Cajoo was founded this year and is led by the former general manager of ride hailing service Bolt. It raised $7.3 million (£6.3m) this year and wants to tap into the rise in the grocery home delivery market in France, which has accelerated during the pandemic.
In this interview with Future Food Finance, CEO Henri Capoul talks about the provenance of the business and how rapidly it is growing in France. “We are opening one micro fulfilment centre a week at the moment,” says Capoul during the interview. Capoul also talks about potential partnerships and the possible integration of vertical farming technology into its business.
Paul Cuatrecasas: Henri, so just starting with the inspiration for Cajoo..what inspired you and your co-founders to actually, during a pandemic, during the time when everyone is at home, to launch this new alternative grocer company..what was the idea and the plan? What was / is the vision?
Henri Capoul: So for the context, I was the GM of Bolt, one of the biggest European ride hailing companies, which I left during the summer. The ride hailing industry is on the other side of the market, as the pandemic has been tough on that business, so we were spending weeks and months trying to find ways to increase our business.
After three years at Bolt, as I had always wanted to start my own company, I thought hey, actually, this is the right time. The pandemic has completely shifted the way we live, we don't go to the office anymore. Digital is playing a bigger part in our lives. Mobility is nowhere at the moment, and so I decided to launch my own company, making sure that it could have a positive impact and that it was embracing the way people were changing their habits.
As you say, food is one of the biggest markets in the world. Ordering groceries has always been a pain and the pandemic has just increased this friction; you need to wear a mask, to queue, so it’s really frictional at the moment. And I just thought, actually, we need to solve this, we need to make sure that we can make these moments of life buying groceries very simple moments, like ride hailing, like food delivery.
And so it was end of November, beginning of December 2020 I started to talk to my two friends, Jérémy and Guillaume. Guillaume is a friend from prépas, the intensive classes before business and engineering schools. We worked at McKinsey for a few years together. After four years at McKinsey he was the COO of one of the hottest startups in France, Respire. I talked to him about this idea and he said "actually, that's a great idea, let's go". So, he left his job in two weeks.
Jérémy and I had some common friends and we'd got in touch a few months before. We started to talk about different projects, and we finalised all these discussions in early December 2020 with these big markets and a bigger mission. And so we got this small team of three guys.
We thought that we needed some funds, it's a very big market, and actually, if you want to deliver a very full experience, you need to integrate every part of the value chain to make it profitable.
We're not building a 2010 business like Uber or Deliveroo, we need to own every part of the business to make sure the economics work, but also to ensure that ethically and socially we are building a sustainable business. So, we own our products, we store them in our stores, and we have our own bikers who are paid hourly and not by the order.
And so we needed some funds, we started to pitch 25 funds in early December 2020, after two weeks, we received some term sheets. And then in two weeks, we signed this €6 million (£5.15m) seed round to start our business.
Jérémy then coded the backend of the app in three weeks. Guillaume developed all the ops processes and procurement flows to make sure that we can get profitable from the beginning. And yeah, this is how it started. We are now 15 people at HQ, and around 100 people on the ground, in the hubs and delivery bikers.
PC: Are these employees or contractors?
HC: Different types but they're all employees. There are some part-time to absorb only the peaks of demand. But yeah, we think that it's important to make sure that we can create a sustainable business.
PC: So you were able to code the software and the mobile platform in a few weeks from scratch?
HC: Yes. We got some help from some existing solutions as well, that we implemented at some different breaks that we will carve out at some point to redevelop our own code.
All the front end, and some parts of the back end have been developed internally from day one. We think that it's very important to get technology from day one in our business, this is not just pure operational execution.
This is all about how technology can help us provide the best experience to the customer in automating what you can automate, making sure that we have the right flows in the app, but also the right SKU strategy, providing the right products to the customers to ensure that they come back. We think that we are the best position in France to source the right products.
PC: So, on that note, how much research did you do on the on the market existing market, at least in Paris? There didn't seem to be any other alternative shopping services apart from the supermarkets themselves, right?
HC: Yeah, so actually, there are some solutions, but they are not ideal in France. In France, you can go to the grocery store physically, like in any other country. There are some players that are positioned to offer two hour slots for delivery with big basket sizes, so priced aggressively, but you need to wait, you need to plan and there is nothing doing what you can get in a physical grocery store at your corner like in 5, 10, 20 minutes, digitally.
PC: Why do you think there was nothing like we've seen in other countries, but not in Paris? Or in France?
HC: Honestly, I don't know, and I don't know why I didn't have the idea before. Now, when you create it, then you realise that actually, it's solving a big problem, or at least it's helping people to do their groceries without any hassle.
Probably, because this is quite cash intensive, we needed this lockdown period to really realise that there was a real friction or hassle that we needed to solve.
