#24 Gousto CEO: The UK's Food System is Broken.

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1:19Hello, welcome to Big Boss Interview. I'm Fliss Hanna and I'm here with Sean Farrington. And Sean, today you're getting into a sector that has seen a huge amount of growth in the last 10 years. Tell me who you've been speaking to. I've been speaking to the boss of one of the fastest growing businesses in the UK over the last decade or so. He was the founder as well. Timo Bolt, meal kit company, Gusto is the company that he has created. We had a bit of a debate over what type of business you'd describe it as these days. But unsurprisingly, food was his big passion and it still is to this day. That came through in all of our conversation, pretty much, whether it was about the provenance of our food, how much we pay for it as well.

2:00The price of their meal kits, of course, debate to be had over who can afford it, who is it really for? How does the world of discounts around that industry actually work? So we got into the detail of some of that. We heard when he was growing the business all those years ago, how he was hand delivering these kits on trains by himself in the early days. and then some of the challenges along the way as well. There were some tougher times through there, but he's a passionate guy, is Timo Bolt. Here's what he had to say about running Gooster.

2:37Timo, thank you very much for your time on Big Boss Interview and taking the time to speak to us. My pleasure. Thank you for having me. Easiest place to start, I think, with these interviews is often just how is business right now and particularly in the world of food, whether it's in your business or just as you see it more widely at the moment? I think there are a couple of things happening across the UK at the moment to call out. One is, you know, cost of living crisis. And so price is really, really, really important. During the cost of living crisis, you know, grocery inflation was 8 % per year, we kept it to 5%.

3:17But that is still a huge issue. We want to be affordable. We want to cater to the masses, not the classes. And so price point, everyone is stretched across the UK. This is a really big topic for us. And then secondly, I would call out obesity levels since the 1990s have more than doubled and quadrupled in teenagers. And that is a massive issue across the UK. Here in the UK, 60 % of all diet is ultra processed food. And we now have so much scientific evidence establishing the link between what you put into your body, you know, and what actually happens in terms of health and lifespan. And so that is a massive issue.

4:01I think we're at this tipping point where we need some government intervention. We can talk about this and unpick it. But I'm really proud of the role Gusto can play from a fiber protein nutrient density perspective as food is becoming medicine and as we somehow need to fix that system. Well, let's unpick prices. So amidst those numbers, effectively, you were saying when you look at the cost of food for you as a business and the prices that you were charging, that went up less than the sort of average cost that people might have been seeing overall. Now, the starting points might be different and we'll get to that.

4:42Where within that were you able to limit some of the price increases and where did you find things more difficult? So, I mean, firstly, today, Gusto starts from£3.20. A meal. It delivered across all of the UK, a meal. So that's per head. So people listening to this who maybe aren't familiar. Yeah, exactly. Absolutely, per person. But you get, you know, amazingly fresh quality chicken, beef, whatever you like to, seafood delivered across the UK to your door. So you save a huge amount of time not queuing, not writing a shopping list, not, you know, having all that hassle. But most people still, unless you're buying it for every single meal of your week, you are still going to have the big shop experience that you need to do.

5:30Surely most of your customers will still be doing a big shop in a supermarket at some point. Yeah, most of our customers are buying four to five recipes per week for their family. And thereby, they massively reduce, you know, the cognitive load, all the planning, all the looking up recipes. The average Brit has a six dish repertoire in their head. And so they repeat and rinse and repeat, you know, dishes all the time. And so we inject that level of fun, you know, 200 recipes on the menu every week. There must be something that's perfectly fit for your family. whether it's five minute prep recipes xl protein if you're a gym bro you know so this is nutritionally you say perfectly fit for your family but you when you mention the cost of living crisis for many people it's the decision is not just about nutrition is it and sadly not and so when you're talking about what that might tot up to be i don't know rough maths is it 60 70 pounds a week that people might be spending for their family when you describe that five meals for a household that is considerably more expensive than people would be spending if they are really feeling this cost of living crisis right now so a couple of points i i doubt it i doubt you can cater a really you know nutritious meal for your family at lower prices taking into account kind of fresh meat from the farm and all the time you save using gusto there's no food waste in our supply chain we now have 0.3 percent food waste and then there's no food waste for you as a family at the end of the day look at all the stuff you're throwing out there's money down the drain and we're taking that out of the equation so once you factor all of this in i would argue strongly argue that 320 per meal per person is a really really affordable level we have taken For a very nutritional meal.

