HelloFresh Business Model | How Does HelloFresh Make Money?

HelloFresh was founded in 2011 by Dominique Richter, Thomas Griesel, and Jessica Schultz (née Nilsson). HelloFresh’s business model is fairly straightforward. Customers pay a subscription fee for meal delivery services to generate revenue.

What is HelloFresh?

HelloFresh is an online food delivery service that produces and dispatches two- and four-person meal kits. You can choose from vegetarian, family-friendly, and low-calorie meal plans from the HelloFresh menu.

HelloFresh business model is focused on charging clients a monthly fee. There is a cost associated with the frequency of ordering food (two to four times per week) and the number of people ordering (two or four).

HelloFresh Business Model

HelloFresh, established in 2011 and based in Berlin, Germany, has become one of the largest meal-kit providers in the world. After years of expansion, the company made its initial public offering (IPO) in 2017. 

Even though HelloFresh earns close to $2 billion in revenue each year, the company is still struggling to be profitable.

HelloFresh Business Model

HelloFresh delivers a weekly package of unusual dishes together with all of the ingredients needed to prepare them.

A well-organized shipment of high-quality fresh foods can lift your spirits during these challenging times. 

Furthermore, you will save time and money if you are trying to minimize your grocery trips.

I considered other subscription services, but HelloFresh caught my eye since its dishes are extremely easy to prepare (and recreate) and quite affordable. 

They offer healthier options, too, as their sauces and spices are constant favorites. 

A Camryn La Sala HelloFresh subscription offers you three to five recipes per week, each with enough portions for two or four people.

HelloFresh delivers a weekly package containing an assortment of unusual dishes and the necessary ingredients for preparing them. 

HelloFresh also works if you appreciate surprises! You may choose to have HelloFresh make a selection for you. Another aspect of HelloFresh that I love is that you’re not obligated to receive a box. 

HelloFresh Business Model

You can always skip a box if you don’t like one of the dishes provided during a certain week or if you won’t be at home.

Since I live alone, I typically order two portions for supper and lunch the next day (). 

I have tried both four and three recipes every week, but I have found that the three-meal option gives me enough food to be creative in the kitchen and to order in from my favorite restaurants.

The entire process becomes significantly less satisfying when you have to locate each spice box or vegetable. 

The components arrive organized in brown paper bags, and the meats for each meal are stacked at the bottom of the package to prevent cross-contamination.

You will find all the essential ingredients you need for a perfect dinner on HelloFresh, including butter, oil, sugar, and other common ingredients found in most households.

Every HelloFresh recipe includes detailed instructions so you can follow them no matter your skill level.

How Does HelloFresh Work?

HelloFresh is an online food delivery service dedicated to delivering ready-to-eat meal kits to its customers. The packets include both the recipe and the ingredients for cooking. 

HelloFresh offers customized programs that allow customers to specify how many people they want to feed, how often they would like food delivered during the week, and the type of food they want (e.g., vegetarian or low calorie). HelloFresh offers more than 20 dishes at any given time.

A single delivery usually includes between three and five meals. Ingredients are designed to last for approximately a week. Meal kits include a protein component that is packaged separately and maintained fresh by an ice pack.

HelloFresh’s flexible plans are one of its primary selling points. You can easily cancel a subscription at any time.

How Does HelloFresh Make Money?

HelloFresh earns money from a weekly subscription fee charged to its customers for the meals they order.

The price of meal kits is affected by the quantity of food ordered, the frequency of orders, and how the consumer places the order. 

In the case of a two-person lunch, the price per serving will be $8.99. For a four-person dinner, however, the price per dish will be $7.49.

HelloFresh can offer bulk offers at a lower rate as a result of its vertical integration. Therefore, they are responsible for all aspects of value creation, from obtaining ingredients to developing recipes to storing and delivering meals to consumers.

This is also why the company has lost money and continues to do so. Warehouse space, delivery vehicles, hiring personnel, and developing a menu are just a few of the initial setup costs that will only amortize over time.

In addition, the company has embraced the Netflix model (or should I say cookbook) by allowing customers to cancel at any time.

How to Order on HelloFresh?

