Insights & Stories

Written by Nirvan Dani

HelloFresh: A Story of Adaptation, Growth, and Intrigue

There’s something undeniably fascinating about HelloFresh’s journey in the meal kit delivery world. For years, they’ve been a household name for bringing fresh ingredients and chef-designed recipes right to our doorsteps. Yet, what really draws me to HelloFresh right now is how they’re navigating a rapidly changing landscape with a sense of resilience and a focus on reinvention.

In their Q2 2024 performance, HelloFresh delivered a somewhat mixed bag – but one that’s still full of intrigue. On the one hand, revenue came in slightly below expectations, but on the other, they absolutely crushed it with their adjusted EBITDA. That tells me that while the meal kit industry is feeling the squeeze from external pressures, HelloFresh is actively finding ways to optimize and grow.

A New Chapter with Ready-to-Eat Meals

The standout in their performance? HelloFresh’s Ready-to-Eat (RTE) segment. Seeing this part of their business grow by 47% year-on-year is more than just impressive – it’s a sign that the company is adapting to how people’s lives are changing. With busier schedules and the need for more convenience, their RTE meals seem to be hitting the right notes.

What’s interesting is how this pivot to ready-made meals may be the next phase in the company’s evolution. Yes, their core meal kit business declined by 9%, which is a big red flag, but it’s clear that HelloFresh is taking steps to diversify. In my mind, that shows they aren’t just waiting for trends to change – they’re actively making moves to stay relevant. I’m eager to see how this shift plays out over the next few quarters.

The Profitability Puzzle

If you look past the slight revenue miss, HelloFresh’s ability to significantly beat their EBITDA expectations is pretty remarkable. With EUR 146.4 million in adjusted EBITDA, they showed they’re more than capable of managing costs in a tough market. Despite a hit to their contribution margins, they tightened the reins on marketing expenses after Q1, and the results speak for themselves.

For me, this is the most compelling part of HelloFresh’s current story – they’re not just surviving, they’re finding ways to thrive in key areas. Their 7.5% EBITDA margin exceeded expectations, and while their core segment faces challenges, they’re proving they know how to balance growth and profitability.

Undervalued or Underappreciated?

One of the more intriguing aspects of HelloFresh is how the market seems to be undervaluing them compared to their peers. They’re trading at about 3x EV/EBITDA, whereas companies like Zalando are closer to 5x. Does this represent a buying opportunity? Or is the market right to be skeptical due to the challenges in the meal kit business?

There’s no doubt that HelloFresh’s share price volatility reflects the uncertainty around its long-term prospects, but part of me can’t help but think there’s more to this story. With the rapid rise of their RTE segment and their focus on cost efficiency, I’m excited to track their next moves.

HelloFresh: A Company to Watch

Yes, there are challenges, and yes, the meal kit segment’s decline is concerning. But HelloFresh is far from a one-dimensional company. They’re showing a willingness to evolve and, more importantly, the ability to execute that evolution. For now, they’re a company I’ll be keeping a close eye on, especially as they lean further into the RTE market and continue managing their margins with precision.

It’s not just about whether they can rebound in meal kits – it’s about what’s next. And I, for one, am very curious to see where HelloFresh’s journey takes them. Could this be a turnaround story in the making? Only time will tell, but it’s certainly one to watch.