IPO ahead

Food Startup Hello Fresh Woos Investors

Hello Fresh CEO Dominik Richter source company
Chief chef? Hello Fresh CEO Dominik Richter.
  • Why it matters

    Why it matters

    Hello Fresh, the loss-making home-delivery food retailer, plans an IPO on the Frankfurt exchange. It needs capital to push its unorthodox service.

  • Facts

    Facts

    • Hello Fresh turnover soared in 2015, but losses went up too; so far this year, the company is down €58 million ($63.5 million).
    • Hello Fresh was valued at €2.6 billion in its last funding round, in September of this year.
    • Rocket Internet, a Berlin-based start-up factory, owns 56 percent of Hello Fresh.
  • Audio

    Audio

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People up to the age of about 35, the so-called Generation Y, have two defining characteristics: They have high standards and they’re lazy.

That makes them perfect customers for Hello Fresh, a Berlin startup that supplies food boxes that contain all the ingredients for a home-cooked meal, plus the recipe to cook it.

If you order one, you save yourself running to the supermarket and you don’t have to worry about what to do with left-over ingredients because there aren’t any. Need unusual spices for a recipe? Hello Fresh sends the precise amount needed: No three-quarters full jars lurking in the food cupboard for years.

Hello Fresh was founded in 2011 and has grown strongly ever since. Today, the startup is active in seven countries; as well as Germany, this includes Austria, the Netherlands, the U.K. and the U.S.

In the first nine months of 2015, turnover climbed to €198 million, or $217 million, compared with €41 million for the same period last year.

Profits, however, are a different story. So far, there are none. In the first three quarters of this year, the company had an operating loss of €58 million, six times greater than the previous year. The biggest culprit is thought to be high advertising costs. When marketing costs are taken out, the firm has an operating profit of €19 million.

The marketing is necessary. Anyone traveling regularly on German railways will have seen young people in railway stations handing out Hello Fresh vouchers.

But the problem for Hello Fresh is not just raising brand awareness – they also have to make people understand the product idea. When it comes to food shopping, Germans tend to be conservative. It will not be easy to get them to hand over decisions on what they cook in their own kitchen. Marketing pushes may get people to try out the company’s service, but one-off customers are expensive. For Hello Fresh, the real key to success is gaining longer-term subscribers.

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