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Home , Blue Apron, Food delivery, Freshly, Gousto, HelloFresh, Home Chef

Dinner is served HOW FAR WILL THE APPETITE FOR KITS GO?

CONSUMER WHITE PAPER SEPTEMBER 2020 Barely 10 years old, the market for meal kits is worth USD3.5bn today. The idea of putting together pre-packaged fresh ingredients using a recipe that accompanies them in the appeals to consumers who value “naturalness” Contents and quality alongside convenience. Although meal kits are currently favoured by a relatively niche group of high-income and urban Millennials, the segment is expected to grow 17% year-on-year, to reach USD8.9bn in 2025. And that’s before Covid, which has simultaneously boosted the home consumption and e-commerce that drive the market. The sales performance of meal kit groups A RAPIDLY EXPANDING MARKET MEETING NEW CONSUMER DEMANDS 2 such as HelloFresh and Marley Spoon has seen a sharp acceleration in Q2 2020. What is a meal kit? 2 How are meal kits positioned in the overall online market? 3 For meal kit companies, success is all about customer acquisition and retention. With hefty promotional spending A USD3.5bn market expected to grow by 17% 5 needed in a new and competitive market, each customer costs Covid has accelerated the adoption of online across food 7 EUR70-150 to acquire, yet mid-term retention rates are only 10-12% on average. As a consequence, few players have THE SEARCH FOR EVER MORE PRACTICALITY IS DRIVING TWO NEW TRENDS: OMNICHANNEL AND READY-TO-EAT 10 been profitable – at least until Covid, which has now inflated profitability to -even for many. However, it’s unlikely that Meal kits are unlikely to be spared by the omnichannel trend 10 this stimulus will endure, and we envisage further exits in a Omnichannel tests and partnerships are multiplying 11 market that has seen plenty of consolidation since 2018. In our view, it’s the inherent challenges of the meal kit market, Towards shorter preparation times 11 rather than meal kit launches from giants such as Amazon and IT’S ALL ABOUT CUSTOMER ACQUISITION AND RETENTION 12 incumbent large retailers, that’s been behind the shakeout in Customer acquisition 12 meal kit players.

Customer retention 13 In a market that’s still fragmented, we see two models Searching for profitability 14 proving successful: either international expansion driven by sophisticated data collection and analytics; or a regional THE UNAVOIDABLE DARWINIAN TREND IN MEAL KITS 18 strategy focused on operational excellence. It’s these A competitive landscape in a consolidation phase 18 approaches that may yet see the global market for meal kits mature beyond its niche and take a lasting place in the global The ramp-up of supermarkets and Amazon should be put in perspective 20 food market. Two winning and sustainable meal kit business models 21 Clément Genelot CONCLUSION 24 Analyst Equity Research & e-commerce

1 A rapidly expanding market meeting new consumer demands

At USD3.5bn, the worldwide meal FIG. 1: POSITIONING OF MEAL KITS IN THE ONLINE FOOD MARKET How are meal kits kit market remains a niche food positioned in the overall segment. The first meal kit offers Prepared food online food market? emerged in the early in , driven by start-ups offering In a global online food market Meal delivery from subscriptions to containing restaurants estimated at USD250bn1 (pre-Covid), a recipe and all the ingredients the meal kit is positioned half-way necessary to prepare a . between home delivery of shopping and home delivery of meals from What is a meal kit? restaurants. Meal kits stand out for

Meal kits delivery being more practical than online The meal kit involves home delivery shopping – there’s no need to think Less convenient More convenient of pre-packaged ingredients plus about all the ingredients required instructions to a meal at home. to prepare a dish - with increased After signing up for a weekly/monthly “naturalness” and better quality subscription, consumers pledge to than takeaway meals. take at least one or two meal kits Online grocery delivery Grocery stores a week that are delivered to their homes. Subscription remains the 1: Online Grocery Market Size, Share & Trends Analysis Report | Grand View Research | April 2020 standard model in the , although terms and conditions have eased considerably since the early Unprepared food days of meal kits: today, there are no lock-in periods and customers can pause or skip deliveries at any time. Source: Bryan, Garnier & Co

