Users have increased 74.2% year-on-year © HelloFresh
Users have increased 74.2% year-on-year © HelloFresh

HelloFresh cuts costs through 'favourable supplier terms'

5 May 2021

HelloFresh has reduced procurement expenses by 0.6 of a percentage point through “more favourable supplier terms” and flexible recipe selection. 

The meal kit delivery firm told investors on its quarter one earnings call it had 7.3m active users globally in the first three months of 2021, up 74.2% year-on-year as global lockdowns saw the hospitality sector shut down. 

Dominik Richter, co-founder and chief executive of HelloFresh, said he was confident the firm would “benefit disproportionately from the shift to increased online grocery penetration”.

He added HelloFresh had continued to grow despite bottlenecks in its capacity to "over the majority of 2020", particularly in its US market.

Despite a surge in orders, HelloFresh said it had been able to reduce procurement expenses from 34.4% of revenue to 33.8% in the first quarter of 2021.

It attributed the reduction to “more favourable supplier terms achieved through higher volumes and continued optimisation of menu planning”, despite some ingredient price fluctuation.

Christian Gaertner, CFO at HelloFresh, said: “There is a certain level of [ingredient price inflation]. Having said that, if you look at our track record of decreasing procurement expenses… that track record is very strong and that’s not going to fundamentally change going forward. 

“There are levers that we have ourselves in terms of optimising our supplier conditions and in terms of our menu planning. If there is price inflation attached to a certain category of ingredients, we have much higher flexibility to just bring different recipes, use different ingredients. We’re not exposed to that kind of inflation as much as a normal grocer.”

Despite a reduction in procurement costs, Gaertner added the cost of fulfilling customer orders had increased due to the addition of two fulfillment centres in the US as well another two internationally in the Netherlands and the UK. 

“In our US business in February, we saw meaningful weather disruptions. Two out of those four weeks in February were impacted by heavy snow storms and that somewhat impacted our production expenses in those weeks,” Gaertner continued.

HelloFresh is not the only meal kit firm enjoying success as a result of the pandemic. Earlier this year, meal kit provider Pasta Evangelists reported its sales increased by more than 300% during 2020.

Lockdowns and the shut down of the hospitality sector had a drastic impact in 2020, However, with lockdowns in the UK beginning to recede, the food and drink industry is forecast to grow by 12% in 2021. 

IGD and foodservice consultant Peter Backman said the increase would be driven by strong retail growth from January to March. “Pent-up demand for socialising” will boost the sector and allow foodservice to grow by 54% (£18.6bn) compared to 2020.

 Want to stay up to date with the news? Sign up to our daily bulletin.

LATEST
JOBS
Location: Home-Based with travel
We are offering a salary up to £60,000 for this role, depending on experience.
Zurich Insurance Ltd
Canary Wharf, London (Greater)
£33,119 - £37,209 pa
CMA
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE