourth quarter of 2021. that is a reduction of over $32 million on an annualized gas man.
Speaker 6: It is worth noting that this is all been done against the backdrop of a record inflation and the launch of our industry-leading good food on-demand service, which now represents approximately 10% of our net sales.
Speaker 6: The work we have done on improving unique economics and reducing our fixed cost base is positioning us well to betterenef from our expected return to quarterly sequential revenue growth in the first quarter of 2020. -three and.
Speaker 6: So on that note, I'll turn it back to John feri to provide additional details on project Blue ocean and.
Speaker 6: Which includes the ongoing revenue gross margin, and that she improvements. We are executing.
Speaker 4: Thank you, John . I'll now turn to Slide 7, which outlines the key pillars of project U ocean.
Speaker 3: We're pleased with the improvements in profitability indicators achieved in recent quarters and are excited by our team's strong execution on this plan to date.
Speaker 3: Project gluocean is built on three key pillars to achieve profitability and lay the foundation for profitable secular growth for years to come.
Speaker 3: First we are harmonizing our brand's value proposition, focusing on our existing customers and providing fresh, delicious meals, while tailoring our grocery assortment to customers' needs by providing convenient and differentiated products.
Speaker 3: This will enable a much clearer value proposition to our existing and prospective customers and help build our second pillar.
Speaker 3: Our second pillar- Blue ocean- of blueocean consists in attracting higher-value customers.
Speaker 3: Our targeting marketing spend and incentive structure will to adentice the very customers to whom this clear value proposition appeals.
Speaker 3: These customers have displayed more loyal behaviors, with strong order rates and lesser churn.
Speaker 3: Thirdly, we are aligning our operations, footprint and cost structure to not only return to growth, but do so profitably.
Speaker 3: We've already begun streamlining meal kit operations and fulfillment to capture cost efficiencies, and have also begun reviewing and rightsizing our footprint to improve asset base effectiveness.
Speaker 1: Overall we continue to evolve and focus on our loyal customers ordering large baskets, enticing them, for example, to interact with both our weekly kit subscription and good food on demand to increase the average sales pro active customer, and continuing to offer the fresh, high-quality meals and grocery products that the business was built upon, while leveraging good food on demand to improve convenience and serve customer use cases beyond weekly dinnersi will now turn to Slide eight.
Speaker 3: To review how project loocean translates into better financial performance and a return to profitability.
Speaker 3: Since the fourth quarter of fiscal 2021. project theocean has in part helped us improve profitability by nearly $3 million through SGNA and expense reduction and gross margin expansion.
Speaker 1: In this next phase of the project, we are executing on key initiatives.
Speaker 3: With direct top line and bottom line implications.
Speaker 3: We have revamped our incentives program and marketing, focusing on loyal, high-value customers.
Speaker 1: Early in the fourth quarter.
Speaker 3: We also passed a near double-digit price increase in our meal kits.
Speaker 3: Which which has had limited impact on churn and likely limited impact on orders.
Speaker 1: Moreover, we implemented supply chain and operational improvements, such as reducing the number of ingredients sourced and limited and limiting the number of grocery products available to weekly meal kit subscribers.
Speaker 1: Other initiatives include the automation of part of our customer service.
Speaker 1: And the review of our footprint, which has resulted in the consolidation of our breakfast production facility into our main much real facility, with more consolidation likely expected in the near future.
Speaker 7: In addition.
Speaker 1: Focusing on strengthening on-demand economics along with growing our good food. On-demand penetration is expected to provide significant bottom line contribution. Bring good food to solid profitability levels.
Speaker 3: As we complete the review of our asset base and consolidate learnings from our existing footprint.
Speaker 3: We expect the fourth quarter to provide an opportunity to apply these learnings and delivery radiuses and times automation, picking technology and location, enabling us to further improve profitability.
Speaker 1: Finally it is important to note that, while we are committed to returning to profitability and growth in the coming quarters, our primary objective is to ensure we continue building a platform for long-term success and to invest in key people technology, product portfolio and efficient customer acquisition efforts.
Speaker 1: As a result, in our pursuit to unlock and capture, a disproportionate share of what we estimate can quickly become as traditional brick-and-mortar shopping is replaced with superior customer value proposition. A $3 billion market in on-demand grocery and meal solutions.
Speaker 3: The path to profitable EBITDA and positive cash flow will be achieved by balancing this growth and profitability.
Speaker 3: Before opening up for questions, I would like to remind you that our fourth quarter is our seasonally slower quarter, with the summer weather and travel influencing demand, particularly in our weekly subscription customers.
