The meal kit delivery business has had a rough 2017, starting with the lackluster stock market debut of Blue Apron in the wake of Amazon’s purchase of Whole Foods. Blue Apron’s stock has struggled in the ensuing months, and it was recently announced the company plans massive layoffs to help offset costs.
So it took industry analysts by surprise when Blue Apron competitor Hello Fresh announced it was raising $353 million in an IPO on the Frankfurt Stock Exchange. The company is targeting a $1.8 billion US valuation in their initial public offering, it was reported the week of October 22.
Hello Fresh plans a different approach by seeing how they fare in the European market. The company received backing already from Rocket Internet, a German technology company, according to an article in Tech Crunch.
But the company isn’t focusing on growth in the European market only, at least in the long-term. Chief Executive Officer Dominik Richter said HelloFresh wanted to “become the clear No. 1 player on the U.S. market in 2018,” according to Bloomberg News.
Blue Apron’s entry into the U.S. stock market came just weeks after Amazon had announced its purchase of Whole Foods. Since, Amazon has also offered its own meal kit delivery service for Prime members at a much lower price, disrupting customer loyalty for other meal kit companies.
This has made U.S. investors weary, especially with Blue Apron. The company increased its marketing spend to compete with Amazon’s distribution network. Blue Apron also moved its main distribution center, which caused some problems with their deliveries.
Customer retention has dogged Blue Apron as well, which offers subscription plans in order to keep folks invested in their offerings. But competitors along with Amazon have made one-time meals available for customers not willing to commit, so recently Blue Apron unveiled its own individual meal kit offerings.
Hello Fresh however is positioning itself as the industry leader. The company reported 435 million euros in revenue for the first half of this year, and its losses were nearly 57 million euros. Compared to Blue Apron’s $483 million revenue and $84 million loss, Hello Fresh came out ahead.
The European market might be more likely to embrace the meal kit industry, Hello Fresh is hoping.
HelloFresh had planned an IPO as early as 2015 according to Bloomberg, but shelved the idea when concerns about investor demand and valuation in a volatile market at the time.