Each meal kit contains a recipe for several people, chosen a few days The meal kit offer is attractive in ƒ The search for recipe ideas, for ahead by the client online from a list that it provides an answer to several people looking for inspiration and that is generally updated every week, trends in food: variety in their meals. and all the necessary ingredients to prepare a meal at home ƒ A desire to “eat well”, contrasting ƒ Reduction of food waste, as within 30-60 minutes. with the “” nature of ingredients are already weighed take-away meal deliveries from according to the recipe. restaurants. ƒ The increasing number of ƒ The search for practicality and people following strict diets or convenience, which is a genuine suffering from allergies, who have need in lifestyles where difficulties shopping for the right time is lacking. ingredients.

2 | IS SERVED 3 A USD3.5bn market FIG. 3: A USD3.5BN MARKET EXPECTED TO expected to grow by 17% GROW BY 17% PER YEAR OUT TO 2025 (IN USDBN)

According to Hexa Research, meal 10 kits represent a global market worth 8,9 USD3.5bn, half of which is generated 9

The price of a meal kit is 20-30% This leads some meal kit companies customers are well-off, city-dwelling in the US (USD1.7bn) and around a 8 7,6 higher than an equivalent supermarket to say that they are price-aligned with couples or young millennial families. third in (USD1bn). 17% CAGR 7 2 shop and 10% higher than having supermarkets if only the amount of Nielsen noted that people with annual 6,5 shopping delivered. It is worth food actually consumed is considered. income of more than USD70,000 Pre-Covid, Hexa Research expected 6 5,6 noting that the price gap versus a represented 65% of the US meal average annual growth of 17% over 5 4,7 16% CAGR supermarket is also the estimated Meal kits are a form of culinary kit market and the 25-44 age group 2019-2025, which didn’t imply any 4,1 4 amount of food wastage as well as a delivery service. represented 56% of the market. slowdown relative to recent years, 3,5 3,0 3 by households. So, it is not surprising to see that their where with average growth has run 2,5 2: Will Shoppers’ Enthusiasm for Meal Kits Remain Strong in 1,9 2,1 2019? | Nielsen | 3 April 2019 at 16% from 2015-2019. This growth 2 rate is in line with expectations FIG. 2: MEAL KIT CONSUMER: WHO ARE YOU? in the global online food market. 1 The penetration rate of meal kits is 0 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e 2024e 2025e Meal kit consumer profile A wealthier and more family profile expected to increase in households vs other segments of online food in Western countries, where it is Income level currently 5% in the US and less Lifestyle Source: Global Meal kit Delivery Service Market Size And Forecast, By Type (Fresh Food, Process Food) And Trend 1 Cooks on a regular basis than 5% in other Western countries. Growth may be revised upwards Analysis, 2015 - 2025 | Hexa Research | February 2019 Meal kits delivery post-Covid, although too early for Marital status market intelligence agencies to 2 Married with children update their projections. / married / committed relationship

Online grocery Age delivery 3 30+

Meal delivery Income level from restaurants3 4 Upper-middle to high income

Residence 5 Urban, suburban

Single Married

3: With disparities among some countries such as the Nordics and , which face higher prices for meal delivery than groceries or meal kits. Source: Bryan, Garnier & Co

4 | DINNER IS SERVED 5 However, there are limits on ƒ Consumers want to maintain Covid has accelerated of food consumption from in-home to post-Covid era, the share of in-home the extent to which the meal kit a degree of spontaneity in the adoption of online away-from-home has reversed. The food consumption could sustainably business can expand relative to preparing their meals and across food catering industry is under pressure and increase by 15 points to 55% in the the rest of the food market: cannot always anticipate what the trend towards teleworking has and by 10 points in they would like to eat several Covid has had two favourable been accelerated. Estimates from Europe to 75%. ƒ Prices are prohibitive for a days in advance, especially effects on the development of food HelloFresh and Piper Sandler’s 2H20 large share of the population. during the summer holidays. e-commerce. First, the slow transition outlook report suggest that in the

ƒ The majority of current ƒ Home delivery can prove to subscription offers do not be restrictive. FIG. 4: FOOD WALLET SPENDING address people who live

alone. Single meal kits are ƒ Excess packaging of 100% developing in the US ( ingredients in the meal box 25% 35% and Factor 75) and in the could put off consumers who 80% Nordic countries (Godtlevert, are concerned about the 45% 60% a brand of Linas Matkasse). environment. 60%

40% 75% 65% 55% 20% 40%

0% US pre-Covid US post-Covid Europe pre-Covid Europe post-Covid

Food at home Food out of home

Source: Piper Sandler 2H Consumer Outlook Survey | HelloFresh and Piper Sandler | August 2020 Bryan, Garnier & Co ests.

