The steep decline and rapid recovery of KiwiSaver balances in 2020 took many by surprise. So what made the difference? Jihee Junn asked Kiwi Wealth’s Gordon Pfeiffer to explain. 

On March 11, 2020, the World Health Organization officially declared the spread of Covid-19 a global pandemic. In New Zealand, five cases had already been confirmed, which quickly climbed to 20, then 66, then 102 by late March, prompting the government to announce a strict alert level four nationwide lockdown. And while for Aucklanders going in and out of lockdown this might have a sense of deja vu, the mood this time last year was much more uncertain, compounded by the fact that KiwiSaver balances – many of which had been accruing for over a decade – took a sharp, scary and unexpected turn for the worse. 

At the time, KiwiSaver providers were inundated with questions from concerned investors. At Kiwi Wealth, its customer service team was fielding 600-700 calls a day during the first week in lockdown, many of whom were wanting to know if they should switch their fund to a more conservative portfolio. The near-unanimous message from the team and financial experts was simple: unless your KiwiSaver timeframe has changed, stay calm and stay put, because things will get better. 

And things did get better. Much better and much faster than anyone had imagined. By July, KiwiSaver had bounced back by more than $7 billion from the March dip. By December, the industry had surpassed $76 billion with returns for most funds soaring high despite the ongoing struggles of the pandemic. Which begs the question: why? And why so quickly?

“One of the reasons is that it became clear that lockdowns were being managed around the globe. At the same time, governments had started to roll out very strong stimulus packages to soften the huge impacts of those lockdowns,” says Gordon Pfeiffer, head of KiwiSaver at Kiwi Wealth. 

The severity of these lockdowns and the virus’s spread globally also meant vaccine development started early and rigorously, leading to a strong belief there would be a vaccine available sooner rather than later, says Pfeiffer. In fact, when the Pfizer/BioNTech vaccine was announced in November, shares surged all over the world as investors bet that a successful vaccine would help the economy recover and reopen from a year hamstrung by Covid restrictions.

“Despite the uncertainty, the way many governments have responded and the speed at which a vaccine has been developed has provided confidence about long term recovery. It meant after the initial shock many shareholders were more optimistic that the books of a lot of companies weren’t going to be that bad after all. So I think all these things just really made the difference to the strength of the market.”

The bounceback from such a dramatic downturn, says Pfeiffer, was also an endorsement of the way KiwiSaver is designed, particularly the diversity of assets that make up any KiwiSaver fund, whether that be growth, balanced or conservative. That’s because all funds are made up of a mix of different assets, such as shares, property, bonds and cash. Each asset has a certain level of risk and the proportion of each that you’re invested in depends on your type of fund. That’s why in March, growth funds experienced a bigger drop than conservative funds – but also a far more impressive recovery. 

Pfeiffer also cites the role of the manager as a factor, particularly for active funds like those offered by Kiwi Wealth. 

“What we’re always trying to do as a global, active manager is to manage risk to absorb and ride out unstable periods. And by doing so, if something like Covid happens we’re prepared to help make sure our clients are protected in a way that we can adapt to. And as we could see in the March to April period, that philosophy really worked,” he says.

With vaccine rollouts now well under way, the panic and confusion that struck markets and investors globally has largely subsided. But that’s not to say it can’t happen again – investment comes with risk and the market can go up and down at any given time. It happened in 2020 and it happened in 2008 when the impact was even bigger and the economy took much longer to recover. 

So what should investors do if another crash were to hit? The advice, Pfeiffer says, would still be the same: if you’ve got time on your side, sit tight and prepare to ride the wave.

This content was created in paid partnership with Kiwi Wealth. Learn more about our partnerships here. 

For months, Chris Schulz and his wife Heather were battling to get their dream food business off the ground. Then Covid-19 came along and everything went ballistic.

We sat, crumpled in a heap on the couch. It was nearing midnight and my wife and I were exhausted. In just a few hours, we’d have to be up before dawn, picking up bread, pastries and doughnuts from bakeries around Auckland, then packing and delivering more than 200 orders over Mother’s Day weekend. In 2020, that celebration was being held with the country in alert level three.

In front of us lay the things we’d need to do this. Branded paper bags hand-stamped by us with our company’s logo were piled on tables. Boxes containing thousands of eggs were lined up in rows. Bags full of avocados, pancake mixes and sauces were pre-packed, ready to be loaded into cars and delivered to customers by mates we’d roped in to help.