Speaker 3: On that note, I will turn it over to the operator for the QA portion of this call.
Speaker 2: Thank you, sir. Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchstone phone. You will then hear a three tonone prompt acknowledging your requestand if you would like to withdraw from the question Q, please press star, followed by two And if you're using a speaker phone, we ask you please list to answer the before pressing any keys. Once again, please press star one now, if you had a question.
Speaker 2: And your first question will be from fleid accountably at the other day. Please go ahead.
Speaker 2: J will be from freevery ecounibly at the jadday. Please go ahead, Thank you, good morning.
Speaker 8: Got on the wayaround.
Speaker 9: Congrats on the sequential improvement in gross margin. I was just wondering if you could provide a bit of detail on the main drivers behind that on the gross margin side. Sequentially was it?
Speaker 9: Like what do you attribute to pricing versus other cost containment initiatives there?
Speaker 4: I F to Neil thanks for thanks for the question.
Speaker 10: Yes So we, as a strong enjojustment in the prepared remarks we've we've been focused quite a bit on on getting our gross margin back to historical levels and a lot of the, a lot of the efficiencies that we've been able to see through project oion, through some of the building changes and menu changes that we've been bring the forth as had led to what you've seen printed this morning.
Speaker 6: We the price increase that John mentioned also was- was not really reflected in this quarter, So small price increase earlier in the quarter but most of it will come in in Q4 and subsequent quarters from there. I think we've been really happy with the execution of the team in these high inflation and challenging times. But continuueed to kind of look at any of all opportunities that weak that we have.
Speaker 8: Perfect and on the H line, I guess, focusing on the marketing side of things. I think you mentioned marketing efficiencies and comments D the slides.
Speaker 9: Can you give us a bit more detail about that about your current marketing approach and maybe thoughts on marketing initiatives as we approached the back-to-school seasondefinitely. So we're primarily focusing on our most profitable customer segments and our most profitable product lines right in order to generate that improvement that we're seeing on ultimately the bottom line basis and.
Speaker 3: Know in line with our historical averages.
Speaker 3: And combined with an improving gross margin, higher arpuves from our customer base and more profitable products that they're buying, is' translating into significantly improved economics in terms of marketing strategy. Part of.
Speaker 3: Refining our core value proposition was to really make sure that our weekly meal subscription plan is complementary to our on demand offering for our good food customers. So for good food customers that are within our on demand zones, we're actively cross selling our weekly meal kit subscription and our on demand offering and what we're seeing from that customer base is- once a customer who's on a wekly meal plan.
Speaker 3: Interacts with the good food on demand. There're spending on average to X what other customers are spending every quarter, and so there's a real opportunity for us to focus on that cross-sell and make sure that our customers are interacting with as much of good food as possible and then over time, as we roll out additional MFC's, additional markets, additional coverage, we'll be able to roll out good food part of demand as it complement to more and more weekly deal kit subscribers.
Speaker 9: Great I'll get back into Q, Thank you. Next question will be from a Ryan Lee national Bank financial. Hey, thanks for take. My question is maybe the first one can you, can you provide more color on the change in consumer behavior as it relates to the economic conditions? Have you seen that evolving into Q4?
Speaker 11: Be just some more color on that? What specific changes you're seeing? Good morning Ryan. Thank you for the question.
Speaker 3: So as we exited the spring and going into the summer, we're definitely seeing changes in consumer lifestyle. For the summer period we're seeing customers- Canadians, Coast to coast- spending more, more time travelingand So spending less time at home has an influence right on the overall e-commerce business and good Foods business as well.
Speaker 3: But we're certainly seeing that normalizing right now- and I think this is kind of we're within our last quarters- that are quite difficult to come from COVID-19 levels, and so I think we'll start seeing that normalization be reflected in our year -over-year numbers as welli think the other piece that we're seeing is from an inflation perspective. Some customers- Canadians, Coast to coast- are thinking about ways to spend their money more effectively: save money.
Speaker 3: And in certain cases, are trading down to more discount type productsthat's been. That's had a positive impact in the demand for private label products globally across the countryand So in the cases where we're able to provide great value with our good food brands, product customers are, in fact, more open to switching brands than they might be otherwise.
Speaker 3: And that being said, what we saw in the price increase that we talked about from a ready to cook perspective that we did in June , we saw that part of the impact was reflected in sales growth, but also part of the impact of that price increase led to a little bit of uptrading down. So overall our basket sizes are largerfrom a revenue perspective but a bit smaller from a portions perspective.
Speaker 3: That's a little bit of commentary on both the normalizing of lifestyles as well as have the impact of inflation from an consumer demand perspective.
