HelloFresh: US Meal Kit Market Dynamics and Growth Prospects

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Feel free to answer this for either Green Chef or HelloFresh as a whole, but there have been a lot of failures in this space, with Blue Apron being the most well-known. What do you think Green Chef or HelloFresh did differently?

Meal kit companies fail when they don't have their CAC to LTV figured out. They don't have their payback period dialed in and they don't know how much they can actually spend on a customer. They think their product is better than it really is. Blue Apron, for example, failed spectacularly. They went public, made a lot of money, and then started making mistakes. Their error rate went up, they were using the same recipes, and they didn't get good at using data. At first, it's just about the food, but then it's about understanding how people react to the food, what works and what doesn't, and leading a data process for chefs. Blue Apron didn't do this quickly enough. They didn't anticipate the competition. They didn't measure their performance quickly enough and they lost a huge number of customers. Their stock plummeted. They only had one brand, so if they messed up a product, they couldn't divert funds into another successful brand.

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Let's switch gears a bit. You managed the supply chain for an online supermarket in the past and were responsible for the supply chain at Green Chef. Could you discuss the differences between the two and the advantages and disadvantages of managing meal kits versus online groceries?

Meal kits are easier to manage because the purchasing is predictable. A mature meal kit company, like HelloFresh, plans its entire quarter of menus three months out and leverages its supply chain team to buy all the food based on relatively accurate forecasts, locking in prices. This strategy is similar to Walmart's where they bid out everything quarterly. In contrast, online grocery management involves inventory levels and different counts based on sales trends, similar to retail.

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Why is it cheaper to order ingredients online from, say, Walmart, than ordering an equivalent meal from HelloFresh?

Because online supermarkets leverage existing infrastructure and operate on thin margins. They might not make much profit, or even lose money. However, grocery stores profit from massive scale and, if managed smartly, might do relatively well.

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