Cheffelo AB (publ) (CHEF) Earnings Call Transcript & Summary

Hi, everyone, and a warm welcome to Cheffelo's Capital Market event coming out to you from Cheffelo's new office in Sundbyberg outside of Stockholm. My name is Paulina Modlitba, and I have the huge honor of being the host of this event. We have an exciting and jam-packed agenda in front of us, and we'll have a look at it. Lots of talks coming from the key leaders within Cheffelo. Let's have a look at the agenda. I will start off by talking to the CEO of Cheffelo, Walker Kinman whose session will focus on the meal kit market dynamics on Cheffelo's business model and strategy, customer behavior but most importantly, how he is planning to grow the business profitably. After that, we'll zoom in on the company financials with CFO, Erik Bergman. And he's here to share the seasonality of the business, but also, of course, provide a financial outlook. We will then move on to Helsingborg, where we'll be joined by Klaus Toft Norgaard. He's the Chief Commercial Officer; and Jeanette Agertoft, who is the Nordic Marketing Manager. And Klaus and Jeanette will talk about Cheffelo's brand and marketing strategy, including how the Nordic presence enables efficiencies in the customer acquisition and retention. Then we will move over to how the food and recipe creation contributes to the Epic customer experience of Cheffelo. We will do this with Claes Stenfeldt, Chief Supply Chain Management Officer. And for the next session, we will get the opportunity to visit one of Cheffelo's 3 production facilities, this one in Norway, where Chief Operating Officer, Vibeke Amundsen will give us a look into how the new kits are produced and how she drives operational excellence to ensure continuous operations. The last presentation will feature Anton Nytorp, who's the Chief Technology Officer, the CTO of Cheffelo. He's joining us from Oslo, and he will share the in-house built tech platform strategy and how the company is at the forefront of using AI and machine learning across its operations. And last but not least, we will conclude with a Q&A session, where you will have the possibility of adding questions to the speakers via the event website. Now and during the whole session, we will make sure to feed them into the session. So that is the agenda. Let's get started with the Cheffelo Capital Market event. Walker, why don't you start by giving us the key highlights of Cheffelo and what you do?

Thank you, Paulina. For those of you who are just joining us today and only hearing about the name Cheffelo for the first time. That's okay. It's a new name for us as well. Since listing on the Stockholm NASDAQ First North Exchange in March 2021, we've been known as LMK Group. However, as a leading supplier of meal kits in the Nordic region, most people who know us by the 4 brands we operate. So in Sweden, this is Linas Matkasse. It's about 35% of our revenue. In Norway, we operate under the brands Godtlevert and Adams Matkasse. It's a little over half of our revenue. And in Denmark, we are known as RetNemt, which is just around 15% of our revenue. Last year, we delivered around 17 million meals with roughly SEK 1.1 billion in net sales. We currently have around 73,000 active customers, and we can deliver to over 85% of households in these 3 countries.

So tell me why Cheffelo and it is correct that it only relates to the corporate brand and not the consumer brand?

Yes, that's true. The strength and success of our company going forward is based on an organization that is able to effectively coordinate activities and also operations in 3 countries in 5 different locations. Without this, we will have a big difficulty in extracting synergies, best practices, things that would otherwise be unavailable to a smaller local unit in which, in turn, would reduce our competitiveness. So we see a stronger corporate brand as a way to further attract and retain talent. Perhaps the most important thing that we say in relation to Cheffelo is that it will not replace the strong local brands that we've built up over 15 years. So Linas, Godtlevert, Adams Matkasse and RetNemt, these will continue to be the brands that carry our product to market.

People say that no business is larger than the problem it actually solve for real people. What is the problem that you solve for your customers? .

Yes, this is true. And meal kits are really -- they're solving an everyday problem. Everyone must eat. It's just a fact of nature. We want to be great cooks. We want to make our own meals, for at home for our families. We like to bring them together to enjoy inspiring and nutritious food, while keeping costs down and not contributing to overconsumption. This desire how our results are typically offset by some realities. So most of us these days have limited time to find inspiration, to plan the meals and to shop for groceries. Add to this, a lot of people have really limited knowledge about nutrition. They may not feel comfortably -- comfortable with cooking food to begin with. So meal kits contributes very well in solving this everyday problem. With a meal kit, the inspiration and planning process is convenient. It's also time saving. Most customers manage to do this on their phones. We provide tasty, variety, flexibility and personalization. We combine this with easy-to-follow recipes that simplify the cooking process.

And so the business model, can you walk us through what it looks like?

Sure. So our business is it's a weekly subscription that's delivering recipes and ingredients, other ingredients you need to prepare those recipes directly to the customer's home. So the customer can -- they're not forced to choose, but they can choose from a curated selection of recipes. So as we talk about how AI is supporting our business, this means that machine learning and customer preferences are playing a greater role in the presentation of the recipes to match you to customer need. So this reduces the need for the customer to replace recipes alternatives that just don't suit them. For instance, if they need a household that has kids that are hard picky eaters or they need to make dinner quickly or if they just actually want to explore new cuisine. So the customer saves a lot of time not needing to spend it to plan and shop for ingredients. Our model is also demand driven. This simply means that we're not speculating on perishable food items, they carry very little -- we carry very little inventory. We have high order visibility and we also have a significant amount of data that's available for our operations. And this helps our upstream suppliers actually plan production, and it helps us to provide perfect portion size for customers, precisely what they need to have, to have a great meal without throwing away ingredients or having unused ingredients or overconsuming. So the result of this is both low food waste generated in our own operations. It's also contributing to driving down food waste from food production and any -- that may occur in our customers' kitchen.

So nobody acts in a vacuum, you basically invented the meal kit some 15 years ago. But what trends have hit you now? And is the meal kit still relevant in this mix?

Yes. So the future growth is supported by several megatrends that we see in the market. Most investors and consumers they are seeing the shift from off-line to online sales. So this is probably self-evident. Online penetration remains limited in the Scandinavian food market. And that makes -- it gives us good room for consumers to continue to shift online. Many consumers are also becoming increasingly aware of food, health relationships. So this takes the form of how food affects our bodies, but even sort of the broader consciousness of how the food that we consume impacts the world around us. So we're not a health company. Our dishes, however, they are nutritionally calculated. They're always well balanced and many consumers are also telling us that we're helping them to eat better. I've mentioned time already quite a bit. This is where the new convenience plays a role. Many of our customers lead very active lifestyles. They do not want to miss out on uniting their families for quality moments. Often, this is done with food. So meal kits provide a valuable service that helps bridge the time gap. It does in a way that they can feel proud to have been the cook. And then finally, we have a loud and clear call for sustainable development. So much so there aren't many customers or consumers that are -- they express willingness to change their own behavior. if it has a positive effect on the planet. So food production and distribution remains one of the highest sources of CO2 emissions behind energy production. So improving the current production and distribution of food is a good way to reduce the CO2 imprint. We find it natural that we can contribute to change. And this comes by inspiring customers to how to eat. How do you eat a more plant-based diet by providing delicious vegetarian options. We have so many options you can eat as many meals as you like, 1 or 2 a week perhaps from a vegetarian selection.

So can you give us some more details into Cheffelo's sustainability efforts?

Sure. Yes. We've done our part to look at sustainability from and map that out related to UN sustainable development goals. So this is something that has really been at the core of the business since day 1. A key part of our business model is about reducing food waste. Waste is cost. And any type of spoiled food products that we have in our own operations or anytime we deliver something into the customer's house that they don't need, it's just simply bad business. We proactively work with this topic by making sure that our -- that we have timely forecasts that we give to our producers. We work with suppliers also to find new products so that sort of even these odd cutting details can be turned into viable products. In our own operations, we don't speculate on perishable food items, and that means that we only had 3.8 grams of food waste per delivery -- per delivered meal in 2022. Finally, we're also teaching customers to cook without creating food waste, while also supplying them with perfect portion-sized ingredients. So other topics of sustainability that are interesting in our value chain also include sourcing local meat and dairy products, requiring good animal husbandry practices that support animal welfare. In Sweden, we offer climate calculated recipes. This is something that other brands will eventually follow with. We've reduced unnecessary packaging materials, both in terms of what's delivered in the meal kit to the customer, but also distribution packing materials. These are not highly visible to the customers, but we've also been successful in reducing that. Because we deliver it to the doorstep and are also hopefully replacing several trips to the grocery store. we are working with transportation providers. And this means route optimizations, improving fill rates and also increasing the use of renewable energy sources.

So while you touched on the fact that a lot has happened on the market the last 15 years since you started out, consumers can now order groceries or ready-made dinner via their cell phones, et cetera, et cetera. How would you describe the market right now? And who are your main competitors?

Well, we generally talk about 3 areas with some nuances in between these. There is the -- we have the grocery market with traditional retailers. Some of them have moved into the online space. But then we also have the sort of pure-play online grocery competitors as well. When you move sort of up the price and service level in the offering, the meal kit market is where you find another selection. And then you have set menu, sort of these set menu providers, but most of the market has already shifted into flexible meal kits. Moving even further up the price and service offering, you see food delivery services, and this is making home delivery of restaurant food part of the quick commerce trend, if you will. While there's been a lot of competition in this space, one thing is pretty clear and that's the high cost of capital is driving consolidation. It's either happening through bankruptcy or exiting the market. And we can see that a number of competitors in the last 10 to 18 months have been forced to shut down or take decisions to exit.