Second, movement restrictions and health concerns have allowed e-commerce to gain two to three years of development, according to several industry managers and panelists. Many newly recruited e-commerce consumers will remain loyal to this new distribution channel. The panelists have therefore raised their estimates of online penetration in the food sector for 2020 post-Covid, see Fig. 5.

6 | DINNER IS SERVED 7 FIG. 5: E-COMMERCE PENETRATION WITHIN FOOD Boosted by the boom in home customer registrations in some low among households in developed consumption and e-commerce, geographies at the peak of the crisis. countries. 9.5% it is not surprising to see the sales 10% performance of meal kit groups However, it is legitimate to ask 9.0% It is reasonable to expect online accelerating sharply in Q2 2020. whether this boom is sustainable grocery to catch up relative to a large 8.0% 7.4% 7.6% 7.9% Marley Spoon saw sales rise nearly once the peak of the pandemic has number of other non-food consumer 8% 130% vs around 40% in Q4 2019 passed and we enter a “new normal”. segments. Looking at the US, and Q1 2020, and HelloFresh sales But the underlying trends driving Packaged Facts estimates that 5.7% 5.7% 6.2% were up 120% vs 66% in Q1 2020 meal kits (i.e. e-commerce, the pre-Covid, 25% of US households 6% 5.3% and 41% in Q4 2019, driven by both search for naturalness and the rise of were monthly online grocery users 4.6% the recruitment of new customers teleworking) will again be reinforced and that 5% were monthly meal kit and the frequency of purchases by by Covid, and a reversal of the users. Around 50% of US households 4% 3.2% existing customers. Meal kit groups recent growth in the meal kit market could quite easily become regular 55% including HelloFresh in the US and seems unlikely. All the more so as the consumers of online food, especially in UK even restricted new penetration rate of the service is still 40% as this is the proportion of households 2% subscribed to Amazon Prime. Household adoption of meal kits could FIG. 6: HOW FAR CAN ADOPTION OF MEAL KITS GO AMONG HOUSEHOLDS? then follow at the same pace as the 0% online grocery shopping penetration US UK and eventually double from 5% to 50% 10% in the near future, i.e. from 7 2018 2019 2020e pre-Covid 2020e post-Covid up to 50% in million to 10 million US households. the mid-term? 40% 35% Source: COVID-19: e-commerce reaching a new threshold in France | Nielsen France | 22 April 2020 ; CPG Companies Face an E-Commerce Tsunami | BCG | 9 July 2020 ;

Bryan, Garnier & Co ests. 30% 10%

20% beyond 10% in Source: Online Grocery Shopping Still Rare in U.S. | 25% the mid-term? 8% Gallup | 20 August 2020; June 2020 Online Grocery 10% 3% Scorecard: Growth in sales & HH penetration continues | 5% Brick Meets Click | 6 July 2020; Bryan, Garnier & Co ests. 0% Monthly online grocery users Monthly meal kit users

Pre-Covid During Covid

8 | DINNER IS SERVED 9 The search for ever more practicality is driving two new trends: omnichannel and ready-to-eat meals

