Print article

HelloFresh: changing how people eat forever

Key Points

  • On a mission to change how people eat forever, HelloFresh CEO Dominik Richter sits down with investment manager Lawrence Burns
  • By building strong supplier relationships globally and mastering the ‘art and science’ of recipe development, HelloFresh streamlines the journey from farm to front-door, reducing food waste and providing hassle-free meal options for consumers
  • Lawrence explains HelloFresh’s secret ingredients – constant improvement to the proposition, an incredible ability to scale the service, and a long-term outlook from management

As with any investment, your capital is at risk.

 

With its innovative approach to reducing the pain of meal planning and grocery shopping, the direct-to-consumer (DTC) meal-kit delivery service HelloFresh reduces food waste by providing convenient and healthy meal options straight to its customers' doorsteps.

In a recent conversation, investment manager Lawrence Burns hears from Dominik Richter, co-founder and chief executive of HelloFresh, about the company’s progress in its mission to “change the way people eat forever”.

 

Food, glorious food

The genesis of HelloFresh was three friends that wanted to flex their passion for entrepreneurship by addressing a large market need. They alighted on the $7bn global food industry, where they recognised households struggle to find the time and resources to cook healthy and nutritious meals.

Having identified consumers’ problems and challenges in maintaining a varied and balanced diet, they worked backwards to pioneer the meal-kit concept. Starting in Germany in 2011, HelloFresh expanded across Europe to North America and is now in 18 countries worldwide.

 

Reducing food waste by building strong supplier relationships

Traditional food supply chains often result in large amounts of waste. Richter states, “About one-third of the [US] harvest never makes it to the customer.”

With HelloFresh, it’s a case of less is more:

The fewer touches a product requires, the fewer stops, the fewer intermediaries, the fresher it is and the more potential to extract margin you have. So, it’s both good for business and the consumer; it’s good for the environment, so it’s a win-win.

The company has built direct, “very tight integrations and relationships” with around 2,500 suppliers globally. That helps maintain the quality and variety of its meal offerings.

 

An art and a science

Creating and delivering the “right” recipes and meal-kit menus at scale is complex. Richter notes:

We develop the recipes and menus and then source all the ingredients, repackage them into the exact quantities you need to cook these delicious meals and deliver them to your doorstep.


Meticulous recipe development and menu creation sets HelloFresh apart from its competitors, whom he says have “really underappreciated the art and science behind that”.

To begin with, “It was about ‘what are five or ten meals that have mass market appeal, and how can you still ensure that you have variety week over week, month over month?’”

Today, HelloFresh boasts a recipe database of about 10,000 recipes. It delivers approximately a billion meals annually and caters to a wide range of customer groups, cost, taste and variety preferences.

Factoring in a better consumer experience

A focus on improving the customer experience is the hallmark of HelloFresh’s culture. Richter confirms,

We continuously work on the proposition and the customer experience. My north star is that I want to be very confident that, every year, the product we’re building is much, much better than the product we had in the previous year.

This was evident during the Covid-19 pandemic when it entered the ready-to-eat (RTE) market by acquiring Factor75. The move was motivated by customer research, which identified that, unlike the meal kits, “ready meals are usually consumed when you’re alone”.

With this applying to less than 10 per cent of HelloFresh’s meal-kit customers, this is a complementary market where HelloFresh can quickly leverage its existing capabilities to rapidly expand its total addressable market.

“A lot of the muscles we need to be good at operating a ready-to-eat business are the same muscles that you need to operate a meal kit business,” he says.

That’s why Richter thinks his company can offer a larger range of more nutritious, much tastier and healthier ready meals than its retail competitors at a competitive price point.

In doing it well, HelloFresh can address consumers’ challenges in eating well in different circumstances, such as when you need a quick meal, but don’t want to compromise on nutrition or taste. He says, “In my view, there is very little reason why this business line shouldn’t become as big as meal kits is today.”

Burns agrees that, “what’s next in the journey . . . with ready-to-eat, with new DTC offerings over time,“ earns the company its place in the Scottish Mortgage portfolio.

If you would like to hear the full conversation between Lawrence Burns and Dominik Richter, please click the link below. We’re providing this link as this company is held in a number of Baillie Gifford portfolios globally so could be of interest to you.

Listen to the podcast here.

