IN1622

Case Study

PopChef: Creating a Tasty Foodtech Business

Source: PopChef

01/2020-6391

This case study was written by Dawn Jarisch, Research Associate, under the supervision of James Costantini, Affiliate Professor of Strategy, both at INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

The case preparation benefited from a student project conducted as part of the INSEAD-Sorbonne Business Foundations Course by Noémie Haesaerts, Aniss Kessaci, Luca Margheri, Ombeline Morand- Monteil, Éric Oblet, and Hugo De Rocquigny. Financial support for the case writing from the Dean’s Annual Fund is gratefully acknowledged.

To access INSEAD teaching materials, go to https://publishing.insead.edu/case/popchef

Copyright © 2018 INSEAD COPIES MAY NOT BE MADE WITHOUT PERMISSION. NO PART OF THIS PUBLICATION MAY BE COPIED, STORED, TRANSMITTED, TRANSLATED, REPRODUCED OR DISTRIBUTED IN ANY FORM OR MEDIUM WHATSOEVER WITHOUT THE PERMISSION OF THE COPYRIGHT OWNER.

Copyright © INSEAD 1

Through the spread of the internet and television, plus multinational restaurant chains and a greater variety of cuisine, young people in cities all over the world now have high awareness of what their international peers are viewing, sharing and experiencing, and they’re eager to test out such experiences for themselves. Rising disposable incomes and access to foodservice has meant they can act on those desires, seeking out new ways to expand their dining horizons.1

Waking from his daily siesta on a beanbag, Francois Raynaud de Fitte surveyed the top floor of the PopChef offices through the glass partition, spotting his business partner with whom he had created the lunchtime food delivery business in Paris. It was the summer of 2017, and at the age of 27, he was about to embark on a partnership of a different kind. Like other employees, he was entitled to unlimited holidays so he could look forward to his honeymoon knowing the business could function without him. The downtime would provide an opportunity to reflect on the business and how to differentiate PopChef in what had become a highly competitive market.

The Entrepreneurial Journey

When François Raynaud de Fitte met Briac Lescure whilst working as a trainee venture capital analyst in 20142, they knew they wanted to build a business venture together but did not know where to start. Using skills gained from business school, they considered 10 potential businesses and narrowed them down to the three most promising (yet very different) ideas. They presented the concepts to potential investors, asking ‘Which of these ideas would you invest in?’3 Although none of them were prepared to invest, their idea for a food delivery service won support because of the huge potential of what was an untapped market with little competition.4

The duo began to investigate the feasibility of creating a foodtech start-up.5 After some desk research, they decided to target the lunchtime food delivery market in Paris (see Exhibit 2). Francois explained the rationale for serving lunch (and only lunch):

Every single study we looked at recommended the evening meal market, as 80% of the food delivery business was for evening meals and only 20% for lunch. So we wondered why people didn’t have delivery at lunchtime and decided to create our own market, where we could have our own ‘blue ocean’.6

The plan was to create a “virtual” restaurant (no physical location for the customer to visit), creating and preparing meals using only locally sourced and traceable produce in their own kitchen, distributing through their own network of hubs and delivery drivers, and relying on a website and app to promote the service, take orders and create a community.

Testing the Concept

1 Euromonitor Opinion 07 Feb 2015, Introducing the “Universal” Global Consumer: Five Trends Driving Demand in Cities 2 See Exhibit 1 3 Author’s interview with Francois Raynaud de Fitte, 26 January 2018 4 At the time, only Allo Resto and pizza delivery companies served the Parisian market 5 Foodtech combines food and technology 6 Author’s interview. ‘Blue Ocean Strategy’ by INSEAD professors W. Chan Kim and Renée Mauborgne.

Copyright © INSEAD 2

Francois and Briac hit on an interesting way to carry out market research. They boarded the RER train between Arc de Triomphe and La Defense (business district) and during this long, nonstop section of the line, surveyed 500 ‘captive’ commuters to understand whether they would be prepared to order lunchtime meals for delivery to their place of work.

They discovered that many commuters used lunch vouchers – worth €9 a day from their employer – to purchase food from local bakeries, cafes and restaurants.7 Employees were entitled to one voucher for every working day – no change was given if they spent less. 10% of the people surveyed said they would order food online if (i) they could pay with vouchers, and (ii) it was delivered within 20 minutes.

Buoyed by these results and the fact that there was limited competition in the lunchtime market, the two were starting to make plans when they heard about Frichti, another start-up which was planning to launch a similar concept. Aiming for first-mover advantage, they rapidly got to work. Two weeks later, in January 2015, PopChef was launched.8

Launch of PopChef 2015

Since there was no time to design the ‘full-stack model’ (across the entire value chain), they adopted an interim approach. They teamed up with a local restaurant that agreed to provide a €9 ‘dish of the day’, packaged it with PopChef packaging, and delivered it for €9.90 using Francois’s parents’ car or via Vélib, the bike-sharing scheme in Paris. Each day, they sent an email to people in their network and posted on Twitter with a link to order the day’s menu.

These early experiences enabled them to understand the needs of the market: “We spent lots of time ringing customers to understand their tastes and preferred recipes. After each delivery, we sent an email inviting them to rate their meal.”9 PopChef used these ratings – given by 30% of customers – to create a customer community. Within a few short months, PopChef had created a website and was delivering as many meals at lunchtime as the provider restaurant was producing for its evening customers.10

With a proven concept, they were able to raise €330,000 in May 2015, from three business angels: Xavier Niel, Antoine Granjon, Thibaud Elzière, and Francois’ teacher from business school – Marc Simoncini.11 The money was spent on renting and equipping relay hubs (where food was stored and reheated) and to pay for marketing and onward delivery. Delivery was outsourced to self- employed riders on bikes, who delivered the meals from a backpack within a 20-minute timeslot. Many were students working a couple of hours a day as ‘micro-entrepreneurs’.12

However, when PopChef reached 80 meals per day, the provider restaurant could no longer continue the relationship. Not known for his culinary skills, Francois was forced to take over the

