Will HelloFresh go stale post-COVID?
The specialist told us that HelloFresh was distributing approximately 1.2 million boxes during the height of the pandemic, and expects customers who joined during the pandemic to continue using the service. However, they expect some business to subside as COVID-19 restrictions are lifted further and the warmer weather returns.
The specialist said HelloFresh has increased its revenue through TAM expansion, adding brands such as Green Chef, EveryPlate, Good Chop and Factor in an attempt to diversify its offering. But the specialist said having numerous brands has led to a “saggy mattress effect”, whereby all brands are competing for the same middle ground. For example, the specialist told us HelloFresh’s more affordable EveryPlate brand was now looking to upscale dishes as orders have increased, while its more expensive brand Green Chef is managing food costs – both effectively becoming a version of mid-range brand HelloFresh.
Acquiring different brands has also made it difficult to track HelloFresh’s customer acquisition. The specialist said the company might be “cannibalising their own field” by passing customers between its different brands rather than taking share from competitors such as Blue Apron. The specialist told us greater transparency by moving all brands onto one platform would help track this movement. However, they said this also brings problems such as devaluing its premium brands.
Customer acquisition has become more challenging for HelloFresh since Apple deprecated the Identifier for Advertisers (IDFA) last year, with the company “heavily” reliant on third-party data to target and re-target customers, according to the specialist. Apple’s move also revealed the “disproportionate” dependency HelloFresh has on Facebook advertising – something the specialist called a “key vulnerability” that was no longer sustainable. Instead, the specialist told us HelloFresh would conduct more advertising through Google Ads, which can be “tracked more easily”.
How HelloFresh prices its products moving forward will be something to watch, the specialist told us, given the heavily discounted nature of the industry, and the conscious decision not to increase prices over the past two years. Despite large discounts in the specialist’s opinion “killing the industry” and “devaluing” its own product, they said bosses are “terrified” to be the first to increase prices in fear that competitors won’t follow.
This position will be put to the test as food prices increase, putting greater pressure on HelloFresh’s margins.
To access all the human insights in Third Bridge Forum’s HelloFresh – Group Update, Pricing Positioning & 2022 Growth Outlook Interview, click here to view the full transcript.
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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