According to market research firm Technomic Inc, the global market size for home delivered fresh meal kits is estimated to be a billion-dollar market. The US meal kit market alone is expected to grow to be worth $3 billion-$5 billion in the next 10 years.
Berlin, Germany,-based HelloFresh (Private:FRESH) was set up by former batchmates of the London Business School - Dominik Richter and Thomas Griesel. The idea for HelloFresh came about when Dominik returned to Berlin in 2011 with the intention of setting up a new business of his own. He wanted to make others around him have access to his love for healthy food and cooking. He realized that starting a Food at Home business would be the natural choice.
By 2012 he had gotten together with Thomas and begun formalizing the idea of HelloFresh. After conducting enough market research, they narrowed down on packing shopping bags for Berlin, Amsterdam and London to target the highest density population areas in Europe. It began offering locally sourced and pre-portioned ingredients to help consumers prepare home-cooked meals each week.
Soon enough, the product was liked so much that they began getting requests from people outside the markets that they were serving. By the end of the year, HelloFresh had expanded into the US as well. It began operations on the East Coast and within two years its meal kits were available for sale across the US. Today it is the leading provider of subscription-based meal kits and serves more than 7.2 million meals a month across seven countries in Europe, America and Australia. At the end of the third quarter of 2015, HelloFresh had over 500,000 subscribers and a database of more than 5,500 recipes.
HelloFresh operates on a subscriber-based model. Meal prices range start from $8.75 per meal for a family plan which offers child-friendly options along with food that is good to cater to two adults and two children. Customers are able to opt for a flexible subscription that allows them to receive a box of fresh ingredients and recipes every week.
Reports estimate that its revenues have grown from $3 million in 2012 to an annualized run rate of $290 million by 2015. But the high revenue has not guaranteed profits. EBITDA margin has fallen from a loss of 18% in 2014 to a loss of 26% in 2015.
The company has been venture funded so far with $255.5 million raised from investors including Baillie Gifford, Rocket Internet, Insight Venture Partners, Phenomen Ventures, HV Holtzbrinck Ventures, Investment AB Kinnevik, and Vorwerk Direct Selling Ventures. Its last round of funding was held in September 2015 when it raised $85 million from including Baillie Gifford, Rocket Internet and Insight Venture Partners at a valuation of $2.9 billion. Valuation has grown steadily from $450 million in a June 2014 funding to $705 million in a February 2015 funding.
According to an October 2015 news report, HelloFresh secretly filed for an IPO to list on the Frankfurt stock exchange. But it ran into problems within a month with its investors and had to delay the IPO. Analysts said that the company could not arrive at a price that was acceptable to Rocket Internet - essentially implying that the valuation of $2.9 billion without profitability may not be something that the market is willing to digest.
Additionally, the competition in the global market is heating up. In the US, there is Blue Apron to compete with, which as of 2015, was trending at annual revenues of more than $324 million and was valued at nearly $2 billion. Then there is Plated, another smaller player in the US, which offers a more customized meal kit option to its customers. HelloFresh needs to up its game.