I think the pandemic has really changed the way we believe in terms of consumption and for sure it's a catalyst.
PC: What do you think the degree of automation potential is for a micro fulfillment center? Given the decentralised, localised nature, compared to say, a centralized warehouse. Do you have a plan for automation over the next year, two years? A vision for how you see that unfolding?
HC: Actually automation is in our plans. The thing is at the moment, we operate with micro fulfillment centers, so we have some people there. It's important to make sure that we understand the processes, make sure we don't do any mistakes, and we can also observe and understand how it works.
Technology is everywhere from day one, meaning that they have the right tools to make sure that they don't make any mistakes. We track every order, we can know how many products are left for every SKU from day one.
In the coming months, we will operate with different layers of operations, meaning we'll have our micro fulfillment centers, but also some bigger centers to make sure we can absorb all the procurement and make sure we can internalise our operations even more efficiently in the next months.
But for sure, technology helps us to automate what we can automate and yes, we will put technology everywhere we can to make sure we are efficient.
PC: So wherever you see technology developing that's appropriate, you will integrate it. Does this include robots like Starship or Marble? Starship is being used successfully in the US to deliver food and other goods, and then even drones presumably, years out?
HC: We will always improve efficiency via technology, probably drones and other bots like this are bit futuristic at the moment, but for sure this will be in the scope in the next years. If we can deliver very fast experience without any trouble in terms of quality, we will do it.
PC: Is there a big enough market in Paris to play there for quite a while to grow before you need to go outside of Paris?
HC: Yeah, we want to expand quite quickly actually.
We are opening one micro fulfilment center every week at the moment and we want to serve all the customers living in urban areas, at least in France, during the next six months. So we plan to open at least 50 hubs this year in France.
PC: Okay. You said in the beginning that it was important to own your own products. Does that mean you buy and own the food and the goods and take inventory of that? Or are you just procuring it on behalf of an existing vendor or merchant?
HC: We define our inventory. So we know which products we want to buy and we negotiate with tens and tens of wholesalers or direct with brands to make sure we have the right assortment [of products].
Having the right assortment does not mean having the same assortment as in the physical stores. For sure we have this kind of 80/20 assortment that you can find in any grocery store at your corner, but we also have some very specific local brands that you cannot find physically and that you love so that you come back to our app.
We also want to push some local producers for meat and for vegetables to make sure that we have the best assortments compared to what you can find in 20 minutes in the street.
PC: So fresh meat and vegetables? You keep them fresh in the micro fulfillment center?
HC: Yes. So actually, it's a huge logistics process. We have some freezers, we have some fridges, we have some processes to make sure that our vegetables are well sustained. It’s big.
PC: Would you consider over time integrating vertical farm technology as costs start to come down? For example, you can have smaller container based vertical farms - would that be an option as well for fresh fruit and vegetables, to grow them yourselves?
HC: Yeah, we are already in talks with some vertical farms, so many options there.
Either we just partner and buy them, or we create some spaces dedicated to vertical farms that we can put in our micro fulfilment centers, or bigger centers that then distribute all the vegetables.
So yes, there are many opportunities here. At the moment, we are really focusing on making sure that we have the right assortment and delivering it in 10 or 15 minutes to all our customers, but once we have nailed that for sure, there are many opportunities to develop.
PC: Now another question is dark stores. This idea is a relatively new phenomenon in the alternative grocery space. How do you see that growing versus the centralised warehouse model, like Ocado, which is centraliSing, then has its own delivery mechanism?
Or the aggregator model like Instacart? Do you do you see those models competing in some way over time? Do you think there's a great opportunity for the dark store model because presumably at some point, the aggregator model, the Instacart or the goPuff or the Gorillas, are going to be coming to your territory. What's your view on that competitive landscape?
HC: I think that pure execution is needed. So, you need to execute well in 10/15 minutes. But what makes you a winner in every market is having the right assortment and making sure that you can delight your customers with what you get in the app. This is exactly why we are sourcing the right products with our French network that is quite deep.
We are signing some exclusivity agreements with a lot of brands here to make sure that their products aren't available on some of the other dark stores, and we really believe that there is a positioning that is a bit different in France versus other countries.
The food quality is very important. We cannot negate the fact that if you want to go buy a Coca Cola or a bottle of milk you will go to a supermarket. But, what will make the difference for us as Cajoo is providing some great products at the right price to all customers, and we think we are the best position to do so.
To launch a market, you need to rebuild your entire procurement network. It's exactly the same for the big retailers; you get Carrefour in France, you get Aldi in Germany, you'll get Tesco, Sainsbury's in the UK, and it works the same in France as in every other country.
So, if you want to launch a country, it's not like Uber or Deliveroo, it's not just a platform. You need to rebuild all your assortments corresponding to the customers, and that's why we are in the best position to provide French people the best assortment
PC: So, the assortment is very important, and is really difficult to do? It's very difficult to understand what that precise assortment needs to be, so that there's no inconsistencies on the app. So, what you order you're going to get. And you're going to get exactly that in 15 minutes?