So what is your market position?

Well, the competitive landscape for meal kits in the Nordics has changed substantially with the entrance of HelloFresh in 2019. We have understood that a head-to-head competition for market share will always go to those who have the deepest pockets. And HelloFresh has shown willingness to invest heavily to buy market share, while we have maintained our focus on being self-financed and profitable. So today, Cheffelo has a strong #2 position in the Nordic market, which we estimate at roughly EUR 645 million. HelloFresh has captured a lot of market share by expanding the market, which is a silver lining in this change. As a strong #2 though with a great brand equity, we no longer need to be the category driver on our own, and we can focus efforts on providing a better customer experience than our competitors with more personalization and the local trusted brands. When we talk about the strength of brands, we are referring to the measurements like awareness and associated characteristics of the brands. So, if you look here at the aided brand awareness measures for the general population in the first half of 2023, you can get an impression of how well these brands are known. In Sweden and Norway, our brands are very well known in comparison to other brands involved in selling meal kits.

So I've heard that meal kit customers are notorious for turning off quickly. How do Cheffelo customers behave?

Yes. This is a widely known fact that the meal kit business has a very high churn rate when onboarding new customers. So after 2 months, half of the new customers that have tried our service will not continue with us. However, churn rates slowed down considerably after the first 6 months. So those customers that do remain tend to be with us for a very long time. There's also a lot of variation in how churn rates look depending on the month of acquisition and how aggressive -- how aggressively the offering was priced. So over time, that variation settles down considerably. So when it comes to revenue, the curves are higher, and this is fairly logical, customers that stick around, spend more money with us than a customer that buys on a discount and then churns. So while customer retention rates are around the 10% to 15% interval after 12 months, net sales retention actually around -- lands closer to 30% to 40%. These long-term customer relationships play an important role in current revenue generation and profitability. And as you can see in the top of the chart, the 2019 cohort which had no inflow of customers during the pandemic, still retain 10% of the revenue generated in 2019 after 15 quarters.

And so how are you planning to actually grow in this market?

Well, the element of flexibility and ultimately, personalization is one key part of our growth strategy. Fundamentally, there are 3 things that need to happen to grow a business. First of all, you need to increase the number of customers. You also can increase the purchase frequency of these customers or the actual or average purchase amount. But the most important element of these 3 for us is the number of customers, as both purchase frequency and purchase amount, these tend to move in smaller increments over longer time periods. So flexibility is seen as an enabler to addressing a larger market by better addressing specific taste and preparation time preferences. We also are currently investing significant effort in improving our e-commerce sales foundation. Initial results are promising, and we've been able to increase customer inflow with a lower acquisition -- cost of acquisition point. Retaining customers is the flip side of the customer acquisition equation. And here, we are focusing on improving loyalty and customer care programs, but we're also investing in the customer experience. And this is both in the digital interactions with us or when they're standing in their kitchen using our product. Finally, we see actively pursuing partnerships with strong brands that allows us to open new acquisition channels as important.

So how are you planning to increase the purchase frequency and ticket size?

So increasing engagement with product and increasing purchase frequencies in [ the next they want ] to grow. Here, we are currently working with AI and machine learning to simplify the increase in personalization options for customers. We offer today the broadest range of options in the market. But our vision is actually that the process of getting to the right meals in your meal kit every time should be effortless, requiring limited interaction on your part. So personalization encompasses even the delivery options that are available. So while we have no intentions of offering delivery anytime and anywhere, there's always a need for delivery flexibility and meeting the most convenient delivery windows for our customers. And finally, I mentioned investing in the digital product and kitchen experiences as a way of reducing churn. This is also a way to increase engagement. So there, we also consequently see an impact on purchase frequency. We intend to increase the average purchase amount through the expansion of our sales capabilities of add-ons and groceries. This means making these offerings more visible to customers and easier to purchase. So this focus us on how we're selling our products and is an important first step, but we're also working then on the offering itself. And that includes premium recipes, but also even additionally add-on -- additional add-on products. So our established distribution network also offers interesting opportunities for third-party partnerships to leverage this distribution capability. So one of the variations of this is actually sample distribution. We're using the dinner table as a marketplace to launch or market new products. Direct access to the dinner table of our customers and guidance on how to use products in delicious recipes creates a win-win situation for customers, for suppliers and our own business economics. If you think about flexibility and a high degree of personalization, this is supported by 100% customer unique production, but it's not easy. When we look across our portfolio of brands, we can see how these capabilities have enabled a complex product offering. This is supported by AI capabilities in the form of recipe selection and alternative recommendations. We will continue to move forward in our efforts to personalize each meal kit even better. And that's with the intent of each household receiving a weekly meal kit. So the level of personalization drives differentiation in a crowded market. And it's one way our product both stands out among the competition as well as creates a significant barrier to entry for any new player or traditional off-line retailer.

So it definitely sounds like there's potential for growth, but do you have the capacity and the capabilities of doing so?

Yes, definitely. There are several elements of our operating platform that we can think about that, that allow the ability to grow cost effectively and also in generating economies of scale. So our model is quite proven at this point with efficient scalability, and that's both up and down. It's a high accuracy and low customer complaint levels in the business. We have integrated operations across Sweden, Norway and Denmark, where functional organizations are working across all 3 markets with a common leadership team. So both Klaus and Vibeke will talk to us a bit later about the flexibility and know-how in our operations. It's very difficult to replicate at scale and therefore, generates high barriers to entry. We use state-of-the-art technical infrastructure, which we've also built ourselves. We use fulfillment technology that we have deployed ourselves. We work with over 100 suppliers across the Nordics, where we have very long well-established relationships. And when it comes to distributing the customers, this step is fully outsourced to line-haul and last-mile carriers. The combined elements of our operational setup are a solid growth platform.

So thanks for now, Walker. You'll be back. But now it's time for us to have a look at the financial metrics and numbers.

Hi, Erik Bergman, CFO at Cheffelo. We will now move over to talk about Cheffelo's financial performance. And in an environment where cash is expensive, it all boils down to having a solid financial performance. So perhaps you can start by providing us with some insights on profitability.

Thanks, Paulina. The market has been through a turbulent macro environment during the last couple of years. We have had the COVID pandemic that boosted e-commerce in beginning of 2020, where we saw an increase in customer inflow and a changed customer behavior. And that was followed by a post-pandemic pent-up decide to travel, which in turn was followed by an aggressive inflation and increased cost of capital. As Walker mentioned earlier in the presentation, cost of capital is driving consolidation in the market and that we have seen a number of our competitors being forced to close down or taking a decision to exit. This puts emphasis on our profitability and cash generation. And that is why I proudly could say that we are profitable. We have, during the last 12 months, delivered an EBITDA of SEK 75 million, which also translates to a positive cash flow. We have obviously needed to adapt our business to have a strict approach to cost, and we have been focused on our margins. I will, in this presentation, talk more about profitability and cash flow dynamics. I will not focus so much on top line. I'm rather doing a deep dive into the factors that actually drive profitability, and that will then lead up to what is driving our positive cash generation.

I'm looking forward to it. But should we start with profitability then?

Yes, sure. I have highlighted 3 key factors that contribute to significantly to our profitability. Those are control of unit economics, efficiency in marketing and a disciplined approach to other operating expenses. Maintaining control of our contribution margin is crucial for overall profitability. We have set the targets of the contribution margin of approximately 30% on net sales on an annual basis. We have successfully reached that level. I'm proud to say that we have actually 12 months -- in the last 12 months, actually reached 30.2%. Another vital factor in ensuring profitability is how we handle our investment in sales and marketing. So throughout the day, we will emphasize on the importance of marketing efficiency. This is not only essential for achieving high volumes but also [ forging ] profitability. We have already made several improvements in this area as evidenced by our lower customer acquisition cost at the same time as obviously we have seen an increase in number of new customers. Our strict approach to managing operating expenses has also yielded a 17.5% reduction in operating expenses if we compare the last 12 months to the same period 1 year earlier. It's worth noticing that we have achieved this reduction without cutting back on our tech investments. Today, our OpEx is at a level where we can see the potential for leveraging increased volumes to gain scale advantages. This positions us for a continued profitability and growth.

And how do you see sales and marketing expenses develop in the future?

So we have managed to keep our sales and marketing expenses below [ 13% ]. However, with the right traction and as a part of our strategic plan, but are open to increase the spend to support growth.

And what about the contribution margin moving forward?

Yes. So we have successfully managed our contribution margin at 30% of net sales, that is. And we will continue to manage it to 30%. Moving forward, additional improvement in efficiency or in the purchasing power will, in a short term, be passed on to our customers to enhance our competitiveness further.

Can you tell us how you actually reached those 30%?

