Hellofresh presented good financial results for 2021. HelloFresh delivered nearly 1 billion meals to 7 million households in 2021. Sales increased by more than 60 percent to 6 billion euros. Profit was almost 160 million euros. That could have been higher if the company had not invested heavily in expansion into new markets and fulfillment capacity in 2021. Sales should grow between 20 and 26 percent in 2022. That is a good outlook. Hellofresh is maturing.
Changing consumer behavior
Hellofresh foresees excellent opportunities in the market for online food, both in daily groceries and ready-to-eat meals. Food is the largest consumer market with still the lowest share of online purchases. Hellofresh’s penetration in their markets is currently less than half a percent. Hellofresh is going to give consumers more choice and much faster delivery times.
Hellofresh ultimately wants to be the ‘world’s leading fully integrated food solutions group’ with complete supply chain integration, sourcing, production, and delivery. They have an enormous head start on the classic food chains with their own ‘ in-house’ chain logistics operations and information technology competencies. There, fragmentation, waste, and price battles are still the order of the day.
Hellofresh can quickly adapt their service-offerings to consumers, cost benefits through more innovative working remain within the company, and Hellofresh can rapidly implement innovations.
Decreasing purchase costs
Hellofresh has managed to reduce purchasing costs from 43% to 34% of sales over the past five years, despite rising food prices. Do suppliers also take advantage of the hyper-growth? It’s hard to believe with the year-on-year decline in the share of purchasing costs, Hellofresh’s power is great. Nevertheless, Hellofresh does warn in its forecasts of rising purchase prices in the coming years.
Rising fulfillment costs
Fulfillment costs (note: production and delivery) increased to 40.6% of sales. Hellofresh explains this with the costs associated with international expansion. Hellofresh has invested in new production and distribution centers to meet additional consumer demand; economies of scale are yet to come. After the purchase and fulfillment costs, a nice gross margin remains.
Sustainability is high on the Hellofresh agenda with zero-emission deliveries, sustainable warehouses and factories, and less food waste.
Winner takes all?
Competition is fierce. Takeaway services Uber Eats and Delivery Hero are launching new services in Hellofresh’s home markets. Meanwhile, flash delivery companies like Gorillas, Zapp, and Getir, backed by wealthy venture capitalists, are fighting for market share in food service.
Caterers are looking to enter the consumer market with dark kitchens. Traditional supermarkets are expanding their online offerings, and local-for-local networks are emerging. As a result, the online food market is on the move.
Skeptics will say that 6 billion euros in sales is still very little. In the Netherlands alone, consumers spend 45 billion euros at supermarkets… My conclusion is that Hellofresh has matured and made the right strategic choices. Their business model is valuable. Winner takes all? There will soon be losers, too. The traditional stores, caterers, A-brand suppliers, and restaurants will feel it when Hellofresh grows further. Hellofresh inspires!
Walther Ploos van Amstel.