Editor’s note: This article is part of A Year of Evolution: CFOs on 2021 series featuring insights from finance leaders across industries, and their COVID-19 lessons and 2021 plans. To receive weekly updates on this series, sign up for our CGMA Advantage newsletter.
In April, as the pandemic took hold, Stephan Burow, ACMA, CGMA, finance vice-president at Gousto, a company that delivers ingredient and recipe kits to UK customers’ homes, described in an FM magazine article how a data-driven approach was helping the company plan amid great uncertainty.
As the effects of COVID-19 caused other food businesses to fail, tech-enabled Gousto continued to ride high. In early November the company established itself as a dollar unicorn with a valuation in excess of £770 million, after it raised new equity funding of £25 million from existing investors, according to The Grocer. In doing so, it joined only two other UK enterprises with this status in the food and drink industry: Deliveroo and BrewDog.
More recently, FM talked to Burow again about Gousto’s crisis response, its priorities now, and its forecasting approach for 2021.
Was there anything that you did during the first wave of the pandemic that you consider a successful crisis response?
Stephan Burow: Obviously, COVID-19 has been a very unfortunate event, but as a business, we’ve actually benefitted as people have sought out a convenient, quick, healthy way to eat, avoiding the trip to the supermarket, avoiding seeing people in the nicest sense.
That said, it’s probably led into two things. In particular, the first one is connecting with [our employees] even more as we’ve worked from home since February-March time. So whether that’s increased recognition, increased “thank yous”, increased daily stand-ups, whatever it may take to just make sure that we feel and continue to feel connected. We’ve also sent people flowers and plants, and we’ve paid for their working from home equipment. That’s on the people side.
Has the pandemic delayed any of your business or team’s ongoing projects?
Burow: If anything, it’s just accelerated existing plans for hiring and investment.
Are you still in a crisis mode, or have you gone beyond that?
Burow: Crisis mode, in a sense, yes, [because] we continue to work from home. We took quite early on a decision to not open the office until the earliest, January. I think we’ll possibly push that further back; we might see another spike post-Christmas and the new year as people gathered for the festive season. So that way of working continues.
Operationally, what we’ve seen happen in online shopping — e-commerce — is an existing trend over the last ten years be compressed, essentially in the space of just nine months.
You talked about working from home. How has productivity been impacted?
Burow: At the very beginning, people felt really rather excited. Suddenly, you don’t have to do your commute. You can be at home. You have more time to do the things you like.
Very quickly, though, what we found is that you are just jumping from video call to video call to video call. You have no interruption in your routine and the workload is such that it’s very easy, if you’re not conscious of it, to have a day that starts at whatever time in the morning and finishes at whatever time in the evening without any interruption.
And so in a perverse way, productivity actually went up in the short term. Before we then very consciously invested in making time for people to have a lunch break, and decreeing that we won't have a meeting between 12pm and 1pm. This means encouraging people [to shape] the way they work in the day, whatever suits them. And if that means you start late because you have to bring your kids to school or if you want to have a break in the afternoon to go for a run, that’s fine.
How have you kept morale up, and have you taken steps to build people’s own resilience?
Burow: I would say that we pride ourselves on being very close to our teams, and I have catchups with probably most of my team every day. So recognition is growing that we’re very fortunate to work for a business that hasn’t had to lay off people, hasn’t had to furlough people.
Where it’s been possible, I’ve tried to bring people together in the park, just outdoors, and say, “Look, I haven’t seen you in six months. Let’s just gather and have a conversation about how we’re feeling and what are some tips and tricks that can help with your personal resilience, whether that is trying to carve out a clear separation between work at your desk from your home life or whether it’s about exercise.”
As a senior leader, I have a responsibility to live by those principles myself. So I always talk about how I’ve just been for a cycle, or I stop work at 6pm, so that people can feel the message really comes from the top, and is lived by.
And what about cash and costs?
Burow: We recently closed a funding round, so on the back of that funding round we’re now a dollar unicorn [a startup valued at $1 billion or higher], and we’re in the process of being cash generative now.
We have some natural cash conservation, because we are not in the office. Now that isn’t millions of pounds, but it does help. Some of it, we returned to our employees in the form of gifts, and vouchers, and things like that.
I think other than that, we continue to benefit from our economies of scale. So every day that goes by, we are a bigger purchaser of primarily food products, and that helps because on a unit basis, our costs decrease.
