What if you could enjoy delicious, healthy and convenient meals every day, without having to worry about cooking, shopping or counting calories? That’s the vision of Fundely, a Japanese company that focuses on three primary business segments: Medical Food Delivery (MFD), Cooking Immediately Delivery (CID), and Marketing. Each of these segments plays a crucial role in the company’s overall mission to promote a healthy and enjoyable food lifestyle for its customers. In this report, we will examine how Fundely leverages its expertise in nutrition, food technology and marketing to create value for its customers, partners and shareholders. We will also explore the opportunities and challenges that Fundely faces in the rapidly growing meal delivery industry, and examine how it can enhance its competitive edge and achieve sustainable growth in the future.

First, let’s take a closer look at what the company does in each segment. Each segment has its own value proposition, target market, and competitive advantage.

• The MFD segment delivers nutritious and well-balanced meals to individuals with specific dietary requirements, such as those with lifestyle-related diseases. Fundely employs registered dietitians who provide personalized nutritional counseling services and create meal plans tailored to each customer’s unique needs. This segment aims to help customers improve their health outcomes and quality of life through customized food solutions.
• The CID segment offers frozen meals made from fresh, seasonal, and locally sourced ingredients. These meals target health-conscious individuals and those with busy schedules, who want to enjoy delicious food without spending too much time or effort on cooking. Fundely distinguishes itself from other frozen food and meal delivery services through its proprietary ingredient sourcing network, optimal heating techniques, and AI-powered subscription service that learns customers’ preferences and suggests suitable menu options. This segment aims to provide customers with convenience, variety and satisfaction through ready-to-eat food solutions.
• The Marketing segment sells advertising space in catalog magazines, conducts sampling operations, and manages health food recipe websites. This segment complements the MFD and CID segments by creating awareness and demand for Fundely’s products and services among potential customers. It also provides targeted marketing strategies for food manufacturers who produce health-oriented products, helping them reach their desired audience more effectively. This segment aims to generate revenue and enhance brand recognition for Fundely and its partners through media and communication solutions.

As we can see, Fundely’s business operations encompass a comprehensive approach to promoting a healthy food lifestyle for a diverse range of customers.

Company History

In September 2000, founder and CEO Kosuke Abe established Fundely with the vision of promoting healthy and happy lives. The company launched Japan’s first “Counseling Delivery” service in April 2001, delivering nutritious meals to customers’ homes. Initially focused on ingredient delivery, the company expanded into healthy meal delivery after receiving requests for ready-to-eat diabetic meals.

In April 2004, Fundely introduced the “Mealtime” catalog, initiating nationwide sales targeting customers across Japan. The company expanded its referral network, collaborating with medical institutions and pharmacies to promote “Mealtime.” In September 2005, the Mealtime e-commerce site launched, improving customer convenience.

April 2007 saw the introduction of the “Mealtime Regular Course” (now “Nutritionist’s Choice Regular Delivery”), offering tailored menus selected by assigned nutritionists based on customers’ medical conditions and dietary restrictions. In October 2008, Fundely launched “Foodish,” a community site for nutritionists, which now boasts around 50,000 registered professionals.

In October 2011, Fundely initiated key reforms, including a significant 30-40% price reduction for “Mealtime” products, which solidified the company’s unique business model. By effectively combining its high-profit marketing operations with the Medical Facility Distribution (MFD) business, Fundely was able to grow and expand. In June 2015, the company went public on the Tokyo Stock Exchange Mothers market, backed by an extensive referral network of around 18,000 locations. Later in November 2015, Fundely launched the “Hachimaru Recipe” website, showcasing recipes developed by nutritionists employed in various medical institutions.

Achieving a sales operating profit margin exceeding 16%, Fundely entered an expansion period. With the food delivery market valued at 2.5 trillion yen and the home meal delivery service market surpassing 140 billion yen, Fundely launched new services to capture this growing market. In October 2016, the AIoT media “Point Appliances” site was established, and services began, as the company actively diversified its revenue sources. In July 2020, Fundely introduced “Shun wo Sugu Ni” (Seasonal Delights), a meal delivery service targeting younger customers and those prioritizing food safety and security, using 100% domestic ingredients.

Business Environment

Fundely operates in a business environment filled with both opportunities and challenges, as the Japanese meal delivery market experiences growth. This expansion is driven by various factors, such as the shrinking domestic food market, increasing dual-income households, lifestyle diversification, women’s social advancement, and a growing number of elderly individuals who face difficulties in obtaining food or dining out. The COVID-19 pandemic has further increased the demand for home delivery services due to the preference for contactless options.

