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Smart Food

SMART AS YOUR CHOICE e-‐Commerce of organic products based on a Nutritional Plan studied with University professors Free home delivery www.smartfood.bio ANTONIO ANTONACCI [email protected] +39 340 3197533 Skype: systony LinkedIn: linkedin.com/in/antonioantonacci

Overview PROBLEM

. main players in the e-‐Commerce sector primarily offer not-‐organic products (Cortilia organic offer 10%)

. organic products mainly distributed in retail (Almaverde, , NaturaSi)

. current e-‐Commerce platforms are not user friendly (e.g. BioExpress, BuonEssere)

SELLING PROPOSITION

. user-‐friendly website, offering only organic products in accordance with a Nutritional Plan

. presence in the 2 biggest cities of the country: first Milan and then Rome

MARKET . italian organic market value: 1550 mln* (of which 30% fruit and vegetables)

. organic products e-‐Commerce: Milan 73,5 mln -‐ Rome 197 mln

. potential Customers: Milan 44K -‐ Rome 118K = 162K

PROOF

. consumers are more likely to buy food online -‐ CORTILIA evidence of success (in 3 years 3 mln of Revenue only in Milan)

. in the testing phase (July -‐ Sept 2014) of SF website 6K visits registered

. other institutions have already believed in the project: Unicredit, Naturitalia, University of Milan

Needs: 500K of Investment in next years

. marketing: customers captation and media advertising

. website maitenance and App development

. owned fleet and delivery optimization software

*font FIBL-‐IFOAM 2012 and ISMEA 2013

The Team

University of Milan P. Magni & M. Ruscica

Professors and Nutritionists

Brunella Giacobbe Web Marketing

Consultant

WebSolute Web Agency and Strategy consultants

Cesare Guerreri Industrial Engineer Operations Consultant

Nicola F. Casassa Agronomist & Entrepreneur Decades of experience as Sales Manager in the Food Industry

Antonio Antonacci Grad in Political science

Decades of experience in IBM as Marketing and Commercial

Manager

founders

Problem

DISTRIBUTION

Considering the Milan area, where the business has started since 3 months: GDO 226 POS x 1.300K inhabitants*

ORGANIC retailers :

. NaturaSì 10 POS

. 3 POS

. Almaverde 1 POS

. Others** 26 POS

*1 POS each 5,800 people, font http://www.mole24.it/ ** Family-‐run shops

CURRENT OFFER:

. inadequate presence: . limited number of POS, half of the city is not served

. northwest of the city is the area more inclined to organic, but only 2 POS

. POS more similar to a Mall, customer experience not aligned with the expectations of organic typical consumer

. organic covers only a small percentage (5-‐10%) of the offer of food e-‐commerce leaders (e.g. Cortilia, Esselunga, Coop)

. pure organic e-‐commerce websites not user-‐friendly and not focused on consumers needs

. big organic retailers have shopping online section on their website with deliveries at the closest POS, otherwise delivery fee exceeds 10 (e.g. NaturaSi)

www.smartfood.bio

. user-‐friendly and well designed platform

. registration procedure faster and less clicks to buy

. possible purchases for non-‐registered users

. no minimum purchase cart (e.g. Cortilia 35 )

. focus on the customers by proposing each week boxes based on a nutritional plan studied by the university in 3 formats (i.e. single, couples, family)

. increased shopping coverage to reduce the time spent in supermarket during the week.

. intuitive graphical interface and effective communication

. limited information requests for the delivery

. complementary goods available only as addition to the box purchase and free for subscribed users.

. collaboration with Professors Magni-‐Ruscica and weekly boxes definition with Naturitalia, our fruit and vegetables supplier.

. offer integration with complementary products (current categories: bread, water, cheeses)

HOW: SOLUTION:

Italian Organic Market

SUPPLY CHAIN & OFFER SIDE

. Italy is the 6th country in the world for extension of surface used in organic farming

. + 5,4 %* of organic growers and producers

. + 12.8 %* of cultivated area under organic farming

. organic firms are conducted by young entrepreneurs (22% of managers are under 39years)

. introduction into the GDO of new product lines than in past years were not present

. big players (e.g. Amazon, Eataly, Esselunga) have entered into food e-‐commerce market

. 6 food e-‐commerce (no retail) in last 5 years in italian context: Cortilia (no organic), BioExpress, BioMi, BioBox, BuonEssere and Zolle