7 Supermarkets and hypermarkets were also allowed to accept the vouchers as payment for sandwiches and ready-to-eat

meals and salads only 8 Together with Pierrick Paul, as CTO and third co-founder and registered under the official business name Pop Expedition 9 François quoted in the journal Entreprendre: Foodtech : Pop Chef mise sur les points relais – Entreprendre.fr 7 2 17

http://www.entreprendre.fr/pop-chef 10 50 meals per day 11 Xavier Niel was the very successful founder of the French telecommunications company, Free, and Antoine Granjon was

one of the cofounders and CEO of the very successful French ecommerce company Vente-privee.com. 12 Because students only worked lunchtimes under auto-entrepreneur status they were not classified as employees

Copyright © INSEAD 3

cooking: “It was terrible. We lost many customers in these two weeks before finding a catering company and outsourcing the cooking.”13

The Shift to Catering Companies

The new supplier was accustomed to producing meals in large volumes, but the quality was not high enough. To overcome the problem, PopChef asked a well-known chef to develop the recipes. Henceforth the catering company simply had to produce the food according to instructions, using only ingredients from local, traceable farmers and producers. For the catering company it was both a new market model and a new channel. The model proved to be scalable and PopChef enlarged its daily menu to offer a choice of three to six starters, main courses, desserts and drinks, with prices of main meals between €8 and €11.

In its first fiscal year of operation, PopChef posted a loss of €248,000 on turnover of €198,100.14 Nevertheless, it was building a strong technological infrastructure (geolocalisation, real-time algorithms, website, etc.).

As the business grew to 300 meals per day, PopChef focused on improving the technology and the delivery, using data analysis to understand and forecast customer demand. A proprietary algorithm allowed it to optimise delivery by calculating the shortest distance between the hub and the customer, cutting delivery costs by 15%.15

Francois began to think that – without adding to the team of 10 people in PopChef’s office – it would be possible to deliver up to 10,000 meals a day.

From a Tech Company to a Virtual Food Company However, rather than continuing to expand, sales plateaued as new entrants Frichti, Nestor and Food Cheri arrived with better quality products, customer focus and marketing. Francois noted:

Frichti’s technology was poor – but they outranked us when they arrived as they focused all their energy on the recipes and small details, including calling their customers every day on the phone. This created a consistent credible message.16

With greater access to funding, competitors splashed out on advertising campaigns. It became impossible to take the metro without seeing advertisements from Deliveroo, Take Eat Easy or Allo Resto 17 (see Exhibit 4).

The co-founders decided to change tack – from a tech company to a food company18 – and to hire people who were passionate about food. Each day they ordered meals from competitors and rated

13 Author’s interview ibid. 14 PopChef : des liens capitaux pour une levée de fonds de 2 millions d’euros, 18 octobre 2016,

http://www.itespresso.fr/popchef-levee-fonds-2-millions-140714.html 15 Foodtech : PopChef mise sur les points relais – Entreprendre.fr 7 2 17 http://www.entreprendre.fr/pop-chef 16 Author’s interview with Francois, 26 January 2018 17 La foodtech en 2020 : qui gagnera la bataille de l’assiette ? Jan 28, 2016,

https://medium.com/@briac_lsr/la-foodtech-en-2020-qui-gagnera-la-bataille-de-l-assiette-69572b9c5dca 18 Pierrick Paul left PopChef in February 2016 on good terms. The stressful life of an entrepreneur didn’t suit him and there

were disagreements on the vision of the company.

Copyright © INSEAD 4

them on the quality of the food, packaging and user experience. Initially, PopChef’s meals ranked lowest in every domain, but with daily tweaks and improvements, the ratings and number of orders mounted.

With renewed momentum for the business, PopChef secured €2 million in funding19 from Elior,20 a large industrial caterer, and a group of private investors. Francois was convinced that the deal with Elior would bring synergies for both parties: “We gave them access to our technology, and by having access to their purchasing power we could cut the cost of ingredients.”21

Culture and Identity

The funding allowed PopChef to invest in refining its identity and increase its distribution facilities to 10 hubs. It also invested in developing the brand, an essential element for acquiring and retaining customers.

In December 2016, PopChef made an amusing video22 parodying Emmanuel Macron coming to the aid of the then President Francois Hollande by organising food from PopChef for an important meeting. It ended on a play on the word PopChef, with Hollande saying “I'm the chef (boss)”, and Macron quipping “Not for much longer.”23

PopChef customers positively identified with its new identity. This included a new internet site explaining the eco-friendly concept of delivery by bike or electric scooter, biodegradable packaging, and sourcing fresh local ingredients, in season, from small organic producers (see Exhibit 5). Stickers that came with their packaged meals communicated PopChef’s brand values (e.g., ‘Fuel for entrepreneurship’) and were displayed on office computers.

Entering the PopChef offices, a few minutes’ walk from the Champs Elysees, visitors could see a difference (with a traditional French business). There were artificial trees among the desks and a relaxation room where employees were encouraged to relax and take a nap on the beanbags when necessary. When they wanted to work in silence, employees could isolate themselves in a see-through bubble (see Exhibit 6).

As if working for their own business, employees did not have to keep office hours and could take as much holiday as they wanted, providing the work got done.24 Describing the corporate culture, Briac insisted: “We buy results, not hours.”25 Even trainees were trusted with using the company

19 In May 2016 20 Elior Group were the second largest industrial caterer in France with annual revenues of €6 billion. It invested in eight

European food-based startups: GoCater (la Belle Assiette), FoodMeUp, Touch and Play, Never Eat Alone, Rose & Mary, Vitalista, Foodles and PopChef as part of its 2020 strategic plan. Source: Neorestauration.com, 22 March 2017, 40 startups pour inventer la restauration du futur avec Elior Group. In subsequent funding rounds, a similarly sized amount was raised from Elior.

21 Author’s interview ibid. 22 Cauchemar dans les cuisines de l’Élysée, 16 Dec 2016 – PopChef – YouTube

https://www.youtube.com/watch?v=aP1qHGxggJ4 23 In November 2016, Emmanuel Macron declared that he would stand for election under the banner of En Marche!, a new

political party founded in April. He subsequently replaced Francois Holland as President (May 2017). 24 Unlimited holidays could be taken whenever the employees wanted, as long as they fulfilled the objectives set every six

months. 25 L’édition du soir Ouest France, Ces entreprises proposent des congés illimités, 3 July 2017

Copyright © INSEAD 5

credit card. This unusual approach won PopChef free publicity – it was featured on M6, the TV channel.26

Every Monday at 8:30 am, the whole team came together and each person explained their top three priorities for the week ahead. Head of Marketing, Clémence Decoene, explained the advantages of being a small team: “Everything went very fast. We could take a big decision one day (such as changing the marketing or the packaging), implement it the next day, and if it worked duplicate it.”27 Hélène Myon, Head of Food, observed “We were like a big group of friends, all cross-functional, sharing the good times and the bad.”28 When she proposed a new dish, the whole PopChef team came together to test it, checking it tasted and looked good.

