HelloFresh aims to provide households with wholesome, homemade meals with no shopping and no hassle. Everything required for meals is carefully planned, sourced and delivered to the door of each subscriber at a time most convenient for them. This subscription delivery model means HelloFresh can fundamentally change how consumers shop for food and consume meals, thus changing the traditional food supply chain.

This business is hard and expensive to scale as customer acquisition costs are high. Therefore, anyone entering this space must be willing to burn through a lot of cash for quite some time. HelloFresh boasts industry-leading gross margins due to its purchasing power benefits. Its scale has allowed it to source most of its ingredients directly from producers, cutting out wholesalers and other brands. Secondly, there are scale benefits in logistics given that the company can deliver directly to a local hub rather than going through a multi-stage network which lowers costs and enhances freshness. The final benefit of scale is data. Large amounts of data allow HelloFresh to forecast demand accurately. Anticipating this demand provides vital visibility to suppliers, which is rewarded through further pricing power.

CEO Dominik Richter states that HelloFresh is essentially creating a market rather than just fulfilling one, as even in markets where the company has been operating for eight years, it still doesn’t know where the growth ceiling is.

October 2015