Commentary

Giant Food, Stop & Shop To Start Serving HelloFresh Meal Kits

Berlin, Germany-based HelloFresh will begin to sell its meal kits in the 581 Giant Food and Stop & Shop supermarkets owned in the U.S. by the Dutch operator Koninklijke Ahold N.V. starting Wednesday. HelloFresh claims it is the world’s leading meal kit company. It operates in the U.S., the U.K., Germany, the Netherlands, Belgium, Luxembourg, Australia, Austria, Switzerland and Canada. 

“To support the move into retail, HelloFresh built out its network from five to 11 facilities, and plans more expansion in the future. It is also experimenting to see which recipes and packaging work best in retailers and appeal most to shoppers. To start, recipes include Peppercorn Steak and Mediterranean Style Chicken,” reports CNBC’s Lauren Hirsch.

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“For grocers, meal kits offer a lure to bring shoppers into stores, as it becomes increasingly easy to buy food staples online,” she adds.

“With the success of our online business, HelloFresh collects more than 60,000 U.S. customer data points per week. What results from these insights are recipes delivered to retail that are endorsed as delicious by a broad consumer base,” the company states in the release announcing the deal. And that leads to meals such as Homestyle Meatloaf, Chickpea Couscous and Paprika Chicken that cost between $14.99 to $19.99 and take less than 30 minutes to cook.

“It’s for customers that don’t have the ability to preplan as much,” HelloFresh CEO Dominik Richter tells the Wall Street Journal’s Heather Haddon. “We think this is an offering that is very complementary,” adding that the company is in talks with other retailers to sell its kits in their stores.

“Many meal-kit companies have struggled to acquire delivery customers and keep them on board. Analysts expect the biggest meal-kit makers will need to sell their products in stores as well to keep driving sales,” Haddon points out.

“Retailers are looking for the right partner to make the economics work,” Richter tells her. “This is still a quickly growing category.”

HelloFresh’s move is indeed “the latest in a larger trend toward meal delivery services offering their prep kits beyond online marketplaces,” reports Brent Molina for USA Today. “Last month, Blue Apron announced it would start selling meal kits at retailer Costco. Meanwhile, Walmart revealed in March it is taking its meal kits nationwide, offering them in more than 2,000 stores over the course of the year.”

And last month, Kroger said it was acquiring Home Chef in a deal that starts at $200 million but could be for as much as $700 million if the Chicago-based startup hits certain targets over the next five years.

Food Dive’s Jeff Wells writes that Hello Fresh is now the market-share leader in the $5 billion U.S. meal kit market with Blue Apron slipping. It reported a 68.9% increase in active U.S. customers over the past year with U.S. revenues up 49.4% to $213 million and margins increasing 8.2% to 26.8%. It’s not profitable yet, “but expects to reach break-even status on an adjusted earnings before interest, taxes, depreciation and amortization basis by this year’s fourth quarter,” he reports.

“While many of its competitors focus exclusively on market segments like regional cuisine, vegetarian cooking and special diets, HelloFresh is hitting on these segments too, and trying to outmuscle smaller competitors on spending and data science. The company has a ‘one pot’ cooking line, a global cuisine line and offerings that require just 20 minutes of prep time,” Wells continues. And look for more deals along the lines of its March acquisition of Green Chef, which was the first USDA-certified organic and certified gluten-free meal kit company.

The worldwide meal-kit market is projected to grow at a compound annual growth rate of 20.51% over the next five years according to the Global Meal Kit Delivery Service Market 2018-2022 released in April by the Dublin, Ireland-based ResearchAndMarkets.com.

“One driver in the market is cost-effective solution when compared to eating out. The global meal kit delivery service market is growing at a high rate, which can eventually affect the dine-in restaurant business,” according to a summary of the study. “Consumers look for convenience in their eating routine, along with sustainably sourced food at affordable prices,” the report states.

Add in candle light and ambient music and what more could you ask for?

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