The French Meal Delivery Market in 2017

By 2017, there was a trend for healthy eating and sustainable food production using fresh, locally sourced, environmentally-friendly products. INCO legislation aided transparency in the food sector, as the product origin had to be indicated on meat, fresh fruit and vegetables.29

In Paris, there were three main models in the meal delivery market:

1. Classic delivery –

Physical fast-food restaurants with delivery service, such as Domino’s Pizza, the leading brand, which supplied nearly half the French meal delivery market via its franchise network.30

2. Intermediaries with their own online platform, which allowed customers to compare offerings and prices, see and post customer reviews, and place orders with a few clicks at no additional charge (compared to phoning a restaurant). Those with sufficient scale achieved high margins, as they earned a fixed margin per order and could also charge for promoting particular restaurants to make them more visible on the website. The network effect helped to drive market share for established leaders. Intermediaries sub-divided into two types: a. Platforms which provided no delivery service, such as Allo Resto (part of Just Eat),

Livraisonresto and Pages Jaunes Resto. Their role was to put customers in contact with restaurants that had their own delivery service. They managed the digital side of orders and took 10% to 15% commission per order. Offerings were biased towards low-quality fast food, such as pizza and burger restaurants.

b. Platform and delivery operators, such as Deliveroo and Foodora (part of Delivery Hero) that had their own delivery service and worked in partnership with high-quality restaurants. Margins were undermined by high delivery costs, which were not optimised. Take Eat Easy was part of this group before going bankrupt in 2016.

For some restaurants these offerings opened up new and previously untapped customer segments, expanding revenues while not needing to invest in the online order process and logistics infrastructure. This had to be balanced against the risk of diluting the restaurant

26 PopChef – Vacances illimitées JT M6 12h45 27/11/17 – YouTube https://www.youtube.com/watch?v=- IC8a6ODbqI#action=share

27 Author’s interview with Clémence Decoene, Head of Marketing, 14 February 2018 28 Author’s interview with Hélène Myon, Head of Food, 14 February 2018 29 Euromonitor, Consumer Foodservice in France, May 2017 30 Euromonitor, Home delivery /Takeaway in France, May 2017

Copyright © INSEAD 6

brand, as the customer experience was uncontrollable once the food had been passed to the delivery driver.

Operators received a fixed margin from the restaurant (up to 30%) and a small delivery fee from the customer. Uber Eats, a subsidiary of the US ride-hailing group, entered the Parisian market with a large and varied offering, leveraging its existing driver network, tracking information and user base. It tended to focus on lower quality restaurants, including a partnership with McDonald’s.

Copyright © INSEAD 7

3. Virtual ‘restaurants’

Virtual vertically-integrated ‘restaurants’, such as PopChef, Frichti, Food Cheri and Nestor. They sought to deliver high-quality meals at lower cost by taking responsibility for the whole food chain – from production to delivery.

Lunch Trends in Paris According to TripAdvisor, there were 10,000 restaurants in Paris serving the lunchtime market. Of these 2,600 offered take-out and 700 offered delivery.31 Few office workers32 had the time or inclination to return home to cook lunch and usually went to a local restaurant, supermarket or bakery (if they did not bring their own pre-prepared food to the office). In summer, they might buy items (bread, cheese, fruit, wine, etc.) at a market for a picnic in a park.

• Bakeries made sandwiches or quiches to take away and some would heat these up. A ‘formule’ consisting of a sandwich, pastry and drink could cost €8 or €9.

• Supermarkets like Carrefour Market sold packaged sandwiches and cold drinks for about €5.

• Restaurants and cafés had a weekday lunchtime menu typically between €15 and €35. By having food delivered, customers could minimise the time spent on lunch (to go out and wait to be served in a restaurant) and they rapidly embraced “home delivery”. As online ordering gained popularity, several companies in the segment reported double-digit weekly growth33 (including Foodora and PopChef).

Customers

PopChef’s offering was aligned with a growing trend for eating healthily, sustainably and locally sourced. Business mainly comprised individual orders from office workers and the start-up community, with a small yet profitable niche of bulk orders of meal-trays for meetings. Most customers were aged 25 to 45. Around 80% worked in offices without a company canteen; 10% were multiple orders from office managers, and the remainder were university students or office workers who either did not like the canteen or wanted a change. Around 40% of orders were repeat business. Briac claimed:

80% of PopChef’s customers have never previously used a food delivery service. However, delivery is a quickly acquired habit among Parisians and the reason is actually quite simple: with an equal price and product quality, “convenience” always wins.34

31 February 2018 32 Larger companies had their own internal canteen restaurants, often outsourced to large catering groups like Sodexo. The

caterer might outsource other requirements it did not provide such as lunchboxes and cocktails. 33 Euromonitor, Consumer Foodservice in France, May 2017 34 Briac, in La foodtech en 2020 : qui gagnera la bataille de l’assiette ?, Jan 28, 2016,

https://medium.com/@briac_lsr/la-foodtech-en-2020-qui-gagnera-la-bataille-de-l-assiette-69572b9c5dca

Copyright © INSEAD 8

In contrast to the evening meal market, where people were prepared to spend more time choosing and eating dinner, at lunchtime they tended to eat light and quickly, as Clémence Decoene, Head of Marketing, explained:

People don’t want to spend time choosing which meal is best. At 8 a.m., they usually don’t know what they will want to eat at lunchtime, but when lunchtime comes they want to pick quickly and have their order delivered within 15 minutes.35

Communication with customers was by web chat and friendly mass emails, with orders taken on the website. PopChef had developed an app in 2016. However, it proved to be user-unfriendly and since, at meal times, most customers were in front of their computer screens and preferred to click on PopChef’s daily meal email, the app was abandoned.