You can place orders through the company’s website or mobile applications for Android and iOS. There are currently over 15 countries where HelloFresh is available, including the United States, Germany, and Australia.

HelloFresh Business Model

You can begin buying from HelloFresh by signing up for a weekly plan customized to your  dietary preferences and household size:

Classic Plan of HelloFresh

  • 3 meals for 2 people costs $69.00 ($11.50 per meal)
  • 4 meals for 2 people costs $84.90 ($10.61 per meal)
  • 5 meals for 2 people costs $99.00 ($9.90 per meal)
  • 3 meals for 4 people costs $129.00 ($10.75 per meal)

Veggie Plan of HelloFresh

  • 3 meals for 2 people costs $59.00 ($9.83 per meal)
  • 3 meals for 4 people costs $109.00 ($9.08 per meal)

Family Plan of HelloFresh

  • 2 meals for 4 people cost $79.95 ($9.99 per meal)
  • 3 meals for 4 people costs $105.00 ($8.75 per meal)

HelloFresh will deliver your box of food and recipes once a week (Mon-Sat). The meal plans include shipping. 

You are not locked into the program (regardless of recurring payments and food delivery). You can pause, alter, or cancel your membership at any time.

Customers can choose their weekly deliveries, in addition to those listed above. HelloFresh’s chef team creates ten new recipes each week so that you can customize your meals. Menu options for the upcoming week (12/31–1/6) include:

  • One-Pan Spanish Chicken with Chorizo and Bell Peppers (Classic Box)
  • Poblano Peppers and Thyme Beef Bolognese (Classic Box)
  • Balsamic Onions, Olives, and Walnuts on Zucchini Flatbreads (Veggie Box)
  • Turkey Burgers with Cranberry Salad (Family Box)

HelloFresh is more than just a food delivery service, as discussed previously. The company ships precisely sized food boxes (encased in a cooling agent for maximum freshness during transport) corresponding to recipe cards. 

The recipes include step-by-step instructions, an ingredient list, and nutritional information. HelloFresh says you only need salt, pepper, sugar, “good cooking oil,” and butter.

It is as simple as that. HelloFresh generates revenue by offering meal plans in the United States, the United Kingdom, and many other countries throughout Europe (where the company was founded). 

The HelloFresh revenue model is relatively simple. You can choose from the following categories for your personalized meals plans:

  • The Meat & Veggies department offers a variety of meats, fish, and seasonal produce.
  • Vegetarian options are available that include seasonal vegetables grown naturally in the area.
  • Recipes are suitable for families wishing to prepare quick, tasty meals with their children.
  • There are 650 calorie meals in the Calorie Smart line that dieticians approve.
  • Meals that are quick and easy require minimal prep time and cooking.
  • Fish and vegetable meals are available in the pescatarian restaurant.

Success Story of HelloFresh

HelloFresh was founded in 2011 by Dominik Richter (CEO), Thomas Griesel, and Jessica Nilsson in Berlin.

HelloFresh was launched by Germany’s Rocket Internet, the same company behind Delivery Hero, Zalando, and Lazada.

Samwer founded and ran this organization, known for building replicas of successful enterprises and deploying them worldwide. 

Samwer gained billions from creating and selling European versions of YouTube, eBay, and Groupon a few years ago.

Rocket recruits the world’s most talented individuals from top business schools to create its firms. 

The profile is rounded out by experience in management consulting and investment banking and competitive background in sports.

Both Richter and Griesel tried to fit into the mold. The two earned degrees at the WHU-Otto Beisheim School of Management (Samwer’s alma mater) and the London School of Economics, worked at Goldman Sachs and OC&C Strategy Consultants and played semi-pro soccer.

HelloFresh’s basic concept comes from Sweden. A Swedish business, Linas Matkasse, offers professional meals and their accompanying recipes every week. 

Models like this were extremely popular in Sweden. It was predicted that Linas Matkasse would generate sales of $45 million during its fourth year of operation.

Richter first joined Rocket Internet and then asked classmates Griesel (who graduated from WHU in 2014) and Nilsson, who resigned to help found HelloFresh.

Rocket’s investment enabled the group to get to work right away. The company distributed the first meal package within three months of being in business. 

HelloFresh begins setting up subsidiaries in Amsterdam, London, Paris, and Sydney after a few weeks.

