5 question exam based on a case study

IN1622

Case Study

PopChef:
Creating a Tasty Foodtech Business

Source: PopChef

01/2020-6391

This case study was written by Dawn Jarisch, Research Associate, under the supervision of James
Costantini, Affiliate Professor of Strategy, both at INSEAD. It is intended to be used as a basis for class
discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

The case preparation benefited from a student project conducted as part of the INSEAD-Sorbonne
Business Foundations Course by Noémie Haesaerts, Aniss Kessaci, Luca Margheri, Ombeline Morand-
Monteil, Éric Oblet, and Hugo De Rocquigny. Financial support for the case writing from the Dean’s
Annual Fund is gratefully acknowledged.

To access INSEAD teaching materials, go to https://publishing.insead.edu/case/popchef

Copyright © 2018 INSEAD
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Through the spread of the internet and television, plus multinational restaurant chains
and a greater variety of cuisine, young people in cities all over the world now have
high awareness of what their international peers are viewing, sharing and
experiencing, and they’re eager to test out such experiences for themselves. Rising
disposable incomes and access to foodservice has meant they can act on those
desires, seeking out new ways to expand their dining horizons.1

Waking from his daily siesta on a beanbag, Francois Raynaud de Fitte surveyed the top floor of
the PopChef offices through the glass partition, spotting his business partner with whom he had
created the lunchtime food delivery business in Paris. It was the summer of 2017, and at the age
of 27, he was about to embark on a partnership of a different kind. Like other employees, he was
entitled to unlimited holidays so he could look forward to his honeymoon knowing the business
could function without him. The downtime would provide an opportunity to reflect on the business
and how to differentiate PopChef in what had become a highly competitive market.

The Entrepreneurial Journey

When François Raynaud de Fitte met Briac Lescure whilst working as a trainee venture capital
analyst in 20142, they knew they wanted to build a business venture together but did not know
where to start. Using skills gained from business school, they considered 10 potential businesses
and narrowed them down to the three most promising (yet very different) ideas. They presented
the concepts to potential investors, asking ‘Which of these ideas would you invest in?’3 Although
none of them were prepared to invest, their idea for a food delivery service won support because
of the huge potential of what was an untapped market with little competition.4

The duo began to investigate the feasibility of creating a foodtech start-up.5 After some desk
research, they decided to target the lunchtime food delivery market in Paris (see Exhibit 2).
Francois explained the rationale for serving lunch (and only lunch):

Every single study we looked at recommended the evening meal market, as 80% of
the food delivery business was for evening meals and only 20% for lunch. So we
wondered why people didn’t have delivery at lunchtime and decided to create our own
market, where we could have our own ‘blue ocean’.6

The plan was to create a “virtual” restaurant (no physical location for the customer to visit), creating
and preparing meals using only locally sourced and traceable produce in their own kitchen,
distributing through their own network of hubs and delivery drivers, and relying on a website and
app to promote the service, take orders and create a community.

Testing the Concept

1 Euromonitor Opinion 07 Feb 2015, Introducing the “Universal” Global Consumer: Five Trends Driving Demand in Cities
2 See Exhibit 1
3 Author’s interview with Francois Raynaud de Fitte, 26 January 2018
4 At the time, only Allo Resto and pizza delivery companies served the Parisian market
5 Foodtech combines food and technology
6 Author’s interview. ‘Blue Ocean Strategy’ by INSEAD professors W. Chan Kim and Renée Mauborgne.

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Francois and Briac hit on an interesting way to carry out market research. They boarded the RER
train between Arc de Triomphe and La Defense (business district) and during this long, nonstop
section of the line, surveyed 500 ‘captive’ commuters to understand whether they would be
prepared to order lunchtime meals for delivery to their place of work.

They discovered that many commuters used lunch vouchers – worth €9 a day from their employer
– to purchase food from local bakeries, cafes and restaurants.7 Employees were entitled to one
voucher for every working day – no change was given if they spent less. 10% of the people
surveyed said they would order food online if (i) they could pay with vouchers, and (ii) it was
delivered within 20 minutes.