As a small number of customers ordered three to five times a week, it was important to change the menu each day and consider the weather as preferences changed depending on the season. Customers particularly appreciated hot meals between autumn and spring when they did not want to go out but wanted to eat something hot. Few offices in Paris had fully equipped kitchens, and at best had one or two microwaves serving 100 co-workers. As everyone needed to eat within the two-hour time slot, they did not want to waste their lunchtime queuing to use the microwave. When it was sunny, people preferred to eat outside. Contrarily, Head of Operations, Charles-Henri Tournier observed that rainy days were difficult as self-employed drivers did not like to work in the rain, but there was a rise in orders.36

Marketing and Competitors Planning was further complicated as PopChef daily orders were affected by the promotions of other operators. Comparable competitors (see Exhibit 4) used different methods to promote their offerings:

• Food Cherie ran ad campaigns in the Paris metro: it ran at least 3 campaigns, displaying a small discount promotion code in the left-hand corner of the billboard.

• Frichti sent out newsletters to customers, actively used social media, had partnerships with famous chefs and brands, emailed special offers to customers,37 and offered referral code discounts.38

35 Author’s interview with Clémence Decoene, Head of Marketing, 14th February 2018 36 Author’s interview with Charles-Henri Tournier, Head of Operations, 14th February 2018 37 For example, offering a discount for that day or a free dessert 38 Some commentators wondered about the economics of this type of marketing campaign. For example, Medium

highlighted that this acquisition strategy has a significant cost. By using a Frichti referral code, you earn € 5 and your friend also receives € 5 voucher. Your acquisition cost is therefore € 10. An average menu will cost 14 € with delivery. Out of the € 14 you have to deduct the commission of the deliveryman, the costs related to the platform (notably related to the payment), and the unit production costs. So, one can easily conclude that Frichti loses money on its first order. (and we do not speak yet of the other expenses of the company, wages, premises, taxes …). Source: Medium, Oct. 20, 2016, J’ai vécu aux crochets des start-ups pendant une semaine, https://medium.com/@AMikl_/jai-vecu-aux-crochets- des-startups-d2f39780f5ef

Copyright © INSEAD 9

• Nestor relied on very low prices, flyers handed out at metro stations to attract customers, and partnerships with Comités d’Entreprise (works councils) to offer a €8 menu to employees.39

PopChef relied on a word-of-mouth referral strategy, with around 80% of the business originating through referrals. It used email, journal, newsletter and Facebook campaigns. To discourage churn, it sent first-time clients a €2 voucher off their next order if they had not placed a second order within 7 days, and a €5 voucher after 30 days.

PopChef operated an unusual tiered discount structure based on the number of accounts in a company rather than the number of orders in a month. The idea was that if people received the newsletter and the product looked good, they would want to try it.40 To encourage people from the same location to place orders together, a 10% discount was offered for multiple orders.

Growth in 2017

By 2017, PopChef had made changes to its delivery model. Riders who had initially been paid a fixed income of €12 per hour plus €2.50 per order, now received €4 per order payment only. Customers who had previously received free delivery, now paid a €2 delivery charge.41

In January 2017, PopChef was the first foodtech company in France to launch a B2B meal-tray offering, which it ran in parallel with its B2C offering.42 A couple of months later, Frichti advertised meal trays on its website, but as Frichti focused on B2C it did not actively promote meal-trays to businesses. As Clémence pointed out, it was hard to have two different identities: “People either see you as B2C or B2B.”43

On 22nd March 2017, PopChef announced that it was gaining 100 new customers a day and growing by 10% each week. It acquired Happy Miam,44 a small company that had been distributing 100 meals a day to 2,000 customers in Paris fitness clubs. PopChef now had a catalogue of 90 recipes and was delivering more than 1,000 meals per day,45 purchased from two catering companies and distributed through its network of 10 hubs (see Exhibits 7 and 8).

By summer 2017, with more than 100,000 dishes sold and a double-digit monthly growth,46 orders had risen to 1,500 meals per day. While profit margins remained low, PopChef was hopeful that costs would fall and further finance was imminent. Francois confidently told investors, “As we

39 This compared to an equivalent price for a menu of €15 from PopChef or Frichti 40 Author’s interview with Charles-Henri Tournier, Head of Operations, 14 February 2018 41 From Mid 2016 42 The traditional in players in the Meal Tray Delivery Market in France were L’Affiche, purchased from Sodexo to become

part of Riem Becker SA in 2014, Classcout and Room Saveurs – the market leader, part of the Fleury Michon groupe. 43 Author’s interview with Clémence Decoene, Head of Marketing, 14 February 2018 44 Happy Miam was founded in 2016 and based in La Celle-Saint-Cloud, Paris. As of March 22, 2017, Happy Miam operated

as a subsidiary of Pop Expedition, SAS. 45 Food: PopChef met la main sur Happy Miam et ses 2 000 clients, 22 March 2017,

https://www.maddyness.com/2017/03/22/food-popchef-met-la-main-sur-happy-miam-et-ses-2-000-clients/ 46 https://www.welcometothejungle.co/companies/popchef

Copyright © INSEAD 10

densify orders in a smaller area, delivery costs will go down and profits will rise.”47 Costs would be further diminished with the expected change to delivery by drones or other devices.48

In the meantime, together with its 40 committed employees49 and €400,000 in the bank, PopChef sought to establish a strong market position in what had become an increasingly competitive market with limited price and quality differentiation.

47 Author’s interview with Francois Raynaud de Fitte, 26 January 2018 48 “Data may prove highly valuable for developing routing algorithms to power fleets of drones, which seem well-suited for

food delivery – as the value per unit of weight is high, packages are not excessively heavy or voluminous, the content is not toxic/dangerous, and being able to ignore traffic should give them a significant speed advantage vs. mopeds and bicycles. Drones could also help reduce delivery costs and further enlarge the market.” The Billion Dollar Food Delivery Wars, July 11, 2015 https://techcrunch.com/2015/07/11/the-billion-dollar-food-delivery-wars/

49 25 people employed at HQ and 15 in the hubs.

Exhibit 1

Copyright © INSEAD 11

Founders’ Biographies

Francois Raynaud de Fitte (pictured left)

2008-10 – Bachelor of Law, King’s College London 2010-12 – Masters of Law, Sorbonne University, Paris 2012-14 – Masters in Marketing, Sciences Po, Paris January – August 2014 – Junior venture capital analyst, Jaina Capital, Paris 2014-15 – Entrepreneurial studies, HEC Business School, Paris January 2015 to present – Co-founder, PopChef

Briac Lescure (pictured right)

2009-13 – EDHEC Business School, undergraduate business degree 2012-13 – University Bayreuth, Germany, Masters in Management August 2013 – July 2014 – Junior analyst, Jaina Capital, Paris January 2015 – present – Co-founder and CEO, PopChef

Source: LinkedIn accessed January 2018

Exhibit 2

Copyright © INSEAD 12

Meal Delivery Market in France at the time of PopChef Launch

According to Euromonitor, there were five global food service trends driving demand in cities:50

1. Better and healthier. Including fresh, high-quality ingredients, cooked to order food that customers can feel good about eating, for example, organic or artisanal.