Yes, absolutely. So I have previously mentioned the importance of maintaining control of unit economics and control of the contribution margins. To give you an idea of what that control consists of, I will do a deep dive on how we allocate costs within the margin and how we work with cost effectiveness within each part. So if you start with that, 45% of our revenue is allocated to variable food and packing materials. And that makes it a significant part of our cost structure. We have put a lot of effort into optimizing this. If you compare the last 12 months to the previous 12 months, we have improved that relative cost by 3 percentage points. So behind that improvement, we have efficient processes for handling each meal's margin criteria, along with efficient coordination of weekly meal plans to minimize inventory and to add that to seasonal variations. We also order on demand, and that allows us to reduce food waste and achieve high inventory turnover which keeps our inventory at a low level. We have also been working hard with getting to attract supplier agreements in place that are leveraging on our large quantities. Later today, Klaus will talk more about what this actually means. And if you take a look at the second largest cost component, we have 90% of our net sales, our fulfillment operations, that encompass our planning, sourcing, production and logistics costs. Also here, we have done huge improvements. If you compare the last 12 months to the previous 12 months, we have improved the relative cost by approximately 3 percentage points. We have made a big step change transition to customer unique production. We have been proactive in investing in our production capabilities and that leads to a significant improvement in efficiency. We now have high-tech production technologies and processes that support efficiency and flexibility, that we have in-house reduction also shows that we have a consistent high efficiency and a high quality. We are also carefully choosing our logistic partners to ensure our cost-effective deliveries. Vibeke will provide further insights into these areas later on today.

You mentioned seasonality. Can you dive deeper into what that means and how it impacts profitability?

Yes. So in Nordic markets, the customer passing the deliveries to [indiscernible]. And that's its main summer month in June to August, but also to some extent December. This leads to a large fluctuation in volume throughout the year. This is also one of the reasons why it's a good time to acquire and reactivate customers in the beginning of the year and after summer holidays, which is also the period when we invest the most in marketing. The combination of volume development and our investment in sales and marketing actually results in that where each quarter have a different profile. So for example, in the first quarter, we allocate a relatively higher value to marketing and customer comes early in the quarter, which result in that we have a large volumes during that period. But it also means that we have a relatively higher marketing spend. This is in contrast to the third quarter when we experienced lower volumes due to the vacation periods in the first half of the quarter, while we invest heavily into marketing to acquire and reactivated customers after the vacation season has ended. And this leads to a relatively low volumes, but a relatively high marketing spend. As a result of that, we are almost never profitable in the third quarter. We have one exception to that, and that's been during the COVID-19 pandemic. Then we saw higher volumes during the summer period and as a consequence then of customer not traveling.

And what about cash conversion?

Yes. So I want to emphasize that the strong unit economics is not only a foundation for profitable growth but also contributes to our cash conversion. So during the last 12 months, we had a positive cash flow of SEK 37 million with the cash flow from operations excluding changes in net working capital of SEK 68 million. That is about 8% of our net sales. I have highlighted 3 factors behind our strong cash conversion. These are our unit economics, our live CapEx model and our financing through net working capital. I already mentioned that the controlled unit economics and that to have good unit economics with good margins are a foundation to a strong cash conversion. It is a bit self-explanatory. But I want to highlight that we have had a positive contribution of SEK 260 per delivery during the last 12 months. This means that growth in volume will have a significant [indiscernible] on our cash flow. We also have a light CapEx model. Last 12 months CapEX amounted to 1.4% of net sales. We will see that down a bit in the coming quarters, but in the medium term, they expect us to be around 1.5% of net sales. Another noteworthy aspect of our financial position is that we do not carry any structural debt other than the IFRS 16 leases. We have managed taking that in our production capabilities without taking on significant debt while maintaining a healthy cash position. We are [indiscernible] financing our operations with a negative net working capital model. And this means a model where we see payments from our customers shortly after delivery while we pay our suppliers at a later stage. This gives us a relatively low financing cost and also a leverage for growth. So if you combine control of unit economics with our CapEx light mobile and the negative working capital model, we do have an attractive cash-generating business. If you move on in the presentation, I will show you a graph on this slide of the development of our cash flow. If you take a look at the cash flow from operating activities, and exclude changes in net working capital on a rolling 12-month basis, we have consistently generated a positive cash flow since 2019. However, as you could see in this chart, our cash flow experienced significant fluctuations due to change in the working capital, these fluctuations have a considerable impact on our old cash position. To gain a comprehensive understanding of Cheffelo's cash flow and financial position, it's crucial to understand the dynamics of net working capital.

So can you dive deeper into how working capital dynamics works?

Yes. Sure. As mentioned earlier, we are financing some operation with negative net working capital model. Net working capital has historically fluctuated between approximately SEK 50 million to SEK 90 million. I have previously talked about the seasonal cycles that impacted our profitability. And those also apply for our cash flow. So the fluctuation in net working capital are mainly related to 2 balance sheet items, it's trade payables and accounts receivables, each of them with different characteristics. So starting with trade payable, that constitute the largest component of our net working capital. It is affected by a combination of seasonal effects and as well as the timing of when we actually pay the suppliers. So trade payables follows our volume seasonality with lower volumes during some vacation periods and higher volumes during nonvacation periods. In average, I could say that our supplier payments are around 13 days. The second largest item is receivables, which is mainly affected the last weekday of the quarter. So as they -- so deliveries are done on either Sunday or Monday, it takes a few days until we receive the payment from our customers. And that gives -- that in the quarter end -- in the beginning of the week, then have a relatively higher accounts receivables while the quarter ends later on in the week, then have received most of those payments for that week deliveries dependent on season, this could have about [ SEK 10 MSEK ].

[indiscernible] financial outlook as well. So can you please enlighten us.

Yes. So actually, today, we're having good momentum in our customer acquisition in the second -- third quarter of 2% if you adjust for currency. So our current outlook is that they see a single-digit revenue growth continue also in the fourth quarter and into 2024. We will have a relatively higher sales and marketing expenses in the fourth quarter. As mentioned in today's presentation, we expect to see sales and marketing for the full year and the coming years to be around 13%. Our ambition is to maintain a contribution margin around 30%, talked a lot about in today's presentation, with the intent to reinvest incremental efficiency and cost savings into meal kits itself.

Thank you, Erik, for joining us today.

Thank you for having me.

So we just heard Erik talk about Cheffelo's financial performance, but what about the financial targets? And what have you and the Board agreed on?

Yes. Well, as we look back to 2022, we had been forced to acknowledge some new realities. And in early 2023, we presented some near-term priorities and new financial targets. First of all, we were clear that our most important near-term target was to be profitable and self-financing. This was necessitated by high cost of capital in an environment where high inflation and low consumer sentiment was impacting the market and the business. To credibly be able to talk about future growth in the business, it was also necessary to stabilize the top line and demonstrate the ability to profitably grow delivery volumes. So both of these, we've been able to achieve. The reason we have been successful is attributed to several must-win battles that were identified in late 2022. Our focus on increasing marketing excellence has led to acquiring more new customers while spending less money on sales and marketing to do it. Another must-win battle was to cultivate epic customer experience. We have significantly reduced our rate of complaints and done it in a much higher efficiency when looking back over the last 2 years after the implementation of 100% customer unique packing. That initially drove down productivity. Finally, in terms of increasing volumes in Denmark. We're now currently in a growth phase. This is showing double-digit increases in this market. And as we announced in our report for Q3, we grew revenue by 21% on a local currency basis. So from our point of view, we can conclude that what we set out to achieve in 2023 has now been achieved, and we have our eyes set on long-term targets. So these long-term targets are defined as net sales CAGR of 6% to 8% and EBIT margin ranging between 4% to 6% with both of these targets within balance for our business, with growth opportunities that are available in the market as well as what we have been able to demonstrate with regards to discipline on unit economics and cost structure. It is necessary to point out that long-term profitability margins are somewhat dependent on economies of scale. So we do not expect to be already be there in 2024. Looking forward to 2026, though this translates into roughly a 20% increase in net sales of roughly [ SEK 1.2 billion ] which is a revenue level where we see EBIT margins hitting SEK 50 million to SEK 70 million.

So what are you focusing on to your large these goals?

Well, in much the same way that we have executed during 2023. We're again focusing on 2 core must-win battles that focus on increasing the marketing excellence and cultivating epic customer experiences. We've made excellent progress in marketing effectiveness. And -- but we still see 3 areas where further investments give us good potential for future profitable growth. So our value proposition in all markets is something we've recently spent a lot of time working on. So Jeanette, we'll be discussing that shortly. While our customer-facing platform has gotten an upgrade, there are still areas where we see continued work with our partners as a way to optimize our performance in this area. The same applies for social selling channels, where we are ramping up our work with relevant influencers and other thought leaders. We have demonstrated the strength of partnerships with good brands this past year. We have plans on continuing to develop partnership channels where it makes sense. So while we can continue to be more effective in our marketing efforts, it is maybe just as or even potentially more important to retain customers. The key to doing this is delivering even better customer experiences. We'll do this by transitioning to a fully personalized subscription model, supported by individual preferences and our machine learning models. Our food is very tasty. And consistently, it receives very high customer ratings. However, there is still more we can do in the kitchen experience. This is completely unrelated to how food tastes and the improvement of this is a core initiative. We've been investing in the further development of our customer care programs as well. This includes the launch of a new loyalty program and then also other measures focusing on communicating with customers during their customer journey. We see the add-on and grocery side of our business that's offering great growth potential while increasing convenience for the customer. So this -- the key to doing this though is unlocking -- the growth there is -- this is actually developing relevant capabilities that make the offering more accessible to customers as actually a sales channel. So the last thing finally is just operational excellence. It's perpetually in the background. It's key to where we are today. I think this is very important. So we have consequently continued to focus on this as a driver for profitable growth. Vibeke will also be sharing a little bit more about how we work with operational excellence in a bit. So we're very excited about the opportunities ahead of us. We do feel very confident we have a good plan to tap into profitable growth in the markets where we are operating.