To navigate our lounge you’d need to pick your way through carefully. A thin strip between the front door and the kitchen was the only visible floor space. Put a foot wrong one way and you’d smoosh a six pack of eggs straight into the carpet. Step the other way and you’d knock over a leaning tower of pre-made cake boxes.

Everything was squished into our humble Te Atatū home: us, our kids and our rapidly expanding food business. We were bulging at the seams. In one of our fridges, packets of our favourite bacon supplier lined the shelves, packed as tightly as we could fit them. In the other, cheesecakes, chocolate cakes and brownies were stacked neatly, intoxicating smells of chocolate and vanilla wafting through the house whenever the door was opened.

As the clock hit midnight, we felt frazzled and fried. We’d been working every day for weeks as Brunch Box, our twice-weekly delivery service of brunch essentials, took flight when the country went into alert level four. In the year previous we’d been limping along, trying to make our dreams a reality. We were about ready to give up on them.

Back on March 25, when lockdowns bound millions of people to their homes, we were sitting on the same couch having a different conversation. My Food Bag was considered an essential service. So were Woop and Hello Fresh. Our small delivery service wasn’t the same size, not even close. But all the small producers who supplied our business had nowhere for their food to go. Cafes might be closed, but eggs still get laid, avocados still ripen, and the bacon’s already packed.

Couldn’t we pick those products up, package them safely and deliver them to people stuck at home? Surely our tiny food business was also an essential service?

After many confusing email chains and phone conversations with the Ministry of Business, Innovation and Employment (MBIE), it turned out we were. As soon as we made that decision, business went ballistic as people in our local area flooded our site and helped spread the word. Excuse the pun, but those Covid-19 lockdowns saved our bacon.

Yet Mother’s Day weekend was different. It was huge. Mother’s Day is known as the biggest day in hospitality all year, and yet cafes were only allowed to serve takeaway items. The orders had flooded in during the week, the numbers getting so high they’d lost all meaning. We’d never done 200 orders before, and we were terrified.

Could we pull this off?

Side hustle to main hustle

Here’s another question we kept asking ourselves: how did we get here? At the beginning of 2019 my wife and I quit our office jobs. Disillusioned after nearly 20 years in our chosen industries – Heather had worked in the fashion industry, I’d spent a similar amount of time in newsrooms – we decided to take a punt. Our side hustle was going to become our main hustle.

For years, we’d each been cheating on our careers by having small flings with food. Sick of terrible supermarket avocados, Heather found a Katikati grower, persuaded them to courier her boxes of avocados every week, and delivered them to homes around Te Atatū, organising orders through an invite-only Facebook group.

By accident, I’d created a seasoning mix that worked well with almost every meal. It seemed to be addictive, and friends and family nagged me to make more. Finally, I called it Redspice, got a label made and began selling it through local grocers. The first day it went on shelves, then prime minister John Key was photographed with a jar. New Zealand, eh?

One day, Heather roped me in to help deliver avocados. I got bored and began throwing ideas around. “Why aren’t we delivering more things? Why not eggs? Bacon? Sourdough? Coffee?” It snowballed from there. We couldn’t stop talking about it. We knew all too well how hard it was to experience a long, leisurely cafe brunch with noisy kids in tow. Why couldn’t we box all our favourite brunch ingredients up? Who wouldn’t want the best bacon, eggs, bread, juice and coffee arriving on their doorstep on Saturday mornings?

A quick Google search found there was no competition. All food bags and boxes catered for weekday meals, not leisurely weekend treats. No one else offered that kind of service. Soon, the thought dominated our conversations. In the middle of the night, unable to sleep, we chose the name Brunch Box, gave a bloke $300 to design a logo and asked a family member to take some cheesy photos of us.

Then we lost a bunch of our savings to a website designer who promised amazing things but disappeared once he’d been paid.

Eventually, with a new designer on board, our site launched in January 2019. Looking at the video I took of us at the time, we look pensive, wide-eyed, terrified. Heather had already left her job. I was about to leave mine. We had no startup capital, no investors, no real business plan, and just a few thousand in savings. Did I mention we have kids? And a mortgage?

The startup grind

After that very definition of a soft launch, I harangued all my media contacts and spammed PR friends for advice. To promote it, we started attending farmers markets. We made a paltry $80 that first weekend, but feedback was fantastic. Determined to spread the word, we committed to more markets: Grey Lynn, Parnell, and Te Atatū Night Market. They were hard work, with low financial rewards, but crucial for building our confidence.