Meal kits are unlikely (alone or through partnerships with bought their kits in supermarkets, Omnichannel tests Towards shorter cooking instead of the usual 30-60 minutes. to be spared by the meal kit brands), as they represent while a further 8% bought them both and partnerships are preparation times This trend goes even further with omnichannel trend one of the rare fast-growing online and in supermarkets (vs. 3% multiplying “heat and eat” meal kits notably segments and offer a means of in 2017). This latter figure shows While meal kit offers have typically offered by Home and Sun As home delivery and subscription capitalizing on all the main consumer that the omnichannel trend is also Since 2017, tests for direct sales tended to focus more on the wealthy Basket. HelloFresh is also preparing services can prove to be restrictive, demands for fresher, more natural taking shape in the meal kit segment of meal kits in supermarkets and urban family, the new offers are the launch of its own hot meal offer. it is not surprising to see an offline and more practical food options. and could be a useful tool to enable partnerships between meal kit also aimed at single consumers or Such meals are already pre-cooked distribution channel emerging within meal kits to attract new consumers companies and retailers have couples who are in a hurry yet still when they arrive at the customer and the meal kit segment. Food retailers In the US alone, Nielsen noted that at a lower cost through their online multiplied. Examples include looking for fresher/healthier meals just need to be reheated in an oven or want to gain exposure to meal kits in 2018, 32% of meal kit consumers monthly subscription offers. meal kits at , Gobble meal than takeaway food. microwave. In contrast to traditional kits at , HelloFresh meal kits meal kits, which focus mainly on at Ahold Delhaize or SimplyCook To this end, all meal kit companies dinner, prepared meals open up meal kits at Tesco. have started to create special additional segments: , the “express meal” categories, with weekly for employees working If these partnerships between recipes ready in around 20 minutes at home and even diets. supermarkets and meal kit companies are to be relevant, two operating constraints need to be CASE STUDY overcome:

ƒ For the meal kit company, the challenge is to extend the lifespan of the box, which is generally five days. To get genuine interest from Frichti and its diversification and premium dishes). Currently supermarkets on a wide scale, this across all segments of the online serving the Parisian region, Frichti lifespan needs to be tripled to 15 today captures around 10% of orders in this market, days. The convergence of traditional just behind , Eats meal kits with a more premium and and . ƒ For retailers, the aim is to work fresher offer of their own meals on in-store merchandising, pre-prepared in “dark ”3 is 3: Kitchens for delivery only meals that are not consumed in restaurants which means placing meal kits clearly illustrated by the business in the fresh food department model and success of French company Frichti. Established in (which naturally attracts well-off 2015 in the meal delivery segment, customers who are prepared to Frichti now offers a wide range of cook their meals) or at the store services including dishes prepared entrance, in order to limit the risk to order in dark kitchens recipe of customers not buying them kits and the delivery of fresh food since their trolleys are already full shopping (an offer of fresh, local before they see them.

10 | DINNER IS SERVED 11 It’s all about customer acquisition and retention

Customer acquisition marketing spend, which accounts margin (gross margin minus unit Customer retention FIG. 8: AVERAGE RETENTION RATE FOR MEAL KIT COMPANIES for 15-30% of company sales. logistics costs). On average, the In the rapidly expanding meal kit Customer acquisition costs generally largest meal kit companies see In an ultra-competitive market where 60% market, the main aim is to acquire vary between EUR70 and EUR150 customers they acquire and who start-ups have proliferatedCovid impact since the Comment Post-Covid Comment 52% depending on the supplier. remain loyal generating a return new customers. Consumers need start of the 2010s, the main issue 50% to be attracted through promotions of 1x the investment made to is to retain customers and make such as reductions of 25-50% for the Customer Lifetime Value is calculated attract them after 12 months them loyal. However, the retention 40% first purchases and to be educated as follows: average basket x and about 3x beyond 36 months. rate stands at only 12% on average 30% about this new service through hefty purchase frequency x contribution after one year according to Second Measure, and then tends towards 20% Best performers 19% 10% over the longer term. 12% FIG. 7: ACQUISITION COST FOR A SINGLE CUSTOMER VS. THEIR CUSTOMER LIFETIME VALUE (EUR) 10% Worst performers In other words, out of a cohort of 6% 100 customers acquired through 0% 350 2 3 4 5 6 7 8 9 10 11 12 Upfront investments Customer lifetime value hefty spending, no more than 12 Months after subscription 300 are still subscribed a year later. This ~3x Source: Ugly produce boxes retain customers three times as well as meal kits | Second Measure | 22 January 2020 250 low retention rate primarily reflects Bryan, Garnier & Co ests. (marketing + discounts) (cumulative contribution margin generated) an initial curiosity effect for a new 200 ~2x emerging food offer on the part of 150 consumers and should improve ~1x gradually as the market moves 100 towards maturity. 50 It is also worth noting the 0 heterogeneity between new -50 customers ordering less than 10 boxes per year while some “sticky” -100 CAC 12 months 24 months >36 months and very loyal customers order 30 to 40 boxes per year.