Thank you, Walker. I'll see you shortly in the Q&A session.

So we just heard Walker talk about the huge opportunities ahead and marketing excellence playing an important role in that. We will now talk to Jeanette Agertoft, who's the Nordic Marketing Manager about Cheffelo's marketing strategies. Welcome Jeanette. How do you position Cheffelo in the meal kit business?

Hi. I'm glad to be here. We do not sell food actually. We sell an experience. We sell meals that unite families. Our service is all about inspiring and helping consumers saving time and remove anxiety of what is for dinner in a busy week. We took out the stress by planning, shopping and helping with dinner preparation in a clear and simple way, facilitating families to serve great meals liked by their specific family. But consumers are used to digital solutions that help them in their everyday lives and are looking for possibilities to solve their specific needs no matter what. They are getting much more demanding day-by-day in personalized services. And we need to follow their demands in the most efficient way for both them and us. So a common value proposition across the markets will help us drive higher efficiency in both acquiring and retaining customers.

And how do you offer meal kits that fit various customer needs?

We sell meals that unite families by offering the largest variation of dishes to choose from with new dishes each single week. So they, the families always can find a great variation of meals personalized to their family needs. So it's always what Matt likes and Lisa likes and mom and dad. It's a complicated thing to solve. But we cover most needs without complicating this service, and we understand the local preferences for both ingredients and meals our customers grew up with. We can actually both build on the heritage of childhood memories of good food while at the same time providing inspiring world cuisine and I know that Klaus will talk a bit more about this later today.

You operate across Nordic countries with 4 different brands. Why is that?

Well, our brands come with different cultural backgrounds. And so is the culture actually in this organization. And it may seem like a strong barrier to build efficiency in the business when we keep this cultural background. But there's also a very high brand value behind each of the brands that would take years and immense investment to rebuild and with this without additional effect as the brands actually operate in different markets, so consumers wouldn't see that they were alike. And for us, harvesting synergies can be found on many other levers than just a common brand. A common denominator today is our understanding of delivering personalization. We were the first movers at the Nordic market to offer a large flexible variation in the meals offered and we are still the leaders in offering a large flexible variation. And now we are implementing our common value proposition with focus on our common key messaging, both in communication but also internal across cultures and departments. And it may sound banal, but a common understanding is key to drive growth.

With your 4 different brands, are there ways in which you can benefit from synergies?

Actually, research show that our brands are positioned alike with minor local [indiscernible] across the markets. And variation and personalization are key and we at Cheffelo like to call it, your taste and your choice. And if you spice this up with the good mood around the dinner table, it's something families all over the world can embrace. And I'm assuring you that in the Nordic countries, it's exactly the same. This is why we can work with marketing efficiency across the borders with common content development, common media mix and cross learnings and digital performance and thereby optimization. In August, we doubled our impressions of our content and had double-digit growth in new acquisitions with the same investments as last year, so really increasing efficiency. This was just by utilizing learnings across borders and then improving content creation and media purchasing. So we're operating in a market where we have professional competitors, and we can't fall to sleep on that. We have both local and international competitors. But, I think, we have the advantage of succeeding in combining common tools and ways of working with a business model where we also can embrace the insight on a local taste preference in an efficient way.

You mentioned professional competitors. Would you say that your brands are strong enough to survive in a competitive market?

Yes, sure. Our brands have the strongest unaided awareness across the markets, and we will continue to build strong brand equity and high awareness. It's key for us to win. It requires smart investment to succeed in the long run in a competitive market and CAC, which is customer acquisition and retention cost is a key KPI for us. We want to stay profitable as mentioned earlier by Walker and Erik. And we keep fueling the investment funnel by balancing the investment for the future with the short-term growth of our brands. So 60% of our spending is in the upper funnel, building brand preference and consideration while the remaining spent in acquiring new customers with relevant offers. So we do experience strong proof of driving preference lower in the purchase funnel by investing in consideration and emotional drivers. In Sweden, we [indiscernible] in Norway, they got [indiscernible] and in Denmark, [indiscernible] . So you see it's quite different but still building on the same emotional values. And we are close to combine our brands on a common communication platform, not that different from today but it's common while still keeping the local brands. This is to become even more efficient, reaching the consumer with the relevant brand-building content. So for us, A&B testing, digital performance is proving the right messaging capability to convert more consumers into customers. So this is for now, but Klaus will talk more about how we drive efficiency and customer acquisitions and retention.

Thank you, Jeanette. We will now turn to Klaus Toft Norgaard, the Chief Commercial Officer. Welcome, Klaus. What do you say is your approach to drive customer acquisition efficiently?

Yes. Overall, we obviously build on and utilize all the strength and the positions of our product brands. But basically, this is all about attracting good customers with a high customer lifetime value at a lower cost. It may sound very simple, but actually, it involves several different disciplines. And the approach you could say, is about constantly optimizing the activities and the allocation in the marketing funnel. And in addition to that, it's also about improving the foundation, which is not really traditional marketing or sales, but rather enablers and enhances like server side tracking or web analytics or continuous conversion optimization, trust pilot ratings and on-site lead generation and obviously, search engine optimization. And, yes, over the past 1.5 years, we did numerous changes and developments from which we now see the very clear effect in terms of reduced customer acquisition cost.

Can you give us some concrete examples of such changes and how they've been successful?

Sure. We've done several different and successful changes. Let's take a search engine optimization. It consists on-site improvements, link building and also more content, which has increased our online visibility, driving much more organic traffic at basically [indiscernible] when it's done. And another example would be initiatives in the mid and lower funnel or also called performance marketing where we could take examples as optimizing paid search and social media advertising with the help from external expert partners, creating and testing much more and better ads with more efficient and targeted balance between the thing and 2 parts of the funnel. Again, this drives more customers at lower cost. Another example is that we have teamed up with direct affiliates as well as affiliate hubs, which done well is an excellent way of cost efficiently extending our reach and utilizing our other funnel investments. And the last one I would like to mention here could be also increase and optimize social selling efforts by engaging more influencer marketing and creating more and better content for social media and even test new platforms like TikTok. Another angle to it is that we in this industry are very much driven by introductory discounts. And we also now constantly work to optimize the size and the composition of these discounts, i.e., how much in percentage of kroner for how many deliveries for reactivations or for new customers, et cetera. It's about giving an incentive to become a subscriber, here you could say, and not overdo it and then just attract bargain hunters. In essence, this is very much driving profitable growth as lower cost per acquisition enabled us to acquire [indiscernible] and then we have [indiscernible] as can be seen already in the Q3 report.

What are things you're doing to get customer acquisition?

Let me mention 2 important contributes to our marketing excellence. First one is a tell-a-friend program where you -- where our many satisfied customers are encouraged in various ways to act as ambassadors towards family and friends. We are developing further the features, including gamifications of this and obviously, top it with incentives for both prospective customers and for our ambassadors. And the second one is partnerships of various kinds. The biggest and most visible ones are WeightWatchers in Sweden and Roede in Norway, both are weight loss integrated co-branded partnerships with us offering recipes and food from the partner, which is really a true win-win partnership here where we pay a cut to the partner also driving sales. Besides these, then we do also drive affiliated partnerships for cost-efficient additional traffic and leads and obviously, sales developing these partnerships further is actually a high priority for us in the coming years here, and it is a key ingredient for our profitable growth.

What would you say is making Cheffelo special in respect to customer care and what you're doing to retain customers?

Basically, we are very customer focused or even you could say, customer-centric here. And internally, we call it and we pursue the Epic customer experience. On the commercial side, this involves several incremental improvements and some major improvements on top of that. Here, I could mention AI-driven churn prediction, which has been built and trained. And based on that churn prediction, we've built a prevention program operated by our CRM team. And here, we experiment with various executions and this includes different messagings and action triggers, but also A/B testing channels as e-mails versus SMS or push messages. Another one worth mentioning here is a true loyalty program where we on our loyal subscribers here with valuable benefits depending on their buying behavior. And by a true loyalty program, I mean that we reward customers for buying mealkits and not just for being subscribers. And we reward progressively, i.e., customers can earn more and extra benefits when buying more. And we are also here challenging the paradigm of the industry here where much discount is spent on just reactivating churn customers. We put it into the loyalty program here, rewarding the loyal customers basically. And a last example here would be also what we have successfully tested here. We call it we love your calls in the onboarding process. Early June, churn has been really reduced here with a carrying contact after your first couple of deliveries. This is now being rolled out in all our brands to further improve customer lifetime value. We really truly believe that happy customers are the fastest way to long-term growth and profitability.

Thank you, Klaus, and you will also join us for the Q&A later.

Sure. I look forward to that. Thank you.