Speaker 12: Okay Thank you, and maybe along the same lines in terms of: I think the skew rollout has maybe slowed the last couple of quarters and, as you focus on other other items up, how big of an impact is.
Speaker 11: The skewe, the depth there on your own-demand customers? Do you anticipate accelerating the SKU rollout over need to?
Speaker 8: Over the newyearyes I this continues to increase on on a net basis but, as we said last quar, it's important. It wasimportant to to hit a kind of critical mass, to be a bit toffer our good food on the mand customers a.
Speaker 6: A full basket shop and very attractive add on to to their weekly meal solutions, as it an verging profitability. Here we VE we've also been making changes on team size, So the output that we're able to accomplish it's is lower as well. So we'll continue to grow towards, towards the 4000 skws that we've said in the past, but we feel a lot less pressure today. Basket size continues to to hold hold up.
Speaker 6: And and product margins continue be optimized in this in this inflationary environment. So overall we're happy with with what we're seeing in, no major changes from a customer perspective. Obviously, the more, the more newness we have on on the website, the more buz. But with all of the summer travel, we think it's a good time to kind of focus on the essentials and focus on the all quarters.
Speaker 12: Okay make for that and maybe one last one on the MC rollout. I think you indicated that you may fall short of the 20 target. But in terms of the remaining MFCS planning for the year is it going to be more weighted towards the summer to as you prep for having it having more MC ready for for the fall or is it like.
Speaker 11: Even when spread that across the quartersso. In terms of the MFC roll out, our objective is to build out the infrastructure we need in Montreal and Toronto to offer consistent delivery experience with the highest level of profitability.
Speaker 3: And we had estimated originally that it would take us about 20 MFCS or 18 to 20 MFCS in order to cover Montreal at Toronto fruit with that coverage. I think the good use is we should be able to achieve that coverage with less MFCS than we originally anticipated. So it's probably just the growth of a couple MFCS from here and that'll really help us achieve again the unit economics on the on demand.
Speaker 3: Offering even more quickly than we were expectingokay, Thank you. I'll just get back in the queue. Thank you.
Speaker 2: Thank you. Your next question will be for Martin. Lottery at stevefu G MP. Please go ahead.
Speaker 13: higood morning guys Jonathan you were talking about consumers trading down the.
Speaker 14: The consumer sentiment that is reaching new lows and I was wondering if you could talk to us a little bit about your pricing strategy.
Speaker 14: Where do you stand right now for a meal kit meal delivered home versus this similar product purchase at a grocery store? Are you price at a premium or equal or lower to products found in grocery stores?
Speaker 8: So our intent has been to think about how to provide great value to our customers while while.
Speaker 3: Maintaining and improving our margin basis right, and in order to do that, we've been thinking about how to price our products to reflect the amount of convenience that Goodfood is offering, whether it's through our on demand delivery cost or through our meal kit offering.
Speaker 3: From a supermarket comparison, I would say it's hard to compare on an apples for apples basis and the prices and supermarkets are increasing extremely quickly on a week to weak basis. So I would sayour pricing compares favorably to the supermarket. But ultimately, as we do our customer research, many of our customers are thinking about the comparison of our meal kit pricing.
Speaker 3: To going out to the restaurant or to restaurant delivery right like on a new breed or adodoor datch and when consumers are looking at our meal kit products or any of our meal solutions products through that lens they're seeing a lot of value're ING 30 40 50% discounts to what it would cost them for a restaurant quality experience and so from that lens we're really able to provide great value to our customers and we see our ability to maintain pricing power in the.
Speaker 3: That we're seeing in this inflationary environment. There, certainly there's trading down across all levels, right? So going from the restaurant to meal kits and meal solutions and then, as you would have seen in the brick-and-mortar banners, there is going from conventional to discount shopping. So the customers that we're focusing on are the ones that understand the comparison in terms of a restaurant experience.
Speaker 3: We also have the flexibility of being able to interact with our meal solutions, both through a weekly meal plan and on demand, and so the flexibility of being able to interact the product how customers want, when they want, is making that comparison even easier to the more expensive restaurant offerings.
Speaker 3: And then the second thing that we're seeing in our data is certainlycustomers' willingness to switch brands, and so it certainly, as the national brands are increasing pricing across the board- multiple price increases per year-the opportunity we have is for our private brand products are really shine and to show customers the value that we're offering and encourage them to switch at a time where their most open-minded to that.
Speaker 4: Okay you, Thank you. Next question will be from the Luke hannon, at kind of cordt enuity, Please go ahead.
