Greetings Lettuce Backers!
We know that you, along with so many other people, believe in what Lettuce stands for, and it’s underlying business model. Over the last few months it became imperative that for us to achieve a robust, scalable and economically sustainable business model, we analyze and revitalize all our processes. To that end, in mid-May we paused our operations in Austin temporarily for the summer to give us the time and space to retool and rebuild. We are now excited to share with you a high level overview of Phase 2 of our journey, designed for success on all fronts, including a revamp of our operations, technology, customer acquisition strategies, and product offerings:
Phase 1: The process that was created when Lettuce started with a handful of deliveries a month, hadn’t really evolved when it was doing thousands of deliveries a month. This resulted in an inefficient operational model that thwarted economies of scale to kick in. There was no choice, but to tear it down to the studs and rebuild.
Phase 2: We are instituting an operational model that’s akin to a fast service restaurant (as dissonant as it sounds, considering we stand for healthy food!). Small teams, working in relatively small physical footprints, in 24/7 cycles of receiving ingredients, assembling products, and delivering them. Our tests and models show that with this model we can deliver the same output as before in 1/4th of the labor and infrastructural footprint - while putting out a more flexible, fresher, higher quality product with fewer (and traceable) mistakes. Armed with this new plan, and 1000+ recipes already in our database, we expect to restart deliveries of Lettuce products and Lettuce Bazaar items by early Sept this year. Leading up to that, we will be staffing up with high output food service professionals - a sharp shift in our team development strategy; and will be onboarding Lettuce Bazaar partners.
Phase 1: We were not able to give enough focus to our evolving technology platform, resulting in stunted progress and a sub-par user experience.
Phase 2: Under the leadership of Ashok Srinivas, a seasoned technology executive who recently joined the technology team team in India, over the next few weeks we are rolling out our rebuilt platform - including Web and mobile apps - that will power the business going forward. We have gained a lot of experience working in the local food ecosystems, and this new platform has evolved out of our learnings to enable us to be more efficient in all parts of the business.
Phase 1: After testing several different customer acquisition channels, we found ourselves under-resourced to double down into the winning ones. As a result, most growth came from word of mouth, which while steady, wasn’t enough.
Phase 2: We are working on a cohesive, multi-channel customer acquisition strategy that’s based on tangible, proven approaches, including online marketing, PR, events and seeking and activating targeted audiences. The primary channel is going to be online - and we are building a team of experienced digital marketers to boost, measure, and optimize audiences at every stage of the funnel - from awareness to retention and word of mouth. State of the art digital marketing automation technologies are also being coded right into the core technology platform as well.
Phase 1: Thanks to a rigid operational model, and an inflexible technology platform, we could not innovate fast enough to solve known structural gaps in our product offerings - lack of choice, high initial bar for a potential customer, lack of multiple service levels and delivery options.
Phase 2: The new technology platform combined with the new nimble operational structure will enable us to have product offerings and variations that fit the modern, busy lifestyle and give us major competitive advantages. These will include personalized plans and products based on dietary, taste and sustainability choices, ordering a la carte recipes (especially great for lowering the barrier for trial by new customers), on demand deliveries, and more.
All of the above factors contributed to a suboptimal financial model for a local food business. On the one hand lack of profitability is common in startups, including the food industry (e.g. a 5 year ROI horizon is common in restaurant businesses, and we were only in year 3). On the other hand, by putting in the structural changes described in this update we will make quick, predictable progress towards profitability and rapid customer growth. Within 3 months of restart, we expect to nearly double the revenue, and reach a 50-20-10-20 financial model (50% ingredients, 20% labor, 20% facilities & delivery, 20% profit margin). This is akin to the well-trodden 30-30-30-10 model followed by successful restaurants - with some obvious differences.
We are excited about this next phase of our journey to make local food mainstream. We look forward to your continued support, including investing in our vision!
Yogesh Sharma, Co-founder & CEO, Lettuce Networks