7:30Yeah, exactly. And the convenience. A lot of households will hear£3.20 per head per meal as being very expensive. Look, we can't compete at the very, very, very kind of lowest price point ever where you literally get rice and nothing else for a nutritious meal. You know, saving you so much time. You choose whatever you like, fresh ingredients delivered from the farm. I think taking that into account, it is highly affordable. It is what 50 % of British families are spending on dinner. And so we're not asking people to spend. We're literally trying to deliver convenience without compromise. Because in today's world, everyone tries to deliver convenience.

8:12But then you have a huge compromise on cost, people are charging huge prices for convenience, and also health, right, the stuff, the additives that the industry is putting into these meals. one in four restaurants in the UK is a fast food place. The cost to the NHS of these fast food restaurants is crazy. It's 67 billion pounds measured by UCL economists recently in a study together with Gusto. And so if you take into account all these issues, I would argue one, you know, the UK and the global world has a systematic challenge in its food system. We need to talk about that. And from an affordability perspective, Gusto launched at a higher price point, you know, 13 years ago.

8:56Now we have invested so much into automation and AI. We have successfully managed to keep food inflation, you know, 40 percent below what the supermarkets have passed on to the customer. So when you talk about just to clarify on that, when you talk about inflation being 40 percent below, you're talking about the rate at which prices are going up being 40 percent less. We're not talking about food being 40%. Supermarkets, 8%, us doing 5%. Yeah. What is it about the way you go about things at Gusto that has protected you a little bit from those massive increases we've seen in recent times? I mean, customers don't care about AI or robotics, but the truth is for us from a supply chain perspective, it's hugely important to use technology.

9:44And so we have automated our factories to a fairly high degree. We have used AI to cut food waste to 0.3 % in a world where 66 % of all salad in the UK is wasted. That's a huge hidden cost you don't even see as a consumer. And so we've got food waste now down to 0.3%. That's the supply chain impact. And so that has allowed us to limit food inflation and really fight for customers and obsess about what prices customers pay. Can I ask you about food more generally, just more broadly? Does it feel to you like food price pressures in 2026 are going to be easier than they were in previous years? I mean, it's easing off a bit, but we still have fundamental issues.

10:36One is sustainability. If you look at the frequency of flooding, of heat waves destroying the crop and therefore driving up prices, these issues are a structural change and we globally have not found a solution for this. Gusteau is a B Corp. Just explain a B Corp. Sure. I mean, we have a set of, you know, principles in place to balance profits with doing the right thing for our employees. So from a real living wage foundation pledge to our customers, we obsess about health to how we treat food, how we treat farms, the practices we use. And so we have a set of principles, I guess, to operate this business.

11:21And that's really important to us because Gustav's purpose since day one has been to have a positive impact on people and the planet. And, you know, to your question, why does inflation happen? Sustainability is a big issue. We see these issues, these spikes in cost in the supply chain. You know, suddenly cocoa prices jumped by 50 percent. Now it's beef. Now it's that because it is flooding. It's heat waves. These issues are occurring in a much faster pace. And we have to find some kind of solution. And at a very small level, you know, and to your B Corp question, today 80 % of our packaging is recyclable, compostable, reusable.

12:01Our stretch ambition this year is to get it to 100%. We want to fight for customers. We don't expect customers to do the right thing. It's our job, our moral obligation to get these levels down. So they are all interlinked. On the question of sustainability and where we source our food. Are farmers paid enough in the UK, for example, for the food that they produce? Probably not. And look, at the end of the day, most of the food we eat is not controlled by farmers. It's controlled by big manufacturing companies that dominate food sales here in the UK. 60 % of diet, of calories taken in, by the way, it's 80 % in poor demographics, the lowest 20 % of income, are ultra processed food.

12:50And so the manufacturers have a huge incentive to add salt, sugar, fat, to create the bliss point, the famous bliss point, kind of the point where you can't stop eating and you overeat and you overindulge. And then they add additives. You know, it's almost a chemical lab and they get you addicted to these things. And so the food system is stacked against you. I don't think the farmer is paid enough. I think farmers are kind of all the way down in the supply chain sadly. But I do think we have an opportunity to regulate these companies because the food system is broken. You and I are getting addicted to bad food and these companies are addicted to profits on the back of you and me getting addicted to their food.

