Market Environment of "HelloFresh". What are the opportunities and risks of the company?

Table of contents

List of figures

1 Problem statement

2 Environmental analysis
2.1 Main drivers in the macro environment
2.2 Main drivers in the micro environment

3 Systematized strengths/weaknesses and opportunities/risks as well as derived strategies
3.1 Strength
3.2 Weakness
3.3 Opportunities
3.4 Risks
3.5 Strategic approaches

4 "Untapped opportunities" for HelloFresh

5 Bibliography

List of figures

Abbildung 1: Ausschnitte des Wettbewerbs nach Kategorie; Fokus auf direkte Wettbewerber

Abbildung 2: Ausschnitte des Wettbewerbs nach Kategorie; Fokus auf indirekte Wettbewerber

Abbildung 3: Übersicht der Stärken/ Schwächen und Chancen/ Risiken

Abbildung 4: Übersicht der strategischen Ansätze

Abbildung 5: Blue Ocean Strategy und Strategy Canvas

1 Problem statement

HelloFresh is a rapidly developing German start-up and a role model for many young companies. "The development we went through in five years is what a normal company undergoes in 20."¹ Especially by reaching the last milestones, such as the successful IPO in 2017, the takeover of the competitor Green Chef or the market leadership achieved in March 2018 in the USA, HelloFresh is increasingly becoming the focus of the business media.²

Since its foundation in 2011, HelloFresh has been offering so-called "cooking boxes" by subscription in currently ten countries. The boxes contain recipes and foods prepared for cooking. Customers have the choice between different cooking boxes with different portionings as well as varying recipes.³

In the following, the company HelloFresh and its corporate environment will be examined in more detail. The following questions are specifically addressed.

1. What is the market environment for HelloFresh? What are the main drivers?
2. What are the internal strengths and weaknesses as well as the opportunities and risks of the company? What strategic approaches should be taken to achieve a competitive advantage?
3. Where can "untapped opportunities" lie for the company?

2 Environmental analysis

HelloFresh is on a very complex scale, as the company is present in ten different countries on three continents. Therefore, this work does not claim a comprehensive consideration of all influencing factors on all markets, but rather the main drivers will be discussed below. Furthermore, taking into account the scope of the work, the specifics of the respective countries are not discussed, but the international markets and the USA as the largest market are analyzed. The environment is to be illuminated on two levels.

2.1 Main drivers in the macro environment

By taking a macro look at the political, economic, socio-cultural, technological, ecological and legal environment, the following main drivers can be identified:

Main drivers of demographic change: Especially in Europe, a major driver of demographic development can be identified. By 2020, 30 percent of the population is expected to be 60 years and older, and a significant portion of the population will rely on delivery services in old age. The use of the Internet by future pensioners is well known.⁴

Main drivers of economic growth: The economic development in the environment of HelloFresh can be rated as positive. The global economy grew by 3.7% in 2017⁵ and the eurozone by 2.4% on the previous year. The growth extends across the various industries and countries and can be attributed to high domestic demand. In addition, the unemployment rate is also declining.⁶ This positive image is also reflected in the USA. Here, the economy grew by 2.2% compared to the previous year. Due to the increase in wealth and the low unemployment rate, private consumption is also at a very high level here.⁷

Main Driver Infrastructure: Through its business model, HelloFresh places high demands on the ecological environment. The main driver here is the infrastructure, especially in the area of logistics and the Internet. The short transport routes desired by HelloFresh can be ensured in the respective markets by well-developed transport networks. Contrary to the logistics sector, many countries have some catching up to do in the digitization process, which is already being counteracted in the markets. Germany, for example, has set itself the goal of creating nationwide broadband coverage at a speed of 50 Mbit/s by 2018.⁸

Main driver regulation: The legal requirements placed on HelloFresh and the food industry are increasing. It specifies exactly how food may be stored and transported. In addition, the legal and social requirements for sustainability and quality criteria for food are growing. HelloFresh claims to meet these requirements to the highest degree.⁹

Especially in the socio-cultural environment of HelloFresh, the main drivers can be identified.

Main drivers of buying behavior: On the one hand, the buying behavior on the Internet must be considered. Currently, the online sale of food for consumers plays a subordinate role. Only one in ten consumers has already purchased food via the Internet.¹⁰ This shows the untapped potential of the market. If one combines this finding with the expectation that e-commerce will grow, especially in the food sector, the trend can be assessed as positive.¹¹ This can also be seen in the global sales development in the cooking box sector, which is forecast from USD 1 billion (2015) to USD 10 billion (2020).¹² Potential customers of HelloFresh are also increasingly using the Internet as a medium for purchasing food. Time savings and convenience are the main drivers of this trend.¹³

Main Drivers Lifestyle: On the other hand, the trend of healthy and sustainability-conscious living can be identified. A healthy diet and resource conservation are becoming increasingly important and are expressed in the development of nutrition into a status symbol and expression of personal lifestyle. Thus, the experience of cooking moves more into the focus of people.¹⁴

2.2 Main drivers in the micro environment

After considering the macro environment, the industry and micro environment are considered below. To this end, the main drivers in the areas of; identified existing competition, possible new suppliers or replacement products and negotiating power of the suppliers or suppliers.