2. Differentiation on every part of the plate including branding, the use of technology and fostering a sense of community.

3. Functional food including maximising the value for money and different health trends such as low fat, low carb and low sugar.

4. Customisation and flexibility, where customers want to control the experience, for example through flexible mix-and-match menus.

5. No boundaries in format or category, including experimenting with crossover concepts between retail and foodservice, and welcoming the unconventional and unexpected.

Studies showed that 21% of French people preferred to purchase locally produced food; 61% said they would be prepared to pay more for local products as they perceive them to be of higher quality.51 Eating preferences were affected by a growing number of television programmes on food. This encouraged an increasing interest in high-quality, fresh, locally produced food. Healthy eating trends also meant that people were moving away from junk food and towards organic.52 However, consumer spending on food was linked to the economic and social environment. As the French economy had been weak, and VAT on restaurant food purchases had increased from 7% to 10% in 2014, (compared with 5.5% in supermarkets), consumers did not always act on their preferences.

France was known for its culinary traditions and fine dining; long family meals were part of the national identity and lifestyle. This may have explained why the meal delivery market was smaller relative to other developed countries, representing only 3% of total consumer food service value sales in 2015, compared to 7% in the UK. It was also behind in terms of online meal ordering (2% of total consumer food service value sales in 2015 in France, compared to 8% in the UK).53

Nevertheless, an OpinionWay survey found that habits were changing and a third of French people spent more time shopping online than preparing meals.54 In Paris, the increasing number of single people and longer commuting times were affecting eating habits and accelerating the trend towards home delivery.55

With the ubiquitous use of smartphones, digitalisation was shaping the food delivery market and customers wanted the convenience of ordering via an app or online. Restaurants that were unable to provide their own digital offering formed partnerships with companies that provided this service. Technology was also improving food service processes, increasing efficiency and minimising operational costs. The data generated from apps and online applications used in conjunction with algorithms to understand customer behaviour and delivery routes had the potential to increasingly disrupt existing market models, create better

50 Euromonitor Opinion, 7 Feb 2015, Introducing the “Universal” Global Consumer: Five Trends Driving Demand in Cities 51 From a 2015 survey by Credoc and 2016 study by opinion way FoodTech: Le défi logistique du mieux manger 14/12/17

https://www.maddyness.com/innovation/2017/12/14/foodtech-defi-logistique-mieux-manger/ https://www.maddyness.com/innovation/2017/12/14/foodtech-defi-logistique-mieux-manger/

52 Euromonitor Opinion, 7 Feb 2015, Introducing the “Universal” Global Consumer: Five Trends Driving Demand in Cities 53 Euromonitor consumer food service in France, May 2017. According to Euromonitor’s Consumer Foodservice in France,

May 2017, the representative percentage of total value of food to drink in the French home delivery segment in 2016 was 89% to 11%, whereas in comparison for full-service restaurants it was 67% to 33%

54 Le Français passe plus de temps à faire ses courses en ligne qu’à cuisiner – ATABULA, 27 May 2016, www.atabula.com/2016/05/27/consommation-france-courses-en-ligne/

55 According to a study by the employment ministry, Parisians spent an average of 68 minutes commuting daily, Les Echos, 2 November 2015

Copyright © INSEAD 13

customer value, improve forecasting and drive growth in the industry. Further, the trend of sharing food experiences on social media (taking and posting photos of meals or elucidating on bad restaurant experiences) and the willingness of consumers to be part of an online community had a potential to instantly propel or hinder businesses.

Exhibit 14

Copyright © INSEAD 14

Worldwide Food Delivery Market

According to a November 2016 McKinsey article, the worldwide market for food delivery was €83 billion, representing 1% of the total food market. It was projected to grow by 3.7% per annum. Nearly 90% of this market was supplied by traditional fast-food restaurants and three quarters of orders were placed by phone.56 As online food delivery sales were low, these were expected to grow by over 15% per annum, to the detriment of offline orders. So by 2022, this sector, known as “Foodtech”, could be expected to generate $255 billion in sales worldwide.57 Nevertheless, the online market was very competitive as a result of low barriers to entry, high amounts of capital raised, and the need for food delivery platforms to quickly install a local monopoly, (as the leading player benefited from a chicken-and-egg situation: scale driving customer traffic, and traffic driving scale).

Top Worldwide Food Delivery Players

In 2017, there were five companies which had begun to dominate the worldwide food delivery market – Delivery Hero, Just Eat, Deliveroo, Takeaway.com and GrubHub,58 all in the Intermediaries segment, each valued at more than $1 billion. They had attracted significant investor support and tended to carve up the different national market areas between them, with only two or three operating in each. For instance, Just Eat took the number one position in France, whereas Delivery Hero only operated through the Foodora network.

Source: McKinsey: The changing market for food delivery November 2016, https://www.mckinsey.com/industries/high- tech/our-insights/the-changing-market-for-food-delivery

56 McKinsey: The changing market for food delivery, November 2016, https://www.mckinsey.com/industries/high-tech/our-insights/the-changing-market-for-food-delivery

57 La foodtech: une révolution de la fourche à la fourchette, 4 July 2017, http://www.lejdd.fr/economie/la-foodtech-une- revolution-de-la-fourche-a-la-fourchette-3377018

58 GrubHub was only active in the US.

Exhibit 15

15

Selected Players in the Meal Delivery Market in Paris Virtual restaurants: Food Cheri Launched in 2015

Funds raised: €7 million (€1 million in Sept 2015 and €6 million in Sept 2016)

Model – French virtual restaurant delivering homemade dishes in the evening from its own kitchens, sold through an app and website.

Copyright © INSEAD 16

Source: Translated using Google from www.foodcheri.com and reviewed by case writer

Frichti

Launched: 2015 by Julia Bijaoui and spouse Quentin Vacher (their second start-up after selling BirchBox).

