Investor Update April 2024

 New TOG ambassador Nathan Outlaw

 

Dear TOG Partner,

The 2022-2023 period has been eventful for us at TOG.

We’d like to bring you up to date with where we are today, by sharing the many initiatives we instigated while facing the widely reported economic challenges, the financial results on the back of this and our plans for 2024-25.

We will be reporting separately on the 2023/24 financial year when we have final figures. At the same time, we will share a more detailed growth plan.

The Perfect Storm


Following our second Crowdcube investment round in Oct 2022, we encountered the same cost increases, supply chain disruptions and slowing consumer demand faced by many in the post-covid era. In our case, this was compounded by the impact of a significant fraud incident, the loss of a valuable knife shipment and a challenging website re-launch in 2023.

In response to this, we increased our pricing to maintain margin, upgraded our key supply partner, tightened our security and risk management, improved our insurance cover, increased flexibility in our team set-up and rectified the website issues ahead of Christmas trading. We have also adjusted both our customer acquisition strategy as well as our cost-base for 2024-25, to ensure we return to profitability and get back on track with our mid-to-long term growth plans.

We also welcomed Jorrit Jorritsma into the TOG family. Jorrit brings a wealth of global brand and supply chain management experience to TOG from his times as Global MD for accessory brand Kangol Headwear and as Founder of sustainable outdoor lifestyle brand Millican. Jorrit has initially taken charge of our supply chain overhaul, 3PL initiative, streamlining of our financial and product reporting, as well as providing healthy challenges to our long-term strategic decision making.

The year 2023 finished with the biggest November in our history, the launch of several exciting new products as well as a long-term product and brand collaboration with renowned fish chef Nathan Outlaw and an ever-expanding TOG community of professional and home chefs – green shoots to build on for 2024.


Summary Headlines


Our 2022/23 turnover totalled £565,000 (-17%), Gross Profit 57.3% (-5% points), Overheads £444,000 (-5%), resulting in negative EBITDA (-£121,000) and Net Profit (-£83,000).

Stock remained healthy with 98% invested in evergreen stock. Stock turn reduced to 2.5 as a result of reduced sales against expectation + the impact of increased minimum order quantities from our main supplier.

Year-end cash position on 31 March 2023 was £237,000 and Net Assets increased to £520,000, reflecting our second Crowdcube investment in Oct 2022.

Based on the 2023 headwinds described, at this stage we are expecting our 2023/24 performance to mirror the 2022/23 growth trends, before we’ll see the full-year recovery results in 2024/25. We’re confident that our recovery initiatives will bring us back to our original growth plans beyond the year ahead and we remain focused on a potential sale of the business in the coming 5-7 years.


Commercial Progress


The reduction in our 2022/23 revenue was driven by both traffic (-17%) and average order value (-11%) losing ground, with conversion remaining static at 1.12%.

Traffic was negatively impacted by increased online competition, Apple’s iOS 14 update wreaking havoc on digital advertising, as well as META’s tightening data rules, leading to increased costs, weaker targeting and subsequent reductions in our overall Paid spend.

Our customer acquisition strategy, focused on converting new customers via lower-value foldable knife ads on META, initially proved successful. However, the supporting repeat purchase strategy of upgrading these new customers to our core kitchen knives through email and in-package marketing converted below expectations. A reduced AOV was the unintended result.

In the first half of 2023 we redesigned our website and moved platform from WooCommerce to Shopify, to help improve the user experience, conversion rate and to increase our ability to scale internationally.

Unfortunately, we experienced a number of unexpected challenges post-launch, ultimately impacting our revenue by an estimated £40,000, before we managed to remedy all main issues ahead of the Christmas trading period. We’re expecting to see the benefit from an improved conversion rate in the year ahead.

Customer loyalty and engagement remained strong, with our social following growing by 15%, 1,350+ customer reviews still delivering a 4.9* Yotpo score and repeat purchases growing to 36% of sales.


Creative Team


We switched up our marketing initiatives by engaging Bristol-based agency Studio Danvers last year, now an integral part of our team. This partnership has allowed us to drive our paid and organic customer acquisition harder and smarter, expand our email marketing and improve our content generation, maximising results in a very challenging period.

In addition, we refined the TOG brand look and feel this year through our content work with the new creative team of Studio Danvers, Luke Rance, Ed Schofield and Jason Ingram.

Pasetti and Boote photographed by Ed Schofield

 

LESTRANGE collaboration film, featuring Jonnie Collins and created by Luke Rance and Studio Danvers.



Customer Acquisition


TOG’s marketing strategy shifted away from META (Facebook and Instagram) and focused more on growing higher-intent, lower-cost Organic awareness, supported by targeted CRM strategies and retention plans.

We’re targeting a reversal of the balance between Paid and Organic traffic towards a 35%/65% split by 2025. We reached a 50%/50% balance by November 2023.

We’re expanding our own content creation for paid and organic traffic generation, expecting Google ads to remain the most effective channel, with an average Return On Advertising Spend (ROAS) of 9+ last year.