HC: Yeah, the data can tell you what customers like in your existing assortment. But it can also tell you what some customers would like to have, because you can get some feedback.
But the thing is, you need to also have a sense of how people consume and behave in the country, making sure that you can put all your efforts and the right assortment in one country to be the leader.
And I think that having the central team here, so the tech here, the marketing team, and all the local team, thinking about the French assortment will help us for sure to become the leader here. Of course, it's a question of money but you could have all the money of the world, if you don't have the right product to delight your customers, at some point you're out.
PC: Are you in a stage where you would even start thinking about partnering with the larger corporates, either in France or companies that want to come into France to enter this market? Or is it not really necessary?
You're building some exclusive partnerships on the on the assortment side, but is there anything you could see Cajoo doing with some of the larger corporates that are operating along the value chain? At least in France?
HC: Yeah, we already have some discussions with some big brands as well as some big retailers. Let's see.
PC: Do you see a company like goPuff, which is aggressively attacking not just the US market but Europe and looking to acquire? Do you see them wanting to get into France in some way, either building from scratch or some other way? Do they see France as attractive, now that you've shown the way?
HC: Yeah, for sure, France is very attractive. It is the biggest market in terms of grocery spend every year, 250 billion euros and growing. So, for sure, France is attractive.
If I was goPuff, I would start with the UK and this is what they are doing actually. Which makes sense because the consumption habits are more similar to the United States. I really think that in France, you need to build the right assortment, which is completely different from the UK.
And yeah, let's see, it's a huge market. Even on the ride hailing side and the food delivery side, there was some space for different players. There is probably some space for two/three players in France only. Let's see how they can manage to provide the best experience to their customers here.
PC: Do you think that over in the next one-three years Cajoo will have an impact on the on the supermarkets? Whether it's supermarket or local convenience stores, because if people can get the assortment they want from Cajoo they don't really need to go to the store themselves anymore. Do you see that becoming a trend and maybe even becoming a threat where it could affect their market share?
HC: Yes, for sure. Our goal is not to replace the local supermarkets. Local supermarkets are great because you can see all your vegetables, you can know what you buy, you get even more choice than on Cajoo.
So, if you want to really take the time to do your groceries, you can go there, and it's great. The real friction we are solving is when you don't have anything planned, or you want to just get right on a social moment of life, like brunch, breakfast, when you share some lunch with some friends, and then we'll get the best products for you.
PC: So it's convenience, but it's also the speed. Is that a guarantee that you offer? If you don't hit the 15 minutes, what are the consequences?
HC: The guarantee is to be below 15 minutes. If that is missed, we refund the delivery fee. And then if it gets way higher than 15 minutes, we will refund the whole basket. It's a guarantee. It's necessary in this market to deliver it in 10/15 minutes, but it's not how you become a leader.
PC: Is the delivery fee enough of a revenue source to become profitable at some point in time? How does the company actually move into profits?
HC: Actually, we already have some great gross margin on the products we get, as we are properly negotiating every contract with every brand and every wholesaler.
The delivery fee is around like two euros, 1.95 euros so it's symbolic, but at the same time, it taps up for some higher margin. So, it's quite important to have it. It's part of the economic equation, but the biggest part of the revenue is done through gross margin on the products.
PC: And presumably as you grow scale that will only improve?
HC: Yeah, for sure. This is only the first months of activity, and we are having some great gross margins and it will improve.
PC: And you think that even when we're back to normal, after the pandemic, say, end of this year, that there will still be the same level of interest in demand and having the 15-minute delivery, even though they have to pay the delivery fee?
HC: Yeah, two things. First, when the pandemic started, we thought it was here to last two, three months, but it’s probably going to last for a long time, even all our lives, we don’t know.
Second, every time there is a consumer habit that lasts more than three months, it stays. So, we believe that if you're used to ordering Cajoo in 15 minutes for three, four months, actually, you'll get back to it, even if there is no more pandemic.
PC: And that you think is a general consumer habit, not just France?
HC: For sure. It's worldwide. And this is why there are so many players, launching this kind of activity. I really believe this is the future of how we consume groceries. Now let's see how the market is shaping, but there will probably be some national players and one or two European or regional players in five years’ time.
PC: And how long do you think you can go before the next capital raise? It looks like you're going so fast, you'll need to raise again this sometime this year, towards the end of the year?
HC: Actually, we are very efficient. So, we can last one year like this. But we are starting to have some discussions with some funds at the moment as we get some great traction and if we want to accelerate.
PC: Excellent. Very exciting, Henri, and congratulations on your accomplishments to date. Thanks again for your time today.