- HelloFresh plans to announce later this month that it will file for a public offering, according to sources interviewed by Bloomberg.
- Currently, the meal kit company is gauging interest from investors and waiting for its preliminary third quarter results to come in so it can show continued growth. Sources told Bloomberg that there has been no final decision on whether the company will file for an IPO. HelloFresh also planned an IPO for 2015 but canceled it due to market volatility.
- Estimates put the Berlin-based company’s worth at around $2 billion.
HelloFresh’s desire for a public offering has been no secret, with majority owner Rocket Internet stating that the company needs to float in order to continue to grow. In interviews, HelloFresh’s CEO Dominick Richter has said the company has outperformed competitors, citing faster growth, better profitability and significant market share gains.
According to Bloomberg, HelloFresh received a valuation of 2 billion euros ($2.3 billion) during a funding round back in December. Since then, the company has continued to increase its sales. In the second financial quarter this year, HelloFresh’s sales increased 53% to 230 million euros ($271 million) as the company signed up 90,000 accounts.
Blue Apron, in contrast, is valued at around $1 billion.
“The Blue Apron IPO has only limited relevance for us,” Richter recently told Manager Magazin. “We play in a different league.”
Richter may be overstating his case. After all, HelloFresh struggles with many of the same challenges Blue Apron faces, including, crucially, a lack of profitability. Like its competitor, whose stock has lost nearly half its value since late June, HelloFresh has to contend with high customer acquisition and marketing costs. HelloFresh also spends a lot of money on its sales force, including door-to-door salespeople in cities like London. This would be worthwhile if customers spent a lot once they became loyal customers, but research shows that average spending by meal kit consumers is declining. HelloFresh is also spending a lot to fulfill its orders, according to an analysis by Business Insider.
HelloFresh’s biggest problem, though, may be the competition. In addition to a free-for-all of online startups, the company must square off against Amazon — which recently began testing meal kits for two in Seattle — and grocery retailers. Grocers like Kroger and Publix have begun offering their own meal kits in stores, and plan to grow their offerings. According to Nielsen, grocery meal kits racked up $80 million in sales last year, and should bring in much more this year.
On the plus side, HelloFresh is taking some innovative steps. It recently came out with 20-minute meals in response to consumer demand. Realizing the potential to save money and grow sales through a physical retail presence, HelloFresh also partnered with British grocer Sainsbury’s earlier this year to offer £10 meal kits for two. This partnership, which preceded Albertsons acquisition of Plated, offers a new sales channel as well as increased exposure for the company.