The German meal-kit company HelloFresh has agreed to acquire Boulder, Colorado-based Green Chef. Terms of the agreement were not disclosed, but HelloFresh expects the acquisition of Green Chef to contribute approximately $15 million per quarter to HelloFresh Group's revenues starting in the second quarter of 2018.
Meal-kits have become a crowded market that by Packaged Foods estimates includes more than 150 players in the U.S. As the business model has proven to be operationally complex to build and scale, venture capitalists interest in investing in these companies has waned, making consolidation in the marketplace inevitable.
In an interview with Reuters last summer, Michael Joseph, CEO, Green Chef said the company had raised $67 million from venture firms such as New Enterprise Associates (NEA) and Greenspring Associates. At the time, the company was seeking an additional $50 million in funding, which it did not secure. During the same interview, he noted that the company would entertain acquisitions offers.
"If we find a buyer who is betting big into organic and wants to help grow this company, I'd be a fool to say, No, we wouldn't look, especially with market conditions like this where companies scrambling to get into the space," said Joseph.
The meal-kit space has also struggled to escape the taint of Blue Apron's paltry performance on the public market. Before its IPO, the company had raise nearly $200 million and was considered the leader in the space. But since its initial public offering last year, the company has lost almost 80 percent of its value and was forced to layoff six percent of its workforce, or approximately 300 employees.
HelloFresh had its own public showing when it made its appearance on the Frankfurt Stock Exchange last November. Overall, it has fared much better than Blue Apron, and its value has risen 25 percent since its IPO.
But meal-kits are notorious for high customer churn, and like Blue Apron, HelloFresh has struggled to retain users. Analysis by Daniel McCarthy, assistant professor of marketing, Emory University, found HelloFresh's six-month retention rate to be just 17 percent, which was even lower than the 28 percent that was estimated for Blue Apron.
Founded in 2014, Green Chef has tried to differentiate itself from competitors by offering meal-kits that cater to diets that can be difficult for home chefs to prepare on their own like keto, gluten-free, vegan and paleo. Its is also one of the only services to be certified organic by the USDA. Sun Basket, the company's closest competitor in terms of its offering, also has the USDA organic seal, but it has come under fire for making inaccurate claims about some of its ingredients that were found to not be organic.
Previously, HelloFresh only offered what it calls a classic menu and a veggie menu. With the purchase of Green Chef, it will be able to expand its reach by tapping into the market segment of consumers who have specific dietary needs. In the press release announcing the sale, HelloFresh noted it would integrate Green Chef into its operations and culinary teams.
HelloFresh and Green Chef did respond to requests for comment.