Buoyed by these results and the fact that there was limited competition in the lunchtime market,
the two were starting to make plans when they heard about Frichti, another start-up which was
planning to launch a similar concept. Aiming for first-mover advantage, they rapidly got to work.
Two weeks later, in January 2015, PopChef was launched.8

Launch of PopChef 2015

Since there was no time to design the ‘full-stack model’ (across the entire value chain), they
adopted an interim approach. They teamed up with a local restaurant that agreed to provide a €9
‘dish of the day’, packaged it with PopChef packaging, and delivered it for €9.90 using Francois’s
parents’ car or via Vélib, the bike-sharing scheme in Paris. Each day, they sent an email to people
in their network and posted on Twitter with a link to order the day’s menu.

These early experiences enabled them to understand the needs of the market: “We spent lots of
time ringing customers to understand their tastes and preferred recipes. After each delivery, we
sent an email inviting them to rate their meal.”9 PopChef used these ratings – given by 30% of
customers – to create a customer community. Within a few short months, PopChef had created a
website and was delivering as many meals at lunchtime as the provider restaurant was producing
for its evening customers.10

With a proven concept, they were able to raise €330,000 in May 2015, from three business angels:
Xavier Niel, Antoine Granjon, Thibaud Elzière, and Francois’ teacher from business school – Marc
Simoncini.11 The money was spent on renting and equipping relay hubs (where food was stored
and reheated) and to pay for marketing and onward delivery. Delivery was outsourced to self-
employed riders on bikes, who delivered the meals from a backpack within a 20-minute timeslot.
Many were students working a couple of hours a day as ‘micro-entrepreneurs’.12

However, when PopChef reached 80 meals per day, the provider restaurant could no longer
continue the relationship. Not known for his culinary skills, Francois was forced to take over the

7 Supermarkets and hypermarkets were also allowed to accept the vouchers as payment for sandwiches and ready-to-eat

meals and salads only
8 Together with Pierrick Paul, as CTO and third co-founder and registered under the official business name Pop Expedition
9 François quoted in the journal Entreprendre: Foodtech : Pop Chef mise sur les points relais – Entreprendre.fr 7 2 17

Foodtech : Pop Chef mise sur les points relais

10 50 meals per day
11 Xavier Niel was the very successful founder of the French telecommunications company, Free, and Antoine Granjon was

one of the cofounders and CEO of the very successful French ecommerce company Vente-privee.com.
12 Because students only worked lunchtimes under auto-entrepreneur status they were not classified as employees

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cooking: “It was terrible. We lost many customers in these two weeks before finding a catering
company and outsourcing the cooking.”13

The Shift to Catering Companies

The new supplier was accustomed to producing meals in large volumes, but the quality was not
high enough. To overcome the problem, PopChef asked a well-known chef to develop the recipes.
Henceforth the catering company simply had to produce the food according to instructions, using
only ingredients from local, traceable farmers and producers. For the catering company it was
both a new market model and a new channel. The model proved to be scalable and PopChef
enlarged its daily menu to offer a choice of three to six starters, main courses, desserts and drinks,
with prices of main meals between €8 and €11.

In its first fiscal year of operation, PopChef posted a loss of €248,000 on turnover of €198,100.14
Nevertheless, it was building a strong technological infrastructure (geolocalisation, real-time
algorithms, website, etc.).

As the business grew to 300 meals per day, PopChef focused on improving the technology and
the delivery, using data analysis to understand and forecast customer demand. A proprietary
algorithm allowed it to optimise delivery by calculating the shortest distance between the hub and
the customer, cutting delivery costs by 15%.15

Francois began to think that – without adding to the team of 10 people in PopChef’s office – it
would be possible to deliver up to 10,000 meals a day.

