Frozen-meal venture has landed tens of millions of dollars in financing and has several sales channels including 8,000 grocery stores
Former Lululemon Athletica Inc. CEO Christine Day has had a successful two-year run as CEO of the frozen-meal producer Luvo even though she scrapped her original business strategy for the Vancouver-based company.
Day has quadrupled the company’s revenue and landed tens of millions of dollars in financing from investment banker Goldman Sachs, which bought most of founder Steve Sidwell’s shares when Sidwell left the company last April.
Back in 2014, Day told Business in Vancouver that she intended to launch a string of kiosks in hospitals, hotels and sports stadiums, where licensees would sell meals and pay Luvo royalties for use of the brand.
“We’ve put that [growth strategy] on hold,” Day told BIV in March. “We’ve really focused on developing the food.”
The company maintains kiosks or vending machines in a few locations, such as at a hospital in Cleveland, but its focus has been on expanding its menu of frozen meals, increasing its presence on airlines and getting more shelf space in more grocery stores.
While the company had nine frozen-meal options two years ago, it now has 25 choices.
Service on airlines has also taken flight.
Two years ago, the company had a pilot agreement with Delta Air Lines Inc. (NYSE:DAL) to have its meals served on the shuttle service between Los Angeles and San Francisco.
Delta expanded that deal to include all of its U.S. flights that are longer than two and a half hours, as well as two shorter flights – one between Los Angeles and San Francisco and the other between New York City and Washington, D.C.
Delta’s exclusive agreement to serve certain Luvo products in the air does not include Canada, but Day is in “discussions with a to-be-named Canadian airline” and hopes to launch with it in July, she said.
While expansion into the friendly skies has been significant, it still represents less than 10% of company sales.
The bulk of Luvo’s eight-figure revenue comes from grocery store sales.
Two years ago, Luvo sold an average of two items in 5,000 stores. Today, that has increased to an average of seven items in 8,000 stores.
Retail Insider Media analyst and owner Craig Patterson was impressed with Luvo’s expansion of its average number of products per store because frozen-food sections of grocery stores tend to be a fixed size with limited freezer space.
“It sounds like they’re taking the grocery industry by storm and retailers are lining up to be a distributor, which is terrific for a Vancouver company,” Patterson said.
Luvo’s Canadian grocery store distribution is partly through United Natural Foods Inc., which warehouses and distributes products to independent grocers. It also sells directly to various Overwaitea Food Group grocery stores, such as Urban Fare, and to Choices Markets, MarketPlace IGA and Whole Foods Market.
“We’re in the process now of launching with Loblaws, starting with the West Coast and moving east, and that will give us another 700 stores,” Day said.
“We’re also in discussions now with Sobeys, which would be a pickup of about 900 stores for a launch in September or October.”
Day recently moved her company’s head office from Richmond to the corner of Fir Street and West Broadway; about 30 of her 50 head office staff are located there.
Much of the company’s production takes place at a 60-employee plant in Illinois but Day said she is looking for a new manufacturing partner, and the leading candidate is in Canada.
A final sales channel that has yet to gain traction is selling items in sports arenas.
Former New York Yankees captain Derek Jeter, who has an ownership stake in the company and sits on one of its board committees, arranged for Luvo to be served at Yankee Stadium suites. He is also what Day calls a brand ambassador, or public face for the brand.
The company is close to signing a sponsorship deal with a retired Canadian Olympian in the lead-up to Rio’s Olympic Games in August.
“Celebrity endorsements are a huge trend and an effective business strategy,” Patterson said.