Main drivers of market size: Spending on food accounts for a large part of private consumer spending. The market is highly fragmented and has so far only been slightly influenced by online trading. With the business idea, HelloFresh is surrounded by food, gastronomy and snack industries. In total, the addressable market comprises approximately 238 million households.¹⁵

Main drivers competition: On the one hand, the barriers to market entry are to be assessed as low. The barriers to entry and switching costs are low for national and international companies in the young market. Due to the digital sales structure, a functioning logistics system is essentially required, which can be covered by existing logistics companies. Thus, market entries can be observed in the recent past and upcoming market entries, such as.B AmazonFresh, are to be expected.¹⁶

On the other hand, a relatively high substitutability by substitute products can also be determined. Switching costs for customers are low due to the flexible subscription design. In addition, there are many similar or identical products and suppliers.

In addition, the competitive situation between direct and indirect competitors must be analysed.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Excerpts of the competition by category; Focus on direct competitors¹⁷

Direct competitors are those who offer food prepared for cooking as a delivery service (see Figure 1). The competition in this segment is predominantly characterized by young companies. In the largest market, the USA, HelloFresh took over market leadership for the first time in March 2018 following the acquisition of Green Chef and declining business from Blue Apron. HelloFresh is also the market leader in Europe and Canada.¹⁸ In the USA, Blue Apron, Home Chef, Sun Basket, Plated, Munchery, Chef's Plate and Chef'd can be identified as the biggest competitors.¹⁹ In the international markets, the following suppliers are to be mentioned as major competitors: Loblaw home delivery, Chef's Plate, KommtEssen, Marley Spoon, Lidl Kochzauber, The Cook's Grocer and Fit & Fresh.²⁰

In addition to direct competition, indirect competitors must also be taken into account (see Figure 2). The area of competitors consists of stationary sales, food delivery services and delivery services of ready meals.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Excerpts of the competition by category; Focus on indirect competitors²¹

The overview of HelloFresh's competitors makes it clear that the competitive pressure is enormous. This pressure is likely to intensify further due to the growing, young market. For this competition, HelloFresh seems to be well positioned with the current market shares and financial strength of the company as well as investors.

Main driver of bargaining power: The negotiating power of the suppliers is to be classified as low. HelloFresh is strongly dependent on the quality and accuracy of the delivery. However, the bargaining power lies with HelloFresh, which can minimize their own food waste and storage effort with innovative weekly, precisely calculated orders from the suppliers. Above all, HelloFresh is increasingly strengthening its negotiating position through growing economies of scale. The bargaining power of the buyers, on the other hand, can be classified as high, as the market is very customer-oriented. HelloFresh counters this through a high level of interaction with customers in order to meet the needs of customers.²²

In conclusion, the environment of HelloFresh can be described as follows. The company's macro environment is characterized politically and economically by stability and security. The described trends and developments in the socio-cultural, ecological and legal environment can be evaluated as the main supporting drivers for HelloFresh's business model. Looking at the micro-environment leaves a great market potential, which causes an enormous competition. HelloFresh currently has a good market position due to the given market share and financial strength. Thus, the business environment can generally be assessed as positive and promising.

3 Systematized strengths/weaknesses and opportunities/risks as well as derived strategies

Selected internal strengths/weaknesses and external opportunities/risks can be derived from the environment under consideration and the company profile of HelloFresh (see Figure 3).

Abbildung in dieser Leseprobe nicht enthalten

Figure 3: Overview of strengths/weaknesses and opportunities/risks²³

3.1 Strength

The following internal strengths of HelloFresh can be systematically categorized.

Market positioning: HelloFresh is the market leader in its highest-selling markets. This positioning combined with high brand awareness allows HelloFresh to build on a large customer base. This is mainly due to the high level of marketing activities.²⁴ HelloFresh satisfies the value awareness or the increasing value trend of its target group. Among other things, it stands for regional, seasonal, fresh and healthy products as well as sustainable packaging and food consumption as well as environmentally friendly delivery conditions. In addition, the time savings offered to customers by the products are convincing. With the development of recipes that can be easily recooked by laymen in a short time, the needs of the target group are covered. Thus, HelloFresh has a clear brand identity with which HelloFresh distinguishes itself from its competitors.²⁵

[...]

¹ Richter, S.:

² cf. Molla (2018)

³ cf. HelloFresh (ed.) (2018a): 3:

⁴ cf. EY (Ed.) 2014: 11

⁵ cf. IMF (Ed.) 2018: 1

⁶ cf. OECD (ed.) 2017: 1ff.

⁷ cf. ibid.: 1ff.

⁸ cf. KPMG (Ed.) (2016): 15 ́

⁹ cf. KPMG (ed.) (2012): 17ff.

¹⁰ cf. ibid.: 20ff.

¹¹ cf. Statista (Ed.) (2017)

¹² cf. Statista (Ed.) (2016)

¹³ see HelloFresh (ed.) (2018a): 20ff.

¹⁴ cf. Nestle (Ed.) (undated)

¹⁵ cf. HelloFresh (ed.) (2018a): 13

¹⁶ cf. KPMG (ed.) (2012): 20 ; cf. Pimpao (2015)

¹⁷ Based on: Mignot (2015)

¹⁸ cf. Molla (2018); cf. Statista (2018a)

¹⁹ cf. Statista (Ed.) (2018b)

²⁰ cf. Geeck (2018) ; cf. Steen (2016)

²¹ Based on: Mignot (2015)

²² see HelloFresh (Ed.) (2018a): 14

²³ Own presentation

²⁴ cf. Molla (2018); cf. Statista (Ed.) (2018a)

²⁵ cf. HelloFresh (Ed.) (2018b)