13:33And that feels fundamentally wrong. We today have a huge amount of science proving the causality between bad diet and, you know, the negative impact on all the organs you have and your health and lifespan. And so now is the time to ask for intervention and change that system and make it more fair for everyone in it. Is the system improving for farmers at the minute, do you think? When you talk about intervention being required, it sort of feels like people, despite us having talked about this for many years now, households maybe aren't being convinced by that message. I mean, look, the government is doing, you know, let me let me zoom out, not just touch up on farmers, but the government is doing some some stuff.

14:20We have the milkshake tax now. We're taxing sugary drinks. That's a starting point. We're also banning certain ads of junk food before 9 p.m. There's still lots of loopholes. This is still done in a half hearted way. there's still a lot of scope to really regulate this to make the system more fair for the consumer and farmers but like there are some steps taken by the government and i'm really glad kind of to see these changes there is i mean you asked about farmers and inflation the obvious point is is labor you know if i run a farm and i don't have enough people who want to work on my farm and not letting people into this country, then this translates into inflation, food inflation, or my profits as a farmer are shrinking.

15:10And so all these topics are interlinked quite substantially. When you talk about people being able to work in the farming industry in the UK, is there a potential solution to that, do you think? It seems that it strikes you as a major issue for food prices at the moment. It is. But I mean, the number one topic really is the customer. You and me eating additives, salt and sugar to the extent we shouldn't overindulge. That I think is the number one issue we need to fix. the side effect would be that farmers will be better off if you make if you incentivize the customer to buy a better more nutrient food you know by definition if we if we get supermarkets incentivized to sell apples and bananas and things that actually grow in the UK not in a chemical factory but if supermarkets are incentivized to have these items by the aisle you as a consumer and I massively benefit and the side effect is you as a farmer benefit because you can sell your products to customers more directly.

16:16But as you describe and the demographics of people who may be spending a larger proportion of their income on these foods that these food manufacturers are making, it seems that if you are asking for more taxes and more regulation on these foods, it's going to be hitting those on the lowest incomes hardest? Well, at the same time, you can't, of course, just make food more expensive through taxes. You have to subsidise and incentivise supermarkets and manufacturers to push nutrient-dense food. Our mission at Gusto is really around convenience without a compromise. And I think we've been conditioned by the industry to believe that quick food, easy food, simple, convenient food is expensive and it's unhealthy.

17:08And somehow we have accepted that. But it's not the truth. It doesn't have to be. But you as a government, we have to regulate this so that you and I can eat better food. And so why are we not subsidizing certain farming methods that are good for the environment and good for you as a person? All right, let's put the sugar tax up. Let's incentivize farmers to grow stuff that's actually natural for you and then let's incentivize the supermarkets to put it on the aisle away from all the chocolate all the guilty pleasure stuff that's at the the checkout right now so well some of it had to be moved away from the checkouts hasn't it in recent times but i know what you mean the aisles in the supermarket that dominate in that perspective so are you saying you would use those taxes like the sugar tax for example on something very specific within the food industry using it as a subsidy for elsewhere?

17:58At the end of my job, at the end of the day, my job is to fight for our customers. Can I give customers better prices, better taste, more choice? We already lead with choice. We have 200 recipes on the menu. Can I deliver faster? Can I make it tastier? Can I make it healthier? If I do these things, my share of stomach is growing. But the message has to be, and having operated in the UK, food system for the last 14 years, it is appalling to see that 60 % of calories are coming from ultra processed food. With the US, we're leading as the UK, no other country in the world has a higher percentage from these ultra processed food companies, and no other country has a higher dominance of these food manufacturers.

18:47And so that is ultimately what we're up against. And scientifically, we now have this link between the damage these companies are doing and the damage you and the NHS carry. And so if we want to make the UK more affordable, well, let's start with 100 billion on cost for the NHS that's driven by a broken food system. Let's unlock that. Let's regulate that. That will free up 100 billion pounds you and I could benefit from, plus kind of the enjoyment of life if we're healthier for longer. And so, yes, I think the government should text on the one side and incentivize on the other side. Of course, you are a meal kit business.

19:29But a lot of people might hear that and think you're just describing shopping and cooking here, changing. As the advent of technology comes along, we can take a picture of our fridge now and the AI chatbot will just tell us what to cook. The delivery services from supermarkets have changed drastically in the last decade. So how do you compete with that as individuals get more power to actually do it themselves? Yeah, I mean, I love that. By the way, I don't think Gusto is a meal kit company. I think we are a dinner solution company. We've got so much choice now. There's so much convenience. There's so much variety.