An entrepreneurial startup announced its first significant funding round a year later, in the summer of 2012. 

Rocket Internet invested $10 million in the company along with Holtzbrinck Ventures and Kinnevik. HelloFresh is a global company with offices in seven countries.

A competitor service called Blue Apron launched in the United States at the same time. 

The founders built an office in New York City a couple of weeks later. According to the company’s 2012 financial report, the company earned $3 million.

Although these figures are impressive, they fall far short of the $10 million Samwer typically expects from his first-year ventures. 

Furthermore, the startup’s excessive focus on expansion created many operational problems.

When the corporation was first starting, clients were expensive to acquire. A marketing budget of $2.3 million in 2012 was increased to nearly $30 million in 2014. 

The service was regularly canceled a few weeks after new consumers started using the meal packages.

Moreover, the construction of warehouses, the storage of large amounts of supplies, and the employment of hundreds of employees were all expensive. 

Operating costs (excluding marketing expenditures) accounted for over 80% of the company’s revenue by 2014.

In addition, employees in American warehouses have been found using narcotics and having sex on the job. 

A former employee even boasted on social media that he carried a gun to work and threatened to shoot anybody who came near him.

Rocket was losing enthusiasm for investing in the company. Holtzbrinck and Kinnevik both sold their holdings in the company after the investors resigned from it.

Jeffrey Lieberman, the founder of Insight Venture Partners, intervened on behalf of the founders. He raised $34 million in June 2014 (at a $178 million valuation). 

Samwer’s interest in the company was reignited by the firm’s latest funding round.

HelloFresh was valued at $700 million by Rocket Internet following a $124 million round of funding in February 2015. Rocket’s stake in HelloFresh has increased to over 50% as a result.

That same year, word came from within that the company had attempted to go public. Regrettably, investors were uneasy with the company’s high capital burn and slow route to profitability.

As a result, HelloFresh chose to raise additional capital. Additionally, the corporation tried to enhance its operational metrics and employed more experienced leaders. 

Additionally, the company increased the minimum salary to $13, which resulted in increased employee satisfaction and decreased turnover.

Meanwhile, the meal kit market has begun to consolidate. Larger firms have either acquired competitors, such as grocery chain Albertsons or had their sales volumes drop (Blue Apron).

By 2017, HelloFresh has established itself as the de facto market leader for meal kit delivery in the United States. Other markets, including the United Kingdom and Australia, followed suit. 

The company’s sustained expansion resulted in its November 2017 initial public offering, which enabled it to raise an additional $330 million at a valuation of $1.9 billion.

Today, HelloFresh claims to have a customer base of over 1.5 million in the United States alone. 

It achieved profitability in a few select markets but continues to be unprofitable on a global scale. The organization presently employs over 5,000 people across 15 different locations.

What is the Revenue of HelloFresh?

HelloFresh earned €3.7 billion in revenue in 2020. During the fiscal year 2019, the company generated revenue of €1.8 billion, increasing 38 percent over the previous year. 

The company anticipates stronger growth in 2021 due to a pandemic (and online orders for meals).

What is the Funding and Valuation of HelloFresh?

HelloFresh has raised $367.7 million in venture capital over six rounds, according to Crunchbase. Rocket Internet, Insight Partners, Baillie Gifford, and Phenomenon Ventures were among the company’s early investors.

The company raised an additional €320 million (at a valuation of €1.7 billion) during its November 2017 initial public offering. HelloFresh trades at a discount of 50% to its peers and fetches 38.6 times this year’s earnings. HelloFresh has a market value of €9.4 billion, employs 7,000 people, and operates in 14 countries, including the United States, the United Kingdom, Germany, and Australia.

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Key Takeaways from the HelloFresh Business Model

HelloFresh is a German meal kit company that has expanded to a global scale. Rocket Internet first invested in the company based on a similar Swedish company, Linas Matkasse.

HelloFresh subscribers can subscribe weekly. The Meal Plans are priced based on the number of individuals and the number of unique recipes included in each plan.

HelloFresh does not charge additional prices to its customers to cancel or amend their plans, but failed deliveries may incur a re-delivery charge in rare cases.

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