Delayed Gratification

Here, it sits alongside innovative food-related companies, from Ocado to Delivery Hero and DoorDash. Looking across these companies helps the managers’ ascertain how the food industry is changing and evolving.

Burns notes, “[HelloFresh] could have reached profitability sooner and produced much higher margins than it does today had it decided to sit back and not reinvest that money into the product.”

But the fact that Richter hasn’t and “is willing to delay gratification to achieve that ambition is vital” in aligning HelloFresh’s management with Baillie Gifford’s long-term investment horizon.

If HelloFresh continues to enhance its offerings, even a slight increase in market share could lead to significant growth over time due to the vast global food market. The company is poised to shape the future of the food industry, providing consumers with convenient, healthy and sustainable meal options.

Important Information and Risk Factors

The views expressed should not be considered as advice or a recommendation to buy, sell or hold a particular investment. They reflect opinion and should not be taken as statements of fact nor should any reliance be placed on them when making investment decisions.

Past performance is not a guide to future returns.

This communication was produced and approved in November 2023 and has not been updated subsequently. It represents views held at the time of recording and may not reflect current thinking. 

This communication contains information on investments which does not constitute independent research. Accordingly, it is not subject to the protections afforded to independent research, but is classified as advertising under Art 68 of the Financial Services Act (‘FinSA’) and Baillie Gifford and its staff may have dealt in the investments concerned.

All information is sourced from Baillie Gifford & Co and is current unless otherwise stated.

Baillie Gifford & Co and Baillie Gifford & Co Limited are authorised and regulated by the Financial Conduct Authority (FCA). Baillie Gifford & Co Limited is an Authorised Corporate Director of OEICs.

Baillie Gifford Overseas Limited provides investment management and advisory services to non-UK Professional/Institutional clients only. Baillie Gifford Overseas Limited is wholly owned by Baillie Gifford & Co. Baillie Gifford & Co and Baillie Gifford Overseas Limited are authorised and regulated by the FCA in the UK.

Persons resident or domiciled outside the UK should consult with their professional advisers as to whether they require any governmental or other consents in order to enable them to invest, and with their tax advisers for advice relevant to their own particular circumstances.

Financial Intermediaries

This communication is suitable for use of financial intermediaries. Financial intermediaries are solely responsible for any further distribution and Baillie Gifford takes no responsibility for the reliance on this document by any other person who did not receive this document directly from Baillie Gifford.

Europe

Baillie Gifford Investment Management (Europe) Limited provides investment management and advisory services to European (excluding UK) clients. It was incorporated in Ireland in May 2018. Baillie Gifford Investment Management (Europe) Limited is authorised by the Central Bank of Ireland as an AIFM under the AIFM Regulations and as a UCITS management company under the UCITS Regulation. Baillie Gifford Investment Management (Europe) Limited is also authorised in accordance with Regulation 7 of the AIFM Regulations, to provide management of portfolios of investments, including Individual Portfolio Management (‘IPM’) and Non-Core Services. Baillie Gifford Investment Management (Europe) Limited has been appointed as UCITS management company to the following UCITS umbrella company; Baillie Gifford Worldwide Funds plc. Through passporting it has established Baillie Gifford Investment Management (Europe) Limited (Frankfurt Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in Germany. Similarly, it has established Baillie Gifford Investment Management (Europe) Limited (Amsterdam Branch) to market its investment management and advisory services and distribute Baillie Gifford Worldwide Funds plc in The Netherlands. Baillie Gifford Investment Management (Europe) Limited also has a representative office in Zurich, Switzerland pursuant to Art. 58 of the Federal Act on Financial Institutions (“FinIA”). The representative office is authorised by the Swiss Financial Market Supervisory Authority (FINMA). The representative office does not constitute a branch and therefore does not have authority to commit Baillie Gifford Investment Management (Europe) Limited. Baillie Gifford Investment Management (Europe) Limited is a wholly owned subsidiary of Baillie Gifford Overseas Limited, which is wholly owned by Baillie Gifford & Co. Baillie Gifford Overseas Limited and Baillie Gifford & Co are authorised and regulated in the UK by the Financial Conduct Authority.