20:11variety i i really think what you see today is fundamentally different than what you've seen a couple of years ago and so we're really pushing the boundary again this year in terms of product innovation um but but yeah i mean ultimately you know our job is to just make it better and better and better for you as a customer uh and and people don't want to look up recipes uh they don't want to write the shopping list they don't want to queue forever in the aisles that are full of people then you know carry heavy bags and so i think gusto can take on all of this load for you at pretty affordable prices you know while not compromising on health and and so i think technology will make this easier and easier and more fun and perhaps for people who haven't used these services whatever we might call them dinner solutions meal kit companies whatever it might be we have an idea of the industry because people who even those that haven't used them may well be very familiar with the brands involved because you see offers everywhere don't you that's a big part of how the industry has been attracting people to try and use it for the first time and so how do you figure out were you expecting to necessarily be in that market i'm quite interested in the in the idea of you as a the boss founder of the business your brand is associated with big discounts for that initial trial for a lot of new customers?

21:38The most effective way to get somebody addicted to Gusto and hooked for life is to get people to try. Changing habits, you know, is hard and it takes time and therefore we are incentivizing people to sample Gusto effectively. What I learned 14 years ago was it's such an uphill battle to sell food online, food in a box, recipe kits. I mean, 14 years ago, no one was buying food online. And still today, food, grocery has a much smaller online penetration than, for example, fashion, where over 50 % is online now. So grocery is lagging behind and people are skeptical. And so discounts are serving a purpose, namely to get you to try and then to get you to try for a couple of weeks and hopefully build a habit.

22:27And it's all about forming that habit and holding your hand so that you can fully kind of explore all the value you're getting. You might you might learn so much new cooking techniques or, you know, like there are all these hidden benefits that are not kind of apparent if you just blast TV advertisement out there. And so we really want to get as many people to try to see the huge benefit. There's one thing you can say about the British food shopper is that they're savvy. And we see that with the competitiveness within the supermarkets. So I'm sort of thinking the natural conclusion would be if people see that they can get these discounts and there are other competitors in the market as well where they can get discounts.

23:08People might well hop between them. When we talk about price, just thinking how much that initial discount price becomes embedded in people's minds as actually that's the price I want to pay. I don't want to pay what might be double the price. I think people are willing to pay as long as they understand the value equation and they really understand all the great stuff they get, the convenience, the time saving, the choice, the variety. You know, if you experience this, you don't want to go back to a less, you know, good way for you and your family to eat dinner. And so we have a huge amount of confidence in what we offer.

23:47And by getting people to sample, you know, we get a lot of customers who stick around forever and literally buy every single week to cater for their family. Did I start 14 years ago saying we must do heavy discounting? This is how the UK eats food. no that wasn't part of the plan but it serves a purpose and I really believe you know habit formation takes time and to get people to fully appreciate all the value we offer for their family every week you got to get people just you know to try it and not just speak about it. Can we rewind 14 years or what might be 15 16 years a little bit because it does feel like the the business quite a different proposition now to maybe the one you were initially thinking about What got you into Gusto?

24:35What got you into, what was then surely you'll allow me to call it back then a meal kit company? So I've always loved food. I'm really passionate about cooking. I used to be a bad cook. Now I'm a fairly good cook, I would say. But I used to work in finance in London. I came to the UK 18 years ago. I'm really proud of my British passport today. You know, and I worked in finance and I worked ridiculously long hours, up to 100 hours in banking. I was tired all the time. And I started eating all this really bad food and I started to feel really bad and I probably gained a lot of weight. And so fundamentally, I challenged myself, how do I take the 40 % of food we waste out so that I can make a proposition affordable for a big chunk of the population?

25:26And how do I make meal and dinner time fun, nutritious, you know, engaging, create togetherness? And so that was kind of the idea, the nucleus idea, 15 years ago, brainstorming while traveling to Italy to do a cooking class. And I came back and, you know, shortly after quit my job. And then I, the next day, I literally started experimenting, coming up with recipes myself. And yes, we then launched a very basic proposition. We had six recipes on the menu. I'm forever grateful for the earlier customers. So shout out to those who have bought back then. Thank you. And I hand delivered boxes to Oxfordshire on the train, which was an incredible pain.