The rising number of patients with lifestyle-related diseases annually contributes to the expansion of Fundely’s primary customer base. This trend is expected to persist as the aging population results in a greater number of households with elderly residents. As a result, the meal delivery market is seen as a promising sector with significant potential for growth. This potential has led to heightened competition from various industries, as more businesses enter the market to gain a share.

Challenges in the business environment include escalating delivery costs due to price increases by delivery service providers. Additionally, the growing consumer focus on food safety and security necessitates stricter management systems within the food industry.

Several business risks may affect Fundely’s financial position, operations, and cash flow, such as food safety incidents that could damage customer trust and company performance. Data security is crucial to prevent breaches and maintain a positive reputation. The company’s growth is also dependent on expanding and retaining its membership and referral networks.

To compete in the burgeoning food delivery market, Fundely must maintain a competitive advantage in quality and pricing. As a small organization, the company needs to bolster its workforce and systems to accommodate rapid expansion. Insufficient talent acquisition and development may impact competitiveness and growth.

Procurement risks include excess inventory and valuation losses if orders fall short of expectations. Rising costs in raw materials, labor, and petroleum-based products may affect the company’s performance and finances. Ensuring a stable electricity supply is critical for preserving frozen products, with shortages potentially impacting operations.

Equity financing and stock options could lead to a decrease in share value. Financial covenants and going concern considerations pose risks, although strong relationships with financial institutions and conservative cash flow forecasts help mitigate concerns.

Amid this environment, Fundely has focused on providing valuable products and services to customers by leveraging its strengths, such as meticulous nutritional consultation by registered dietitians and nutritionists. This aligns with the company’s corporate philosophy of contributing to a prosperous future society by proposing healthy and enjoyable eating habits to as many customers as possible.

Management Policy

As a company with a vision to become a comprehensive healthcare enterprise, Fundely is dedicated to providing high-quality products and services that cater to the diverse needs of its customers. Recognizing the challenges posed by an aging population, the rise in lifestyle-related diseases, and the subsequent increase in medical expenses, Fundely strives to promote health improvement as a means of transforming society.

At the heart of Fundely’s approach is the concept of “Isshoku Nii 一食二医,” which emphasizes the importance of prioritizing diet control (食事) as the primary method for maintaining health, with medical care (医者) playing a supporting role when necessary. By advocating for an “Isshoku Nii” society, Fundely aims to contribute to a more sustainable social insurance system.

Under its five-year medium-term management plan, “Will 2022,” Fundely has identified several strategic initiatives to bolster its growth and profitability. These initiatives include transforming business structures, securing large contracts, and creating new businesses that leverage the company’s strengths in each of its segments. One such example is the launch of “Shun wo Sugu ni,” a new service in the CID business that focuses on offering high-quality, time-efficient meals to younger, working-age customers.

To effectively reach this demographic, Fundely employs social media platforms such as YouTube, Twitter, and Instagram to showcase the quality of their ingredients and share timely information. By doing so, the company aims to distinguish itself from competitors and appeal to a wider audience.

In its marketing business, Fundely is committed to enhancing its relationships with food manufacturers. By utilizing web conferencing systems and investing in external training programs for sales representatives, the company seeks to improve the quality of interactions and strengthen its ties with manufacturers.

In essence, Fundely’s management policy revolves around the continuous improvement of its products and services, addressing societal challenges, and capitalizing on emerging opportunities. By focusing on these key initiatives, Fundely aims to secure its position as a leading comprehensive healthcare company and contribute to a healthier, more sustainable society.

Strengths

Fundely boasts a range of strengths that contribute to its success in the health food delivery market, setting it apart from competitors and ensuring a promising outlook for future growth.

One of the company’s key strengths lies in its efficient customer acquisition strategy, achieved through an extensive referral network. Over more than a decade, Fundely has built a robust network of around 20,000 medical institutions and pharmacies across Japan. By having physicians and dietitians introduce “Mealtime” to potential customers, the company has established a significant barrier to entry for competitors attempting to tap into this market.

Another strength is Fundely’s sustained competitive advantage through its long-standing relationships with medical professionals and large referral network. This solid foundation enables the company to maintain and expand its customer base, remaining a dominant player in the health food delivery market while also deterring potential competitors from entering the space.

