Meal Kit Companies: Maintaining Growth Post-Pandemic

The Meal Kit Surge During Lockdown

State lockdowns due to COVID-19 have forced many consumers to prepare meals at home. This has boosted demand for meal kit services like HelloFresh (HFG).

As the pandemic set in, grocery stores experienced such a huge influx of online orders that some had trouble keeping up. Meal kit companies offered a streamlined alternative to ordering online from traditional grocery stores. Now, however, many are wondering if meal kit companies will be able to maintain their growth as restaurants begin to reopen and people start to feel slightly comfortable returning to their normal routines.

HelloFresh and Blue Apron

HelloFresh, headquartered in Germany, has been one of Europe’s top-performing stocks this year. It saw a 37% increase in revenue during the first quarter, whereas New York-based Blue Apron (APRN) only grew 8% quarter-on-quarter.

HelloFresh’s increase in revenue may be attributed to its climbing number of active users. The company added 1.2 million customers over the course of the first quarter. In comparison, Blue Apron only added 25,000 users.

Looking Ahead as Lockdowns Lift

Investors are curious to see if customers will stick to meal kit habits formed during quarantine, or if these companies will see losses as people return to restaurants and grocery stores. Based on previous estimates from Second Measure, an analytics company, fewer than 10% of new meal kit company users will continue using the service two years later.

Even before the pandemic, some investors were becoming increasingly wary of fast-growing, but unprofitable meal kit companies. Now, many believe that meal kit companies’ success during lockdowns may not last. For example, on May 27, when the US National Institute of Allergy and Infectious Diseases shared news that a COVID-19 vaccine might be available by the end of the year, shares of HelloFresh fell 6%. Despite the recent growth that meal kit companies have seen, they may face a difficult road ahead.

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