As we can see a beginning of this event, there are many parts that make up the meal kit business model, but the heart of it is, of course, food and the customer experience. [indiscernible] quite possibly there's within Cheffelo's longest title, Chief Supply Chain Officer. Welcome. Thank you. Please start with actual recipe creation and process.

Yes. Changing from the fixed meal kit to fully flexible and personal subscription and with that being the best in customers' choice, either the choice of using or not choosing and always deliver what the customer wants or expect. This is our focus when we plan the recipes. Our business model doesn't have any direct limitation of the number of recipes in 1 week. This week, we offer 285 recipes in 4 brands. We offered the largest selection of recipes in the meal kit category, securing that our customers have a choice and variation and that what we recommend is based on the customers' preferences is key to keep the customer satisfying and stay longer. Focus on local taste preferences and using local suppliers, ingredients is something we prioritize. We never sent out a dish that hasn't been tested by our local chefs. And every week, we look at customer feedbacks and adjusting to be even better when we reuse the recipe. In the menu cycle, we use between 250, 300 ingredients to build a weekly menu and with that maintaining efficient procurement and ingredients handling. We plan 3 week cycle with [ 70 ] weeks horizon using data and tracking customers behavior in how they will choose is base of our forecasting that gives us good control and the capabilities and relevant forecasts to our suppliers.

Many of you have mentioned the kitchen experience, but what does that really mean?

The kitchen experience focus us on improving the non-test kitchen experience. How we pack the box, the tailor-made ingredients that we have made for our meal kit, the semi premade ingredients that simplify the cooking experience and shorten the time too. It takes the number of steps to make the dish and the time it takes to clean up afterwards. And I think the most important, of course, is the need itself. This is what we call the total kitchen experience.

One thing that really sets you apart from food, e-commerce and traditional retail, for example, is the way you source your ingredients. Can you tell us more about that?

Yes. There are 2 key differences. One is that we order on demand, meaning that we order after our customers have made their choice that has some clear implications, we need to cooperate with suppliers that can deliver what we need with very short lead time. Ordering on demand also gives the opportunity to work with almost 0 inventory and extremely low food waste. And that goes the same for suppliers that they just produce exactly what we need. However, on products with longer shelf life, primarily dry goods, where we can see a cost advantage, we use inventory with a limitation that it should be used within the 3-week cycle. The other is that we don't sell the ingredients that we buy. It's a part of the dish, the meal kit, and that means that we focus on our suppliers that can develop unique tailor-made ingredients for us to use in our meal kit. So working with suppliers on product development is an important aspect. The packaging is just what we need for the recipe that we can work with suppliers to optimize packaging solution, saving plastic and optimizing deliveries to production and so on.

And working about 3 markets, 3 synergies sourcing on a Nordic level while being locally relevant.

Orders that are not classified as local or domestic kind of Nordic tenders. That means adding all the volumes from here and sending our tender to different suppliers. The target to keep high quality, get tailor-made products at a lower cost. The latest [indiscernible] is on vegetables, where we now have a Nordic supplier supplying both in Sweden and Denmark, great result. We have ongoing tenders with 4 additional -- or in 4 additions this year. Nordic tenders will be a focus area coming years always improving and finding synergies over our markets and our brands.

Thank you for having us.

Thank you.

Hi, Vibeke Amundsen, Chief Operating Officer, at Cheffelo, where are you?

We are in our facility in Norway. And you can see the production going on behind. So the beginning of 2022, we have 100% personalized production processes in all of our facilities with 3 lines in Norway, 2 in Sweden and 1 in Denmark. We have invested SEK 25 million to get common effective and flexible processes and it has enabled us to shift from the production of fixed meal kits to making [indiscernible] for each customer. The investment is made through inhouse development and is capital light based on the effect and functionality it gives us. With the investment done, we are able to double the capacities only bidding in more production hours.

Your personalized meal chips mean that the right ingredients and recipes need to end up at the right customer. We can see production going on behind you. But just to make it easier for us to understand what does the production process look like?

The process starts with making the box in the right size based on the customers' order. We label the box with the customer's name and address and at that time, we all already know which carrier and which [that will] deliver the meal kit and we put that on the box as well. We even produce the box in the right order for the route -- so the first box produced is the first box that will be delivered on the first route for the carrier that has the first pickup time at our production facility.

There are a lot of ingredients involved and not one meal kit is the same. Is it challenging to be efficient and keep high productivity levels?

With the pick-to-light and good optimization of the 250 to 300 ingredients on the line, we can produce with normal flow of more than 400 boxes an hour on each life. We even unlearn how to adjust the flow to our actual needs for the total volumes in the week to balance flow with a good productivity. Measuring all-in productivity and units per production hour, we have increased our productivity this year with more than 40%, passing near more than 300 units per hour. And stable production processes with that kind of improvement ensures low and stable fulfillment costs.

Then the meal kit is delivered to your customers doorstep. What does that part look like? And what further improvements have you made.

The last year, we have improved the flexibility in the logistics offering to our customers, especially in Sweden. In all countries, all urban customers can choose between 2 or 3 different time slots for delivery. We concentrate our deliveries to Saturday, Sundays and Mondays as our service is every day and the customer expectation is to get the meal kits delivered earlier in the week. We have expanded operation with [ Godlevert ] and by the end of the year, all customers in all over Sweden will get their delivery information through their platform letting them track their delivery live on delivery [ nights ].

What is your household reach?

We cooperate in carriers over the country. And that enables us to reach 85% of households in Norway and Sweden and almost 100% in Denmark.

As I've understood it, you delivered the meal kits the last mile using cooled transports rather than putting ice in the boxes. What are the advantages of that?

Our main carrier use cooled transport in Sweden and during 2024 we will also do this in parts of Norway. With refrigerated vehicles, we do -- we don't use ice in the boxes saving the production and delivery of 180 tons of water in Sweden alone in a year.

Have you done other improvements that boost your sustainability performance?

Yes. We have also improved the calculation of box sizes, enabling us to use more small boxes and saving 20 tons of cardboard usage in Norway and Sweden year-on-year. This year we also did a Nordic agreement for cardboard and again, working across the slides together gives benefits, both to quality and cost.

In 2022, you delivered 17 million meals. That's a huge responsibility. So how do you ensure food safety.

For us, the most important responsibility is to make sure the customer can trust us with the quality of the food we are delivering. Food and safety is our priority number #1 as more customers have an unwanted reaction when eating anything unique. In our part of the supply chain, it means ensuring correct temperature and surroundings. [indiscernible] when receiving products from all of our suppliers. In June, the Cheffelo delivered the best quality ever with more than 96% of our customers having a flawless delivery experience. And it is very seldom, our customers contact us with food safety issues. Most common is dirt and soil on fruits and vegetables, which needs to be expected when we deliver directly from the farmer to you.

One of your strategic pillars is operational excellence. Can you tell us what that means in this context and how you apply it?

For me, the triangle of success is improved performance in quality, productivity and engagement. And to do it at the same time as the 3 [indiscernible] combined. Engaged employees are motivated to do a good job and improve the performance of our process and with processes that works, we get good stability and we do the right things at the right time. And then the quality is good. We deliver what the customers expects. And satisfied customers gives us good feedback and confirms we are doing it right, which motivates us to improve even further.

Given that your business is subscription based, I guess, at every direction where the customer matters when it comes to customer retention.

Satisfied customers stay with us and keep ordering meal kits every week. Retaining customers is a job for everyone in the company, not only marketing and sales. Our reward winning heroes are customers service together with quality in our deliveries and potentials.

How do you make sure that you continue to improve and learn?

We are good in our operational excellence program to solve problems in a structural way to find root causes and improving our [indiscernible], learning from each other across the sites and also cross-functional.

Are there any more upsides with operational excellence that we have forgotten to mention?

Another additional value working with operational excellence is that it has a positive effect on employee engagement. And of course, we take the safety on our workforce seriously as well. We are employing more people in permanent contracts [indiscernible] but also because they take time to get good in your job. And second quality they are connected. Experienced people [indiscernible] all dimensions, engagement by the safety and productivity.

So moving forward, what would the role of operational excellence be?

Operational excellence remains a strategically important area for us as we see it as important for our success in reducing customer [indiscernible] customer experience.

Thank you so much, Vibeke. It was great getting a glimpse of your portion, and I'll see you in the Q&A.

Hi Anton Nytorp, CTO at Cheffelo. Tell me what is your approach to technology development at Cheffelo?

We view our technology not just as an operational asset, but as a core differentiator that is crucial to our success. As I like to say, technology is the secret sauce in our business. We have, through the last 7 or 8 years or so, built a highly sophisticated tech platform on which we run all of our 4 brands. So this includes systems for menu planning, purchasing, inventory, production logistics, customer handling, subscription logic, basically, all of the things you need in order to run a meal-kit business. I think it's important to note that a meal kit subscription business is fundamentally different to all other e-commerce businesses. So this has led us to develop our own solutions, including our own e-commerce front end. And the other core part of our technology stack is the data analytics platform where we can collect and store all [well] data and have some very interesting use cases on them. So to sum up, a lot of time and effort has gone into building this platform over many, many years. This is not the type of development. You just go out and buy a ready-made software suite from some vendor and this in itself creates a bit of a moat because it's very difficult and time consuming to build because we're a new entrant in the [indiscernible].