From a Tech Company to a Virtual Food Company
However, rather than continuing to expand, sales plateaued as new entrants Frichti, Nestor and
Food Cheri arrived with better quality products, customer focus and marketing. Francois noted:

Frichti’s technology was poor – but they outranked us when they arrived as they
focused all their energy on the recipes and small details, including calling their
customers every day on the phone. This created a consistent credible message.16

With greater access to funding, competitors splashed out on advertising campaigns. It became
impossible to take the metro without seeing advertisements from Deliveroo, Take Eat Easy or
Allo Resto 17 (see Exhibit 4).

The co-founders decided to change tack – from a tech company to a food company18 – and to hire
people who were passionate about food. Each day they ordered meals from competitors and rated

13 Author’s interview ibid.
14 PopChef : des liens capitaux pour une levée de fonds de 2 millions d’euros, 18 octobre 2016,

Certifications : gros changements chez Microsoft

15 Foodtech : PopChef mise sur les points relais – Entreprendre.fr 7 2 17 http://www.entreprendre.fr/pop-chef
16 Author’s interview with Francois, 26 January 2018
17 La foodtech en 2020 : qui gagnera la bataille de l’assiette ? Jan 28, 2016,

https://medium.com/@briac_lsr/la-foodtech-en-2020-qui-gagnera-la-bataille-de-l-assiette-69572b9c5dca
18 Pierrick Paul left PopChef in February 2016 on good terms. The stressful life of an entrepreneur didn’t suit him and there

were disagreements on the vision of the company.

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them on the quality of the food, packaging and user experience. Initially, PopChef’s meals ranked
lowest in every domain, but with daily tweaks and improvements, the ratings and number of orders
mounted.

With renewed momentum for the business, PopChef secured €2 million in funding19 from Elior,20
a large industrial caterer, and a group of private investors. Francois was convinced that the deal
with Elior would bring synergies for both parties: “We gave them access to our technology, and by
having access to their purchasing power we could cut the cost of ingredients.”21

Culture and Identity

The funding allowed PopChef to invest in refining its identity and increase its distribution facilities
to 10 hubs. It also invested in developing the brand, an essential element for acquiring and
retaining customers.

In December 2016, PopChef made an amusing video22 parodying Emmanuel Macron coming to
the aid of the then President Francois Hollande by organising food from PopChef for an important
meeting. It ended on a play on the word PopChef, with Hollande saying “I’m the chef (boss)”, and
Macron quipping “Not for much longer.”23

PopChef customers positively identified with its new identity. This included a new internet site
explaining the eco-friendly concept of delivery by bike or electric scooter, biodegradable
packaging, and sourcing fresh local ingredients, in season, from small organic producers (see
Exhibit 5). Stickers that came with their packaged meals communicated PopChef’s brand values
(e.g., ‘Fuel for entrepreneurship’) and were displayed on office computers.

Entering the PopChef offices, a few minutes’ walk from the Champs Elysees, visitors could see a
difference (with a traditional French business). There were artificial trees among the desks and a
relaxation room where employees were encouraged to relax and take a nap on the beanbags
when necessary. When they wanted to work in silence, employees could isolate themselves in a
see-through bubble (see Exhibit 6).

As if working for their own business, employees did not have to keep office hours and could take
as much holiday as they wanted, providing the work got done.24 Describing the corporate culture,
Briac insisted: “We buy results, not hours.”25 Even trainees were trusted with using the company

19 In May 2016
20 Elior Group were the second largest industrial caterer in France with annual revenues of €6 billion. It invested in eight

European food-based startups: GoCater (la Belle Assiette), FoodMeUp, Touch and Play, Never Eat Alone, Rose & Mary,
Vitalista, Foodles and PopChef as part of its 2020 strategic plan. Source: Neorestauration.com, 22 March 2017, 40
startups pour inventer la restauration du futur avec Elior Group.
In subsequent funding rounds, a similarly sized amount was raised from Elior.