Finally, Fundely’s extensive referral network and relationships with medical professionals have created high barriers to entry for potential competitors. The expertise and trust the company has garnered through its long-standing network ensure that it remains a go-to source for healthy meal delivery, protecting its market share in this niche segment from new entrants.

Financial Performance

The management results for the fiscal year ended March 31, 2021, showed net sales of JPY 3,123 million, a 2.0% increase compared to the fiscal year ended March 31, 2020. However, the company reported an operating loss of JPY 177 million (compared to an operating loss of JPY 553 million for the fiscal year ended March 31, 2020) and an ordinary loss of JPY 158 million (compared to an ordinary loss of JPY 559 million for the fiscal year ended March 31, 2020). A special loss in the form of an impairment loss of JPY 1,777 million was recorded, resulting in a net loss for the fiscal year ended March 31, 2021, of JPY 1,948 million (compared to a net loss of JPY 374 million for the fiscal year ended March 31, 2020).

Fundely’s total assets for the fiscal year ended March 31, 2021, amounted to JPY 5,462 million, a decrease of JPY 2,270 million compared to the fiscal year ended March 31, 2020. Liabilities were JPY 4,819 million, a decrease of JPY 300 million compared to the fiscal year ended March 31, 2020. Net assets were JPY 643 million, a decrease of JPY 1,970 million compared to the fiscal year ended March 31, 2020.

Cash flow situation and factors for the fiscal year ended March 31, 2021 were as follows:

Cash flow from operating activities amounted to an inflow of JPY 738 million (compared to an outflow of JPY 278 million in the previous fiscal year). The primary factors include a pre-tax net loss of JPY 1,964 million, depreciation expenses of JPY 497 million, impairment losses of JPY 1,777 million, and various other inflows and outflows.

Cash flow from investing activities resulted in an outflow of JPY 50 million (a 92.4% decrease compared to the previous fiscal year). The primary factors include expenditures for acquiring tangible fixed assets of JPY 47 million, expenditures for acquiring intangible fixed assets of JPY 620,000, and expenditures for security deposits and guarantees of JPY 2,272,000.

Cash flow from financing activities led to an outflow of JPY 289 million (a 6.3% decrease compared to the previous fiscal year). The primary factors include long-term debt repayment expenditures of JPY 270 million and dividend payments of JPY 19 million.

Path to Sustainable Growth

Fundely’s path to sustainable growth and an enhanced competitive edge hinges on addressing key challenges in customer base expansion, product and service innovation, cost management, and employee development. By tackling these areas, Fundely will solidify its position in the market and build a stronger foundation for long-term success.

Firstly, broadening Fundely’s customer base is crucial for growth. The company should focus on cultivating long-term relationships with its “Nutritionist’s Choice Subscription” customers. This can be achieved by providing exceptional customer service, personalized meal recommendations, and regular engagement with nutrition counselors. By nurturing these relationships, Fundely can increase customer lifetime value and drive recurring revenue.

Secondly, Fundely should capitalize on its referral networks in the MFD business. By fostering strategic partnerships with medical institutions and pharmacies, the company can expand the reach of its “Meal Time” catalogs and tap into a wider customer base. In addition, Fundely could explore collaborations with complementary businesses, such as fitness centers and wellness programs, to further extend its network and diversify its clientele.

Thirdly, appealing to a younger demographic interested in maintaining good health and preventing disease is essential for expanding Fundely’s market share. The company can accomplish this by developing new products and services tailored to this group’s unique needs and preferences, such as meal plans that cater to specific dietary trends or fitness goals.

Fourthly, Fundely should prioritize product and service innovation to stay ahead of competitors. This includes investing in research and development to create new, unique offerings, as well as continuously refining existing products to meet evolving consumer demands. By focusing on innovation, Fundely will maintain its reputation as a leader in the healthy meal delivery space.

Fifthly, cost management is vital for Fundely’s profitability. The company should implement strategic initiatives to reduce costs without compromising product quality or customer satisfaction. This could involve streamlining supply chains, optimizing internal processes, and exploring opportunities for automation. By controlling costs, Fundely can maintain competitive pricing and attract a broader customer base.

Lastly, investing in employee development is essential for the long-term success of Fundely. By providing comprehensive training programs and continuous learning opportunities, the company can ensure its team stays up-to-date with industry trends and best practices. A skilled and knowledgeable workforce will not only improve operational efficiency but also contribute to the company’s overall reputation and growth.