You might be rooting for the HelloFresh story to be a rags-to-riches tale for a group of food-obsessed founding members.
Well, that couldn’t be further from reality.
The growth of HelloFresh is a fascinating tale of venture capitalists and their obsession for making money. There’s a seedy underbelly, plenty of sub-plots and now we’re living the timeline where HelloFresh has become the world’s largest meal kit company.
Does any of this impact your decision to buy meal kits from HelloFresh? It probably shouldn’t. HelloFresh meal kits are still excellent.
It’s a good story though. Let’s dive in.
The Spark of an Idea
Meal kits in their modern incarnation have existed since 2007, when a Swede called Kicki Theander founded Middagsfrid and started delivering pre-packaged ingredient packs to consumers.
This sparked a number of similar services including Linas Matkasse, whose founder Niklas Aronsson was mulling over a similar concept when Middagsfrid launched. He quickly started building Linas Matkasse, a company that has since become the most successful meal kit company in Sweden.
“What is it with family dinner!? Everyone eats the same, why can’t I just stop at a traffic light, roll down the window, reach out and get a packed bag handed to me!?”
Linas Matkasse was quick to overtake Middagsfrid and prove the meal kit concept was a viable business model.
It wasn’t long until venture capitalists from across the world spotted the business model and started looking for ways to expand it into new countries.
One of these people was a German investor names Oliver Samwer. He was the founder of Rocket Internet, a Berlin-based startup factory with a reputation for copying existing businesses but executing more ruthlessly.
Tired of merely copying other businesses, Samwer wanted to dominate an entire new industry. He set his sights on creating the world’s biggest meal kit provider.
The Conception of HelloFresh (2011)
According to Inc. Australia, Samwer was operating with a “factory line” of founders all cut from the same cloth. Graduated from business school, time at investment banking or consulting firms, and an athletic streak.
For HelloFresh, that person was Dominik Richter. At just 25, he was young and inexperienced but brough the ambition that Samwer wanted to see.
Originally named Jade 1314, Richter and his co—founders Thomas Griesel and Jessica Nilsson, the team launched their first meal kits to customers in just 3 months. They quickly renamed the company HelloFresh and set about their ambitious growth plans.
October 2011 saw those first boxes reach customers, with Richter and Griesel reportedly packing and hand-delivering the first boxes themselves.
These stories align with the way Richter has publicly spoken about how they grew HelloFresh, with all of the co-founders heavily involved in the operations.
“[My style is] leading by example, being the one that is very structured, very motivated, very hands-on, doing everything that needs to get done.”
Everything had to be done quickly, and with ruthless German efficiency. Within months, Richter was planning launches in Austria, Netherlands, Australia, and the UK.
Growing Pains and an Australian Launch (2012 – 2014)
HelloFresh launched in Australia in 2012, partnering with 2011 Masterchef winner Tom Rutledge who picked up a role as Australian CEO.
Rocket Internet was, however, known for their strategy of picking a friendly local ‘face’ who’d be recognisable and proficient at media interviews without any real control of operations. Contrary to this reputation, in Australia they found someone who could be trusted to run the business. Tom has remained in charge of HelloFresh AU for over 11 years.
While growing the business, HelloFresh have become widely known for their aggressive marketing tactics. They were early adopters of the trend to set up stalls at train stations to grab busy workers on their way to/from work, or at malls to grab busy parents, as well as extensive digital advertising and direct mail advertising.
This allowed HelloFresh to grow to delivering over 1 million meals per month globally in 2014. They raised another $50 million in cash (after having raised $10 million in 2012 and $7 million in 2013) and injected most of this into more advertising and bringing on more customers.
The speed of the growth became difficult to manage, with plentiful stories of poor working conditions at HelloFresh warehouses. Whilst HelloFresh have always publicly denied any claims of issues at their packing/shipping centers, it’s not hard to see the problems a “growth at all costs” approach might have.
Times Get Tough (2014 – 2016)
The meal kit industry is a notoriously difficult place to earn a profit, and HelloFresh ran into a lot of problems from 2014 onwards. These included:
- Extortionate refrigerated shipping costs.
- High costs of managing refrigerated warehouses.
- Very few long-term subscribers, with many customers sticking around for just a few boxes.
By March 2015, HelloFresh had 250,000 subscribers and hadn’t made any profit. These factors all combined to put the HelloFresh story into serious jeopardy.
A 2015 plan to IPO the company was quickly shelved due to cooling investor interest, with a majority of the company still owned by Rocket Internet. Its other major investors (Holtzbrinck and Kinnevik) at the time had already traded out of all their shares.
If HelloFresh was to be a successful company, Rocket Internet and Dominik Richter were going to have to roll the dice together.