Speaker 15: Good morning everyone. Just a quick point of clarification. When, when you talk about achieving profitability on an adjusted EBITDA basis in the first half of fiscal' 23, does that mean you'll be profitable for like one of the quarters in the first half or does that mean you will be profitable on sort of a run rate basis at some point in that first half?
Speaker 4: Good morning looku.
Speaker 1: Look when we, as we've laid out a project, blw ocean was really selling us up both for a return.
Speaker 1: Sequential growth in in the first quarter of 2023 and then, perhaps just as importantly, you know, we're spending the last few months and the next few months on really improving our unque economics and you see that, with the continued rise in our gross margin since the lows of Q4 2021 and the significant, significant reduction in our fixed cost base with the, the reduction initiated you've seen over these last three ort.
Speaker 1: With Swish or seat and it's goinging to be properable on a adjusted EBITDA basis, on a quarterly, on an ongoing quarterly basis.
Speaker 15: okayi understood and then sort of related to that as well. Let's assume that you do H profitility on an adjusted EBITDA basis. Thinking about the other two components, I guess that that would be considering including adjust EBITDA. But working capital and CapEx I guess I'm trying to figure out. Does adjusted evenbit a profitability also imply that you will be breakeven or better on a free cash flow basis? Assuming you hit adjusted bit a profitability like when? When does working capital?
Speaker 1: formmost.
Speaker 3: That falls with working capital is their next opportunities and it could be better as we head into Q1 just in terms of come to seasonal nature of our business and the sidarea that we 're.
Speaker 3: Spending a lot of time on managing that working capital and figuring it, how to create value out of our balance sheet. I think you've seen us to do over the past nine months. Over the last year, we definitely extracted value out of our balance sheet on appplan to continue. And then lastly, from a CapEx perspective, the days of large, large CapEx dollars- and I think there's a chart in our earnings presentation that really demonstrated that- that those days are over- and ultimately, where we're now spending our capital.
Speaker 3: On CapEx is really on the MFC rollought up and as I think we've laid out in some of our previous call. We're talking under four a half thousand dollars. So for $1 thousand for a facility and with just a little bit of a capitalized it and other ongoing maintenance accapex So.
Speaker 3: Put those three pieces together and ultimately, our objective as we get to 2023. it's three Masters of our own destiny and to do that we a have to be profitable, b- we have to have positive cash flow and then ultimately, then we're Masters of our home.
Speaker 3: Around and'm not reliant on capital markets. Going for understood. Last on for me and then I'll pass the line. You have 99 million in cash on the balance sheet as of the end of last quarter, but curious to how much capacity, if any, you have on your revolving credit facilities.
Speaker 16: Yes So the 99 million is includes the full use of our facilities. We have very very supportive lender base M typically towards the end quarter draw down a portion of that revolver. But it's not needed for ongoing operations and so ultimately through the.
Speaker 3: Through the, the Ind vid, through the months within the quarter that revolver is given back or payback to our lenders.
Speaker 3: So the netyand-nine includes the full use of our lending facilities. Okay, like not needed for ongoing operation.
Speaker 3: The 99 includes the full use of our of our lggage facilities. Okay, like not needed for ongoing operations. Got itma.
Speaker 2: Thank you once again. As a reminder, if you had a question, you will need to press star one on your telephone keypan and your next question will be from George DME at kotia Bank.
Speaker 17: I got morning guys. I just wanted to talkff a little bit about the seven million on to bad sales before my C inintcentive job. That comparable number for last quarter, for Q2, but But I M atth it seems to be flot down So So any color on that?
Speaker 4: Big good morning, georgei. Don't have that number in front of you. It was roughly around 5, So it's up maybe around 40% quarter-over-quarter.
Speaker 5: thats a puouple. You guys commented on the curtailing grocery availability and we see subscriptions. I just streamline process as can talk a little bit about what maybe that entailed.
Speaker 17: Yes So over the over the period of COVID-19, any SKUs that we were launching were available across the country.
Speaker 6: To both our weekly subscription customers and our good food on demand or good food alloww customers at the time. So U count was available to 100% of our customer base. What we saw was there was decreasing marginal returns from an AOV and a margin perspective once we hit at certain plateau on the weekly subscription base. So in order to.
Speaker 6: Improve our gross margins on that side of the business and improve, improve our customer experience. We we cut that skw basase down to roughly what you see on the website today and it continues to be optimizede in terms of margin, in terms of selection, in terms of areas of the country that we are delivering to. We VE got's help us increase our picking efficiency by about two point five X on the on the production floor and and increase keepabv and increase gross margin in the meantime.
