HelloFresh, the leading German online mealkit provider, just pre-announced impressive figures for Q3 with revenue expected up 120% to around EUR970m (vs. EUR836m initial guidance) and EBITDA expected to rise 7x to around EUR115m (vs. EUR73m initially). The company raised its full-year guidance accordingly, now forecasting 95%-105% revenue growth vs. 75%-95% previously.
The read-across is interesting for many other food delivery companies as HelloFresh has leading positions in both Europe and the US. Clearly, the strength shown by HelloFresh during the quarter points to continued rising adoption by consumers of various online delivery options despite the end of lockdowns in May/June. Continued health concerns and restrictions affecting restaurants have arguably been powerful drivers and the trend is likely to keep going in Q4 – early 2021.
Until this year, most of the attention in the food delivery industry focused on the restaurant delivery segment (Just Eat, Grubhub…), as the grocery delivery segment struggled to take off. But 2020 arguably marks an inflection point for grocery delivery, with consumers getting increasingly accustomed to ordering their food online as illustrated by the strong numbers reported by both HelloFresh which, as a reminder, sells « prepared » groceries with recipes, and online food retailer Ocado.
As grocery is a huge market, these evolving consumer behaviors could open up a major avenue of growth obviously for pure online food retailers, for hybrid models such as meal kits but also for restaurant delivery companies that could leverage their logistics assets and consumer data to get into this segment.
While the spotlight is likely to be on grocery in the short term, online food delivery companies have numerous other expansion opportunities ahead of them, such as fresh produce delivery to the foodservice industry and cloud kitchens (facilities dedicated to serving online takeaway orders). Hence, we believe that growth in the industry over coming years should well exceed pre-Covid levels, with a positive impact on profitability as illustrated by the margin leverage displayed by HelloFresh this year.
In conclusion, even if HelloFresh is not part of our Food Revolution portfolio, we have a large exposure (20%) to online food delivery names considering that the segment offers a promising revenue growth and margin outlook and also can be considered as strategic (logistics assets) for e-commerce companies.