What's your most important priority now?
Burow: We are growing tremendously. We have a fulfilment centre in Lincolnshire. We’re currently in the process of opening a second fulfilment centre just down the road. And we have plans to further expand our capacity. In the past, when we were a single entity, single fulfilment centre business, it was quite straightforward. We’re now introducing a significant level of complexity by having a multisite supply chain and operation.
I think the other one is continuing to understand how customer behaviour evolves as we come out of COVID and what that means to our long-term profitability. We’re a subscription business, so the key metric is the cost to acquire customers and how much money customers are going to spend with us during the period of their subscription with us.
Lastly is to continue to make sure that the team feels happy, and supported, and the morale is high. We’ve hired a number of people over lockdown, people that have never set foot in our office. They get sent a laptop. I smile on the screen [during meetings]. But I’ve never even met them. How much do they feel our culture? I don’t know. I’m meaning to invest in that so that we all feel part of the same family regardless of whether you joined pre- or post-lockdown and COVID.
And do you see any threats to the business, and how are you managing those?
Burow: I think we are riding some really big trends — online shopping, convenience, the desire to live more healthily — and we benefit from all of those. I think there’s always a risk that someone like an Amazon decides to chuck a lot of money at the problem and tries to build something.
We will have a fallout from the economic situation that is unfolding. The furlough scheme has to be paid for. Businesses have gone under, will continue to go under. That will squeeze incomes, and needless to say, we are at risk of feeling some of that.
Could you describe the indicators that you’re tracking?
Burow: One of the key metrics is this ratio between cost to acquire and your long-term relative value, LTV [lifetime value] to CAC [customer acquisition cost], and also one of those metrics obviously is the profitability of each box, and another metric is how many boxes do we think you're going to buy. We spend a lot of time looking at what we call retention, or essentially, the ordering pattern of a certain group of customers.
And then secondly, we continue to keep a close eye on our margin. We talk about cash preservation. For us, it’s really margin focused and how do we make sure that we generate the economies of scale.
What do you see as the main constraints for the business next year?
Burow: I think there’s probably considerations of varying degrees of impact and also probability. I think the first one is Brexit, so we’re looking at our costs in our supply chain. I think we are well placed to mitigate some of those, because obviously, we can change what we offer our customers as meals.
So if the Italian parmigiana is suddenly three times more expensive, maybe we’ll offer you UK Leicester cheese, or whatever it might be — provided it continues to delight our customers.
I think the second one is the economic fallout of COVID, and I think that will impact us. And I think lastly, it does come back to our ability to expand our operational capacity and how quickly can we do that.
What approach have you taken to budgeting for next year, and has that been different from previous years?
Burow: The business doesn’t subscribe to normal ways of growth and normal single-digit growth percentages. This year, we’ll grow over 100%.
So I think we are very used to forecasting in a world of uncertainty and significant change. And the only way to be somewhat successful at that is getting into the detail of trying to understand customer behaviour.
Now that sounds very simple. In reality, there’s a little bit more analytics and data behind it. It’s not been a major shift. It's just we have a few more variables to consider as a result of COVID and some kinks in customer behaviour, and so we’re just really trying to understand those. But the fundamental principles as to how we go about focusing haven’t really changed.
How will the pandemic impact both the finance function and also the business’s digital transformation journey?
Burow: I think one of the advantages of being a relatively younger business is that we do not have huge legacy systems. I’ve worked at Unilever before, where changing the IT infrastructure is shifting a monolith. It’s really, really hard. And so we’re fortunate that from inception, we've always focused on investing in the latest technology, and so I think for us, it’s about just continuing that trend.
We use Google [Workspace]. I don’t have Office or Outlook, anymore. We use Slack. We use Microsoft Dynamics in the cloud. A lot of the technology that we’re using are probably technologies that other players are looking at implementing. We're probably a little bit ahead of that.
I think the single biggest investment in our space and that firmly sits within finance and the data analytics team is the introduction of the business information tool. We already have one. It’s really good. I think there's an opportunity to make it even more user-friendly and really help democratise access to data across the organisation even more.
What has been your biggest lesson from the pandemic?
Burow: Over-invest in your relationships with people.
What one piece of technology is a must-have in your 2021 budget?
Burow: The new business information tool. That will really help.
Looking ahead, what is one skill you want to develop in your team?
Burow: Continued resilience and continued focus on personal growth.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.