21 Author’s interview ibid.
22 Cauchemar dans les cuisines de l’Élysée, 16 Dec 2016 – PopChef – YouTube

23 In November 2016, Emmanuel Macron declared that he would stand for election under the banner of En Marche!, a new

political party founded in April. He subsequently replaced Francois Holland as President (May 2017).
24 Unlimited holidays could be taken whenever the employees wanted, as long as they fulfilled the objectives set every six

months.
25 L’édition du soir Ouest France, Ces entreprises proposent des congés illimités, 3 July 2017

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credit card. This unusual approach won PopChef free publicity – it was featured on M6, the TV
channel.26

Every Monday at 8:30 am, the whole team came together and each person explained their top
three priorities for the week ahead. Head of Marketing, Clémence Decoene, explained the
advantages of being a small team: “Everything went very fast. We could take a big decision one
day (such as changing the marketing or the packaging), implement it the next day, and if it worked
duplicate it.”27 Hélène Myon, Head of Food, observed “We were like a big group of friends, all
cross-functional, sharing the good times and the bad.”28 When she proposed a new dish, the whole
PopChef team came together to test it, checking it tasted and looked good.

The French Meal Delivery Market in 2017

By 2017, there was a trend for healthy eating and sustainable food production using fresh, locally
sourced, environmentally-friendly products. INCO legislation aided transparency in the food
sector, as the product origin had to be indicated on meat, fresh fruit and vegetables.29

In Paris, there were three main models in the meal delivery market:

1. Classic delivery –

Physical fast-food restaurants with delivery service, such as Domino’s Pizza, the leading
brand, which supplied nearly half the French meal delivery market via its franchise network.30

2. Intermediaries with their own online platform, which allowed customers to compare offerings
and prices, see and post customer reviews, and place orders with a few clicks at no additional
charge (compared to phoning a restaurant). Those with sufficient scale achieved high margins,
as they earned a fixed margin per order and could also charge for promoting particular
restaurants to make them more visible on the website. The network effect helped to drive
market share for established leaders. Intermediaries sub-divided into two types:
a. Platforms which provided no delivery service, such as Allo Resto (part of Just Eat),

Livraisonresto and Pages Jaunes Resto. Their role was to put customers in contact with
restaurants that had their own delivery service. They managed the digital side of orders
and took 10% to 15% commission per order. Offerings were biased towards low-quality
fast food, such as pizza and burger restaurants.

b. Platform and delivery operators, such as Deliveroo and Foodora (part of Delivery Hero)
that had their own delivery service and worked in partnership with high-quality
restaurants. Margins were undermined by high delivery costs, which were not optimised.
Take Eat Easy was part of this group before going bankrupt in 2016.

For some restaurants these offerings opened up new and previously untapped customer
segments, expanding revenues while not needing to invest in the online order process and
logistics infrastructure. This had to be balanced against the risk of diluting the restaurant

26 PopChef – Vacances illimitées JT M6 12h45 27/11/17 – YouTube https://www.youtube.com/watch?v=-
IC8a6ODbqI#action=share

27 Author’s interview with Clémence Decoene, Head of Marketing, 14 February 2018
28 Author’s interview with Hélène Myon, Head of Food, 14 February 2018
29 Euromonitor, Consumer Foodservice in France, May 2017
30 Euromonitor, Home delivery /Takeaway in France, May 2017

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brand, as the customer experience was uncontrollable once the food had been passed to the
delivery driver.

Operators received a fixed margin from the restaurant (up to 30%) and a small delivery fee
from the customer. Uber Eats, a subsidiary of the US ride-hailing group, entered the Parisian
market with a large and varied offering, leveraging its existing driver network, tracking
information and user base. It tended to focus on lower quality restaurants, including a
partnership with McDonald’s.

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3. Virtual ‘restaurants’

Virtual vertically-integrated ‘restaurants’, such as PopChef, Frichti, Food Cheri and Nestor.
They sought to deliver high-quality meals at lower cost by taking responsibility for the whole
food chain – from production to delivery.

Lunch Trends in Paris
According to TripAdvisor, there were 10,000 restaurants in Paris serving the lunchtime market. Of
these 2,600 offered take-out and 700 offered delivery.31 Few office workers32 had the time or
inclination to return home to cook lunch and usually went to a local restaurant, supermarket or
bakery (if they did not bring their own pre-prepared food to the office). In summer, they might buy
items (bread, cheese, fruit, wine, etc.) at a market for a picnic in a park.