Model: a virtual restaurant delivering ‘homemade dishes’, Frichti claimed to handle everything in house – from orders on its website, to cooking everything in its own 2,000m² kitchen at Villejuif, and delivering via six hubs in Paris.59

Goal: to offer good food, using seasonal products, and as far as possible local suppliers, with as few intermediaries as possible and efficient logistics for an affordable meal.60

Employs its own culinary team, chefs and 100 delivery drivers. Operates every day, delivering cold breakfast, lunch and evening meals: “It tastes better and that’s how the best restaurants work — they cook everything in advance and reheat at the last minute… Delivering hot meals is complicated as well. There’s a significant chance that your delivery is going to be below average.”61

Mission: Frichti “is an ‘everyday caterer’ whose mission is to allow all those who want to eat well but do not have time to cook to do so. We have a taste for good products, a love of cooking well and the desire to simplify the lives of our customers.”62

Funds raised: €43 million –

• €1 million (Nov 2015) from Idinvest and Alven Capital

• €12 million (March 2016) from existing investors Idinvest and Alven Capital, as well as business angels such as Sunrise co-founder Pierre Valade; Leetchi founder and CEO Céline Lazorthes; My Little Paris co-founder Céline Orjubin 63

59 Challenges, 23 5 17, PopChef revisite la pause déjeuner – Entreprendre http://www.mon- incubateur.com/site_incubateur/actualite/50943-popchef-revisite-la-pause-dejeuner-entreprendre

60 Julia Bijaoui quoted in Agence France Presse , 23 May 2017, Livraison de repas: la startup Frichti lève 30 millions d’euros 61 Frichti grabs $13.4 million for its full stack food delivery service 30 3 2016

https://techcrunch.com/2016/03/30/frichti-grabs-13-4-million-for-its-full-stack-food-delivery-service/ 62 www.frichti.co Translated by case writer 63 Frichti grabs $13.4 million for its full stack food delivery service 30 3 2016

Copyright © INSEAD 17

• €30 million (May 2017) from Idinvest, Alven Capital, as well as Verlinvest (Belguim) and Felix Capital (UK)64

It spent the money to establish the brand and prove the concept before expanding to other cities in France and other countries (seen as more important than achieving profitability); investing in its own infrastructure to serve more clients, branding, and fostering word-of-mouth referral.65 CEO Julia Bijaoui said international expansion “was still a goal, but I have no destination or date to communicate…our business is much less ‘scalable’ than a traditional web business because we are also rooted in the physical.”66

In May 2017, it delivered 20,000 meals67 (the equivalent of 25 restaurants68 ) to “tens of thousands of customers” every week and had 300 employees,69 60 were in the kitchens70 and over 100 riders.71 Annual revenues were around €15 million.72

Average price for a menu of starter, main course and dessert: €10 to €14.

Delivery cost: €1.50.

64 https://techcrunch.com/2017/05/22/frichti-grabs-337-million-for-its-meal-delivery-service/ 65 Frichti grabs $13.4 million for its full stack food delivery service 30/3/ 2016

https://techcrunch.com/2016/03/30/frichti-grabs-13-4-million-for-its-full-stack-food-delivery-service/ 66 Under 30 : Julia Bijaoui (Frichti), La Piste Aux Etoiles | Forbes France, 24 January 2018

https://www.forbes.fr/femmes-at-forbes/under-30-julia-bijaoui-frichti-la-piste-aux-etoiles/ 67 Challenges, 23 5 17, PopChef revisite la pause déjeuner – Entreprendre http://www.mon-

incubateur.com/site_incubateur/actualite/50943-popchef-revisite-la-pause-dejeuner-entreprendre

68 Le Figaro, 23 5 17, La recette de Frichti pour concurrencer Deliveroo 69 https://techcrunch.com/2017/05/22/frichti-grabs-337-million-for-its-meal-delivery-service/ 70 Challenges, 23 5 17, PopChef revisite la pause déjeuner – Entreprendre http://www.mon-

incubateur.com/site_incubateur/actualite/50943-popchef-revisite-la-pause-dejeuner-entreprendre

71 Le Figaro, 23 5 17, La recette de Frichti pour concurrencer Deliveroo 72 Challenges, 23 5 17, PopChef revisite la pause déjeuner – Entreprendre http://www.mon-

incubateur.com/site_incubateur/actualite/50943-popchef-revisite-la-pause-dejeuner-entreprendre

Copyright © INSEAD 18

Copyright © INSEAD 19

Nestor

Source: translated by Google translate from https://www.frichti.coand reviewed and adapted by case writer

Launched: April 2015

Funds raised: €0.9 million in May 2016

Model: French virtual restaurant delivering a ‘homemade’ weekday daily lunchtime menu in a limited area in the west of Paris from its own kitchen (in the west of Paris) – with distribution facilities from the kitchen and another distribution hub. Cost: “Nestor delivers to the office a menu prepared by a chef for €15.” Revenues: in year to July 2017, around €10 million (1,500 meals delivered daily in December 2016, rising to 2,000 in July 2017). When Nestor announced in June 2017 that it was reaching profitability, the CEO said, “Our real competitors are PopChef and Frichti. The differences between us (and the intermediaries) are the same as between two neighbourhood restaurants. We do not have a monopoly ambition, as may Deliveroo. They play the network effect to limit competition and costs. Not us.”

Copyright © INSEAD 20

Sources: https://nestorparis.com/ and Les Echos, 24/7/17, Foodtech : Nestor, deux ans, déjà rentable ? and MaddyGrowth : Comment Nestor a atteint la rentabilité https://www.maddyness.com/entrepreneurs/2018/01/25/maddygrowth-nestor- rentable/

Copyright © INSEAD 21

Intermediaries Just Eat (Allo Resto) Allo Resto was acquired by Just Eat in 2012 (but continued to operate under the Allo Resto name in France).

Just Eat was founded in Denmark in 2001 and headquartered in London, UK.

In April 2014, it listed on the London Stock Exchange. It had a market capitalisation in 2017 of £5.5 billion.

Operations: in 12 countries, (United Kingdom, Australia, New Zealand, Canada, Denmark, France, Ireland, Norway, Switzerland, Italy, Mexico and Spain) holding the number one position in each.

Model: A platform which provided no delivery service. As of May 2017, Just Eat commenced delivery. “Just Eat plc, together with its subsidiaries, operates digital marketplace for takeaway food delivery. The company enables consumers to order and pay for food from its restaurant partners.”