ORGANIC is a fast-‐growing market

*http://www.sinab.it/ -‐ numbers vs 2012

1,2%

9,2%8,5%

5,2%

6,7%

11,7%

8,8%

7,3%6,9%

0%

2%

4%

6%

8%

10%

12%

14%

2005 2006 2007 2008 2009 2010 2011 2012 2013

Var % YOYDEMAND SIDE

. 25 % of Italian buys fruits and vegetables every day

. + 55 % of web shoppers in two years

. + 17,3 %* family expenditure for organic food in the last year

. + 7 %* average increase YoY of organic products sold in GDO, since 2010 variation subdued due to e-‐commerce advent

. Cortilia in 2013 has doubled customers: 35000 boxes delivered in 1 year

. organic market value: 1550 mln** (of which 30 % fruit and vegetables)

. organic consumer profile

30,5%

19,0%

11,4%

10,0%

8,7%

4,2%

3,8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fruit and vegetables Dairy products Eggs

Pasta, rice and bread Cookies, candy and snacks Sugar, coffee and tea

Beverages Homogenized Meat

Vinegars Other

Italian Organic Market

*http://www.sinab.it/ -‐ numbers vs 2012 *** ISTAT: http://www.istat.it/it/prodotti/tavole-‐di-‐dati ** font FIBL-‐IFOAM and ISMEA 2013 **** Osservatorio Netcomm & Politecnico di Milano 2013

. Milan: city with the highest per capita income (31K /year)

. graduated inhab***: Milan 13,3 % = 65K people Rome 15,3% = 175K people

. potential customers: Milan 44K -‐ Rome 118K = 162K

. organic e-‐commerce: Milan 73,5 mln -‐ Rome 197 mln

. 3 profiles: faithful (4mln people) -‐ new entry (8mln) -‐ ethical

. 69 %* of purchase intent among people with high annual income

. 68 %* of organic buyers are graduated

. 65 %**** of web-‐shoppers are women

30,5%

19,0%

11,4%

10,0%

8,7%

4,2%

3,8%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Fruit and vegetables Dairy products Eggs

Pasta, rice and bread Cookies, candy and snacks Sugar, coffee and tea

Beverages Homogenized Meat

Vinegars Other

Competitive Landscape . born in 2011 in Milan, nowadays operates also in Monza and Brianza, Varese and Como.

. turnover: 3.000K expected for 2014 families served : 3.200

. business model: internet platform, that provides a showcase to the farmers and competitive prices on the model of short chain to customers with 48-‐72h deliveries

. offers fruits and vegetables boxes: it could represent a threats in next years

. born 10 years ago in Alto adige, nowadays operates also in Lombardy, Emilia Romagna, Veneto and Rome

. turnover: 4.000K in 2013 families served: 4.000

. business model: internet platform that offers organic boxes of fruits or vegetables, delivered through owned fleet composed by 13 vans

. entirely organic offer

. born in 2008 in Rome, operates mainly in Rome

. turnover: 2.000K in 2013 families served: 1.300

. business model: e-‐commerce without online cart, offers complete packages of dynamic-‐organic products

Pontential new entrants:

. strong player supported by huge investments

. has already shown interest in the german market

. competitive advantage: strong logistic network

. strong retailer, that has a consistent customer base

. has developed in early 2014 shopping online section

OUR Competitive Advantages

PARTNERSHIPS & UNIQUE OFFER

. boxes supplier is the market leader Naturitalia

. Naturitalia is located in Bologna: strategical position to serve both Milan and Rome

. only ones to propose a Nutritional plan studied by a University and on which the products offer is based

PRICING & COSTS . prices in line to online competitors and retailers

. no costs related to the POS management (e.g. salesmen, maintenance, property tax, depretiation)

. moderate incidence of warehousing and stock costs, according to MTO approach. Stock of only lasting complementary products

TIMING

. entering in a highly potential and attractive market before big players will do it (e.g. Amazon Fresh)

. great visibility and importance to Food Supply Chain and Alimentation in 2015 thanks to Expo 2015 in Milan

THREATS . market entry of big players such as Amazon or Cortilia, which have already a consolidated logistic network

Business Model

weekly designed offer based on a Nutritional Plan

2 formula: spot purchase -‐ subscription

FVM offer: fruits vegetables mixed boxes and complementary products

3 formats: single (5kg) medium (7,5kg) big (10kg) . Professors of University suggest the weekly composition of the boxes