What upside do you strive building your tech in-house?

I think the main advantage is that it gives a lot of flexibility and freedom to innovate, we can build everything we rely on some third-party road map. The other often part is that we also best control of all data, which is very different. So if you have, say, SAP or Salesforce Oracle system, which will charge you big bucks if you want to attract and to their walled gardens. So we're good control of the data.

The [indiscernible] develop everything on your [indiscernible].

No. We only build what is not readily available. As an example, there's no many tools for meal kit there. And it's a core process for us. We want to be able to innovate on all of the time. So that is something we've been in house. Whereas in another stack say, customer communications, we don't see any point in building out CRM system when there are excellent SaaS tools out there, which we can easily integrate to.

You have some large logo competitors where they probably have some hundreds if not thousands of people in technology. How do you compete with them?

Yes. It's not the time to get this question. My response is always that I think we are very competitive and that's what we lack in scale of not having thousands of engineers, we can make up for in speed and agility. So I really believe that there is sort of a David and Goliath advantage in being a smaller player, we can move fast. We can be very nimble. We can also be very focused on our Nordic customers. As an example, we just launched a loyalty program and because of the similarities in how our Nordic markets look like, we can develop one version and deploy it simultaneously in all markets. I imagine this being a much more complex tech challenge if you have to take into account like all your global 20 different markets, something like that. We also believe that if we invest in the right tools for developer experience and use AI copilots and all of the new technology that comes online now, we are very bullish that we can be very productive with a small number of skilled engineers. So I think that small can actually be better sometimes.

What are the key focus areas when it comes to technology?

Arguably, our largest investments over the last 3 or so years have been in the data and analytics space. So this means building a sophisticated data analytics capability, building a team, a data platform, common practices, perhaps most importantly, building a data-driven culture throughout the entire organization. The meal kit business is very processing intense. And all of these processors lend themselves very good being improved analytics. So we see opportunities to improve customer experience, drive sales and improve margins using data.

Can you give us some hands-on examples of these opportunities?

Sure. To give you some flavor of this meals I will give some concrete couple of things we are doing. So 1 of the things is actually demand forecasting. Our business model relies heavily on that and on time scales, both short term and long term [indiscernible] constantly. One other important thing to do is optimization of which ingredients should be picked in what order to increase the throughput on our production lines. It's not only about throughput. It's also about improving the employee working conditions, avoiding heavy lifting. And it's also the customer experience so that if we have soft goods such as tomatoes that they are not squashed by some heavier ingredients. The one other thing we do is that we try really hard to understand the acquisition and retention fund [ indiscernible ] or less. So the idea is that we want to get the right cohorts at reasonable customer acquisition costs, that turns into loyal customer with a high enough customer lifetime value. So sounds simple, but we spend a lot of time analyzing which discount codes, which channels, which sales motion will get us the right sort of long-term customers for our business. Another focus has been on personalization and relevance. That's a big thing for us. We have developed customer recommendation engines to help customers get personalized and relevant food in their meal kits, tailored to their needs. We believe this is one of these step change improvements, which can really drive our attention and provide a great customer experience. We also use AI to predict which customers are likely to churn, implementing preventative measures on them. So that if we identify customers likely to churn, we can call them using our customer service or we can do some special customer communications or maybe giving them some other offers or something like that? We're also in the process of rolling out algorithmic menu planning, where you basically have the computer and algorithm working alongside a menu planner to help them come up with many recommendations that gives the perfect mix of customer variety and cost and yes. So these are just some examples of the things we are doing.

Wow, that's a bunch and these are already implemented, not just pilots.

Yes. None of these examples are just pilot projects or proof of concepts for us. They are actively used and have a meaningful contribution to our financial metrics, our customer experience, operational efficiency. So they are very much in use. I also believe that this is only the beginning, and that there are so many opportunities left in this space. And as everyone knows there is a bit of an AI boom right now, and I'm personally very excited about how we can use LLMs as a core underlying technology in our business going forward. We are moving at full speed and have huge ambitions going forward.

So to summarize, how would you say that Tech is an enabler for profitable growth.

So to sum it up, I really believe that the tech is the secret sauce here. The tech platform is what enables business, but also, in my view, really the key to get the Epic customer experience, really driving sales, operational efficiency. So we are extremely excited about how the tech platform will continue to evolve in the future and be a core part of how we drive profitable growth as a company.

Perfect. Thanks for joining us, Anton, and we'll see you again for the Q&A. We're now opening up for questions from the audience. Some of you have already submitted questions, for those of you who haven't, the Q&A is still active. Hi, everyone, and welcome to the Q&A session. Thank you so much for listening to this presentation. We're now opening up for questions from the audience. Some have already been submitted, and we'll start with them. But if you realize during this Q&A that you have questions you want to add, the Q&A is still open. So just submit your questions. And we'll start with a question to Walker. What are your thoughts on repurchases of shares?

Thank you, Paulina. This is a question that has come up before, and I think one thing it's important to remind shareholders is that when we talk about Cheffelo as a listed company on the First North exchange, there are certain rules that apply and don't apply. And in fact, this means that a traditional sort of share repurchase program is actually not permitted for a company like Cheffelo because of the way it's listed. So the initial reaction is that it's not possible. There have been very few precedences where a more complicated hybrid solutions of share repurchasing have occurred. But in general, what we -- the reaction on is it possible to do share repurchasing is quite frankly, it's a very complicated process with little precedence for a company like Cheffelo, it introduces both a large cost as well as risk for shareholders.

A question that was raised a couple of weeks ago on Twitter or a while back. Why do you have a maximum of 4 persons. There are a lot of 5 people, 5 person families.

Yes. Well, this is a way of managing complexity. So when we think about what is a person in the definition of a meal as well. And you can see quite a few combinations of families or households where maybe the right answer isn't that a household is either 2, 3 or 4 people. It could well be that a family of 4 has 2 adults and 2 small children or there could be 1 adult in the household and 2 children. So there's a level of complexity here. We've found sort of an optimization point where we can say that -- we offer 2. In Denmark, we offer 3, in both Sweden, Norway and Denmark 4-person boxes. We even offer a 6-person box, which is a larger size for those families that are not able to have enough with a 4-person box. So it's really a question of optimizing both the operational elements of how much variation can you provide with sort of this fuzzy definition of exactly how -- what is a meal and I think most families find that balance themselves through the process.

We have a question for Charlotte. So what differences sort of changes in customer behavior have you seen now these times when we experience inflation and many other trials. Some customers, I imagine switch from Cheffelo to actually go to the cheapest grocery store. Others might shift from going to the restaurant every now and then to actually starting to use Cheffelo. So what trends do you see there?

Well, I think that in inflation time, you always see this kind of down trading. So you look carefully at the money you have and what is providing you value for money. And if you look at our service, it's not selling food. It's actually solving an issue on the problem that they have. So in this period of time, we do see people moving towards grocery stores reducing takeaways or restaurant visits. But it's for all of them, it's really always about value for money. And the problem doesn't disappear even if you don't have enough money, they're still validating what is the best for our life.

We have a question for Klaus. Had the lower cost of acquisition cost -- customer acquisition costs led to smaller addressable market given that the mark-to-market costs might increase to reach more customers.

Well, the short answer is no. Our total addressable market remains and obviously, within that total addressable market, we are still focusing on our selected target groups within that. And that's where we are just focusing on the way we address them to reduce the cost of acquisition, certainly. And you may even say that it may on the longer term, help us increase the total addressable market, bringing down that [ indiscernibe ] actually, so on the opposite.

Another question for you, Walker. A common belief seems to be that it's a bad business to be in, this one that we're talking about now because customers are jumping between suppliers, when tempted by high rebates, et cetera. What would you say -- would you say that this is true? And is it possible to still be profitable despite giving large sort of rebates and special offers.

So yes, I think the question is it a bad business to be in, we definitely don't think so because we've been able to make it profitable. And at this point, we're also seeing growth again in the business. So I think what you have to remember is that it is a business that is driven by discounts. So from a discounting perspective, there will be an application of rebates at some point. What we are focusing on is really about how to optimize those rebates. And I think even as Klaus mentioned here in his presentation is that we have to be very careful about filtering bargain hunters. And so a big portion of what we do is make sure that we're not chasing people who demonstrate that they only will buy on a rebate. So I think this is a -- it is an important area to have focus on from a marketing efficiency perspective. But it certainly doesn't make the business simply bad because customers need an incentive to engage.

And into your 30% contribution margin before or after the [ indiscernible ]? .

So when we talk about contribution margin, that is after we've netted out rebates in the product purchase.

Another question for Walker. For you, Walker, being an active customer for a year. I'm highly impressed with [indiscernible]. I would also comment that [indiscernible] 2 questions. Appreciating that is [ indiscernible ] to propose dividend, how would management reflect over dividend outlook. So that's the first question. Let's take one at a time.

