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HelloFresh – putting the convenience into cooking

Sam Cosh looks at a meal kit provider with all the right ingredients for success.
July 2021
Sam Cosh

Sam Cosh

Director, Portfolio Manager, Global Smaller Companies Equities

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Risk Disclaimer

The value of an investment is dependent on the supply and demand for the shares of the Investment Trust rather than its underlying assets. The value of an investment will not be the same as the value of the Investment Trust’s underlying assets.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

Investments in smaller companies carry a higher degree of risk as their shares may be less liquid and investment values can be volatile.

Investments which are concentrated in a specific sector or country may result in less diversification and hence more volatility in investment values.

Food may be “glorious”, in the words of the Charles Dickens character, Oliver Twist, but it can also be seriously hard work – even for those of us who love to cook as well as eat.

Not only are there meals to plan – increasingly bearing in mind the more specialist palettes of the vegetarians and vegans in the household – but there are the recipe books to rifle through and store cupboards to check for ingredients.

To cap it all, what often follows is a time-consuming, expensive and wasteful weekly trip to the local supermarket to stock up on what we’ve not got, and to probably buy more than we’ll actually need.

Into this picture comes HelloFresh, the largest provider of meal kits delivered to the home globally. It dropped off more than 600 million do-it-yourself dishes last year, spread across 14 markets, including Sweden and France, the US and UK.

The company was founded in Berlin in 2011 by Dominik Richter, a former Goldman Sachs banker who remains chief executive alongside Thomas Griesel, a fellow entrepreneur. It listed on the Frankfurt Stock Exchange six years later in November 2017.

There are plenty of online delivery businesses, of course – for meals as well as groceries – all of them capitalising on the growing trend among consumers to order goods online, a move that has been clearly accelerated by the global pandemic.

And, like its comparators, HelloFresh offers obvious convenience: just click a few boxes on the website and the result is fresh food, reasonably priced, with easy-to-follow and tasty recipes for a range of dietary desires, on the kitchen table in short order.

What marks it out, however, is that as well as convenience, this company has sustainability at its heart and as a result looks like a far more environmentally sound option than the alternatives on the market.

When the first order arrives, it’s tempting to feel that there is a lot of packaging. In reality, though, not only is most of this recyclable, but there is far less than if the food was to have come from the average supermarket.

That’s because meal kits have a very short supply chain: food moves from farms to warehouses and then direct to the home. The supply chain for a supermarket is far more extensive, and each leg involves its own amount of wrapping.

It doesn’t stop there. With a HelloFresh meal kit there is vastly less food waste. The company only holds its food ingredients for specific orders, unlike a supermarket, which has to keep its shelves full of fresh stock, plenty of which will inevitably be wasted.

Furthermore, because there are no HelloFresh stores, it doesn’t have to consume energy keeping them light, cool and airy.

HelloFresh’s revenues and adjusted profits both more than doubled last year to €3.75 billion and €1.1 billion, respectively, clearly boosted by the effects of the pandemic. It also enjoyed a record first-quarter this year, when it took its active customer base to 7.3 million.

There is an argument that demand will fall away once the crisis is behind us. However, not only has Covid-19 provided a once-in-a-lifetime marketing opportunity for this business, but the appetite for its offering has held up well in countries where more normal economic activity has resumed.

Standing back, the size of the total addressable market, and HelloFresh’s relatively small penetration within it, means that there is still huge opportunity for growth. There should be none of Oliver Twist’s gruel on the menu tonight.

Risk Disclaimer

The value of an investment is dependent on the supply and demand for the shares of the Investment Trust rather than its underlying assets. The value of an investment will not be the same as the value of the Investment Trust’s underlying assets.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.

Investments in smaller companies carry a higher degree of risk as their shares may be less liquid and investment values can be volatile.

Investments which are concentrated in a specific sector or country may result in less diversification and hence more volatility in investment values.

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