Source: Bryan, Garnier & Co ests. However, several sources of leverage can be activated to slightly improve the retention rate and its order frequency: expanding the number of recipes offered; stepping up the pace of recipe renewals; differentiating the offer with recipes for special diets; selling extras, such as wines or ; reducing delivery times; and offering more flexible delivery and subscription solutions.

12 | DINNER IS SERVED 13 Searching for the investments made to attract them To the best of our knowledge, only Does the Covid change the meal kit profitability and the other 88 who gradually drop HelloFresh, the world’s largest meal market? out during the first year. kit player, and Linas Matkasse, which Given this relatively low customer invented the meal kit and is focused Covid has significantly inflated the retention rate, meal kit companies’ This is why still very few meal kit on Scandinavian countries, were profitability of meal kit groups, with sales approach needs to be very companies are profitable. Whereas profitable at EBITDA level in 2019, some of them reaching the long- disciplined, with well-controlled the average contribution margin of with adjusted EBITDA margins of awaited break-even point: customer acquisition costs. The the largest companies was positive 2.6% and 6.0% respectively. 12 loyal customers out of 100 that at around 26%, marketing and remain after one year therefore need central costs drag EBITDA margins to generate sufficient value to offset into negative territory (see Fig. 9).

FIG. 9: STANDARD BREAKDOWN OF A LARGE MEAL KIT COMPANY HelloFresh unveiled an EBITDA Linas Matkasse is reported to Marley Spoon almost reached margin of 13% in H1 2020, an have achieved an EBITDA margin break-even point on EBITDA improvement from -2% in H1 of over 12% in H1 2020, an in H1 2020 with slightly 60% 2019, and now expects an improvement of around 300bp positive margin in Q2. 52% EBITDA margin of 9-11% over YoY, and is therefore well on track 50% the year 2020. to be profitable again in 2020.

40% 26% 26% 30%

20% 24% 10% Good Food almost reached generated a positive Gousto now expects positive break-even point on EBITDA in the EBITDA in H1 2020 and is EBITDA in 2020, which would also 0% first nine months of 2020. expected by consensus to be be a first in its history. 17% profitable for the first time in 2020. -10% -15% -20% Gross margin Fulfilment Contribution Marketing G&A EBITDA margin margin

Source: Bryan, Garnier & Co ests.

14 | DINNER IS SERVED 15 However, this surge in profitability rise again close to earlier levels. Only does not seem entirely sustainable, companies that are rigorous around as shown in the table below. The customer acquisition costs and have main factor in margin improvements reached operational excellence will has been the sharp drop in marketing remain sustainably profitable. expenditure. However, this is set to

FIG. 10: COVID: A TEMPORARY BOOST FOR THE MOST FRAGILE PLAYERS

P&L element Covid impact Comment Post- Covid Comment Gross margin = Lower promotions offset higher = Back to normalized levels of procurement costs promotions and procurement costs

Fulfilment -- Hiring of temporary staff, social - Persisting social distancing costs and distancing costs, higher delivery some higher delivery costs costs

Contribution margin - -

Marketing +++ Strong drop of marketing costs + Better leveraging effect and (focus on existing customers and potentially slightly lower CAC lower CAC)

G&A + Positive leveraging effect + Positive leveraging effect

EBITDA margin ++ Strong improvement = Little to no lasting effect

Source: Bryan, Garnier & Co ests.

