HelloFresh’s IPO by the numbers (and what it means for other food startups)

Image credit: Marco Verch

HelloFresh, a leader in the subscription meal kit space, just quietly filed for their IPO (initial public offering). You may not have heard about it since the offering is in Frankfurt, but the business is fascinating to look at since the meal kit category has been a shining spot in the emerging crop of food startups. Let’s look at the numbers to see what we can learn.

Background

HelloFresh provides subscription meal kits, which offer locally sourced and pre-portioned ingredients that enable consumers to prepare home-cooked meals each week. The company delivers food boxes to its subscribers’ doors for roughly US$10 per meal, utilizing a soft subscription model.

Meals are delivered in a box each week, alleviating the need for consumers to do their own grocery shopping or plan out recipes. They compete directly with Blue Apron in the US but also operate in geographies where Blue Apron is not active such as Australia, Austria, Belgium, Germany, Netherlands and the UK.

Interestingly, both HelloFresh and Blue Apron essentially copied the business model pioneered by a swedish company, Linas Matkasse. In fact, Sweden has a multitude of meal kit providers with significant revenue, which is shocking given that the country only has a population of 9 million people.

While the global food market is unimaginably large at US$6.4 trillion (US$2.3 trillion in HelloFresh’s core markets), the company estimates that the “fresh food-at-home” market is about US$1 billon in 2015, growing to US$8 billion by 2020.

Operating metrics

HelloFresh has experienced astronomical growth, growing from US$3 million of revenue in 2012 to US$290 million of annualized 2015 revenue (note: converted from EUR to USD). If they have a strong Q4, 2015 revenue should easily exceed US$300 million, more than 4 times over the prior year.

While the company’s EBITDA (earnings before interest, taxes, depreciation and amortization) loss has historically been manageable, the high growth clearly comes at a cost. In 2014, EBITDA margin was negative 18 percent, but will worsen to about negative 26 percent in 2015.

In terms of gross margin, HelloFresh has maintained right around 50 – 55 percent, quite healthy considering that offline grocers typically have just 25 – 35 percent of gross margin.

HelloFresh’s service is clearly resonating with consumers, and their revenue growth is a testament to that. But how scalable is their business? Their operating costs have been fairly stable as a percentage of revenue.

Key performance indicators

Valuation

Parting Thoughts