26:10I gave customers my personal phone number, you know, and they would call until 1 a.m. with some kind of complaint or issue, whereas my box or the ingredient didn't show up. And so it was incredibly bootstrapped, incredibly tough. I was too focused initially on organic food, on a price point that was too high. We lowered the price point over time as we managed to automate the factories. That's been a big driver of the success we've had. And then, yeah, we grew by 90 % per year for the first decade of Gusto. the Financial Times ranked us the number one private food company in all of Europe from a growth perspective over one decade and the top five in that table for all European private companies in terms of growth.

26:57Of course, that is fantastic growth. What is it like, though, being in charge of that growth? Personally, as the chief executive, that's quite relentless and pretty fast? Well, firstly, it's a privilege. I love my job. I have a huge moral obligation from a food safety perspective, from a fairness perspective. Our people in our factories treated the best possible way. Our customers getting the best quality every day. We're sending millions and millions of ingredients across the UK. You know, some tomato will be squashed, some spring onion will be dashed. Our error rate is incredibly low. And we worked so hard on this.

27:36But it is about making things right when they fail and really fighting for the customer. And so today is day one, right? And that mentality is shared by everyone across Gusto, because if you don't have that mindset, these companies just collapse immediately overnight. They look easy to run from the outside, but they're very, very complex given the supply chain and the fresh food we give to customers. Sometimes we fumble and we try to rectify as quickly as possible. But ultimately, this is only about the customer. And I think that that kind of has served us really well for the last 14 years and gives me a lot of confidence in the growth over the next couple of years.

28:14And, you know, to the outside, looking in and hearing your story, it feels like one and looks like one that has been almost year after year, a positive story for Gusto and the business. When you've had to come across more difficult times, was it two or three years ago, the valuation of the business dropped quite drastically. What was that about and what was that like after what would have been almost a decade or more of just feeling on top of the world? So we had grown by 90 % for a decade, growth, growth, growth. And then 2022 came cost of living crisis, interest rates went from 0.1 % to 5%. So 50x increase within a year.

29:04And so suddenly, we really had to challenge us, we have to show up for customers during the cost of living crisis. But secondly, we have to be a self-funding business. And so we said, look, you know, growth for a couple of months is vanity, not sanity. We got to double down on profitability while fighting for the customer. And so by obsessing about the customer, revenue has never fallen. It kind of stabilized in 2022. But profits went up so that Gusto is a self-funding business. And I'm really proud of this because for the first 10 years, we raised so much money. And we almost had to believe that money is free and what we're doing is amazing.

29:47And then suddenly the equation got changed and the name of the game became profitable growth. And now you had to prove top line and bottom line. And so it just changed how we approach life. What hasn't changed is the total customer obsession. And so in 2022, we decided to increase the menu, give customers more choice, not less, to really kind of give them more convenience. So using the choice to give customers more convenience. And also, I mentioned this before, but grocery inflation during the cost of living crisis was 8%. We managed to only pass on 5 % by making our AI, our forecasting better.

30:24And so we were really fighting for customers. as a result value for money perception went up during the cost of living crisis and as a result profitability went up and so it's actually served as kind of as a master class of how do you put the customer first in times of economic challenge that then results in profits going up to a level where it's sustainable and so look it's been really really tough it's not been my favorite year but it's been rich in learning and weirdly i'm grateful for the experience i'm hugely grateful for the team showing up the way they showed up fighting for the customer with a day one mentality in 2022 and today we're in a very different world again growth is back we're much much more profitable than back then with self-funding we can invest substantially into automation to make the prices even better for customers you know we we rolled out next day delivery to lots of customers as the first meal kit company or dinner dinner time solution company i should say what was there a bit of an experience though where maybe when some some shareholders smaller shareholders weren't so happy with that process at the time of you raising money from elsewhere and it meaning the value of the business dropped considerably where i don't know was that the first time you you had to almost make a decision that meant some people that are linked to gusto would be unhappy i mean look running a business with thousands of employees has its challenges right like you can't you can't please everyone every day.

31:55My job is to put the customer first and do what's best for everyone involved, all the stakeholders. And at the end of the day, I had to make a difficult decision in 2022 to put the customer first and make sure Gusto has sufficient funding. And I can't dictate what the prices are, the market pays, right? That's outside of my control. And so I can only do whatever is best for Gusto. And that's what I did wholeheartedly in 2022. And I'm really glad we took the decisions we took. You know, is there somebody who would have wished that the valuation just in a straight line would have gone up and up and up to the right?