Dive Brief:
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The CEO of Marley Spoon told Reuters he expects the Berlin-based meal kit company to be profitable by the end of next year. Fabian Siegel said the company hopes to raise about $53 million when its stock starts trading July 2 on the Australian Securities Exchange.
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Australia represents approximately 37% of Marley Spoon's revenue, according to TechCrunch, with the U.S. and Europe slightly behind that level. Siegel told TechCrunch the company has broken even in Australia and expects to hit profitability there in the second half of this year.
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The company had a net loss in 2017 of about $33.5 million, Reuters reported. However, Marley Spoon projected the loss to decline this year to about $30.2 million and sales to climb 75% to about $108 million.
Dive Insight:
Given the unprofitable state of the meal kit business, Marley Spoon seems quite optimistic about its prospects through the upcoming IPO. It's been focused on innovations, including a Thanksgiving dinner partnership with Martha Stewart called Martha & Marley Spoon and Dinnerly, a less-expensive meal kit option with fewer ingredients. But it will need more than that to move into the black.
Industry pioneer Blue Apron still hasn't reached profitability, although it is trying a variety of new approaches — a pilot program with Costco, partnerships with Airbnb, pop-ups and various advertising channels — to acquire and retain customers and boost its bottom line. The company hopes to break even on at least one financial indicator later this year.
HelloFresh, also based in Berlin, recently became the U.S. meal kit market leader by pulling ahead of Blue Apron. The company said its active U.S. customers increased by nearly 70% last year. However, HelloFresh also hasn't reached profitability, although it expects to reach that status by the fourth quarter. HelloFresh recently acquired Green Chef, an organic meal-kit company and placed meal kits inside 600 Ahold Delhaize stores, so that positioning could help things along.
U.S. meal kit company Sun Basket, which delivers organic meals in sustainable packaging, raised $57.8 million earlier this year and hopes to hit $1 billion in value at some point. Yet, like its segment colleagues, Sun Basket hasn't reach profitability either, though CEO Adam Zbar told Food Dive the company would be profitable if it stopped pumping funds into marketing.
Some meal kit companies pay up to $80 per person to acquire new customers, according to the Morningstar research firm, adding the industry has seen sales jump 25% in the past few years. A 2017 Packaged Facts report noted the meal kit market had hit $5 billion in sales, and Food Business News reported it could achieve $35 billion by 2025, so there's a lot to gain if retention, marketing and delivery problems can be overcome.
Meal kit companies have had a tough time keeping customers, who may find it easier and perhaps cheaper to visit a brick-and-mortar supermarket and buy kits on a daily basis than pay for an ongoing weekly meal kit subscription. To stay competitive in the U.S., Marley Spoon may need to strike up a partnership with a grocery chain.
The company will also have do very well with its Australian IPO. According to Reuters, the company has about 110,000 customers in the U.S., Australia, Germany and three other countries, which isn't much compared to the 890,000 HelloFresh reported last year and the 746,000 Blue Apron reported for the last quarter of 2017. Getting to profitability looks like it could take a while for Marley Spoon, as well as for its competitors.