16 | DINNER IS SERVED 17 The unavoidable Darwinian trend in meal kits

A competitive landscape cracked down the global unit Many companies are now running FIG. 11: BANKRUPTCIES AND TAKEOVERS HAVE GAINED MOMENTUM SINCE 2018 in a consolidation phase economics equation, hampered out of steam due to a lack of cash by a lack of control over the whole and an inability to leverage more While the meal kit market still value chain and business processes, capital given the lack of short- boasts robust growth prospects, i.e. inefficient food procurement, term profitability prospects. We Mar 2019: Nov 2019: its ultra-competitive nature remains uncontrolled marketing spending and have therefore seen accelerating May 2018: undeniable. Around 150 meal kit deficient logistics. As well as high consolidation since 2018, with a companies were operating around OPEX, this often leads to missing number of bankruptcies, acquisitions (subscription delivery model the world in 2018. Many of these items in the box, delays in delivery of meal kit companies by food acquired by filed for bankruptcy discontinued) players were in an aggressive phase times or a limited range of recipes. retailers, or meal kit rivals looking June 2019: to acquire market share at any price The result is damage to customer to acquire specific operational Aug 2017: Jan 2019: Mar 2018: in a bid to reach critical mass. satisfaction and reduced customer knowledge. Mar 2016: Nov 2015: acquired by Yet, these layers have still not retention. filed for filed for bankruptcy acquired by bankruptcy acquired by May 2017: merge with

filed for bankruptcy

The jump in the penetration of meal kits within Sep 2017: July 2018: May 2017: May 2019: Dec 2019: households that was created acquired by by Covid has generated suspended its acquired by acquired by a surplus in turnover and acquired by business margin for all players, which Mar 2018: Mar 2019: Sep 2019: has enabled many of them May 2017: ‘s acquired by to gain a few months of business cash. Because this surge discontinued by filed for filed for will not be sustained into 2021 and bankruptcy bankruptcy Covid will not solve the underlying problem of profitability for the majority of meal kit companies, Source: Companies’ press releases; press reports; Bryan, Garnier & Co more unprofitable players may exit the market.

18 | DINNER IS SERVED 19 The ramp-up of Spoon in the US since April 2017 and a lack of products on the shelves recipes depending on regions or even The competitive backdrop in meal supermarkets and and in Germany since April 2018. due to procurement issues. In other catchment areas. For this reason, kits remains fragmented, with few Amazon should be However, no Marley Spoon meal words, there is no sign of disruption only a few food retailers, notably companies above the EUR100m sales put in perspective kit is currently referenced on the in the competitive backdrop caused Walmart and Publix, sell their own threshold. The majority operate only website in Germany by Amazon, despite the large base of meal kits. Others such as Tesco in their domestic market, even though Behind this acceleration in the and Marley Spoon no longer even Amazon Prime users. and Waitrose have abandoned globalization was once in almost number of business failures lies mentions its partnership with the idea and the majority - Ahold every meal kit manager’s speech. a valid question: are Amazon Amazon US/Germany in its financial While supermarkets have access Delhaize, Walmart, and For the same reasons that there are and supermarket chains that are communication. Amazon also sells its to the raw materials and in-store others – have joined forces to sell no truly globalized grocery chains, launching meal kits to blame for it? own meal kits via its Amazon Fresh employees needed to prepare meal kits made by specialists. meal kit players are facing a number of In our view, this fear should be seen delivery service and in Whole meal kits, as well as recurring barriers to going international: cultural in perspective. stores. Moreover, Amazon is still in customer flows in stores, they lack Two winning and and consumer taste differences and a learning phase in relation to food a relevant brand image and the data sustainable meal kit supply chain barriers around building Amazon has been selling meal retailing. There are contradictory analysis capacity that is essential business models supplier relationships while complying kits by Martha Stewart & Marley price cuts and increases in its stores to anticipate volumes and adjust with local regulatory restrictions.

FIG. 12: CURRENT COMPETITIVE BACKDROP FOR MEAL KIT SPECIALISTS (SALES IN EURM)

1810

1500

1000

423 500 214 130 113 102 102 93 84 72 68 60 40 37 23 20 0

Source: Companies data; Bryan, Garnier & Co ests.

Only two of these companies were these two names represent the two profitable in terms of EBITDA in different winning and sustainable 2019 to our knowledge: HelloFresh business models that we see in the and Linas Matkasse. Interestingly, meal kit space.

