Meal kits ‘at tipping point’ as HelloFresh’s bumper quarter illustrates sector’s growth potential
The Berlin-based company, which operates in the UK, US, Germany, the Netherlands, Belgium, Luxembourg, Australia, Austria, Switzerland, Canada, New Zealand, Sweden, France and Denmark, more than doubled its revenue to €1.44bn in the first three months of the year compared to the same period last year. Its active customer base rose by a million customers in both its international and US businesses to reach 7.3m worldwide. The company raised its full-year guidance for revenue growth and now expects revenue growth of 35% to 45% (up from 20% to 25%) in 2021.
The robust performance was mainly driven by strong customer growth and supported by continued high order rates and order values.
"2021 has set off to a strong start. Our teams have been working hard to de-bottleneck the capacity constraints we were experiencing over the majority of 2020, especially in our US market. As a result, we’ve welcomed more customers than ever to HelloFresh,” said Dominik Richter, CEO and co-founder of HelloFresh.
“As consumers around the world have been adapting to new habits, like buying groceries online, they’ve also discovered the many advantages of our full meal solutions over traditional grocery shopping. Since we offer our customers great value for money, convenience as well as tasty and healthy meals, I am confident that we will benefit disproportionately from the shift to increased online grocery penetration.”
‘The potential for growth is clear’
Anne-Véronique Benoist, Head of Insight in the Media Division of market researcher Kantar, told FoodNavigator the huge increase in engagement with meal kits may be the precursor to significant growth in this sector against a backdrop of changed consumer meal preparation habits as we emerge from lockdown.
According to Kantar’s analysis of UK consumer trends, 7% of adults have trialled a meal kit or recipe box service in the past 12 months, but currently just 4% of British adults have taken the plunge and subscribed to services. Those people who did subscribe seem to have been converted – 57% have had meal kits or recipes boxes delivered more since the pandemic began.
“The potential for growth is clear as an additional 12% of all adults are considering ordering a recipe box or meal kit in the next 12 months,” Benoist told us. “These figures compare with 36% of adults who have had groceries delivered in the past year – with 58% of those people doing so more since the pandemic began, prompting supermarkets to massively ramp up their delivery services. We could well be at a similar tipping point for the popularity of meal kits.”
Meal kits give consumers ‘the joy of cooking but not the hassle of shopping’
She added that consumers have embraced scratch cooking from home and say it's something they want to do more. But fatigue is setting in, she noted, a trend which will help meal kit providers as the business model provides consumers “the joy of cooking but not the hassle of sourcing and shopping”.
Further, delivery kits give shoppers the variety they currently crave, she observed. "It seems to be as though food is a bit like your holiday. We can’t really go for exotic holidays so we’re using food as way to escape. Any brand that can help us with new recipes is really going to tap into that thirst for variety and more exploration."
Meal kits can further help boost the cooking skills of those consumers who want to cook from scratch but lack the confidence to do so. They also removed the stress for consumers of deciding what meals to prepare each week, she added.
Researchers have also claimed that meal kits can cut food waste by more than two-thirds (although the researchers criticised the heavy use of packaging in the meal kit sector).
"At the moment the benefit has been perceived maybe a bit more by young working families with children. Brands need to make it relevant to more people," noted Benoist. One opportunity, for instance, is by helping people lose weight. "Four in 10 say they intend to lose weight now the lockdown has finished. HelloFresh has a low calorie range that it could really position here. And that will make it really relevant to lots of people.”
HelloFresh meal kits come with pre-packaged fresh ingredients and cooking instructions and take typically 30 minutes to prepare. According to Benoist, brands could exploit consumer demand for chef-curated, restaurant-quality meals that could be prepared in less than 20 minutes.
‘Supermarkets have tried and failed many times’
How will this growth potential play out? Will it fuel existing players – such as HelloFresh, Mindful Chef and Gousto, which recently revealed it is to take on 1,000 staff after its sales more than doubled? Or will new ones - possibly supermarkets -- muscle in? "Because they seek variety, people are not going to stick to one brand,” responded Benoist.
However, Robert Berg, Senior Equity Research Analyst at Berenberg, expects growth in the meal-kit sector would be limited to existing players.
“Given the company just added 2m customers sequentially (the same as the total number of customers it has in 2018) I think it’s fair to say that this sector has huge room for growth,” he told us.
“Existing players with huge benefits from economies of scale are likely to continue to dominate. Supermarkets have tried and failed many times – they seem to lack the capital and expertise required to really make a good go of it.”
