Meal kit popularity explodes during pandemic
More pressure on traditional grocers to change
The popular meal kit service HelloFresh SE more than doubled its revenues during the most turbulent months of the pandemic as the trend toward food delivery continues to dramatically transform the Canadian grocery landscape.
The Berlin-based global retailer on Tuesday reported sales of 972.1 million euros (CS1,519,893,097) in its second quarter, from April to the end of June, representing a 122 per cent increase from a year ago. The company attributed most of that success to economic lockdown orders that have forced consumers to eat at home, giving them more reasons to try meal kits that deliver a set of pre-portioned ingredients, and corresponding recipes, to make it easier to prepare meals.
HelloFresh’s customer base grew by 74 per cent in the quarter compared to last year and there was “strong habit formation” among people who had never tried the meal kit model before, HelloFresh chief executive Dominik Richter said on a conference call with investors.
Those new habits will be important if meal kits are going to be able to continue their massive revenue gains in a post-coronavirus world.
“I think it’s safe to say that some of these consumers adapted to a new normal,” said Jenny Wang, an equity research analyst at Torontobased Eight Capital. “If that’s the case, that they’ve adapted to ordering meal kits maybe twice a week, or to ordering groceries online because it’s more convenient, I think this habit is here to stay.”
HelloFresh has operations in markets such as the United States, United Kingdom and Australia and is one of the two dominant meal kit delivery services in Canada, though it declined to provide specific numbers on its Canadian performance. Its main competitor in Canada, Montreal-based Goodfood Market Corp., reported its first-ever profit last month, posting net income of $2.8 million and revenue growth of 74 per cent during its third quarter ended May 31.
Goodfood is the market leader in Canada, with a market share of roughly 40 to 45 per cent, followed closely by HelloFresh with 40 per cent, according to Wang.
“The COVID-19 pandemic has had an overall positive impact on Goodfood’s business, acting as a catalyst in the shift to e-commerce grocery shopping,” the company said.
Since the onset of the pandemic, Canadians – once reluctant to try online grocery shopping – have swung toward grocery e-commerce in an unprecedented way. Loblaw Cos. Ltd., the country’s largest supermarket chain, in July reported its e-commerce sales during the first half of 2020 were higher than it had in all of 2019.
Elsewhere, Walmart Canada Corp. has announced a $3.5-billion infrastructure investment aimed, in part, at expanding its grocery e-commerce business. And Empire Co. Ltd., the parent company of Sobeys, FreshCo and Safeway, accelerated the launch of its multi-billion-dollar grocery delivery platform Voila in the Toronto area earlier this summer, with plans to be able to reach 75 per cent of Canadian households in the next three years.