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5 Things To Know As Meal-Kit Startup HelloFresh Preps For IPO

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Meal-kit startup HelloFresh recently announced plans to go public, despite the post-IPO woes of rival Blue Apron (APRN - Free Report) . The company announced on Tuesday its plans to raise as much as $352 million in an initial public offering in Frankfurt, Germany.

HelloFresh is set to list on the Frankfurt Stock Exchange with the help of Deutsche Bank (DB - Free Report) , J.P. Morgan Chase (JPM - Free Report) , Morgan Stanley (MS - Free Report) , and others.

“The public listing marks the next logical step to further expand our business, to secure our position as the leading global player and to pursue our long-term growth strategy,” HelloFresh co-founder and CEO Dominik Richter said in a company release.

HelloFresh clearly plans to buck the trend that saw investors dump Blue Apron’s stock, which has been cut in half since going public this summer.

Now let’s take a look at HelloFresh so potential investors can gain a better understanding of the recipe-kit delivery company as it nears its first days of trading.

Young & Simple

Founded in 2011, HelloFresh delivers between two and four meals a week, for two to four people, as part of three different plans: classic, veggie, and family. The company delivers the ingredients and recipes for free seven-days a week.

HelloFresh gives users the chance to either be surprised, or select their meals every week from a range of options. The company works with chefs and dietitians to create 15 new meals every week.

Family plans cost $8.74 per serving, while the classic and vegetarian options—for two people—run $9.99 per serving. In the U.S., HelloFresh delivers seven days a week in specific areas, and on Wednesday, Thursday, and Friday everywhere else.

International Operations

HelloFresh sells its meal-kit services in 10 countries. Its more than 2,000 employees help operate the business across Europe, including Austria, Belgium, the Netherlands, the U.K., Germany, and others.

On top of that, HelloFresh is currently in Australia and operates throughout the continental U.S. This might help give the company a leg-up against its American rival Blue Apron, which only offers its services in the U.S.

Scale

The company’s CEO says that his meal-kit company is currently outperforming its competitors, citing faster growth and market-share gains as primary justifications for the claim. HelloFresh reported 53% year-over-year sales growth in September. 

HelloFresh claimed that it added 90,000 accounts during the second quarter and now boasts about 1.3 million customers worldwide. The company said it delivered 33.7 million total meals last quarter.

Current Outlook

Despite its German roots, HelloFresh's biggest market is the U.S. However, in order to gain market share, the company has been spending heavily to offer trials and discount offers, as well as pumping promotions on radio and TV.

With heavy spending and rapid expansion, HelloFresh is still unprofitable and reported a $66.9 million loss in the first half of 2017.

The push to expand has helped the company grow overall. The company’s revenues doubled in 2016, and it is projected to grow by as much as 50% this year. HelloFresh also hopes to reach its break-even point within 15 months.

Experienced Owner

German venture capital and technology incubator Rocket Internet SE owns a 53% stake in HelloFresh. Shares of Rocket gained slightly after the IPO announcement.

As of last year, Rocket, which is one of Europe’s most high-profile incubators, had helped launch roughly 100 businesses in 110 countries in the last decade, according to a Wall Street Journal report.

Rocket has already helped another food delivery company go public recently. The company owns a portion of Berlin-based Delivery Hero, which has seen its stock price climb despite the crowded space.

Aside from its potentially helpful guidance, Rocket’s majority stake in the company means that new HelloFresh investors will have less access to shares, as only 20% of the company is up for grabs, according to a recent report.

Bottom Line

The company considered an IPO in 2015 when it was valued at over $3 billion. HelloFresh’s valuation fell to about $2.36 billion last year, which is still greater than Blue Apron’s current $969 million market cap.

HelloFresh plans to continue to expand its business and add to its offerings by adding more choices and personalization options—including wine and desserts.

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