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Envi Analysis Paper
Envi Analysis Paper
Lead By Example
Dr. B
identify all external and internal elements which can affect the organization's
performance. This entails assessing the level of threat or opportunities these factors may
present. We will cover an analysis on the industry’s current status, threats of new
entrants and substitute products, the bargaining power of buyers and suppliers, industry
rivals and target markets and the competitive strategies against the competition.
Industry Analysis
During this Industry Analysis, we will assess the current business environment of
HelloFresh in order to understand the various economic components of the market place
and how these may be used to gain a competitive advantage against the competition.
and Thomas Griesel in Berlin Germany. Their business model is to provide buyers with a
quick and simple way to prepare healthy and organic meals using provided recipe cards
and ingredients. All recipes are designed for meals in under 40 minutes as a simplified
alternative to grocery shopping and meal prepping. The cost of their service on average
is about $65 for two people a week. As one of the first meal delivery kits in the world,
this team packaged and hand delivered the first ten packages locally, but within a few
short years they were delivering nearly a million packages internationally. HelloFresh has
grown to have an annual revenue of about 1.6 Billion with Blue Apron being their biggest
competition coming in at around 430 million in revenue. Since HelloFresh was founded,
they have participated in 7 rounds of funding and raised close to 370 million. They are
based in Germany with 253 retail companies, nearly 300 distribution locations, and
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SE, 2020a, p. 16). While the company is based in Berlin, their US operations are
responsible for 60% of their revenues and have nearly 44% of the American market. One
industry concern is low customer retention, with less than 50% of the customers
remaining subscribers after the first month and under 10% after 6 months of service
(Helm, 2018).
The factors to set up a meal kit delivery business include access to fresh meat,
fresh organic produce, cold storage, preparation kitchens, consumer channels and
this dimension, the most important aspects are the consumer channel (website and data
analytics), sourcing fresh products, and preparation cost. The availability and cost of
website design and coding is relatively low, allowing new entrants to create a consumer
channel and reach customers easily. Sourcing fresh produce on a national scale may be
logistically challenging; however, just like HelloFresh, new entrants can start on a local
level servicing a focus city and growing from there (Helm, 2018). On a larger scale,
HelloFresh has a supply-side advantage because their purchasing volume gives them
more buying power than new entrants. Despite this advantage, the new entrants may be
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able to differentiate themselves due to the availability and variety of ingredients from
suppliers. Preparation includes cold-storage and packing boxes for delivery. In this area
HelloFresh realizes economies of scale by leveraging the available resources like large
storage and packaging facilities to service more subscribers, resulting in a lower unit cost.
A lower unit cost puts new entrants at a price disadvantage or requires a large investment
Regarding demand-side benefits of scale, the threat of new entrants is high. For
customers to try a new entrant (Porter, 2008). A customer's ability to curate their meal or
to customize meals to satisfy their preferences may motivate customers to try several
services before selecting a primary meal kit subscription service. Switching cost is low
for consumers, as the subscription can be paused or cancelled easily. Customers do not
The HelloFresh distribution channel is via UPS and FedEx delivery (HelloFresh,
2017). These distribution channels are easily accessible to other meal kit delivery
companies and highly recognized globally. Another aspect of the distribution channel is
the website where customers manage their preferences and weekly order. As stated
previously, sourcing internet developers and data analysis is accessible and affordable.
There are relatively low barriers to accessing distribution which represents a high threat
of new entrants.
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Capital costs for new entrants include not only fixed costs for facilities but also
costs for marketing and inventory. Marketing is one of the highest costs incurred by
expenditures in social media, direct advertising, and influencer endorsement, and more.
The industry is not only competing with other meal kit offerors, but also traditional
grocery and food service industries. The churn rate for these meal kit companies is
estimated at around 85% per year, with half cancelling within one month according to
third-party research (Helm, 2018). Because of this, there is a continuous need to expend
marketing dollars to acquire new customers. The capital cost to acquire customers can be
HelloFresh enjoys due to their size and age. HelloFresh has name recognition as one of
the most well-known meal kit companies. Their experience gives them an advantage in
production, data-analysis, and marketing methods which new entrants would have to
overcome. They developed specialized meal kits for families, vegetarians, pescatarians,
and low-calorie options which means that new entrants would have to venture farther into
niche categories to overcome HelloFresh advantages. New entrants that are expanding
and already have some or all of these capabilities may overcome or deflect HelloFresh’s
advantage.
does promote their attainment of the SQF-certification (Safe Quality Food), this
designation is an industry program not a government policy (Messier, 2018). The SQF-
certification is an advantage but not a deterrent to new entrants. Food safety is regulated
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locally and federally through the USDA, the FDA and local food safety and health
departments; it is relatively easy to comply with such regulations and obtain the required
In summary, the threat of new entrants in the meal kit delivery industry is high.