. Smart Food weekly sends to Naturitalia the orders received on the website

. Naturitalia composes boxes by combining products from multiple farmers and proceeds with the quality control

. from bologna the boxes arrive the morning after to the logistic hub in Milan, from where the currier starts delivering house after house to the customers

. nowadays orders consolidation once a week, but the logistic network is ready to pass in few months to daily deliveries

we designed a business model and a supply chain easy to replicate even abroad

Spot

Subscription

Naturitalia farmers

orders

Abroad: first Switzerland

. 5th market in Europe

. population: 8 mln (13% of Italian)

. organic market value: 1.411 mln (90% of Italy)

2 cities to serve: Zurich and Lugano

PROS . high income per capita + elevated propensity to organic food

. potential customers: 39.000 people

. consistent revenue streams in only 3 years

. chance to use the supply chain (boxes supplier) already designed for Milan thanks to the proximity CONS . currency rates risk: costs in and revenue in CHF

. regulatory compliance

. increase of secondary transport costs

. development of the website in other languages

0,84

0,80

2012 2014

CHF/

Go-‐to-‐Market Strategy

july 2014: hired a web marketing specialist to present the project on social networks: FB Twitter

september 2014: guests to the radio broadcast Radio to invite customers to visit the website

october 2014: investment on 20 keywords Innovazione del terziario Regione Lombardia for a total investment of 50.000

october 2014: analysis by Zip code of inhabitants propensity to organic food send to a target of 350 people of a letter with promotion

from august 2014: leafleting at the main points of interest in the city

Economics REVENUE STREAMS

. products mix: . small 30% -‐ medium 45% -‐ large 25%. Medium will be the main format sold, due to the perishable nature of the product and average number of members of families in Milan

. subscriptions mix: 1 month 70% -‐ 6 months 20% -‐ 12 months 10%

. shoppers profile will change during the years: . Y1: 85% of orders done by occasional user which want to test SF

. Y5: 30% of orders done by subscriptions

. in Y3 entry in Rome organic market, which will represent 30% of total turnover in Y5

. target market-‐shares: Milan 6% on total organic market (3rd player in e-‐commerce) -‐ Rome 4% (2nd player) COSTS of SALES

. box costs represent on average 80% of total costs of sales

. secondary transport will increased up to Q4 of Y3 (first 2 owned vans in Milan)

units sold Milan 65K Rome 32K

year 1 (2015) year 2 (2016) year 3 (2017) year 4 (2018) year 5 (2019)

Sales Revenue (with IVA)Occasional user purchasesSubscriptionsAdd onOther incomesTotal Sales Revenue





Cost of SalesBox costsOther Products (add on) PickingSecondary transportTotal Cost of Sales

Gross Profit

Economics OPERATING COSTS

Sales and Marketing consistent investments in:

. advertising 328K in 5 years in Google Display, Media and Couponing

. web marketing and PR 362K in 5 years for Blogger, Events and Press office

. agents: 2 resources hired in Y3 to follow B2B in both cities

R&D expenses: . Y2: development app for smartphone

. web-‐site maintenance for 73K in 5 years

. university partnership: 40K /year invested onto the relationship

General and Administrative expenses:

. personnel: Y1 1 resource, a further in 2016, to arrive in 2018 with 4 new employees + 6 drivers for owned fleet

. office rent in Milan since September 2015

. fleet: since Y3 investment in vans to internalize secondary transport

in first 2 years negative income from operations due to the initial investments in

consultants, web-‐site development and advertising, losses will be covered by Y3

Operating Expenses

Total Sales and Marketing Expenses

Total Research and Development Expenses

Total General and Adminstrative Expenses

Total Operating Expenses

Income from Operations



Done so far

designed the whole Supply chain on Milan

obtained a loan of 35K by Unicredit to develop website

GO LIVE on the 17th July 2014 . 6000 visits . 123 subscriptions to our newsletter . 4K of Turnover

www.smartfood.bio

blog, social and media advertising . collaboration undertaken with a web-‐marketing specialist . 12 posts on our blog . 169 like on FB for 545 people reached by our posts . guests to the radio broadcast Radio 24

HAVE TALKED ABOUT US

Investment need

Needs: 500K of Investment to support in next 5 years

. marketing: 330K -‐ customers captation and media advertising . website maitenance and App development: 30K . owned fleet: 130K for leasing of 3 vans in Milan and 3 in Rome . delivery planning and optimization software . market research and supplier scouting to enter in the swiss market within 5 years

Smart Food

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