China

Baillie Gifford Investment Management (Shanghai) Limited
柏基投资管理(上海)有限公司(‘BGIMS’) is wholly owned by Baillie Gifford Overseas Limited and may provide investment research to the Baillie Gifford Group pursuant to applicable laws.  BGIMS is incorporated in Shanghai in the People’s Republic of China (‘PRC’) as a wholly foreign-owned limited liability company with a unified social credit code of 91310000MA1FL6KQ30. BGIMS is a registered Private Fund Manager with the Asset Management Association of China (‘AMAC’) and manages private security investment fund in the PRC, with a registration code of P1071226.

Baillie Gifford Overseas Investment Fund Management (Shanghai) Limited
柏基海外投资基金管理(上海)有限公司(‘BGQS’) is a wholly owned subsidiary of BGIMS incorporated in Shanghai as a limited liability company with its unified social credit code of 91310000MA1FL7JFXQ. BGQS is a registered Private Fund Manager with AMAC with a registration code of P1071708. BGQS has been approved by Shanghai Municipal Financial Regulatory Bureau for the Qualified Domestic Limited Partners (QDLP) Pilot Program, under which it may raise funds from PRC investors for making overseas investments.

Hong Kong

Baillie Gifford Asia (Hong Kong) Limited 柏基亞洲(香港)有限公司 is wholly owned by Baillie Gifford Overseas Limited and holds a Type 1 and a Type 2 license from the Securities & Futures Commission of Hong Kong to market and distribute Baillie Gifford’s range of collective investment schemes to professional investors in Hong Kong. Baillie Gifford Asia (Hong Kong) Limited
柏基亞洲(香港)有限公司 can be contacted at Suites 2713-2715, Two International Finance Centre, 8 Finance Street, Central, Hong Kong. Telephone +852 3756 5700.

South Korea

Baillie Gifford Overseas Limited is licensed with the Financial Services Commission in South Korea as a cross border Discretionary Investment Manager and Non-discretionary Investment Adviser.

Japan

Mitsubishi UFJ Baillie Gifford Asset Management Limited (‘MUBGAM’) is a joint venture company between Mitsubishi UFJ Trust & Banking Corporation and Baillie Gifford Overseas Limited. MUBGAM is authorised and regulated by the Financial Conduct Authority.

Australia

Baillie Gifford Overseas Limited (ARBN 118 567 178) is registered as a foreign company under the Corporations Act 2001 (Cth) and holds Foreign Australian Financial Services Licence No 528911. This material is provided to you on the basis that you are a “wholesale client” within the meaning of section 761G of the Corporations Act 2001 (Cth) (“Corporations Act”).  Please advise Baillie Gifford Overseas Limited immediately if you are not a wholesale client.  In no circumstances may this material be made available to a “retail client” within the meaning of section 761G of the Corporations Act.

This material contains general information only.  It does not take into account any person’s objectives, financial situation or needs.

South Africa

Baillie Gifford Overseas Limited is registered as a Foreign Financial Services Provider with the Financial Sector Conduct Authority in South Africa.

North America

Baillie Gifford International LLC is wholly owned by Baillie Gifford Overseas Limited; it was formed in Delaware in 2005 and is registered with the SEC. It is the legal entity through which Baillie Gifford Overseas Limited provides client service and marketing functions in North America. Baillie Gifford Overseas Limited is registered with the SEC in the United States of America.

The Manager is not resident in Canada, its head office and principal place of business is in Edinburgh, Scotland. Baillie Gifford Overseas Limited is regulated in Canada as a portfolio manager and exempt market dealer with the Ontario Securities Commission ('OSC'). Its portfolio manager licence is currently passported into Alberta, Quebec, Saskatchewan, Manitoba and Newfoundland & Labrador whereas the exempt market dealer licence is passported across all Canadian provinces and territories. Baillie Gifford International LLC is regulated by the OSC as an exempt market and its licence is passported across all Canadian provinces and territories. Baillie Gifford Investment Management (Europe) Limited (‘BGE’) relies on the International Investment Fund Manager Exemption in the provinces of Ontario and Quebec.

Israel                                                                                            

Baillie Gifford Overseas is not licensed under Israel’s Regulation of Investment Advising, Investment Marketing and Portfolio Management Law, 5755-1995 (the Advice Law) and does not carry insurance pursuant to the Advice Law. This material is only intended for those categories of Israeli residents who are qualified clients listed on the First Addendum to the Advice Law.

 

78411 10041010

Back to top