- HelloFresh, which is planning an initial public offering in Germany, is telling potential investors it will soon overtake Blue Apron, according to Bloomberg.
- HelloFresh had sales of $169 million in the U.S. during its second quarter, up from $142 million in its first quarter of 2017, according to an investor presentation seen by the wire service. Bloomberg estimated if the meal-kit maker can maintain that growth rate, it could top Blue Apron’s revenue in the third or fourth quarter.
“We have huge momentum in the U.S. market and are poised to overtake our biggest competitor in the near term,” HelloFresh wrote in the presentation for potential IPO investors. “We have out-executed Blue Apron across all dimensions.”
HelloFresh, which planned an IPO two years ago but cancelled it due to market volatility again, appears committed this time to moving forward with a Wall Street offering despite the challenges its rival Blue Apron has faced since it went public four months ago.
HelloFresh's majority owner, Rocket Internet, has said the meal kit provider needs to sell stock in order to continue to grow — a theme common among the major players in the ultra-competitive space. In interviews, HelloFresh’s CEO Dominick Richter said the company has outperformed its competitors, citing faster growth, better profitability and significant market share gains.
HelloFresh should hope that it continues to be in better financial health than Blue Apron. Since the U.S. meal kit maker went public on June 29, the company has watched the departure of top executives, been hit with multiple class-action lawsuits, started a temporary hiring freeze of salaried employees and fired part of its recruiting team — all while watching its stock drop to $5.25 from its $10 IPO price.
One major challenge Blue Apron and other meal-kit manufacturers struggle with is finding enough money to fund their aggressive growth plans, much of which is tied to lofty marketing costs needed to attract and retain customers.
During its first earnings report as a public company in August, Blue Apron said its customer base increased 23% from a year earlier, but declined 9% from the first quarter, reflecting a planned reduction in marketing.The company's marketing expenses were $34.5 million in the second quarter of 2017, compared to $32 million a year earlier, but well below the $60.6 million incurred in the first quarter of this year as the company geared up for its IPO. These improvements helped increase revenue 18% to $238.1 million, topping analysts' exceptions. Still, Blue Apron lost $31.7 million during the quarter.
It's likely that HelloFresh is facing many of the same problems as its rival, including the high spending and growing competition. Amazon is also in the meal-kit business, and some grocery retailers have entered the fray. Supermarket chains such as Kroger and Publix have begun offering their own meal kits in stores and plan to grow their offerings. HelloFresh also spends a lot of money on its sales force, including door-to-door salespeople in cities like London.
To be sure, HelloFresh has looked for ways to think outside of the box. It recently came out with 20-minute meals in response to consumer demand. It's also partnered with British grocer Sainsbury’s earlier this year to offer £10 ($13) meal kits for two.
In many ways, the challenges the sector is facing today mirrors what grocery delivery companies contended with during the dot-com era of the early 2000s. Today, only food delivery pioneer Peapod remains from that time, but likely only because it was purchased by supermarket chain operator Ahold in 2001 — giving the struggling online grocer time to focus on improving its operations rather than worrying about obtaining new sources of funding.
If more meal-kit makers continue to struggle financially, they could find themselves out of business — like startups Sprig, SpoonRocket and Maple Food — or swallowed-up by a bigger company. Albertsons said last month it bought meal kit company Plated for an undisclosed amount. The purchase gives Albertsons the brand recognition and expertise of a leading meal kit company, while Plated gains access to 2,300 stores and the financial backing of one of the largest supermarkets in the U.S.