Yes, sure. First of all, thank you. It's been interesting and fun and also a little challenging to get this event in order, but we're glad that we can share that with everybody today and also that you're happy to be able to be a customer in Norway. I think when it comes to the outlook in terms of dividend distribution, we do have a dividend policy and the dividend policy as spent will be distributing 50% of profitability of the cash flow that we generate from operations. And so I think from a management perspective in terms of dividend outlook. I think we're happy to see that we've generated more cash this year and have had a return to profitability and showing good growth there. So we do expect to pay out more dividend when it comes to next year. And that's -- as you point out, it is a Board proposal that shareholders will need to evaluate. I think in the long term, there's always a question of what we do with capital. And in much the same way as say, do we actually return capital to shareholders through dividend, do we return capital to shareholders through other mechanics like the question with regards to share buybacks. I think in the long term, we think there is a growth opportunity in this business. There are things to invest in. So the best case scenario is actually where we don't. We would use that capital to reinvest in the business. But I think that, that is a question for the Board to evaluate when it comes to capital allocation.

And the second question is, what would you say if the group -- the Cheffelo Group's top 3 priorities for 2024.

Well, we definitely come back to the must win battle. So and as you saw in the presentation, we actually -- we really formulate these into 2 very core areas. One is continuing to drive marketing excellence, continuing to drive down customer acquisition costs and drive up the volume of new customers that we have coming in. The other side of this is delivering and creating these epic customer experiences. All of these have quite a few initiatives back behind them. So it's -- when you say break it down into 3, I really just focused on continuing to drive marketing excellence and continuing to cultivate these epic customer experiences.

And a question for Klaus. What kind of add-ons are Cheffelo looking for both within and outside of food and meal planning?

Good question. Our approach to this is that it should maybe complement our core product with the meal and the dinner that we are delivering. And that means that it will be mostly adjacent products where you can -- where you can put it on top of your meal. And that could be [indiscernible]. We are already testing out in Denmark. Wine that you can bring with your meal as an example, but it could also for that stake. And I'm not saying that it will be, but it could also be the desert because we are delivering the main meal and not your dessert. So we will be building on that core to say with adjacent products. But what you will be seeing is probably something where we also test out the different things because we have a lot of ideas for it, and we have the customers proposing even the things that they would like us to deliver, but yes, you could say just to mention that also, that it could also be based on the groceries, the few groceries that we are already offering and you can find examples of such where we may be bundling something, making a breakfast selection now. So there are a lot of opportunities here that we will be pursuing and testing a lot out in the future.

Another question for you, Walker. What would be the desired net retention rate after 12 months that you would like to achieve for your customer cohorts from 10%, 15% to 2x, 3x, what's the goal?

This is a very complicated mathematical question because basically, what we see in our business is that we see a sort of a retention rate, which is very similar to many other competitors in market and retention rate will glide around on a cohort based on the types of offers that customers came in on. The seasonality that they came in, the type of macro environment that we're faced with. We've obviously seen some things that have been affected by pandemics. When we talk about our ambition, though, of course, retaining customers is super important. So even if we're acquiring even more customers with a lower customer acquisition cost and the volume of customers coming in is greater, the ability to move 1% or 2% has a significant impact on retention. So it is an overall ambition to continue to drive improved customer cohorts. Putting a number on it is more complicated in terms of a very small change, cohort rate will drive quite a bit of growth.

We have a question Vibeke. Do you have any plans for consolidating production and having only 2 or perhaps just one production facility for all your markets.

I don't have any [indiscernible] for that at the moment. We operating in Norway, Sweden, Denmark and in Norway the import regulations is quite strict. So it definitely makes sense to separate Norway away from Sweden and Denmark due to our suppliers. In addition to that, we have a facility in Sweden and in Denmark. But really the fixed cost of the facility is not the biggest part of the equation. So I think we have local suppliers, and we have local customers. So the cost and benefit on lead time and transport makes it more sensible to keep the 2 facilities in Sweden and Denmark as well. And then in my experience, organizations work better when they are smaller, and they are more efficient. So there's not really a big benefit of being huge in the production facility either.

A question for Klaus. You seem to have the widest variety of recipes in the meal kit category. Is that sustainable? Or could you operate in a more efficient way? And question number two, are you planning on keeping the leadership as a differentiator?

The number of recipes is not a target itself, as I stated before we have no real limitations. The important thing is that we have the variation of recipes. So being as interesting as possible in every season. So it's more defined by the number of ingredients that we are working with every week cycle that is the main issue to secure that we have the variation that is needed. So I'm not focusing on the number [indiscernible] that we have the right variation every week to offer to our customers. And the second question, you need to.

Repeat it? So are you planning on keeping that leadership as a differentiator?

Yes. I should say that's important that we have the right variation every week. So that just makes us the leader in that segment I should say, yes.

And a question for Erik. Congratulations on a positive Q3 report a few weeks ago. I have 2 questions. Let's take one question at a time. We're now in mid-November. Could you say something about how Q4 is looking?

I could reinforce what we said in the quarterly report that we are very happy with the progress that we are seeing right now, and we are expecting to show growth also in the fourth quarter.

And question number two, it seems you're on your way of achieving 30% contribution margin. Are you satisfied with that? Or will you set higher targets?

Yes. First off, we are very pleased with -- that we have achieved a contribution more than 30% on an annual basis. However, the 30% that is not carving stone that is a level that we find ourselves comfortable with as of now. It is a level that makes us profitable with the current volume and has also enabled us to reach the profitability targets or financial profitability targets while growing in the volumes.

We just had a new question from an investor. Thank you for an excellent variety of topics. Two questions for Walker. What are your thoughts on geographical expansion, Finland?

I think, obviously, any company that has growth ambitions is always looking to expand their total addressable market and even geographic footprints. I think one of the conclusions we reached a couple of years ago when we were exiting the pandemic was that we have a lot to focus on in the markets where we are operating. And I think the strength of where we're at today is that focus. It has been making sure that we're executing in a market, which is a tough and very dynamic market with a changing competitive landscape. It won't be any easier to go geographically and do other things, which also means then that executing on where we're at has been our top priority. And I think we're very happy to see the growth come back and we're very happy to see the profitability to be in place. It opens up for new opportunities in the future. But I wouldn't speculate on saying that we're looking at expanding geographically in the short term.

Question number two, could you please share a couple of your biggest challenges? What is the bare case?

I think the bare case that's out in the market is sort of one of these where cost of capital all of a sudden comes way down and we're back in an environment where there's free money floating around in the system and profitability is of interest. So from a bear market perspective, that means that competitors continue to behave in ways which are noneconomical. It's also sort of, I would say, another part of the bear case could well be that the macro environment deteriorates further. There's -- if we look in terms of what's happening, we still have questions about how long interest rates will be high. This is from the consumer perspective where the consumer perspective says that customers are going to be fickle in their purchases, they're not going to be interested. So I think it's -- that's the bare case in terms of what I see. And obviously, in both of these respects, I think, fortunately, right now, what we are seeing is good trends at least in the right direction.

So we have some more questions about -- or at least one more question about contribution margin for Erik. Is there an upper limit with regards to your contribution margin? How do you expect contribution margin to scale with volume. That was for Erik. Are you still with us?

So 30%, that is a contribution margin that we are very pleased with as of now. There are some aspects of scale of economics. However, in the short term, now we are expecting to manage contribution by around 30%, meaning that we will -- additional improvements between contribution margin will go to enhance our product offerings.

A question for Walker. Considering the large changes in Cheffelo recently, is Cheffelo now open and ready for an active M&A agenda. And is that something that is of interest to you?

I think in every strategic plan, there's room for opportunistic business combinations. So it's certainly not something that we would shy away from. But I think that there are some things that have to come into play. Opportunistic is one of these key things. We're not in the business, or from our strategic perspective, we're not out looking for companies to buy to do inorganic growth, they wouldn't be very essential to what we do today. And it needs to be something that would add value to the overall equation. So I think the M&A agenda from that perspective is still very opportunistic. And obviously, when we start talking about things like that, financing questions come up. I think even our own cost of capital we recognize is quite expensive with where the share is trading today and with interest rates, what they are. So any opportunistic events in M&A needs to check a number of boxes before we would actually be willing or able to do something.

And another question for you. Some competitors are closing down. Do you see any effects of that?

Yes, I think there's been a lot of changes in the market over the last 18 months, you could say. I think we see a lot of changes happening both because of exits. I think there's been a lot of action on the quick commerce side where sort of this fast delivery business models, especially in the Swedish market have been closing down. We've seen some exits from other markets, and the large international players in that respect. When it comes to the meal kit business, we've seen companies like City Gross backing out of the meal kit space this last fall. In the Swedish market, we have seen -- we have been involved in acquiring customer relationship databases of competitors in Denmark who are exiting. We've seen Marley Spoon exit both the Swedish and the Danish markets and then on the free pick side, you're seeing a lot of consolidation action. You're seeing traditional players that have actually exited home delivery of food, consolidation, a lot of consolidation has happened in this market. So I think overall, the effect of this is that competition is behaving differently. The options for consumers are being reduced in many respects, which means that an offering like ours becomes more attractive in the market and more competitive and for us to be able to do that in a profitable way also means that we have a sustainable business model that's not going to be around until the next capital raise, it's going to be around for many economic cycles to come.