20 | DINNER IS SERVED 21 CASE STUDY

The global mainstream approach Its proprietary algorithms enable the driven by data - HelloFresh group to: better anticipate weekly demand and adjust procurement With EUR1.8bn of sales in 2019 accordingly, adapt recipes to and a presence in 14 countries geographies and fine-tune the (North America, Europe, ), efficiency of marketing efforts. HelloFresh is the sole truly International expansion throughout globalized player to have reached 14 countries in 8 years helped this size. If going international HelloFresh to quickly reach a critical remains a long and risky process, size and become profitable. It was HelloFresh struggles less than crucial to unlock economies of others when entering new markets, scale, optimize its procurement thanks to its advanced data process and better leverage its approach. marketing spending. HelloFresh was fundamentally built on data collection and analytics.

CASE STUDY

excellence over customer acquisition recognized quality and high level and focusing on operational of service. This in turn will generate processes are such as optimizing sustainable unit economics based on procurement processes, fulfilment improved customer retention rates with The operational excellence of set-up, implementing best practices increased return on marketing spend regional specialists – Gousto, and focusing on improving the and allow players to compete with Linas Matkasse, GoodFood product and service quality. foreign competitors that face natural entry barriers from local cultural and For regional specialists unwilling to As well as creating a lighter and supply chain differences. Gousto, go global, sustainable profitability more agile structure, this was about Linas Matkasse and GoodFood have depends on rebalance the unit focusing on the service aspect of succeed with this approach: Blue economics equation. This means the meal kit offer in order to develop Apron has had mixed results in the two temporarily prioritizing operational strong local brand awareness, with years that it has been applying this strategy.

22 | DINNER IS SERVED 23 Conclusion

Are meal kits the answer to convenient and healthy at home? The industry has had a difficult first 10 years, with many players succumbing to the brutal arithmetic of customer acquisition costs and the difficulty of customer retention.

However, there are signs that meal kits are beginning to carve out a more sustainable niche in the food business. Covid has played a part, of , driving the demand for in-home eating and e-commerce that meal kits are built on. But we have also seen successful models emerge, either built on sophisticated data or operational excellence. And at the same time, as Amazon and the major supermarkets currently lack both the capability and the will to make inroads into meal kits, it would seem that there remains potential for independent players in this sector.

24 | DINNER IS SERVED 25 White paper authors Corporate transactions Clément Genelot Falk Müller-Veerse Guillaume Nathan Equity Research Analyst Partner Partner Bryan, Garnier & Co leverage in-depth sector expertise to create fruitful and long lasting relationships between investors and Retail & E-commerce Germany Paris European growth companies. [email protected] [email protected] [email protected] Jean Cailliau Executive Advisor Paris Global Convertible Acquired by Private Placement Private Placement [email protected] Private Placement Bond New Issue Consumer team

€120 000 000 CAD500 000 000 Undisclosed €20 000 000 €14 000 000 INVESTMENT BANKING Sole Manager Co-Manager Advisor to the Seller Sole Manager Sole Financial Advisor

Greg Revenu Falk Müller-Veerse Guillaume Nathan Managing Partner Partner Partner About Bryan, Garnier & Co Paris Germany Paris [email protected] [email protected] [email protected] Bryan, Garnier & Co is a European, full service growth-focused independent investment banking partnership founded in 1996. The Jean Cailliau Trygve Ugelstad Philippe Le Sann firm provides equity research, sales and trading, private and public capital raising as well as M&A services to growth companies and Executive Advisor Managing Director Managing Director their investors. It focuses on key growth sectors of the economy including Technology, Healthcare, Consumer and Business Services. Paris Paris Bryan, Garnier & Co is a fully registered broker dealer authorised and regulated by the FCA in Europe and the FINRA in the U.S. [email protected] [email protected] [email protected] Bryan, Garnier & Co is headquartered in , with additional offices in Paris, Munich, Zurich, Stockholm, Oslo and Reykjavik as well as New York and Palo Alto. The firm is a member of the . Frans-Matthis Pleie Hendrik Wolters-Fahlenkamp Director Director Germany Germany [email protected] [email protected] Bryan, Garnier & Co Equity Research coverage*

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