Meal Kit Service HelloFresh Considers IPO

Meal Kit Service HelloFresh Considers IPO

Meal kit delivery service HelloFresh is considering filing an initial public offering that values the company at $1.8 billion. 

HelloFresh has increased its active consumer base to 1.3 million, and is planning to use proceeds from its IPO to fund business growth. The meal kit service wants to personalize its catalog and fill more consumer niches by adding products such as wine and dessert foods. 

The Berlin-based meal kit service competes most heavily in the U.S. market with competitors such as Blue Apron, where it spends heavily on advertising and discount offers to attract customers. The company hopes to break even on operating costs by trimming marketing expenditure per customer. 

HelloFresh's consideration of an IPO comes on the heels of the underwhelming response to the Blue Apron public offering, which is covered in the market outlook analysis in Meal Kits Delivery Services in the U.S., 2nd Edition.

Money in Meal Kits

Dominik Richter, CEO of HelloFresh, reported that his company spent $53 per customer on marketing in the second quarter of 2017, compared to the $37 spent by competitor and industry giant Blue Apron. According to Richter, HelloFresh's profitability outlook bodes well, thanks to the company's loyal consumer base and increasing share in the U.S. market. 

New York-based Blue Apron, which owns a market share between 15% and 20% is, arguably HelloFresh's most well-known rival. Blue's marketing expenditure accounted for nearly 25% of net revenue in the first quarter of 2017, but the company has struggled to retain consumers despite its increased focus on marketing.

Blue Apron's early June '17 IPO, which reported that the company's 2014 revenue of $78 million had soared to nearly $800 million in 2016, was the meal kit industry's highest-profile public offering. But despite spikes in revenue, the company lost $55 million in net income due to marketing expenditure.

Although expensive, Blue Apron’s marketing has put it “ahead of the crowd”: Beyond just offering discounts and other profit-cannibalizing gambits to attract new customers, Blue Apron has shrewdly targeted Hispanics with Spanish-language TV commercials placed on Hispanic TV stations. Packaged Facts’ Meal Kit Delivery Services in the U.S. (April 2016) reports that 30% of meal kit delivery subscribers are Hispanic or Black, such that meal kit delivery services were missing out on sales opportunities by not targeting hispanics or African americans, depicting these communities on websites and in advertising, and placing ads in Hispanic or African-American media.

Market Niches to Open Opportunities 

Looking forward, a potentially profitable future for meal kit delivery may lie in unique marketing angles such as organic, paleo, veggie-centric, specialty dietary restriction, or farm-to-table meal preparation, which could give marketers an opportunity to maneuver.

Packaged Facts’ survey data show that meal kit subscribers are more likely to strongly agree that they are health-conscious about the products they consume (57% vs. 31% of food shoppers overall).

“Meal kit delivery services are a specialized sector but widely disruptive force in the food industry,” says David Sprinkle, research director for Packaged Facts. “And new approaches to fresh food groceries are what consumers are most interest in.”

Be sure to also visit our 'Meal Kit Delivery Services' page, Packaged Facts' all-in-one resource on meal kit delivery. 

Further information on current trends in the food industry can be found in our collection of food industry trends reports.

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