Strong growth for Hellofresh. But do suppliers benefit?

Meal kit subscription business HelloFresh has seen sales soar in the first six months of 2021, despite the end of lockdown. Berlin-based HelloFresh said its sales had risen by almost 80% in the first six months of 2021 to hit € 3 bn. The company delivered over 490 million meals to its 7,6 million customers.

The sales growth came due to capacity increases, newly acquired businesses including ready-to-eat services in the US, a market launch in Norway, and assortment expansion, including a newly available pantry offering in the US market.

Hellofresh downgraded its margin forecasts on higher costs. The profit margin of 10 to 12 % will be reduced to 8,25 to 10,25%. HelloFresh expects higher production costs due to the accelerated expansion of production capacity, because the new production sites cannot yet be fully used. In addition, the company wants to accelerate its technology and data teams. These investments in the infrastructure and the platform are necessary to make the medium-term growth ambitions possible. To maximize efficiency and minimize waste, Hellofresh has developed advanced algorithms that let us predict our customer orders and therefore our own demand for each week.

Hellofresh managed to reduce procurement expenses from over 35% of revenue to 34% of revenue (coming from 43% in 2016) despite soaring food prices. Are suppliers benefiting from Hellofresh’ hypergrowth? It’s hard to believe with the year-on-year decline of the share of procurement expenses.

Fulfillment cost went up with 1,2% to 39,3% of revenue in the first half of 2021. Hellofresh explains this with the cost involved with international expansion. Hellofresh invested in depots to meet the extra demand; economy of scale still needs to come.

Retaining customers’ attention and retention will be tough. Takeaway services Uber Eats and Delivery Hero are launching in HelloFresh’s home market. Meanwhile, rapid grocery delivery startups like Gorillas and Getir, backed by deep-pocketed venture capitalists, are fighting for market share. Traditional supermarkets are also ramping up online offerings. The online food market is very dynamic.

Walther Ploos van Amstel.

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