Revenues: (2016) of £237 million. Just Eat was profitable in eight of the 12 countries in which it operated. Over 80% of revenues were generated from the 10% to 12% commission on all orders placed on the websites (13% were received from a flat fee on credit card payments and others such as fees for new restaurants to join the platform and placement fees for restaurants to be placed at the top of search results).

In 2017, Just Eat spent money on strategic acquisitions73 and the creation of its own delivery service in established markets.

Deliveroo British online start-up founded in 2012. Launched in Paris in April 2015

Model: Platform that provides food delivery by bike from restaurants that don’t traditionally offer take-out service. Focused on at home evening delivery.

Concept to propose a simple fast delivery service for orders placed on its website or mobile app by self- employed bicycle riders from popular local restaurants.

Funds raised: €420 million

When Deliveroo raised nearly $200 million in 2015, Deliveroo co-founder and CEO William Shu disclosed that it would spend money on international expansion, marketing and increasing headcount: “We’ve elected to open ourselves up for investment and really accelerate the growth in many developed economies, and that includes a lot of the cities in Western Europe, Southern Europe and Central Europe, as well as the Gulf states and Asia.”74 Also spent money to improve logistics and heavy spend on marketing – including a TV ad campaign from June 2017.75

On July 26 2016, Deliveroo filed an act of “pursuit of activity despite net assets less than half of the share capital.” The company then had a period of two years to regularize its situation, which was resolved through a 5th round of financing of $275 million, led by Bridgepoint, General Catalyst, and its historical investors DST Global and Greenoaks Capital.76

Operations also in Netherlands, Germany, Belgium, Spain, Italy, Islands, Dubai, Australia, Singapore and Hong Kong.

Average order value for 2 people: €30, including €2.5 delivery cost.

73 Just Eat also purchased the French bicycle food delivery service Tok Tok Tok in September 2016. #Delivery : Rachat de Tok Tok Tok : un Français de moins sur le marché de la livraison food, 7 September 2016.

74 Restaurant Delivery Startup Deliveroo Raises $70M Series C 27 7 15 https://techcrunch.com/2015/07/27/series-c-delivered/

75 https://www.campaignlive.co.uk/article/deliveroo-kicks-off-multi-channel-campaign-46000-different-audio-ads/1438037 76 Le destin de Take Eat Easy pourrait-il devenir la norme ? – Maddyness – Le Magazine des Startups Françaises, 1 Aug

2016 https://www.maddyness.com/2016/08/01/food-take-eat-easy/

Copyright © INSEAD 22

Not profitable in 2017.

Foodora/Delivery Hero

Start-up founded in Berlin in April 2014. Arrived in Paris in 2015.

Bought by Rocket Internet in 2015 (also an investor in Take Eat Easy) and was then transferred to Delivery Hero, in which it held 40% stake77 (but continued to operate as a subsidiary of Delivery Hero under the Foodora name).

Delivery Hero was launched in Sweden in 2008, went public on 30th June 2017 and was listed on the Frankfurt stock exchange, with a market capitalisation of €6 .6 billion.

Mission: Delivery Hero raised $1 billion “to provide people with the easiest way to access their favourite food.”

Model: Platform which provided delivery service – Concept to deliver high-quality meals from selected restaurants in less than 30 minutes by bike. Partnerships with restaurants included the high-class restaurant Fauchon. Customers could place an order, track it as it was prepared and delivered.

McKinsey reported in June 2016 that Delivery Hero was processing 14 million take-out orders each month 78

From February 2017, Foodora allowed customers to order online and pick up the order directly from the restaurant, saving the €2.5 delivery cost.79 Companies could become partners and use a corporate personalised platform suited to business needs with monthly invoicing, etc.

Delivery Hero was spending money on acquisitions and expansion into new markets. In 2017 it operated in 10 countries worldwide, including Austria, Finland, Italy, the Netherlands.

In 2017, Delivery Hero was the global leader in online food delivery platforms, was active in 42 countries and had achieved the number one position in 35 markets. Europe accounted for 43% of its €341 million 2016 revenues. However, despite astronomical growth, it posted losses of €209 million. Delivery Hero had been highly acquisitive and operated under a number of different brands with different target segments. JP Morgan estimated that around 13% of Delivery Hero’s orders were delivered to customers through the Foodora network.80

It partnered with over 150,000 restaurants and offered them additional services such as food packaging, advertising and print.

Uber Eats

Model: A platform which provides delivery

“Find food you love from local restaurants and chain favourites.”

Uber Eats sometimes offer a buy-one-get-one-free deal

77 https://www.rocket-internet.com/ 78 How a tech unicorn creates value | Delivery Hero 5 June 2016 https://www.deliveryhero.com/how-a-tech-unicorn-creates-

value/ 79 Foodora lance sa fonction « retrait au restaurant » – SFR News, 21 février 2017, https://news.sfr.fr/style-de-

vie/cuisine/foodora-lance-sa-fonction-retrait-au-restaurant-1107130.html 80 Source JPMorgan European Equity Research 29th November 2017

Copyright © INSEAD 23

Source: https://www.ubereats.com/en-US/paris/

Copyright © INSEAD 24

Take Eat Easy Start-up founded in Brussels in summer 2012. Expanded to France, Spain and England. Launched in Paris in September 2014.

Funding: two fundraisers carried out in 2015: €6 million from Rocket Internet, and another 10 million from various investment funds.

Spent money on: building infrastructure, subsidising loss, expansion to other cities.

Stated objective: “To enable quality restaurants to provide a reliable delivery service to customers.”81

Model: independent bike-riders delivered meals from local restaurants for exactly the same price as clients would pay at a restaurant, plus a small fixed delivery charge.