There are distinct advantages in supply-side economies with HelloFresh's potential lower
unit cost, existing resources such as warehouses and staff, and name recognition.
maintain long term subscriptions. These advantages are counterbalanced by the low cost
of switching, the lack of demand-side benefits, and the easily accessible distribution
channels available for customer contact and delivery. The highest threat of new entrants
is likely in local markets rather than nationally. There are relatively low barriers posed
by restrictive government policies; food safety regulations are not restrictive, and the cost
of compliance is relatively low. There is a threat of new entrants that are willing to
spend the capital to acquire new customers, compete on price, and differentiate
The bargaining power of buyers is high. The bargaining power of the buyer looks
at the customer's power to affect pricing, quality, and services. This section looks at the
negotiating power of buyers based on the number of competitors in the market, the
volume of purchases, and the price sensitivity of the buyers as a group (Porter, 2008).
HelloFresh customers have the choice of many providers in the meal kit industry, the
U.S. has over 150 meal kit companies. This allows the customer to shop around for the
companies specialize in custom dietary ingredients, HelloFresh has meal kit offerings in a
variety to compete with most of these competitors. Many competitors and little
differentiation give the buyer an advantage. A variety of substitutes are also to the
buyers’ advantage. Substitutes include the competitive meal kit companies as well as
grocery stores, restaurants, and meal delivery services. The switching cost is low as the
Additionally, buyers cannot credibly threaten to backward integrate into the industry.
These give HelloFresh an advantage but not enough to overcome the advantages of little
determine how powerful a supplier group is based on the supplier's ability to capture
value through higher pricing (Porter, 2008). There is a lot of competition in the food
industry and many large suppliers. Some suppliers used by HelloFresh include a variety
of small suppliers, like Narragansett Creamery which supplies cheeses and dairy
products. There are also quite large suppliers for vegetables and fruits including Curation
Foods and Ocean Spray (Meet Or Suppliers , 2020). Depending on the individual
hard for them to find a company to match that promise. For example, they work with
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Prairie Fresh Meats; if Prairie Fresh decided to raise their meat prices, National Beef is a
similar alternative with low switching costs. Switching cost, along with diversified
revenues, differentiated products, few substitutions, and the ability of suppliers to enter
the market are factors in the bargaining power of suppliers (Porter, 2008). HelloFresh’s
main ingredient items are meat, produce, and fish. A main produce supplier is Curation
Foods, owned by diversified health and wellness company Landec. In the case of
Curation Foods, they have many other revenue sources and are not dependent on the meal
kit industry for revenue. Curation could credibly threaten to integrate into the industry as
from other potential produce suppliers and there is no switching cost to changing
suppliers.
A survey of HelloFresh suppliers revealed that they do not rely heavily on the
meal kit delivery industry, which is a point of strength. However, products are not
differentiated enough to provide the supplier bargaining strength, nor was there a cost of
switching, and there are substitutes available. These factors mean that the supplier's
Prepared meals have been a staple in households since the TV Dinner was
popularized in the 1950's. Prepared meals offer ease, convenience and affordability. In
today's environment the prepared meal comes in a variety of forms including frozen,
vacuum sealed, and deli prepared. What is commonly missing from prepared meals are
for HelloFresh. There are a variety of substitutions for food acquisition including grocery
stores, farmers markets, food baskets, butchers, and restaurants. These industries have
access to suppliers and can offer the same fresh and natural ingredients found in
What is missing is the convenience offered by home delivery. On this front the
substitutes include restaurant delivery from services like Uber Eats, Postmates, and
DoorDash. Grocery stores like Fry's now offer on-line ordering and delivery and
customers can choose and shop for specific recipes found on the retailers site (Flavorful
Recipes to Shop and Make, 2020). Another option is ready to cook deliveries from
companies like Home Chef and Daily Harvest. These services offer fresh and natural
ingredients already prepped and ready for the oven. Home Chef has also expanded
There is a relatively narrow price span between the substitution options when
considering monetary cost which makes the threat of substitution high. A comparison of
meal kit vs. grocery shopping shows a small difference (Moorehead, 2016). Price to
performance trade-off may vary depending on what the consumer values - price, time-
savings, learning, sustainability, and more. For example, consumers are increasingly
conscientious about sustainable packaging and may opt for substitutions that reduce
waste. Finding easy and delicious recipes is quite easy at sites like AllRecipes.com and
some sites will create a shopping list for creating selected recipes. Since a HelloFresh
subscription does not eliminate the need for grocery store visits, there is still the
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likelihood that subscribers are shopping for other staples and will purchase meal items
during visits. Price to performance trade-off is variable depending on what the consumer
values and there is little to no cost for switching from one option to another which makes
Industry Rivalry
When it comes to meal delivery services, the industry rivalry is extremely high.
From experimenting in the kitchen for the first time, to looking for new recipes to try out
for you and your family. The industry provides you plenty of options, so it’s on you to
decide which service fits your needs. Meal-delivery services have plenty of competitive
factors that play a part. From pricing plans, food ingredients, subscriptions, cooking
time, easy to read instructions, and dietary restrictions. While HelloFresh is able to
compete in all these areas, so are a few others, like Home Chef, Freshly, and EveryPlate.
