HelloFresh’s 3 main growth levers for 2023 and beyond

3 months into 2023 and I’m proud of the team for how they adapted to new realities and an ever changing business environment. HelloFresh continues to grow and has been posting profitable results ever since we first broke even on a Group Level in 2019. With an adjusted EBITDA margin of 3.3% for the Group in Q1, we have managed to exceed market expectations, despite still being impacted by inflationary pressures. Fun fact: we have been operating at strong profitability in many of our markets since as early as 2016 but our group profitability is always dragged down by the many investments in new geographies and verticals that we have and will continue to pursue.?

I remain very excited for what we have planned for the future. We recently presented an update to our mid-term growth strategy at our Capital Markets Day in Berlin. Not only do we see further significant room for revenue and profitability growth in meal kits, but new segments, like ready-to-eat, will gain significant traction across markets in the near future, as we de-bottleneck capacity constraints faced in Q1 2023.?

Here is a breakdown of what we have planned for the coming year(s):?

1. More choice, better service, more customization: Especially in our most advanced markets (active since before our IPO in 2017), we believe that growth and even stronger levels of profitability will come through further enhancing our customer proposition. Next to broadening the weekly meal options to choose from, we plan to provide customers with more levers to customize their weekly meal choice, for example to substitute certain ingredients if that better fits their preference or dietary goals. From a purely operational and technological standpoint, this is connected to very complex processes and a major lift for the teams in Forecasting, Buying and Manufacturing to facilitate. For our customers this poses a massive benefit and is one of the most frequently cited wishes. In addition, we will continue to diligently roll out our marketplace “HelloFresh Market” to further geographies. So far, customers in certain markets have the option to add further pantry items, individual ingredients or ready-to-eat meals to their weekly meal kit orders. In some of our geographies HelloFresh Market already holds more than 400 SKU’s and we see a massive opportunity in scaling this to the remaining geographies of the Group. For our currently underpenetrated markets we will focus on closing the feature gap to our most mature geographies, improving delivery days, menu choice, pricing and service levels to match the experience we offer in the US and other advanced regions. This will help us to consistently improve unit economics and ROI, while strengthening customer satisfaction.?
2. Full Focus on Ready-to-Eat: Ever since we acquired Factor, our first ready-to-eat (RTE) brand 2.5 years ago, the brand has seen significant growth. Factor gained market leadership after just one year of being under the HelloFresh Group’s umbrella and is now profitable, on a clear path towards >10% AEBITDA margins. We actually consider RTE to be the largest growth driver for reaching our ambitious goals for 2025 and therefore plan to bring the brand to further geographies in our portfolio. We’re already on the right track, having launched Factor in Canada in late 2022 and having acquired YouFoodz in Australia. Our next step will be to launch Factor in Europe in late 2023, so stay tuned… For Factor US, we look forward to opening our new and much larger cooking facility in Arizona later this year, which will provide us with the required footprint to scale to a multiple of our current Revenue Run Rate. As a matter of fact, we have been severely constrained lately given the strong customer demand observed.??
3. New brands, new markets, new verticals: HelloFresh has a strong track record of successfully launching new markets and new brands. 28% of our Group’s Net Revenue in 2022 can be tied to new brands or geographies that we launched after our IPO in 2017, i.e. to business units that are still quite early in their lifecycle. In light of this success story, it is essential to invest into new opportunities through the cycle, while exercising strict capital discipline if pre-agreed success thresholds aren’t met.?While we’re currently trialing a couple of new brands in adjacent D2C spaces in the US, we’re also positive on expanding into new meal kit geographies in 2024 and beyond.?

In closing, let me say that we all at HelloFresh feel the best is yet to come. While there are many things we cannot control, rather than lamenting about all the obstacles thrown at us, we prefer to remain laser focused on driving innovation on the customer’s behalf. Their feedback and sustained satisfaction is what gives us energy and make us realize the big impact we have on their daily lives.