Freshly CEO on company’s new ready-made meal offering, COVID-19 impact

Freshly CEO Mike Wystrach joins Yahoo Finance Live to discuss the company’s new gluten free, health-focused meals and break down how the pandemic has fueled the meal delivery boom.

Video Transcript

AKIKO FUJITA: As Americans. Look to shape up from the COVID 15-- yes, we've all experienced the weight gain-- prepared meal delivery service Freshly is offering up a healthy option, launching its new Freshly Fit meals. Let's bring in Mike Wystrach, he's the CEO of Freshly. And we should point out, Mike, just a few weeks removed from that $1.5 billion acquisition by Nestle.

Let's talk about this new service that you're offering, because you've heard the conversations. We have all been sitting at home, sort of consuming as much as we can for the last eight months or so. How do you see the demand in this packaged meal delivery service right now shifting as a result of that?

MIKE WYSTRACH: Yeah, I mean, I think-- well, I mean, for Freshly Fit, we can say it was truly a child of COVID in that our consumers started saying around June, hey, we really want easier options to eat healthy, really pinpointing around lower calories, lower carbs, and asking us if we could create a dedicated line. So in a survey we did, we had 60% of our customers say that they would like to get a low calorie, low carb offering. So Freshly Fit was truly born out of the COVID kind of crisis. And I think it's really around that COVID 15 that we've all experienced.

ZACK GUZMAN: Yeah, Mike, I'm no exception to that. I was doing P90X yesterday for the first time in a while-- got a little sore today. But talk to me about kind of the demo of that and where it stems from considering the fact that, you know, it's a crowded place when you think about meals at home. We talked about how Freshly is very different than some of the other ones in Blue Apron where you just kind of have to heat the meal up.

But how does that kind of tie right in with people who might be more health conscious, who have less time if they're also working out, also have a job to go do, maybe kids at home. What does the demographic look like in terms of that core consumer?

MIKE WYSTRACH: Yeah, I think the challenge that our consumer has seen a lot-- I think I personally saw when we started Freshly-- is that we all know we should be eating better. But the biggest problem we have is it takes a lot of time. It takes a lot of time to do meal prep and those things. So where really we really focus on is with our consumers is convenience.

So we want to give you great tasting, healthy meals that you don't have to cook. So you think about a lot of the meal kits, it's spending 45 minutes to an hour to get that meal. And, yes, they are healthy meals. So our customers have that healthy meal in three minutes.

And I think the big difference that you see from a DoorDash or an Uber Eats is, again, that health focus. Where about 40% to 50%, depending on macros that you're looking at, healthier than your average meal that you're ordering off DoorDash, and we're also about 40% to 50% cheaper. So it's really that sweet spot of done for you, tastes amazing, is fresh, no additives, preservatives-- all the things that our customers are really looking for. And now we have a whole line really focused on low calorie, low carb to help kind of jumpstart those New Year's goals that we're all going to have.

AKIKO FUJITA: When you think about the prepared meal delivery space, it is an increasingly crowded one with a number of options, as you highlighted there. You are coming off of an acquisition by Nestle. How much more consolidation do you think we should expect to see?

MIKE WYSTRACH: Well, I think there's kind of two stories. So one, there's a massive transformation from kind of retail brick and mortar online. So when you think about retail or brick and mortar, you know, there's hundreds of thousands of restaurants. So when you think about the online, it's actually already starting off a lot more consolidated then kind of offline is.

I think you probably see some continued consolidation. But I also think with Nestle's acquisition of us, what it really allows us to do is really accelerate our growth. Freshly Fit is a great example of something that probably would have taken us an extra six months to a year to do without Nestle's support. But where we are now is we can launch these brands a lot quicker. And we're going to launch this brand to scale where this brand will be the fastest growing brand inside of Freshly and will dwarf kind of how fast we grew when we started off Freshly to begin with.

MIKE WYSTRACH: I mean, you got an additional $550 million there contingent on the growth of Freshly here. So when you look out into the future, what are those big growth opportunities for you beyond freshly fit in terms of bringing this on? And what kind of, I guess, benefits does Nestle carry for you guys in trying to build some of the food options, recipe options out as well?

MIKE WYSTRACH: Yeah. I think the biggest thing for us is capacity. So you know, we've been sold out-- we're sold out almost every single week that we ship meals, and we're increasing capacity anywhere from 2% to 3% week on week. So you know, very few industries where there's more demand than there is supply.

So what Nestle really brought for us is the ability to really get ahead of supply. And we see a massive transformation of people going online. We think that's going to continue even post-COVID. I think you're seeing that in the markets with the response to DoorDash is people do think that there is a stickiness that's going to come out of COVID, and it's here to stay, right? So there's not going to be a regression back on a lot of changes that happen.

And we think we're going to be a big, huge part of that. But we've really got to get ahead of supply. And we're really aggressive on that this year.

ZACK GUZMAN: And, Mike, too, just one last question-- quick one from me in terms of maybe shifting over-- I know you said that this came from a lot of your customers saying they wanted healthier options. But how much of that also stems from the idea that maybe the taste profile might not matter as much to a healthy conscious consumer when you're weighing for a $9 a meal, whether I want to go out to a restaurant, maybe eat something a little bit less healthy, but get the taste, versus a $9 meal you can cook at home real quick that, you know, I was looking through the recipe options, might be centered around grilled chicken or grilled pork and a nice little carb on the side?

MIKE WYSTRACH: Yeah. I mean, so certainly we see customers that are going after kind of results are a little more open. We pride ourselves on our taste, though. But you know, you're going to see with your P90X is that that's going to be great, but your best results are going to actually come from what you're eating, not what you're doing.

So I strongly encourage you to compliment that P90X workout with a Freshly Fit, and you're going to get better results. So that's what we see is, again, the number one resolution at the beginning of the year is to eat healthier, right? And we all lose that not because we don't want to do it, it's hard to eat healthier. So we just really want to make that easy for people.

ZACK GUZMAN: We'll see how it goes, Mike. I mean, last night, I followed up the first P90X with the Panda Express. So that was not a phenomenal idea on my part.

MIKE WYSTRACH: See, that's the problem. We've got to give you a Freshly Fit.

ZACK GUZMAN: Yeah, there we go. Mike Wystrach, Freshly CEO. Congrats on the acquisition and the growth, man. Be well.

MIKE WYSTRACH: Thank you.