Great. So we have a lot of questions coming in, and I just want to highlight that you can still submit your questions. So keep it going. It's super exciting to interact with the audience in this way, I would say. A question for Vibeke, how much more volume can your distribution centers handle before you will face a capacity limit and need new investments?

As I mentioned in my presentation, our production facilities can handle at least 100% increase in margin. On the distribution side, we do this, it's outsourced. So we can always go out and buy more. So for the time being, at least double and probably more because we will get more efficient and be able to use the capacity better in the future as well.

A question for Klaus given your high unaided and aided awareness in Sweden and Norway, should it be possible to decrease marketing costs even further, considering what Clement mentioned about the 60% of marketing costs is on the top of the market funnel.

Yes, you could say that, that's an option. But right now, I think really that the spend that we're having is at the right level here and you could say we would even consider increasing the spending when we get potential -- [ indiscernible ] a tough to [go option] when [pack] has decreased. So in other words, we will not give up our market position either in awareness here. So we will consistently support our position here also in terms of spending. But with a clear focus on having the marketing efficiency in place here.

A question for Clement. Are you planning on consolidating to having one consumer brand or at least having just one brand in Norway, it's seen by your Q3 report that there was a significant difference in how they perform.

Well, no, I actually think that the difference in performance is more linked to the financial situation, Adams is a more premium brand. So this is why we see differences in the performance for the 2 brands. Having 2 meal kit brands in Norway is actually helping us covering a larger share of the market in an efficient way. We know that there is little cannibalization between the brands and Adams by having an extra brand is actually helping us be more specialized in one direction towards the more premium segment where [indiscernible] covers the masses. So I would say that for our sake, it's more important to -- that we are not investing in building a brand actually. We are maintaining a profitable brand. It was already established, obviously.

We have 2 questions for the CTO, Anton. How scalable is your technology infrastructure to handle increased user base?

Yes, it's a good question. I think I'm one of the few e-commerce CTOs who don't have to worry about Black Friday next week because our traffic is much more. It's not the type where it's very spiky where you have 50x traffic suddenly. It's quite predictable, and we pretty much know what is going to be throughout the week. I wouldn't say -- I mean, back to your question, it can handle a lot more. It's much more scalable. It's not something that keeps me up at night at all.

What measures are in place to ensure uptime and reliability.

Yes. I would say, we monitor everything, all of our systems, basically, they are 24/7 monitored with alerts and everything. If something were to happen. More importantly, I would say that sort of working with reliability, you must sort of do that in the software development life cycle as well, making sure that what you do is of high quality. And also, like we are -- as technologists, we like to build new stuff all of the time, and we want to build new customer-facing features and everything and making sure that we have sort of the balance between new features and making sure that we don't build up a lot of technical debt, so keeping that balance. And I think we are at a fairly good point now. I would say our systems are very reliable and I can't remember the time we had the last sort of big customer-facing outage. Of course, you have small things every now and then and bugs and so on. But like yes, it's pretty good.

Very comforting to hear. And a question for Walker on M&A opportunities. So one more question on that. What would you be looking at when it comes to M&A opportunities?

So in what -- if we were to think about M&A. It's basically going to be something that needs to complement our existing business. So I think we're not -- we're never going to see an M&A strategy at Cheffelo, which is sort of go buy companies to just grow the top line revenue and then see how you make it all work. One criteria that I look for in transactions would be -- it's the make versus buying question. Can you accelerate a growth trajectory somehow by acquiring a company rather than going through the process of setting up an organization, finding and assembling the competencies that you need to make it work, building brands. There's a lot of money and risk that goes into that. So one of the basic questions is, is there a way to complement your existing business and accelerate growth through an acquisition? That's definitely a criteria. I think for us, it's definitely -- we are in the meal kit business. We are -- we have a very well-established distribution network to move products from central distribution facilities to customer homes. We have a significant amount of customer relationships. So anything that can -- operates within sort of the food space, that becomes capable of exploiting the existing setup or building new capabilities is sort of something that we would look at.

So we have another 9 minutes or so for submitting more questions. So just go with the flow. We have one -- actually 2 questions for Erik. Your last price increase was at the end of 2022. Have you raised prices in line with how much consumer prices have increased or more or less? .

Yes. So we did our last price increases in late 2022. And since that, we haven't adjusted the price on meal kits or our delivery fees. When we raised our prices, we saw [indiscernible] inflation of between 12% to 19% in our markets. It was different market by market. We raised our prices also different depending on each market, but in average between 11% to 16%, which was lower than the inflation that we saw in those markets. Since we have done the price increases, we also have seen the big food inflation continue. We see about 5% increases since 2022, although we have been able to mitigate those increases through the various initiatives that we have mentioned throughout the presentation.

So does that mean -- what does happening when it comes to adjusting your prices again?

Sorry, I could [indiscernible] we are in concern evaluating our prices, although we have currently no plans for increasing the prices as part of new plan asset development.

A question for Jeanette. You have 2 brands in our way. With your current technical abilities, will you be looking into a dual brand strategy in Sweden and Denmark as well?

You could say that, that could be tempting since we think that Adams and Godtlevert is supplementing each other, but it's also very costly to build a new brand from the bottom and try to do that. And I would say that looking at the market, it's not really some buddy who is in the position of matching us, I would say. So for now, no, there's no plans. We would rather focus on the single brand we have in Denmark and Sweden.

A question for Vibeke, it seems you have a lot of improvements -- have made a lot of improvements to our processes, but are there further ways to reduce logistics production and delivery costs.

Yes. Of course, we continue to work with operational excellence and continuous improvement. And of course, there's always more things to do. So we will do that. We are also looking into ways of using robots and automization in a smart way. I'm not looking into fully automated facility, but doing some smart moves here and there that can save cost and be beneficial. And on the distribution side, we've started to work with coal distribution in a larger scale than we used to, which is also beneficial for optimal logistic offer.

Question for our CTO, Anton. You touched on this in your presentation, but how can you keep up with tech development with a relatively small tech.

It's a great question. I think at the end of the day, it comes down to having sort of very curious sort of people on board who are open to looking for new technology, the driver types not the passenger types. We want those who are interested in sort of tech development in general. But I must admit it's also like if you look at something like AI boom throughout the last year with LLMs and everything, it's at that pace where it's also very -- it's quite difficult to keep up. And it's also quite easy to make sort of mistakes where you -- because you're sort of at the top of hype cycle. So it is somewhat of a challenge, but I think in the end, it comes down to the team. We must be willing to explore new technologies. There's also, of course, things we can do to sort of encourage that. We can do hackathons, we can do knowledge sharing. We can do all types of different activities in order to encourage keeping up with new developments.

A question for Walker. How are you planning to keep increasing average order value?

Yes. So I think, as Erik mentioned, we don't have any short-term plans to increase price, but there are other things that impact the average order value. And Charles was in on this a little bit to the extent that we can amplify the amount of the add-ons and groceries that we sell as complements to the meal kits. We can continue to increase the average order values. There's a good synergy in that type of business as well because we're already delivering the meal kit box, which means that we can capitalize on an existing more or less fixed cost for distribution and good productivity impacting any type of add-on in groceries as well. I think that's definitely an area for increasing average order value. I think what we've also seen is as we continue to make the offering more relevant for more people more often, then you also see a mix shift in the portfolio. And that sort of -- we set as an ambition to increase the number of the recipes or the number of meals that are ordered within the -- every single week to the average customer, simply as a way of being more relevant. So as we increase the relevance to the customer, in terms of how we solve their problem. Our hypothesis is that they will order more from us. And that's also a way then of driving the average order value in the right direction.

We have a question about customer churn for you, Walker as well. Do you have insight in other meal kit companies, if they have similar levels of churn? Or are they performing differently?

I think what we see is we -- this type of information that we've shared today is available in other competitor capital market events. And we've tried to highlight the fact that we are very similar in many respects to these type of churn rates that you see in the meal kit market. And I think this is -- as a subscription business, we're obviously looking for customers that come back again and again. And we will have a churn rate that's quite high for new customers. There are reasons why it demands and changes to how a household thinks about dinner, how they plan for their dinner how they make room in the fridge. They're basics that require some adaptation, but once households have adopted then the value of those customers are quite high. And we see that with our services from a comparative analysis towards competitors, we see we're just as good as the competition in retaining customers over the long term.

That would be the last question for today. I'd like to thank all of you who have been listening and asking questions. I'd also like to thank, of course, the senior management of Cheffelo, who shared insights about their business today. I certainly learned a lot. I hope you did as well. The recording of this event will be -- and the presentation material will be available both through the Finwire and the Cheffelo website. And I will now leave the stage and had it over to Walker for closing remarks.

Thanks very much for your help today, Paulina. We very much appreciate all of you who tuned into our capital market event today and of course, your interest in Cheffelo. Hopefully, this time, [innervation] Q&A session has brought you some better insight into our business. That was the interesting investment opportunity that we actually think Cheffelo presents. We're very proud of being able to deliver on our commitments this last year. And hopefully, you've seen and understood the proof points in our business that actually give you more -- even more confidence in the profitable journey that we have ahead as we see it. So the best way of course is to get to know our business even better. Go ahead and try the product if you haven't us already. And we can only say that you're most welcome to join us at the dinner table. Thank you, and have a great day.