Take Eat Easy charged the restaurant a 25-30% commission, and a €2.5 delivery fee to the customer.82 Explaining the costing structure, Adrien Roose, Co-Founder & CEO of Take Eat Easy, declared that with around “0.10€ of net revenue/order, we then have to pay the bicycle courier. Contribution margin is thus a function of restaurant commission, average order value, delivery fee and delivery cost. The first three parameters are mostly dictated by market conditions. Delivery cost, however, is a direct function of ‘Courier Utilisation’, the number of deliveries/courier/hour.” 83

81 From 0 to 1,000,000 to? – Adrien Roose, Co-Founder & CEO of takeeateasy speaking to Medium, Jul 26, 2016 https://medium.com/@adrienroose/from-0-to-1-000-000-to-ecb4e2f863c7

82 Livraison de repas à domicile : Take Eat Easy cesse brutalement ses activités http://www.lefigaro.fr/secteur/high- tech/2016/07/26/32001-20160726ARTFIG00179-livraisons-de-repas-a-domicile-take-eat-easy-cesse-brutalement-ses- activites.php

83 From 0 to 1,000,000 to? – Adrien Roose, Co-Founder & CEO of takeeateasy speaking to Medium, Jul 26, 2016 https://medium.com/@adrienroose/from-0-to-1-000-000-to-ecb4e2f863c7

Copyright © INSEAD 25

Copyright © INSEAD 26

Take Eat Easy closed down in July 2016, shortly after announcing that it had hit the 1 million orders mark, having not been able to raise an additional third round of funding, and revenues not covering costs. At the time of closure, Take Eat Easy had 160 employees and supplied to 20 cities, with 3,200 restaurant partnerships (including 1,000 partner restaurants in France) and 350,000 customers

Take Eat Easy published the following statement on their website after closing down: “As you know, our mission has always been to make you enjoy the best restaurants delivered to you. Although we have not been able to lead it as we would have liked, we suggest you continue to enjoy the best restaurants delivered to you, this time with ALLO RESTO! We share the same passion for catering, innovation and service to our customers.”

Copyright © INSEAD 27

Comparison of Monthly visits to Take Eat Easy website with those of competitors between June 2015 and May 2016

Source: Adrien Roose; Co-Founder & CEO of www.takeeateasy.com https://medium.com/@adrienroose/from-0-to-1-000-000-to-ecb4e2f863c7

Copyright © INSEAD 28

Exhibit 5 PopChef Website

Source: PopChef Initial website web.archive.org https://eatpopchef.com/ as of March 2015

Source: PopChef website web.archive.org https://eatpopchef.com/ as of June 2017

Copyright © INSEAD 29

It is committed! At PopChef, we pay special attention to our ecological and societal impact

Our too cute packaging

Since PopChef was created in 2015, packaging is at the heart of

our concerns. The hard part is to combine quality with

composition, between holding in the heat and recyclable

material. This challenge is pursued with a determination to carry

out its mission. We favour cardboard packaging, kraft paper and

reusable products instead of disposables. We continue to work

on this on a daily basis to improve our offer and our packaging.

Stop the waste Today, more than 41,200 kilos of food are thrown away every second worldwide,

amounting to food waste of 1.3 billion tons per year, or one third

of the global food production dedicated to the consumer… When

we know all these numbers, we necessarily have a role to play

in there, however small it may be. To limit our losses and food

waste, we give our unsold food to associations or resell it with

an anti-waste concept like Fourmi Green. Since 2015, thousands

of PopChef dishes have been recovered, eaten and have avoided the trashcan.

Copyright © INSEAD 30

Eco-friendly delivery

We are committed to provide eco-friendly delivery by bike, by

our fleet of deliverers or scooter/electric car.

When time permits and the sky is clear, our deliveries are made

on the back of a unicorn that runs through Paris in 2 minutes and

24 seconds – not bad!

Source: translated by case writer from PopChef website https://eatpopchef.com/ as of

June 2017

PopChef Cost Breakdown To be transparent, PopChef publishes its cost breakdown on the website:

Source: translated by case writer from PopChef website https://eatpopchef.com/ as of June 2017

Exhibit 6

Copyright © INSEAD 31

PopChef team

PopChef Offices

Source: Maddyness 9th November 2017, Tribune : Popchef, un nouveau départ ,9 novembre 2017 https://www.maddyness.com/entrepreneurs/2017/11/09/tribune-popchef-nouveau-depart

Glass bubbles allow employees to work in isolation

Sources: http://www.mercialfred.com/diaporama/ou-bosser-2017#7 and

https://www.welcometothejungle.co/companies/popchef

Exhibit 7

Copyright © INSEAD 32

PopChef Key Business Processes (2017 figures)

Sourcing Around 8 companies supplying food to PopChef’s Rungis storage centre (2 catering companies, a beverage company, a gluten-free supplier of cakes and desserts, a baker, a cookie and a fruit and vegetable supplier providing fresh fruit salad.

Associated items: delivery backpacks, cutlery and packaging.

Kitchen

The catering companies cook the food the day before consumption in their industrial kitchens and then cool to below 4°C to respect the cold chain.

Meals are wrapped in PopChef packaging with stickers detailing the name of the meal and the final hub destination.

Warehouse storage During the night, meals are transported on pallets by refrigerated truck to storage facilities at Rungis.

The following morning, a person checks all the items, rearranges as necessary, and stacks them on a delivery truck for onward delivery to the hubs.

The cost of delivery to each hub is €42.

Warehouse storage is located 1 hour from hubs.

10 hubs Typical hub size = 40m²

Typical rent = €1,400 per month

Cost approximately €6,000 to equip and refurbish the premises

Maximum capacity per hub 350 meals if delivered hot (1,000 meals per day if delivered cold)

A hub worker uses an iPad application to pick the dishes from the hubs refrigerators, warm them in the microwave to a temperature above 62°C and then packs them in a two-compartment (split hot and cold) delivery backpack.

Delivery to customer The delivery backpack is capable of carrying 20 main dishes (full meal for 10 people).

80 bike delivery riders deliver orders each day, chosen from a pool of 400 riders. Food is dispatched to customers in a radius of 2 kilometres from each hub daily

Riders paid €4 per order

Customers charged €2 delivery cost

Copyright © INSEAD 33

Marketing Average lunchtime menu price €10.30

Average order value €20

PopChef offers a €5 voucher for the first order through an existing customer and a €5 voucher off the next order for the person who made the referral

People working in companies of more than 20 employees can access a 10% discount by signing up on the website and entering the email addresses of five different colleagues (no need for the colleagues to actually order).

Source: PopChef interviews with case writer

Copyright © INSEAD 34

Exhibit 8 PopChef Delivery

PopChef Paris Delivery Zone as of June 2017

Source: PopChef website

Source: Maddyness, 14 December 2017, https://www.maddyness.com/innovation/2017/12/14/foodtech-defi-logistique-mieux- manger/