Nowadays, the meal-kit delivery service is a well-known concept and has become popular among young professionals and young families. The meal-kit delivery service is focused on providing convenience for people who have little time to do grocery shopping and cook or consumers who just do not like cooking or doing groceries (Helm, 2016). Most meal-kit providers offer a variety meal-boxes, where consumers can order via a subscription model. In this way, companies offer a product line where segmentation is based on self-selection (Christensen, Raynor, & McDonald, 2015).
One of the largest company offering meal-kit delivery service is HelloFresh. This company was founded in 2011 by Dominik Richter and Thomas Griesel with the intention to become a disruptive business in the food industry (Cleverism, sd). By offering pre-packaged ingredients with default recipes, HelloFresh succeeded to target a new-market foothold in between two segments of the food industry by taking customers from retail and fast food (Helm, 2016). HelloFresh is known for their aggressive marketing which resulted in a market share of 36% and a revenue of $678. Apart from the fact that HelloFresh occupies one third of the market, the company will no longer break even by the end of 2018 (Thakker, 2018). At the moment, this segment has become attractive in terms of pricing and size (Buck, 2018). Since, large grocery chains have entered the market as well, the segment has become saturated, and therefore, highly-competitive. These companies benefit from having their existing customer base, high reputation, deep pockets and network of suppliers. As a response, HelloFresh is acquiring other start-ups in the meal-kit delivery service market in order to sustain their competitive advantage (Molla, 2018). Besides, HelloFresh tries to differentiate and tapped into the recent rise in customer demand for fresh produce (i.e. separate vegetarian boxes and fruit boxes for special dietary requirements) (Helm, 2016).
Although, these developments show a great interest in the meal-kit delivery service concept, some question if meal-kits fit conveniently in people’s lives and whether or not many of these businesses are sustainable (Coppolino, 2018). The most prominent question is if HelloFresh will ever break-even. In the light of the latest developments and the saturation level of this market, what actions would you advice HelloFresh to take? And the other way around, what would you advice large grocery chains to do in order to stay alive in this highly competitive segment?
References
Buck, T. (2018, March 21). HelloFresh delivers higher revenues and narrows losses. Retrieved from Financial Times: https://www.ft.com/content/c503956e-2cef-11e8-9b4b-bc4b9f08f381
Christensen, C. M., Raynor, M. E., & McDonald, R. (2015, December). What Is Disruptive Innovation? Retrieved from HBR: https://hbr.org/1995/01/disruptive-technologies-catching-the-wave
Cleverism. (sd). HelloFresh. Retrieved from Cleverism: https://www.cleverism.com/company/hellofresh/
Coppolino, A. (2018, January 27). Home-delivered meal kits convenient but pricey as they disrupt industry model. Retrieved from CBC: https://www.cbc.ca/news/canada/kitchener-waterloo/andrew-coppolino-home-delivered-meal-kits-1.4505944
Helm. (2016, February 23). Please stop misusing the word disruption. Retrieved from Helmdigital: https://www.helmdigital.com.au/digital-strategy-blog/please-stop-misusing-the-world-disruption/
Molla, R. (2018, March 26). HelloFresh is now bigger than Blue Apron in the U.S. Retrieved from Recode: https://www.recode.net/2018/3/26/17165030/hellofresh-blue-apron-meal-kit-delivery-marketshare-acquisition-organic-green-chef
Thakker, K. (2018, August 14). HelloFresh won’t break-even until 2019. Retrieved from https://www.fooddive.com/news/hellofresh-wont-break-even-until-2019/530042/
Hi Elise, thank you for your post. When analyzing HelloFresh, I personally think they might be more of a substitute for restaurants/take-out rather then grocery shopping. People would still have to cook for themselves. However, it requires less thinking about what to cook, which is one of the reasons people go out for dinner or order take-out. So my suggestion is that they could market more towards being a (healthy) substitute for a restaurant/take-out. Next to this, about advising large grocery chains; I’d recommend them to focus more on customer experience. So for example have live cooking shows or classes at the store. Or having restaurants in-store, where you can eat meals made from products of the store and then get the recipe to make it yourself at home.
Hi Elise,
Interesting article! In my opinion, HelloFresh’s biggest challenge lies in their pricing strategy compared to the large grocery chains who have, as you mentioned, entered the meal-kit market as well. HelloFresh is relatively expensive due to their high logistics costs, whereas grocery chains can simply put together meal-kits without significantly increasing their costs; they, namely, sell their kits in their own stores, saving money on transportation costs. Especially Dutch people, who are often quite price sensitive, will not mind going to the store themselves to buy a meal-kit if that saves them a large amount of money on each meal.
Kristina mentioned in her comment that HelloFresh can present itself as a substitute for restaurant/take-out food; however, I do not fully agree with this; people go to restaurants mostly for the dining experience and service provided. When cooking a meal from HelloFresh, the customer still has to do most of the work themselves, from cooking to washing the dishes. Therefore, it is critical that HelloFresh distinguishes itself in a different way, because solely buying up competing companies will not be a sustainable business model in the future. In my opinion, if HelloFresh can establish lower logistics costs and thus lower their prices, they will break-even again in the future, and they might even become profitable in the long run.