Daily Harvest founder and CEO Rachel Drori on how the subscription meal service plans to maintain profitability with the return of work lunches
- Daily Harvest is tracking to generate $250 million in revenue in 2020, according to founder and CEO Rachel Drori.
- Drori shared with Business Insider how they maintained steady growth and plan to remain competitive as people return to work.
- "Many people were bringing Daily Harvest with them to the office or having it delivered before the pandemic, and offices were purchasing Daily Harvest for their teams," Drori said. "We expect that behavior to continue."
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Subscription meal service Daily Harvest reported to Business Insider having turned its first profit in February and has remained profitable throughout the pandemic as the popularity of food delivery services have soared. The company is now tracking to generate $250 million in revenue in 2020, with a compounded annual growth rate of over 150% since launching nationally in 2016, according to founder and CEO Rachel Drori.
To scale, Drori has expanded her supply chain from 400 to 500 farmers and workforce from 165 to 240 employees this year, and has kept the lease on her 36,000-square-foot headquarters in New York City.
But what happens when the work-from-home lunch crowd returns to the office?
With vaccines rolling out, planning for the inevitable is key. Business Insider talked with Drori about how she's been navigating growth amid the pandemic, competing against the fast-casual giants as they go digital, and preparing for a post-COVID-19 world when people will have the option to eat out again.
Leaning on a digital-first advantage
Having raised a total of $43 million from a star-studded roster of investors including Serena Williams, Gwyneth Paltrow, Paris Hilton, Shaun White, M13's Carter Reum, Lightspeed's Alex Taussig, and VMG's Carle Stenmark, Drori said she's been in no rush to raise the next round for the Series C startup, last valued at $163 million in 2017, according to Pitchbook. Coming off a banner year, she's made it her mission to continue to fund operations out of profits and has turned her attention to taking on the restaurant chains as they ramp up delivery services.
Seeing the addressable market as broader than just meal kits, Drori has positioned Daily Harvest's smoothies to compete with Shake Shack, its harvest bowls to compete with Sweetgreen, and its lattes to compete with Starbucks. Having added nearly 20 items and two new categories, Scoops and Flatbreads, since February, Daily Harvest's menu now includes 84 items across nine different categories and will be developing more on an ongoing basis.
Drori said the competitive advantage lies with owning the customer relationship and their data as a digital-first company. "We have millions of touchpoints each day with our customers and a fast iteration cycle of eight weeks that enables us to innovate based on customer feedback and bring new products to market quickly," she said. These touchpoints include user ratings, personalized recommendations, and comments like, "Too much cilantro," which are used to tweak products to optimize sales.
She's not concerned about losing market share when people return to the office, citing a July 2020 Bain report that projects that 35% to 45% of the online grocery spending surge will survive the easing of lockdown measures.
"We found that once people form habits around going to the freezer for their daily nutrition, those habits stick," she said. "Many people were bringing Daily Harvest with them to the office or having it delivered before the pandemic, and offices were purchasing Daily Harvest for their teams. We expect that behavior to continue. I'm not anticipating a huge shift, particularly in food deserts outside major urban areas where there aren't as many healthy options to grab nourishing food throughout the day."
Slowing down marketing in anticipation of the new year
How well Daily Harvest fairs in the long term will depend on how well they acquire, engage, and monetize their users now.
As an experienced marketer, Drori has never shied away from paid influencer campaigns, experiential pop-ups, or pricey television ads. This year alone, Daily Harvest collaborated with Boyz II Men on a video to launch its vegan ice cream Scoops, ran commercials on the Discovery Channel to promote its backyard compostable packaging, and partnered with Saturday Night Live's Chloe Fineman, rapper Action Bronson, TikTok star Tabitha Brown, Modern Family's Jesse Tyler Ferguson, and fitness trainer Kira Stokes for its social media campaign, "Give Cooking The Finger."
"You need to have inroads into every single channel to keep your media mix diversified — this enables you to remain agile so you can grow in a capital efficient way," she said. "For this reason, we don't play in Q4 because the holidays are noisy and paid media is expensive. Instead, we focus on the new year and lean into organic media since a huge percentage of our customers are word of mouth."
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