The industry for food kit meals is expected to exceed a revenue of over $ 9.3 billion by
the end of 2020. This is a good thing, as industry rivalry tends to put competitive
position. So, how will HelloFresh separate themselves from the competition? First let's
Target Market
containing over 58 million households, not including the United States (HelloFresh SE,
2020b, p. 22). Within these markets, HelloFresh seeks households consisting of two to
five individuals. Although HelloFresh does not offer packages for singles, they do say
the second meal could be used for a lunch the following day (Do You Offer Plans for
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Singles?, n. d.). That being said, single individuals are not the primary target of the
company. In an interview with Forbes, Matt Fitzgerald, Vice President of Marketing for
HelloFresh, stated the target market includes busy households (Kwittken, 2018). In
addition, HelloFresh also targets individuals enrolled in college as they offer a 15%
discount on their services for any current student. According to Cleverism (Luenendonk,
2016), HelloFresh’s, “customer base is generally between the age of 30 and 50… and 80
percent of the customers are women.” A reliable or direct source from HelloFresh could
Within the United States, HelloFresh targets the “top 50% income households,” or
United States market down even further, HelloFresh is targeting the individuals who
already cook at home, according to Dominik Richter, HelloFresh Chief Executive Officer
(Kang, 2019). Recently, HelloFresh has begun targeting their services to those interested
in keto-genic or paleo meals. This additional target market came after the acquisition of
HelloFresh has a leading competitive advantage over its competitors after a long
competitive advantage, HelloFresh must maintain its current size and continuity of
strategy evaluating every step of the way. The company must adapt to change using the
current tools and techniques while continuously making small improvements toward
making the company stronger into the future. HelloFresh’s key competitive advantage is
their ability to reach millions of customers per day through distribution channels.
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They have been very successful in making sure they connect and attract customers on all
platforms of social media which have been recognized on Twitter, Facebook, Hulu,
Netflix, etc. HelloFresh’s strategy to filter revenue back into the company has
contributed to much success in the past year. According to HelloFresh 2019 Annual
Report, the company spent approximately 405.2 million euros on marketing (p. 59) which
has decreased from 25.7% to 22.3%, which has proven to be the driving reason for the
2019)
discounting strategy and favorable customer acquisition costs during the 2nd half of the
focus on increasing scale, direct to consumer product, building a clear identity and
strengthening customer relations by feedback and data analysis, and customizing to each
individual meal must be maintained and the continuity of these strategies is vital and
Moving forward, Lead by Example recommends Hello Fresh make the company’s
more convenience and most importantly building a stronger relationship with their
packages where clients are able to choose certain days out of the week, skip weeks, or
even stop and restart the service whenever needed allowing the customer to not feel
days they need and be able to get meals when they need them. This flexibility would also
be beneficial for customers who may be traveling and still want to have food shipped to
where they are allowing them to preplan their meals. Refrigerated pickup locations are
another recommendation. This would allow all meals to maintain freshness and provide
students, HelloFresh could incorporate marketing to seniors. Many seniors struggle with
preparing nutrient-dense meals which may lead to lack of daily nutrition and health
issues. Seniors that don't have the energy or ability to shop or cook may eat more
convenience foods like fast food and frozen dinners. A high intake of these processed
foods may harm health and shorten life span (Kubala, 2020). A few reviews by senior
citizens on Facebook stated that they were interested but were not computer literate and
would need to know where to sign up. HelloFresh could advertise with infomercials,
and/ or offer catalogs and phone numbers to attract this age category.
Lead by example also recommends HelloFresh expand the discount program and
partner in a strategic partnership with Imperfect Foods. HelloFresh could offer a loyalty
program that would offer incentives to get more people to commit for longer periods of
time and give back to the customer as gratitude. As a partnership with Imperfect Foods,
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HelloFresh would donate their perfectly rejected foods to Imperfect Foods. HelloFresh
customers could then offer cash back promos that would offer their customers incentives
such as birthday rewards, and customers could also redeem and spend points on both
sites. Hello Fresh could also offer lower plans to customers that would be purchasing
help in reducing food waste and give an option for lower income families, while
proactive on the internet by marketing using internet key search words for example when
a user searches food kit, meal kit, home cooked foods or advertising on food delivery
service apps so when a customer utilizes meal apps such as grubhub, Ubereats,
DoorDash, etc., this would get them more visibility, attract more customers, and growth
Conclusion
While rivalry, threat of new entrants, and substitute products in this industry are
high, HelloFresh has implemented strategies to create distinctive advantages from their
competition. Using clever slogans and attractive marketing imagery they’ve managed to
expand their target market from the top 50% income households to college students with
little to no time to prepare healthy meals. In this analysis we utilized the reading
materials and Porter’s Five Forces Model of Competition to review not only HelloFresh’s
current strategies, but also to analyze future changes the company could implement to
customers, potential entrants, suppliers, substitutes and rivals and how each of these areas
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either support high performance or hinder the company. In conclusion, we found there
were numerous strategies HelloFresh could use to remain one of the most competitive
ME SMG VIR
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