Our 2024/25 expected growth will come from switching part of our paid awareness budget to customer retention initiatives to drive Life Time Value (LTV) – increased CRM activities to leverage our TOG community through our most (cost) effective route using Klaviyo, combined with referral campaigns.

Another marketing initiative we’ve trialled last year is Penny Black’s in-packaging printed marketing material, customised to each individual customer. Improved retention and LTV are the expected long-term benefits - although early days in maximising the technology’s full potential, we’ve achieved a 3X return on investment to date.


Social Collaboration


Authentic and meaningful social collaborations with Food Creators have proven a successful means of generating wider awareness over the last year and are contributing to increasing our organic traffic, relying solely on relationship building and product gifting.

We’re now regularly featuring in the feeds and stories of Doctor Rupy, Elly Pear, Julius Roberts, Alfie Cooks, Appetite Life and many others.

TOG Ambassador


We were thrilled to start collaborating with renowned fish chef Nathan Outlaw as a new TOG Ambassador, with the intention to delight our respective audiences through collaborative product launches and storytelling, bringing together his unique approach to food creation and his love of TOG knives.

TOG X OUTLAW'S film by Luke Rance and Studio Danvers.

PR and Media


PR has continued to play a pivotal role in TOG’s awareness and there has been no shortage of it - securing both traffic and revenue, alongside the awareness that third party coverage creates.

63% of our coverage in 2023 were product reviews, 71% of coverage was online - some examples were:

T3 – Best Chef Knives
Techround – Founder Interview
T3 – Whetstone Review
Expert Reviews – Kyukyoku Set Review
Telegraph – Santoku Review
Independent – Best Knife Sets Feature
Expert Reviews – Best Chef’s Knife 2023
Forbes – Best Luxury Kitchen Gadgets

Alongside well circulated knife reviews, we were also able to secure some brilliant exposure on TV through featuring TOG on Masterchef, Hairy Bikers Go Local, ITV Next Level Chef and Nigella’s Amsterdam Christmas.

 

Product


In late 2022, we trialled a first pre-order collaboration with renowned blacksmith Alex Pole on a British-made Kitchen Axe. The 24 axes sold out in 2 hours, at a sales value of £10,000.

 


TOG’s product development for 2023-24 has focused on several new kitchen knives, a number of valuable brand and product collaborations, as well as an expansion of our knife accessories.

The long-awaited Pankiri Bread/Pastry knife took only 48 hours to burn through the first batch of 60 last December, with the second batch having landed last month. The Bread knife has featured at the top of our customer survey wish list for 2 years running, so we’re expecting this to become a long-term favourite. The Pankiri has recently been listed in the Telegraph’s ‘Best kitchen knives and chef’s knives in 2024 for home use’.



A partnership with London-based clothing brand LESTRANGE exposed us to a new life-style audience and allowed us to experiment with a new sustainable handle material, turning LESTRANGE regenerative cotton trouser offcuts into handles for a limited edition Santoku. Lessons learned from this are already being applied to our Nathan Outlaw collaboration products for 2024/25.


Watch this space for further new product launches in 2024, starting with a smaller Knife block and new Maple Chopping Boards, culminating in a new series of Prep Boards and the first TOG x OUTLAW’S collaboration products designed by Bert and Nathan for launch in the second half of 2024.

Order Fulfilment


To support our long-term growth plans, we successfully moved our warehousing and shipping to a 3PL partner in Bristol (DEVLND), enabling us to close our South-Bristol office in 2023. This has allowed us to further improve our customer delivery promises and brought flexibility to our supply chain overheads and capacity.

The move to a new 3PL partner has also freed up our operations team to further tighten our quality control and stock management, allowing for improved cash management.

Supply Chain


In addition, we successfully transitioned our kitchen knife production to a new supply partner in Seki (Japan) in 2023, improving our lead-times, minimum order quantities and product quality, while simplifying our supply chain at the same time.

With their help, we’re also finalising our new kitchen knife packaging in the coming months, enabling us to bring fully-finished, ready-to-sell products into our warehouse – a step closer to our One Touch supply chain aspirations for 2024-25.

Positive Impact


Socially, we continued our very successful Black Friday Twin Campaign in 2023, this time supporting Bristol-based charity The Mazi Project. Sales over 2 weeks provided 177 meal kits and 573 single meals for young people facing food poverty in Bristol.

Environmentally, we continue to make product and operational decisions based on our founding beliefs of responsible business – create high-quality, long-lasting products, support our customers in further extending the life of their TOG products and minimise our environmental impact through our design, production and supply chain decisions.

Although we’ve come a long way by instinctively making responsible business decisions in our first decade of existence, we recognise the need to accelerate these and hold ourselves accountable for our societal and environmental impact.

We still intend to use the B-Corp impact assessment process to guide us through this. Although our B-Corp aspirations had to go on hold last year, we are expecting to restart our impact assessments again later in 2024.

Looking Ahead


Although 2023 has been a sobering year for us overall, we’re expecting our product, marketing and operational resilience initiatives, combined with a reduced cost base, to deliver a profitable 2024/25 and get us back on track for our growth ambitions.

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