• Bakeries made sandwiches or quiches to take away and some would heat these up. A
‘formule’ consisting of a sandwich, pastry and drink could cost €8 or €9.

• Supermarkets like Carrefour Market sold packaged sandwiches and cold drinks for about
€5.

• Restaurants and cafés had a weekday lunchtime menu typically between €15 and €35.

By having food delivered, customers could minimise the time spent on lunch (to go out and wait
to be served in a restaurant) and they rapidly embraced “home delivery”. As online ordering gained
popularity, several companies in the segment reported double-digit weekly growth33 (including
Foodora and PopChef).

Customers

PopChef’s offering was aligned with a growing trend for eating healthily, sustainably and locally
sourced. Business mainly comprised individual orders from office workers and the start-up
community, with a small yet profitable niche of bulk orders of meal-trays for meetings. Most
customers were aged 25 to 45. Around 80% worked in offices without a company canteen; 10%
were multiple orders from office managers, and the remainder were university students or office
workers who either did not like the canteen or wanted a change. Around 40% of orders were
repeat business. Briac claimed:

80% of PopChef’s customers have never previously used a food delivery service.
However, delivery is a quickly acquired habit among Parisians and the reason is
actually quite simple: with an equal price and product quality, “convenience” always
wins.34

31 February 2018
32 Larger companies had their own internal canteen restaurants, often outsourced to large catering groups like Sodexo. The

caterer might outsource other requirements it did not provide such as lunchboxes and cocktails.
33 Euromonitor, Consumer Foodservice in France, May 2017
34 Briac, in La foodtech en 2020 : qui gagnera la bataille de l’assiette ?, Jan 28, 2016,

https://medium.com/@briac_lsr/la-foodtech-en-2020-qui-gagnera-la-bataille-de-l-assiette-69572b9c5dca

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In contrast to the evening meal market, where people were prepared to spend more time choosing
and eating dinner, at lunchtime they tended to eat light and quickly, as Clémence Decoene, Head
of Marketing, explained:

People don’t want to spend time choosing which meal is best. At 8 a.m., they usually
don’t know what they will want to eat at lunchtime, but when lunchtime comes they
want to pick quickly and have their order delivered within 15 minutes.35

Communication with customers was by web chat and friendly mass emails, with orders taken on
the website. PopChef had developed an app in 2016. However, it proved to be user-unfriendly
and since, at meal times, most customers were in front of their computer screens and preferred to
click on PopChef’s daily meal email, the app was abandoned.

As a small number of customers ordered three to five times a week, it was important to change
the menu each day and consider the weather as preferences changed depending on the season.
Customers particularly appreciated hot meals between autumn and spring when they did not want
to go out but wanted to eat something hot. Few offices in Paris had fully equipped kitchens, and
at best had one or two microwaves serving 100 co-workers. As everyone needed to eat within the
two-hour time slot, they did not want to waste their lunchtime queuing to use the microwave. When
it was sunny, people preferred to eat outside. Contrarily, Head of Operations, Charles-Henri
Tournier observed that rainy days were difficult as self-employed drivers did not like to work in the
rain, but there was a rise in orders.36

Marketing and Competitors
Planning was further complicated as PopChef daily orders were affected by the promotions of
other operators. Comparable competitors (see Exhibit 4) used different methods to promote their
offerings:

• Food Cherie ran ad campaigns in the Paris metro: it ran at least 3 campaigns, displaying
a small discount promotion code in the left-hand corner of the billboard.