The only noise coming from our website was crickets. Very occasionally, when an order came through, we’d gasp and high five. With our leftover market offerings, we launched Dessert Club, delivering healthified treats like paleo chocolate cake, vegan fruit crumbles and bliss balls with flavoured centres to local homes on a Sunday night. That began to flourish. People liked our food, and that gave us inspiration to keep going.

But farmers markets and desserts weren’t the business we’d planned. Along with the avocados and Redspice, our business had become a multi-tentacled mess. None of it was even close to giving us enough money to live on. Our savings dwindled. Imposter syndrome was a daily struggle. Others had spent their lives cooking, cheffing, living and breathing food. Who were we to storm in and set up shop?

Online, without big advertising dollars to spend, things built slowly. Across 2019, our busiest day of Brunch Box deliveries was just 10 orders, delivered between the kids’ soccer games. We expanded our catchment area and found ourselves driving to Pukekohe and Ōrewa for single orders, time and petrol costs negating any possible profit. By February 2020, we’d run out of cash. We were ready to give up.

Sitting on the same couch we’d find ourselves in just a few months’ time slumped on, over-run by orders, we discussed closing the website, selling the house, and giving up our dream.

How Covid changed everything

As it did for every single business on the planet, Covid-19 changed everything. With cafes and restaurants shuttered during alert level four, and lengthy queues formed around supermarket buildings, people turned online to order their food. We already had a website, and Facebook and Instagram groups containing hundreds of members. Our audience was ready and waiting. Spreading the word was easy.

Suddenly, the previous 12 months didn’t seem like such a waste of time after all.

So we “pivoted”, quickly. One part of our sprawling business model suddenly came sharply into focus. We folded everything up into an online farmers market: a choose-your-own buffet of delicious, hard-to-find, freshly picked, quality brunch-centred products, from producers that shared our ethos. We added our own products into the mix, put everything into recyclable or compostable packaging, and delivered to doors safely and contactlessly. Money supplied by the government’s Covid-19 business fund helped pay for a business coach and a newly streamlined, deli-style website.

With our MBIE certification in hand in case police stopped us, signs that read “Essential Service” stuck to our car windows, packs of masks in the front seat and a constant supply of hand sanitiser nearby, we began operating. And we began selling out. Stuck at home, and shopping online, people couldn’t get enough of us. Almost overnight, we went from doing a handful of deliveries to dozens and dozens of them. Orders would come in faster than we could keep up.

We’d be up late most nights, sitting on laptops around the kitchen table, collating orders, talking with suppliers, sorting delivery routes, persuading friends to drive for us. Orders would arrive from all over the place: Facebook, Instagram, email, phone and even text messages. Every available surface was used to prepare orders. Some days, we packed and delivered from 6am until well after 6pm. If we needed a breather, we’d collapse on our couch, too tired to move. There was no home-schooling going on. Sometimes, even our 11-year-old son would help out, demanding payment in chocolate croissants.

During lockdown, it felt like we had an inside eye on the human psyche. At alert level four, our customers craved comfort food. That meant two things: doughnuts and bacon. As alert levels went down, healthier food would take over, like gluten-free breads, haloumi and organic salad mixes. During the recent alert level yo-yos, the same thing happened again. One recent weekend, we offered and quickly sold out of hot cross bun-flavoured doughnuts. We didn’t even get to try one for ourselves.

Lockdown luck

We know we’re incredibly lucky. We didn’t launch our business with lockdowns in mind. We had no idea Covid-19 was coming when we quit our jobs. We also know many food businesses – especially those with fixed retail spaces and expensive overheads – are struggling. Some weeks, we do too. We’re nowhere near making it out of the woods. But we’ve found ourselves a small clearing that seems to be sustainable. Our regulars love us, rave about us, keep coming back and invite their friends to join too. We’ve found several suburbs that work for us, and focus our deliveries and marketing on those.

Yes, business yo-yos between lockdowns. When alert levels go up, Brunch Box gives us something to focus on rather than Ashley Bloomfield’s daily presentations. We know we’re helping our suppliers, who would be throwing away their incredible food. We know we’re helping those stuck at home eat delicious, healthy food during lockdown. “Thanks for being the lighthouse and ray of sunshine on each delivery,” someone wrote on our Facebook page in the middle of lockdown last year. Kind words like that kept us going. That makes us feel good. That makes us feel like we’re doing the right thing. One year on, we might even find time to celebrate with one of those doughnuts. They do look delicious.