TooGoodToGo: The good and bad for us as a company

TooGoodToGo: The good and bad for us as a company

First and foremost: we are part of TooGoodToGo and will continue to be for the foreseeable future, fully convinced that we can save products that are no longer in perfect condition or are about to expire. With us, you'll find pure spices (such as chilies, herbs and spices), spice mixes, hot sauces, or even a cordial mix in the package.

Table of Contents

In this post, we shed light on the topic of TooGoodToGo from the perspective of a manufacturer—thus, as a 'non-ideal customer' of the platform. We'll look at waste, costs, and the slightly sour aftertaste together.

For those who are not familiar with the concept: TooGoodToGo is the world's largest marketplace for surplus food. Bakeries, restaurants, shops, and producers can save still-good food from being wasted. According to their website, they offer consumers an extremely good price-performance ratio. And this brings us directly to the costs and a double-edged sword; but more on that later.

TooGoodToGo is present in many European countries and is growing rapidly. In these countries, the app is already available: Netherlands, France, Denmark, Portugal, Belgium, Poland, Switzerland, Austria, Spain, Sweden, Norway, Germany, Italy, and the United Kingdom. They are also represented in the USA and are pushing forward. This is great, and we say keep it up—the company's vision is "a planet without food waste."

Is TooGoodToGo a Band-Aid for the Real Problem?

Now let's take a small step back and look at what comes onto the platform (at least from Gipfelhirsch): products that are about to expire but are still marketable, products from overproduction, or products that are perfectly fine but have imperfect labels and packaging end up as surprise packages on TooGoodToGo. We prepare these packages once a week, and they are always well received. Rarely are these packages not completely sold out.

There's just one problem: our actual goal is to produce less waste. Fewer faulty productions also mean less waste, lower consumption, and better efficiency. And we're really not bad in this regard. It's sort of a hobby of mine (Motzi) to produce as efficiently as possible so that nothing is wasted. But this also means that we can prepare fewer packages because there is simply nothing to save.

Image of a powder filling machine, as it is used in industry. Image from Makwell.com
Image from makwell.com

This puts us in a rather unusual situation. Not all businesses can be built so lean, and a certain safety buffer is needed. After all, a bakery can't make a fresh sandwich on-demand for every customer, especially not if the bread roll has to be freshly baked each time. There are whole sciences dedicated to this topic, especially in the automotive, semiconductor, and medical industries: Lean, Six Sigma, Just in Time Production, etc. We can also use these concepts on a small scale, but with a big difference compared to the heavyweights: consumer purchasing behavior 😁.

So if there is a package with our products, it doesn't come from poor planning and too much expiring, but often from having better sales figures sometimes and sometimes not. Predicting purchasing behavior is extremely difficult, and many factors contribute to it.

Costs, Costs, Costs

Now let's look at the costs and prices—TooGoodToGo is a B2B2C platform. This means that the platform is created for consumers (with the goal of reducing food waste), but the revenue actually comes from the brands connected to it. Consumers get a great deal—sometimes I can't believe how much stuff is in the package when I save something through the app privately.

But someone had to buy the goods, check the quality, produce, package, transport, and so on. Costs arise, and one might think that the costs would be in vain if we just throw away the goods in the end, and that's completely correct! But it's not that simple. There are some nuances that leave a slightly sour aftertaste:

  • To upload surprise packages to TooGoodToGo, we have to pay an annual fee. This pays for the use of the platform, payment methods, electricity, employees, marketing, etc.
  • The platform also has strictly defined requirements for what must be in the packages based on the product value. Here's an example: goods worth at least CHF 24 must be in the package, and the package costs CHF 7.90 on TooGoodToGo. So, a little more than three times cheaper than the original price. So far, so good. One might think that the brand would get these almost 8 francs to at least cover the rough costs—kind of a value for both partners in this transaction.

Fees on Membership and Products

But be careful! Unfortunately, that's not quite the case. Of the CHF 7.90, another 2 francs are deducted as an additional fee. With such a calculation, we have to seriously think about what packaging, products, and especially how much goods end up in such a package. Our thinking is that we should at least cover the raw material prices to minimize the loss. The alternative consideration would be that we might as well give away the goods for free. That would have the added effect that we might be perceived as an even cooler brand; who knows?

The Business Model and Profit

Recently, we read an interview with CEO Mette Lykke from TooGoodToGo on Watson. She talks about traction, food waste, and how much has already been saved—very inspiring! But the downside is that many consumers are just looking for bargains, and reducing food waste is not always the top priority. And then there's the profitability of the platform. Mette didn't want to say anything about that, but mentioned that their revenue increased by 42% last year.

That makes me a bit suspicious! Is this app a business model that just burns money and makes no profit? Why are there additional fees besides the membership fee to participate at all? How does this fit with the topic of reducing food waste? To be honest, we are not fully convinced by the fee structure, but the overall topic is great. So it's not an easy situation.

In Conclusion

TooGoodToGo has a very noble goal, and we support it 100% - as a company, as private individuals, and as consumers, we need to think more about generating less surplus and using our materials more efficiently. And what can still be saved and consumed, we do.

However, the cost structure is so tight that we no longer have that 'warm fuzzy feeling' when it comes to saving products. We might as well give them away for free...

What do you think? Do you have any suggestions? A different opinion? Let us know in the comments.

Author

Matthias Hirsch

Matthias ist der Gründer von Gipfelhirsch und verpackt seit 2021 intensiven Geschmack mit Humor und einem vollen Label Wissen zusammen in alles was gut schmecken soll.

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