• Frichti sent out newsletters to customers, actively used social media, had partnerships with
famous chefs and brands, emailed special offers to customers,37 and offered referral code
discounts.38

35 Author’s interview with Clémence Decoene, Head of Marketing, 14th February 2018
36 Author’s interview with Charles-Henri Tournier, Head of Operations, 14th February 2018
37 For example, offering a discount for that day or a free dessert
38 Some commentators wondered about the economics of this type of marketing campaign. For example, Medium

highlighted that this acquisition strategy has a significant cost. By using a Frichti referral code, you earn € 5 and your
friend also receives € 5 voucher. Your acquisition cost is therefore € 10. An average menu will cost 14 € with delivery.
Out of the € 14 you have to deduct the commission of the deliveryman, the costs related to the platform (notably related
to the payment), and the unit production costs. So, one can easily conclude that Frichti loses money on its first order.
(and we do not speak yet of the other expenses of the company, wages, premises, taxes …). Source: Medium, Oct. 20,
2016, J’ai vécu aux crochets des start-ups pendant une semaine, https://medium.com/@AMikl_/jai-vecu-aux-crochets-
des-startups-d2f39780f5ef

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• Nestor relied on very low prices, flyers handed out at metro stations to attract customers,
and partnerships with Comités d’Entreprise (works councils) to offer a €8 menu to
employees.39

PopChef relied on a word-of-mouth referral strategy, with around 80% of the business originating
through referrals. It used email, journal, newsletter and Facebook campaigns. To discourage churn, it
sent first-time clients a €2 voucher off their next order if they had not placed a second order within
7 days, and a €5 voucher after 30 days.

PopChef operated an unusual tiered discount structure based on the number of accounts in a
company rather than the number of orders in a month. The idea was that if people received the
newsletter and the product looked good, they would want to try it.40 To encourage people from the
same location to place orders together, a 10% discount was offered for multiple orders.

Growth in 2017

By 2017, PopChef had made changes to its delivery model. Riders who had initially been paid a
fixed income of €12 per hour plus €2.50 per order, now received €4 per order payment only.
Customers who had previously received free delivery, now paid a €2 delivery charge.41

In January 2017, PopChef was the first foodtech company in France to launch a B2B meal-tray
offering, which it ran in parallel with its B2C offering.42 A couple of months later, Frichti advertised
meal trays on its website, but as Frichti focused on B2C it did not actively promote meal-trays to
businesses. As Clémence pointed out, it was hard to have two different identities: “People either
see you as B2C or B2B.”43

On 22nd March 2017, PopChef announced that it was gaining 100 new customers a day and
growing by 10% each week. It acquired Happy Miam,44 a small company that had been distributing
100 meals a day to 2,000 customers in Paris fitness clubs. PopChef now had a catalogue of 90
recipes and was delivering more than 1,000 meals per day,45 purchased from two catering
companies and distributed through its network of 10 hubs (see Exhibits 7 and 8).

By summer 2017, with more than 100,000 dishes sold and a double-digit monthly growth,46 orders
had risen to 1,500 meals per day. While profit margins remained low, PopChef was hopeful that
costs would fall and further finance was imminent. Francois confidently told investors, “As we

39 This compared to an equivalent price for a menu of €15 from PopChef or Frichti
40 Author’s interview with Charles-Henri Tournier, Head of Operations, 14 February 2018
41 From Mid 2016
42 The traditional in players in the Meal Tray Delivery Market in France were L’Affiche, purchased from Sodexo to become

part of Riem Becker SA in 2014, Classcout and Room Saveurs – the market leader, part of the Fleury Michon groupe.
43 Author’s interview with Clémence Decoene, Head of Marketing, 14 February 2018
44 Happy Miam was founded in 2016 and based in La Celle-Saint-Cloud, Paris. As of March 22, 2017, Happy Miam operated

as a subsidiary of Pop Expedition, SAS.
45 Food: PopChef met la main sur Happy Miam et ses 2 000 clients, 22 March 2017,

Popchef met la main sur Happy Miam et ses 2 000 clients

46 https://www.welcometothejungle.co/companies/popchef

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densify orders in a smaller area, delivery costs will go down and profits will rise.”47 Costs would be
further diminished with the expected change to delivery by drones or other devices.48

In the meantime, together with its 40 committed employees49 and €400,000 in the bank, PopChef
sought to establish a strong market position in what had become an increasingly competitive
market with limited price and quality differentiation.

…