What’s going on with HelloFresh, the maker of the DIY meal boxes? Third quarter results were better than expected and the company presented ambitious growth plans last week. But investors seem to have lost their appetite. The share value of HelloFresh on the Frankfurt stock exchange fell from 96 to 74 euros in two weeks.
Since the outbreak of the corona pandemic, the lockdowns have driven people into their own homes worldwide. HelloFresh – also active in the Netherlands – benefited greatly from this: the number of memberships increased from 3 million at the beginning of 2020 to more than 7 million in mid-2021. HelloFresh started delivering meal boxes in Norway last summer and Italy and Japan are also on the rise. this year’s expansion menu. That brings the number of countries served to seventeen.
Last Wednesday, HelloFresh released a strategy update and revenue and profit forecast for 2022. The company announced that it wants to realize an operating profit between 500 million and 580 million euros next year. That was well below analysts’ expectations; they expected an operating profit of at least 630 million euros.
Shocked
Investors are shocked by next year’s major cost hike, thinks Clément Genelot, an analyst at European investment bank Bryan, Garnier & Co. “Let’s face it, the short-term outlook is disappointing when you look at profit margins.”
Those costs are largely in investments. For example, the company announced that it would again add two or three countries to its portfolio. Few analysts expected that. Genelot: “We thought that HelloFresh would not expand again in 2022, so soon after last year’s expansion.”
In addition, HelloFresh also has to deal with product price increases, says Genelot. The company has decided not to pass this on in the price of the meal boxes, but to take it at its own expense. “All those extra costs now come at the same time, in the same year. That comes as a surprise to analysts and investors.”
Still, Genelot isn’t worried. The planned investments are necessary to achieve the target that HelloFresh has set itself for the medium term: a turnover of 10 billion euros in 2025. According to Genelot, that is realistic.
HelloFresh is „leader of the packin the meal box delivery market, Genelot says. “The competition mainly consists of local players.” He mentions Blue Apron and Home Chef in the United States, Good Food in Canada and Gousto in the United Kingdom. “But worldwide we can say that HelloFresh has no real competitors.”
In the strategy update, HelloFresh speaks of the end of the traditional ‘one-stop-shop’ supermarket model. People no longer buy all their food from one store. „There is fragmentation in the food retail, which will benefit online players,” says Genelot, referring to both meal delivery companies and meal box delivery companies. It is not without reason that HelloFresh invests heavily in technology to stay ahead with its digital service. By the end of 2022, the ‘tech team’ should have expanded to a thousand functions, which amounts to a doubling of the current workforce in that department.
HelloFresh sees itself as a ‘pivotal function’ in the fragmented food market for consumers. “I agree with them,” says Genelot. “Traditional players such as supermarkets have not been flexible enough to respond quickly to this trend.”
A version of this article also appeared in NRC in the morning of December 13, 2021
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