They’d now launched in the USA and added Belgium in 2015, along with Switzerland and Canada in 2016. Each expansion was in search of more subscribers who would bring HelloFresh consistent and repeatable cashflow to continue investing in growth.
Going Public and Expanding (2017 – 2019)
The plan worked. By 2017 HelloFresh was still rapidly growing and showing that it had the potential to be an incredibly profitable company despite increased competition in the meal kit sector.
They were now big enough to start buying out competitors, with the 2017 acquisition of Green Chef diversifying the company into a purely organic meal kit service.
On November 2nd 2017, HelloFresh raised $350 million through an IPO on the Frankfurt Stock Exchange which valued the company at an astonishing €1.7 billion. This catapulted HelloFresh’s valuation past their biggest US competitor (Blue Apron) and was an incredible success for Richter and Samwer.
The growth didn’t stop there as HelloFresh launched their budget meal kit service, EveryPlate, in 2018 (for the US market). In Canada, HelloFresh chose to acquire Chefs Plate to target the budget market instead of launching their EveryPlate service.
2019 saw the exit of Rocket Internet’s stake in HelloFresh. 43.7 million shares were sold for €8.00 each. As one of their most successful startups, Rocket Internet were able to make nearly USD $400 million for a significant profit on their investment.
Pandemic (2019 – 2022)
The COVID-19 pandemic was very good for HelloFresh. Whilst the world reeled from lockdowns, HelloFresh was facing unprecedented demand for their services.
Year on year, HelloFresh grew their active customer base an incredible 84%. Their 2019 stock price fell to a low of just €6.11 per share. In November 2021, those same shares peaked at €95.26. A 15x return for any investors who caught that wave.
In this time, HelloFresh continued their global expansion plans by branching out into the prepared meals industry. In the USA, they bought Factor75 and rebranded it to just Factor Meals.
In Australia, they completed an acquisition of YouFoodz. This included the expansion of their regular HelloFresh offering to include prepared meals, snacks, desserts, and marketplace items.
2019 saw HelloFresh launch in Sweden, going toe-to-to with the original inspiration Lina Matkasse. Denmark swiftly followed in 2020 before both Norway and Italy kicked off in 2021. Spain joined them in 2022.
Today and Beyond
HelloFresh is now available in 17 countries around the world and they have recently celebrated their 10 year anniversary. Around 7 million people have active subscriptions.
Since the pandemic, the market has cooled significantly, and HelloFresh has fallen back to around €20 a share at the time of writing. In hindsight, Rocket Internet most certainly sold too early but they could hardly have predicted the impact of a global pandemic.
2023 saw a few more scandals including the discovery HelloFresh’s suppliers were using chained monkeys as workers to produce coconut milk (according to Business Insider). In response, HelloFresh has confirmed they’ll stop using Thai coconut milk in all of their meal kits. In Australia, they also drew anger by claiming to use products sourced from a local farm producer with whom they had no commercial relationship (ABC News).
The HelloFresh story isn’t ending any time soon, and you should expect to continue seeing HelloFresh aggressively growing their business across the world. The “grow at all costs” mentality is still a driving force for the business, which may be unpalatable for anyone who’s more ethically minded.
However, it’s clear HelloFresh have done a lot of good for the world including a focus on improving their planetary impact. For example:
- Reduced food waste down to just 0.35 grams per euro of revenue.
- Donated 12,040 tonnes of unsold food to charities (53% of surplus food in 2022).
- Donated 1.9m meals to ‘Surplus Food’, an American food bank.
- Use of plastic packaging per meal has fallen by 34% between 2020 and 2022.
If you’re interested in HelloFresh’s plans for the future, here’s what Dominik Richter promised investors in his latest annual report. Highlighting my own:
- We will continue to focus on further penetrating our mature geographies, specifically by strengthening our customer proposition by investing into faster delivery, a broader assortment of meals as well as adjacent products on our weekly menus, all at very competitive price points. These are the areas that will primarily drive the profitability of the business
- We added a number of attractive new markets and brands in 2022 such as Spain, Italy, Ireland, and our specialty premium meat and seafood box GoodChop in the US. The focus for these and other emerging geos and brands will be on improving unit economics and return on investment, so that these markets can be efficiently scaled and contribute to our attractive revenue growth
- We will double down on proven winners such as our [Ready to Eat] proposition, as evidenced by the strong growth and capacity expansion at Factor US, having just launched Factor in Canada in 2022, and stepping up growth at Youfoodz in Australia, now that the necessary prerequisites for business integration and capacity expansion have been put in place.
Source: HelloFresh 2022 Annual Report
Check out more HelloFresh Statistics if you’re interested in learning more about the facts and figures behind the company’s growth.