Speaker 18: Past as I my last pect when I own in to past, you guys shared obvs a 60, 70 for from de mand. Just wondering maybe if you can tell us how much of those.
Speaker 18: Fall you know how many orders to it bedefault and the under 25 or kind of 20- 25 arrange. Maybe some strategies we're doing to to get those folks to order a little bit more more possibleofitable likely, hopefully. When you're placing your orders George, you you're placing the 60 to 70 average but there are customers that place smaller baskets. It's part of our strategy to have as frictionless of a shopping experience as possible to create the best.
Speaker 6: Giving them. You know the fees or?
Speaker 6: Flat these or services at certain dollar levels that we're currently underdevelopment and an AB testing, So it's not a significant portion of orders. Obviously it's hit a $50 average. You need to be to be in and around that.
Speaker 6: And sorry I was getting a callso- yes, a small percentage of orders and we're going to use fees and and both kind of carrot and stick, So upsells throughout the process to get people to add more, more things to their basket.
Speaker 5: Thank you. Next question will be from Michael morianna at R BC. Please go ahead.
Speaker 19: Thankyou good morning. You guys announced a partnership with PO periy is a few days ago. I was wondering if you could expand a bit on the strategy behind the partnership, how that economics might differ from your existing on-demand grocer business and if we should expect more, more announcements that are similar to this in the coming quarters.
Speaker 9: Good morning, Michael. Thanks for the question. So we announced the P a terist partnership earlier this week.
Speaker 20: This is really an incredible partnership for us in the GTA region. So, if we think a step back, good food is all about solving meals. Right, whether it's our weekly meals subscription or on demand offering with food is about solving meals, and to us there's a spectrum of ways in which meals can be solld, So at the most prepared end of the spectrum, it's ready to eat meal.
Speaker 20: On solving meals, which is a problem that Canadians, Coast to Coast, have every single day, and so this partnership with puuitaries allowed us to bring on deluitar brands. So the products are branded puitaries for good food, the the products are, you know, these delicious ready deat meals. They are in the 10 to $15 price range and so high quality product.
Speaker 20: That's also quite affordable and ultimately, it allows good food to make sure that we're focusing on our core competencies and that we are selling the highest profitable margin products that we can on a consistent basis, and so pitaras is ensuring the quality of the products, the manufacturing and consistent margin that's being made on those products, while being able to cross brand and cross promote the products. So this is an awesome partnership. We are looking at the results closely.
Speaker 20: And there could be future partnerships announced based on the results that we see here. Okay, that's great. Thank you, and maybe just double click on it. Are you guys seen sort of differences in the unit economics between the post curies branded products and your own?
Speaker 20: So the objective for us from outsourcing the manufacturing of those ready-to meals, the key benefit for good pool's perspective is the consistency of the margin, So we're able to really make sure that we're leveraging the volume that they have and ensuring that the margin is consistently hit. I think that's the biggest piece when we were producing all of our ready-to Eat meals internally.
Speaker 20: The consistency of the margin was one of the challenges and really it allows our team to be laser-focused on improving our cost base, the quality of our meal kit manufacturing and the operational efficiencies within the meal kit manufacturing and delivery, and we're able to leverage some partners to do the manufacturing of the ready-to-e products. So I think it's a great win. Win as we look into profitable growth for 2020. -three.
Speaker 20: We're really going to be focusing on solving meals and finding additional ways that we can help our customers have access to ready-to-eat products like this, in addition to our meal kidits in our private brand groceries that are kind of the ala card version of solving a mealwe're also going to be making sure that we're cross-selling additional on-demand orders to our weekly il at subscribers and ultimately increasing the penetration of our active users Coast to Coast and and availability of our on-demand offering.
Speaker 20: So lots of things to come. We're really excited about 2000 and twenty-threethat's. Great Thank you and appreciate the additional color there, all that lineide.
Speaker 2: Thank youand at this time, Mr ferrarei, we have no further questions. Please proceedall right. Thanks everyone for joining us on this call. We're looking forward to speaking with you again at our next quarterly call in the call.
Speaker 2: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, Thank you for attending and at this time, we do ask that you please disconnect your lines.
Speaker 21: Center please hold for the next available operatorthank you for calling comferenition center which yes, I'm. I M here for the Q3 good fe Mark Corp earnings callsure this for examnameyes: for Rachel Ra, the L class name, lastname: miss FM I K, Thank you very much. And name of the: completely I'm with era, that's AI e A. Thank you, ch. It will be just the moment Now please, who I didn't. The conference of now being recorded.